Life gets complicated for LISPs

A practice note from Vlok Symington that directly affects RAs and living annuities -RF1/96 - which says administrators must provide a annuity for life has led to some consternation within the linked investment service providers (LISP) environment.

It appears that a product that allows an asset base to be exposed is not compliant with RF1/96, which may lead to the tax approval of the fund being in jeopardy.

Some of the LISPs took the practice note at face value and went ahead and redesigned their offerings. There were two players - Investec and Momentum - that stood their ground, and Momentum drew up a white paper, which is still under discussion at National Treasury.

According to Kevin Hinton at Momentum Wealth, living annuities are an important adjunct to the RA. The regulations around living annuities are vague at best, and Hinton says that the industry should be self-regulated.

Amongst some of the matters that need to be considered are the following: There should be individual drawdown guidelines; there should be ongoing client/ifa reporting; and prudent investment guidelines.

Added to which there should also be industry-based analysis and monitoring, with a proposed code on linked annuities.

Note: It appears that the sector has come of age and now boasts R50bn in assets under management, and is thus a player, so they have to be taken seriously.

Editor's thoughts:
*  Self-regulation is an admirable approach and provided that all the regulatory authorities are part of the discussion and debate, not forgetting the industry players.