Ad­ju­di­ca­tor or­ders Lib­erty Life to re­duce RA penalty fees of 34 per­cent

Weekend Argus (Saturday Edition) - - PERSONALFINANCE - BRUCE CAMERON

Lib­erty Life is the lat­est life as­sur­ance com­pany to be caught out charg­ing ex­ces­sively high penal­ties, which life com­pa­nies levy when a pol­i­cy­holder re­duces or stops pay­ing con­tri­bu­tions on a re­tire­ment an­nu­ity (RA) or pre­mi­ums on a life as­sur­ance in­vest­ment pol­icy.

The in­creas­ing in­ci­dence of Pen­sion Funds Ad­ju­di­ca­tor Mu­vhango Lukhaimane and fi­nan­cial ad­vice om­bud Nol­untu Bam catch­ing out life com­pa­nies that charge more than the per­mit­ted penal­ties has re­sulted in in­ter­ven­tion by the Fi­nan­cial

The mem­bers, WH and NM, joined the fund in Septem­ber 2003. WH signed up to re­tire on Septem­ber 1, 2025, and NM signed up to re­tire the fol­low­ing year. Their ini­tial con­tri­bu­tions were R1 000 a month, es­ca­lat­ing an­nu­ally at the rate of in­fla­tion.

In May 2012, WH and NM re­duced their con­tri­bu­tions to R250 a month. WH’s fund value at that date was R425 839 and NM’s was R430 269.

Lib­erty im­posed a “causal event” charge (penalty) of R80 901 on WH and of R81 742 on NM. The charges amounted to 19 per­cent of their re­spec­tive fund val­ues.

In Novem­ber 2012, WH and NM told Lib­erty that they wished to trans­fer their mem­ber­ship to an­other RA. Lib­erty ad­vised that they would each be hit with an­other penalty of 19 per­cent.

Lukhaimane says that, al­though Lib­erty was en­ti­tled to levy the “causal event” charge, it had to do so within the rules of the fund, the pro­vi­sions of the Long Term In­sur­ance Act and the reg­u­la­tions im­posed as a re­sult of the State­ment of In­tent, which limited the penal­ties. The state­ment was an agree­ment signed in De­cem­ber 2006 by the life as­sur­ance in­dus­try and Trevor Manuel, who was the Min­is­ter of Fi­nance at the time.

An in­de­pen­dent ac­tu­ary called in by the ad­ju­di­ca­tor’s of­fice to as­sess the penal­ties found that the charges levied on each mem­ber to­talled 34.39 per­cent, which was over the limit set out in the State­ment of In­tent.

Lib­erty Life agreed to re­duce the penal­ties levied on the com­plainants’ fund val­ues, from 19 per­cent to 11 per­cent, if they trans­ferred their poli­cies to an RA of their choice as at May 24, 2013.

How­ever, Lukhaimane says that Lib­erty Life has not pro­vided her with proof that it has re­vised the pro­posed penalty from 19 to 11 per­cent, and she or­dered the com­pany to do so within two weeks of her de­ter­mi­na­tion.

Lib­erty Life spokesper­son Mandy Den­ton says that Lib­erty has met its obli­ga­tion to ad­here to the ad­ju­di­ca­tor’s process in re­solv­ing the com­plaint.

“Whilst we re­spect the de­ci­sions of the ad­ju­di­ca­tor, we have queried this de­ter­mi­na­tion and the process, be­cause, in our view, we had com­mit­ted to tak­ing the ap­pro­pri­ate ac­tion prior to the de­ter­mi­na­tion be­ing made on June 27, 2013,” she says.

Den­ton says that Lib­erty Life sent a fi­nal re­sponse to the ad­ju­di­ca­tor on May 24, “in­di­cat­ing that we would be re­duc­ing the charges”.

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