Scoring on policy penalties
A R3billion windfall is likely to benefit policyholders who were unjustly penalised for terminating or reducing payment on their retirement annuity funds and endowment policies between January 2001 and the beginning of this year.
Life assurers agreed last week to implement the statement of intent aimed at enhancing values of qualifying policies, agreed to by life companies and the national treasury about a year ago.
The Life Offices' Association (LOA) has recommended that all life companies implement the statement of intent, which is intended to restore confidence in life assurers
From next month, life companies have six months in which to adjust the fund values of qualifying retirement annuity (RA) funds and endowment policies to the minimum values.
Qualifying RA funds and endowments will automatically be enhanced to a minimum of 65percent of the total value of the payments made into them.
The same value enhancements apply to eligible RAs that lapsed during the past six years, and when early retirement or withdrawals took place during this period - but clients must apply for value enhancements in these instances.
Old Mutual, Liberty Life and Sanlam said their systems were on track and they were ready to deal with the enhancements.
"Earlier this year, Liberty voluntarily and comprehensively re-designed its entire suite of recurring-premium investment and retirement savings products to address many of the concerns raised with the industry," said the company's deputy chief executive, Rex Tomlinson.
Old Mutual said it was working hard to ensure that the enhancements were implemented before the end of May.
Old Mutual deputy managing director Peter de Beyer warned policyholders not to "mistake this initiative as a signal that there are no consequences for cancelling their policies early or stopping their premiums.
"It remains true that it is almost always in a client's best interests to continue his policy through to maturity."
The LOA said the estimated R3billion cost of enhancing the values of RAs and endowment policies would not affect policyholders.
All assurance companies are expected to communicate with their policyholders early next year about the enhancements.