The complexity and lack of transparency of with-profits funds will come under fire from the Financia...
The complexity and lack of transparency of with-profits funds will come under fire from the Financial Services Authority's With-Profit Review.
In a paper detailing the Review's background, FSA says the widespread criticism of the complexity and opacity of the products, and the lack of consumer understanding of the nature of the risks are to be examined.
The high degree of discretion currently given to the insurance company management over how the with-profits fund is operated and poor early surrender values are also bound to be scrutinised.
The Review is due to be debated at an Open Meeting on June 18, and is designed to be wide-ranging. According to the FSA, the issues to be addressed will be taken forward in a series of sub-projects. They include transparency in policyholder communications; unfair contract terms; governance and discretion over the operation of with-profit funds; disclosure to customers, and regulatory reporting; inherited estates; and the interests and fair treatment of customers.
The Review is expected to be completed by Spring 2002.
The FSA's paper says with-profit products typically use premiums to invest in a pooled fund made up of a range of assets, usually in the form of equities and property. To cushion the policyholder from the extremes of fluctuations in the equity markets a "smoothing" of payouts takes place.
Those who invest in with-profit products share in the profits and losses of the insurer, including those arising from other business written by the company, and any distributions from the accumulated estate.
Reward to the investor comes with a payment of a guaranteed amount at the end of the contract provided that investment is kept up until maturity or retirement, or on death.
Anyone wishing to attend the meeting should contact the FSA Events Team at [email protected]
Putting the tech into protection
Square Mile’s series of informal interviews
Fallout from Haywood suspension
Launching later in 2019
£80bn funds under calculation