Category Retirement
SUB CATEGORIES Annuties |  General |  Savings & Investments | 

LOA - Statement of Intent Implementation Date

25 November 2006 Lucienne Fild

Enhanced RA fund and endowment values a reality as from December
The Board of the Life Offices' Association (LOA) recommended today that member life companies start enhancing the fund values of qualifying retirement annuity (RA) funds and endowment policies in line with the Statement of Intent as from the beginning of December this year.

Gerhard Joubert, CEO of the Life Offices' Association (LOA), says in the months since the signing of the Statement of Intent with the Minister of Finance in December last year, the LOA has worked closely with National Treasury and the Financial Services Board on regulatory amendments aimed at providing greater clarity going forward. This was one of the requirements of the Statement of Intent.

"The regulatory authorities have made good headway and most of the required regulatory changes have been finalized and are ready for promulgation. We are comfortable that the proposed commission regulation reforms, aimed at achieving a better balance between upfront and as-and-when commission, will be resolved shortly. We are therefore recommending to our members to start implementing the minimum values in line with the Statement of Intent as from December this year."  

Joubert says starting from 1 December this year, life companies will have six months within which the fund values of qualifying RA funds and endowment policies must be adjusted to the minimum values.

Who will qualify?

All RA funds and endowments which became paid-up, or where premium reductions took place, in the six year period between 1 January 2001 and 1 December 2006, will automatically be enhanced to the minimum value of 65% of fund value or investment account.

The same value enhancements will apply to eligible RA funds lapsed during the past six years, or where early retirement and withdrawals took place during this period, but on a complaints basis. This means that affected clients must apply for the value enhancements.

Also with effect from 1 December, all RA funds which become paid-up or lapse, have their premiums reduced, or where early retirement and withdrawals take place will receive a minimum fund value of 70%. All endowments which become paid-up, or where premiums are reduced after 1 December will also receive a minimum value of 70%. In cases where endowments are surrendered (the client withdraws the endowment benefit) after 1 December, they will receive a minimum value of 60%.

Funding the value enhancements

The estimated R3-billion required to enhance the values of RA funds and endowment policies which became paid-up, or where premium reductions took place, between 1 January 2001 and 1 December 2006 will be funded exclusively by shareholders and will not impact in any way on existing policyholders.

Life companies estimate that at least half of all retirement annuity (RA) fund members who stopped paying premiums after 1 January 2001 are set to benefit from the R3-billion set aside by the life industry.

Communicating with customers

Joubert says there is no need for clients to contact their life companies, as all companies will be communicating with their policyholders and RA fund members in due course.

The LOA will be launching an extensive consumer education campaign early in the New Year to explain in detail the benefits of the minimum standards for policyholders.

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