Retirement costs rethink
THE Treasury’s longawaited proposal on how charges for life assurance products could be reduced is due to be released in coming weeks.
Finance Minister Pravin Gordhan met CEOs of service providers in the retirement industry last Thursday to prepare them for the far-reaching recommendations‚ which could fundamentally affect the bottomline profits of the industry.
The retirement industry was rocked by scandal when its exorbitant upfront charges on retirement annuity products were exposed.
At the meeting with Gordhan‚ the CEOs committed to developing a comprehensive‚ uniform and comparable measure of charges so costs of different products could be compared with each other.
This would ensure the market was sufficiently competitive on costs. They also undertook to deal with the problem of incentives for intermediaries.
Gordhan and Association for Savings & Investment SA chairman Johan van Zyl said in a joint statement on Tuesday that the meeting “focused on costs and charges‚ recognising the primary role that the industry and government working together can play in bringing down costs and charges”.
“The meeting noted that the level of costs was not only related to market and disclosure practices‚ but also to current incentive systems‚ poor preservation practices and the lack of compulsion to join a retirement fund‚ compared to many other countries.”
The CEOs were told the discussion document that is due to be released by the Treasury contained findings “on poor market practices” in the industry‚ while noting that significant progress and improvements had been made over the past few years.
The Treasury accepted that the industry needed time to comment on and‚ where necessary‚ contest the adverse findings in the report while the major providers agreed to consider the proposals in a “constructive manner . . and to engage with the Treasury on the findings”. — BDLive
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