22 years... and still get­ting away with it

Finweek English Edition - - Letters - HEN­NIE BEKKER

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!

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