Read the latest (14 March 2014) document from National Treasury on tax free savings vehicles for South Africa. I think it’s a fantastic idea – both from a policy perspective with carefully designed incentives to promote long-term savings and from a personal perspective. I’m definitely going to use one for my own savings. However, one paragraph stuck out as a pretty clear message from National Treasury on their views of life insurers – and views on current product offerings rather than any historical sins:
Insurance products
Products must permit flexible contributions and may not bind individuals into any future contribution schedules. Many insurance investment policies would currently not match these criteria. Government is not open to providing a tax incentive for products that have high charges and may have an adverse impact on household welfare at the point at which the household is increasingly vulnerable. In this regard some savings products, for example endowment policies and any similar investments that include excessively high penalties in the case of early termination of the policy, pose a policy challenge from a market conduct perspective and will not be allowed in these accounts.As discussed, National Treasury will engage with the FSB and industry in determining a reasonable approach to charges and early termination.
Wow. I know there are many bad insurance products around and probably some still being sold. I also know of many insurance executives who strive for value for money and are reinventing products and distribution channels to this end.
Seems to me NT isn’t yet on board.
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