LAURA DU PREEZ: Penalty on retirement savings lawful but fails fairness test, adjudicator finds
With terms that long, no wonder people have reason to stop or reduce premiums
How can an "exorbitant" penalty of almost 12% of your retirement savings on a more than 20-year-old retirement annuity be in keeping with the letter and spirit of Treating Customers Fairly - a regulatory approach adopted by the Financial Services Board setting out fair outcomes for consumers of financial products? This is the question asked by the pension funds adjudicator in a recent ruling. Good on the adjudicator, Muvhango Lukhaimane, for shining the light yet again on these penalties. The industry has taken at times up to 40% of people's savings on more than six million retirement and endowment policies since 2001, says the FSB. The maximum penalty that can be imposed on policies sold since 2009 is now 15%, reducing to 0% on policies more than 10 years old. But many of us hold "legacy policies", sold before 2009. Life assurers have agreed to limit penalties on these to 30% - but 30% is still punitive. If it wasn't for the adjudicator flagging these harsh penalties, we might have...
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