No change?

23 June 2005 Angelo Coppola

FA News published a newsletter today that looks at the issue. Old Mutual responds to the commission and illustrative values question we put out.

In essence a broker, who wanted to investigate the effect of zero commission on the illustrative values for an RA, alleges that the illustrative values do not take into consideration zero commission.

He wants to know how then he can show his client was the effect of commission, or that lack of it, has on the RA.

Michael Goemans, Product Manager of Old Mutual Retail Investment Products, replies:

According to the LOA Code on Policy Quotations, the projected (illustrative) values shown on quotes are not allowed to be higher than gross premiums accumulated at the 4% and 10% accumulation rates. (The Code can be found on the LOA website.)

The aim is to show what a client’s policy could grow to in low and high inflation scenarios and does not take expense charges into account.

Effectively it is projecting at policy returns of 4% and 10% after charges.

Regarding the quote, the effect of expense charges has to be clearly shown in two areas on the quote:

1) The Reduction in Yield must be calculated. This shows the full effect of expense charges on the policyholder’s return and will reduce if commission is scaled down.

2) All charges need to be described and quantified. Again, if commission is reduced it is shown in the quote where charges are detailed.

Quick Polls


The second draft amendments to Regulation 28 will allow retirement funds to allocate up to 45% of their assets to SA infrastructure, with a further 10% for rest of Africa; but the equity & offshore caps remain unchanged. What are your thoughts on the proposal?


Infrastructure? You mean cash returns with higher risk!?!
Infrastructure cap is way too high
Offshore limit still needs to be raised
Who cares… Reg 28 does not apply to discretionary savings
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