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AARP Texas, May 5, 2010
A new law went into effect April 1st that saves Texans who invest in annuities and their families money by ending the abusive practice of some insurance companies of setting maturity dates at an age that few human beings are actually able to attain.
When annuity companies set artificially high maturity date ages—like 115 years old -- they allow for longer surrender periods, which ultimately saddles purchasers with more penalties for early withdrawal (or “surrender charges”). Longer surrender periods also tie up the annuity purchaser’s money longer and therefore support a system of higher upfront commissions to agents. High commission to agents can lead to high-pressure sales tactics and inappropriate annuity sales.
HB 1919, by Representative Carol Kent of Dallas and Senator Rodney Ellis of Houston, limits annuity payments to begin at the next anniversary of the contract following a person’s 70th birthday or at the 10th anniversary of the contract. Known as the “70-10” rule, the law in effect today will ban the sale of annuities with hefty penalties resulting from these unreasonable maturity dates.
“Annuity sales are often a magnet for abuse and some of the terms we see in these contracts are certainly no April Fools joke,” said Bob Jackson, director of AARP Texas. “Protecting Texans’ assets during these tough economic times is a priority for AARP and we’re pleased that this new law takes a step in that direction.”
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