22 years... and still getting away with it
I RECENTLY CAME across an old issue of Finansies & Tegniek (a forerunner of Finweek) of 1985. In the letters column I saw a letter from a certain GW van der Linde concerning annuities. He said that when Regulation 28 of the Insurance Act was amended, which resulted in a lower commission to agents/brokers for retirement annuities (RAs), the benefits insurers offered in terms of (most) RAs improved.
Quite by chance, one of my RAs was taken out in 1985 and it has just been paid out after 22 years. The illustrative value on 1 April 1997 was still R63 211
but on 1 January 2006 it was R45 730. Given all the variables of inflation, falling markets and poor performances by insurers, the gross return on my RA was just 9,6%.
That’s a rather poor performance and I’m becoming more convinced by the day that annuities definitely weren’t (aren’t) a good option and certainly don’t justify the marketing that’s dished up to the public every day.
With that maturity value, a little pension must be bought – which again involves substantial costs, a monthly administrative fee and the financial adviser still gets his service fee every month. And don’t forget the taxman! What’s left of the little pension? We’re also bound by rules and regulations and don’t have access to our capital that we’ve built up over the years.
Retiring Pension Adjudicator Vuyani Ngalwana deserves praise for everything he achieved in his short term in office.
We’re grateful that a new dispensation is now being negotiated with the Treasury, as was reported in Finweek (18 January 2006), and that the high costs and non-transparent fees should be thoroughly investigated to the advantage of the client.
I believe that it’s not the marketers who are to blame, but the life insurers themselves. And Gerhard Joubert, of the Life Offices’ Association, hasn’t been able to convince me otherwise with his arguments!