Appropriate Financial Advice

As South Africa faces this period of ‘lockdown’, businesses, the self-employed and the general public are faced with financial constraints. South Africans have to reassess their budgets, and for many, a review of insurance products may become a reality in order to meet their immediate financial needs.

Saving for retirement, and insurance such as health, life or disability insurance are essential mechanisms for financial planning and reduces risk for employers, employees and all citizens.

It’s crucial that you seek out professional financial advice on reassessing benefits, the COVID-19 payment relief options, and the short- and long-term effects of these decisions.

We provide an overview of the relief options with specific reference to Medical and Retirement Fund Benefits.

Medical Scheme Payment Relief

Council for Medical Schemes (CMS) Circulars 25 and 28 of 2020, seeks to provide proposals to medical schemes during this period to prevent policy lapses, for the good of the industry and its members. Furthermore, the circulars provide greater context to whether medical schemes may consider these mechanisms.

These proposals will be on a ‘case by case’ basis and not applied across all schemes and members (a blanket application).

Several proposals were received by CMS of which the below have been approved for medical scheme application:

Financial relief to members:

• Use of accumulated savings funds to offset contributions.
• Ex-gratia payments to offset contributions.

Financial relief applications from employer groups – Small, Medium and Micro-sized Enterprises (SMMEs):

• SMMEs (<200 employees), seeking financial relief from medical schemes to protect their employees’ membership cover must make a case to their respective medical scheme, demonstrating the financial impact caused by the lockdown due to the COVID-19 pandemic.

Some medical scheme providers have received approval from CMS to implement the above and have initiated an application process for employer groups and individual members.

Retirement Funds

The Financial Services Conduct Authority (FSCA) issued FSCA Communication 11 of 2020 (RF), in which, the FSCA agreed to accept urgent rule amendments, related to Covid-19 relief to employers and members.

Registered Rules of the Fund:

• In the event that Funds do not have a rule that can be implemented to assist distressed employers during this Covid-19 pandemic, the Fund should urgently submit the required rule amendment to the FSCA for approval, following engagement with affected employers. Funds must, however, attempt to keep full risk benefits in place at all times.

Covid-19 Rule amendments:

• Rule amendments must specify the effective date.
• The FSCA will only issue a letter and an unstamped copy of the amendment to Funds during this time, with the stamped version following when normal business resumes. Funds are required to keep a record of all affected members; the FSCA will be requesting this information at a later date.

Member communication:

• Member communication, informing all affected members of the proposal to reduce or suspend contributions, is required to be sent out prior to the submission of the rule amendment, within 30 days of the Fund receiving such request.

Please feel free to reach out to our team for more information.