FSCA issues financial guidelines to consumers

The South African currency.

The Financial Sector Conduct Authority (FSCA) has issued some essential guidelines to assist South Africans to take greater charge of their finances and be responsible when making financial decisions that will impact their lives during and after the Covid-19 pandemic.

Lyndwill Clarke, head of the FSCA’s consumer education department, says that with Covid-19 has come a heightened anxiety about people’s current financial situation, their investments and their future earnings.

“Many South Africans don’t have savings or investments and may already be heavily indebted, a dire situation for hundreds of thousands of South Africans that will only be made worse by the Covid-19 pandemic. People also need to be more mindful during this time about their policy contracts and to not make sudden irresponsible financial decisions out of panic without doing the necessary background checks and assessments.”

The following are some immediate guidelines the FSCA says can be applied:

Read and understand your insurance policy contract, to assess what you are covered for and what is excluded. You may want to clarify the following issues with your insurer:

1. The terms and conditions of your policy.

2. Unemployment definition.

3. Exclusions/inclusions with regard to Covid-19.

4. What classifies as a “lifestyle protector” or dread disease cover?

5. Grace periods for payment.

6. When will my policy lapse and what can I do to avoid it?

7. The implications of a paid-up policy.

8. The implications of surrendering your policy.

9. “Act of God” or “force majeure” provisions or pandemic exclusions.

10. Methods of payment during the lockdown.

11. Business interruption insurance.

12. How can I consolidate my portfolio to save money during this time, e.g. placing all my funeral policies under one cover?

13. Travel insurance: inclusions/exclusions e.g. trip cancellations, trip interruptions; insurance for future travel.

Ensure that you understand any new financial products related to Covid-19 being marketed and sold, and whether these suit your actual needs. Find out if any additional actions, like taking a blood test, are required for the new product and how this will be managed in the lockdown period.

Many banks have announced a debt-relief package on loans to persons and businesses during the national state of disaster. Contact your bank to discuss whether you qualify for a so-called “bank holiday” package. Ask questions such as: What are the terms and conditions of the package? What does “good standing” mean? What will my repayments look like after the “holiday”? How will all of this affect my credit score? How much additional interest will accrue?

What additional non-interest fees will be charged?

Check if you are opted in or out of these packages, and, if opted in, check how this will assist you in the long term.

Check with your bank or credit provider if you have a credit insurance policy and see what it covers. It may cover you if you stop earning an income from your employer, become unemployed or if you are retrenched. You might not have to apply for debt-relief if your credit insurance policy covers your debt for a period.

Avoid exhausting all your emergency funds in the lockdown period. Be aware of what your needs and wants are during this time and only purchase what is essential. Do not panic buy.

Do not make rash investment decisions. Speak to or contact your financial advisor or an authorised financial services provider, before making any decisions about your savings, investments and insurance.

If you belong to a retirement fund, look out for communications from the board of your fund or the fund administrator regarding developments and risk management strategies with respect to Covid-19. Be sure that you understand all the risks that go along with premature withdrawal of your benefits.

To avoid the risk of further spread of Covid-19, pay your premiums and instalments electronically where possible. Speak to your bank about what options are available such as mobile apps. Should this not be possible, practise physical distancing: stand at least one metre apart when queueing to pay your account. Physical distancing should be practised when queueing for any matter.

Money Smart Week (MSWSA), an initiative of the FSCA along with other key stakeholders, was due to be held at the end of March but has been postponed until later in 2020.

Look out for more details about this national campaign to help South Africans become more savvy about their finances.

Go to www.mswsa.co.za for more details.