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Bruce Cameron | Why surrender penalties should be eradicated

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Bruce Cameron (Supplied)
Bruce Cameron (Supplied)

The amount of the confiscatory penalties has changed substantially, but their total removal is essential to protect investors, writes Bruce Cameron.

The question around confiscatory surrender penalties (officially called "causal events"), levied by the life assurance industry on contractual life assurance policies, is whether they are in fact valid considering three pieces of legislation.

The penalties have again been highlighted by the strong criticism of universal life policies - where people are first hit with up to four times the cost of premiums because of issuing policies with far-too-cheap initial premiums on the risk part of the policy. These eat away at the savings (endowment part), resulting in the reduction of savings, and when that money runs out, they want to increase premiums by up to four times.

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