Weekend Argus (Saturday Edition) - - PERSONALFINANCE -

Fi­nan­cial ser­vices com­pany Mo­men­tum has again been caught out ham­mer­ing pol­i­cy­hold­ers by ap­ply­ing con­fis­ca­tory penal­ties – and treat­ing pol­i­cy­hold­ers with con­tempt when they query why the penal­ties have been ap­plied.

Ear­lier this year, af­ter the in­ter­ven­tion of Per­sonal Fi­nance, Mo­men­tum was forced to pay back R800 000 of more than R1 mil­lion it levied in penal­ties against two brothers who had been mis-sold Mo­men­tum re­tire­ment an­nu­ity (RA) prod­ucts.

The re­pay­ment fol­lowed one of four im­por­tant de­ter­mi­na­tions against Mo­men­tum and/or its prod­uct flog­gers by Pen­sion Funds Ad­ju­di­ca­tor Mu­vhango Lukhaimane and fi­nan­cial ad­vice om­bud Nol­untu Bam in the wake of com­plaints about penal­ties. The penal­ties are ap­plied when RA or en­dow­ment pol­i­cy­hold­ers stop pay­ing or re­duce their premi­ums or cash in their poli­cies be­fore ma­tu­rity.

There have also been com­plaints about the un­ac­cept­able mul­ti­ple ap­pli­ca­tion of the penal­ties.

But Mo­men­tum con­tin­ues to ap­ply the penal­ties, de­spite the ex­po­sure of the R800 000 mis­take, the de­ter­mi­na­tions, and a state­ment in June this year by Mark van der Watt, chief ex­ec­u­tive of Mo­men­tum Re­tail, that the com­pany would mend its ways.

In June, Van der Watt said, among other things, that Mo­men­tum recog­nises that the com­pany is “the cus­to­dian of our clients’ fi­nan­cial well­be­ing and our pur­pose is to help them achieve this”.

Well, last month when a Cape Town at­tor­ney trans­ferred his Mo­men­tum RA to Lib­erty Life, his ac­cu­mu­lated sav­ings of R99 947 were re­duced by R11 517 (11.52 per­cent). When he and his fi­nan­cial ad­viser, Arthur Wein­burg, chal­lenged the amount and its cal­cu­la­tion, Mo­men­tum re­sponded: “Un­for­tu­nately we can­not pro­vide you with a break­down of this cost that will be de­ducted. Please be ad­vised that it is in line with leg­is­la­tion ac­cord­ing to the As­so­ci­a­tion for Sav­ings & In­vest­ment SA (Asisa) rul­ing.

“Th­ese con­tracts costs is group based and not on in­di­vid­ual based [sic]. It is also spread over the full term of the con­tract. We trust you find the above in or­der.” Mo­men­tum said.

The at­tor­ney and Wein­burg ap­pealed to Per­sonal Fi­nance to in­ter­vene. We did so, also in­volv­ing the Fi­nan­cial Ser­vices Board (FSB) and Asisa. Sud­denly, Mo­men­tum found it had made yet another mis­take.

Asisa, as the in­dus­try or­gan­i­sa­tion, de­nied it has any­thing to do with reg­u­lat­ing the con­fis­ca­tory penal­ties. The FSB has con­firmed it will be in­ves­ti­gat­ing

In re­spond­ing to Per­sonal Fi­nance, Mar­ius Kock, Mo­men­tum Re­tail Insurance client care com­plaints of­fi­cer, ar­gued that Mo­men­tum was en­ti­tled to deduct the penalty, even though a penalty had been levied pre­vi­ously, say­ing the halt to dou­ble-dip­ping was only ef­fec­tive from Jan­uary 2001. He did not pro­vide the date or amount of the first penalty

But he says Mo­men­tum will re­fund the penalty.

Kock says: “Mo­men­tum is com­mit­ted to trans­parency and the prin­ci­ples of treat­ing cus­tomers fairly.”

I would sug­gest that Kock in­forms the rest of his Mo­men­tum col­leagues of this com­mit­ment, be­cause judg­ing from the ini­tial re­sponse to the at­tor­ney, they do not seem to know about it.

The ques­tion must now be how much longer the FSB is go­ing to con­tinue to al­low Mo­men­tum and other life as­sur­ance com­pa­nies to treat the sav­ings of con­sumers as they do and re­spond with such ut­ter con­tempt when RA mem­bers chal­lenge its de­ci­sions.

The FSB has ex­ten­sive pow­ers to deal with mis­be­hav­ing in­dus­try par­tic­i­pants, in­clud­ing be­ing able sus­pend li­cences to do busi­ness. It does not have to wait for the new “twin peaks” leg­is­la­tion. It is time for the FSB to start us­ing its pow­ers to stop this on­go­ing abuse of the sav­ings of or­di­nary peo­ple.

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