Budget 2011: Mutuals call for more investment freedom
The Association of Financial Mutuals in calling on the Chancellor to allow mutual insurers to invest more widely and to be able to issue bonds.
In a letter to George Osborne ahead of Wednesday’s Budget, AFM chief executive Martin Shaw says broader investment rules would enable mutuals to invest in infrastructure and community projects or to provide seed capital to enable new mutuals to be created.
He writes: “Mutual insurers hold significant volumes of capital which by law must be invested in equities, property or gilts. Were financial mutuals enabled to issue bonds for consumers and given permissions to invest in a wider range of options, some of their holdings could be put to more practical use in the real economy.”
He says the sector suffers from a disadvantage because legislatively they are treated differently from other organisations.
“Better business initiatives introduced by the Companies Act are not carried over to mutuals without equivalent legislation. Friendly societies are still unable to adopt electronic communications with their members, despite this being introduced for companies in 2001, because the relevant legislative order has never been made.”
Last month the Government announced an independent review of workplace sick pay which will consider whether employers should be required to take out income protection insurance for their employees rather than giving statutory sick pay.
Shaw’s letter aims at putting the mutual insurance sector in the frame for any business which could emerge should that change take place.
He says: “The sector has significant experience of running products that sit alongside statutory sick pay and long term invalidity benefits. Contracting out this work would enable employers to offload sick pay and long term invalidity benefits.”
He added that Nest could be re-engineered as a financial mutual to provide low-cost pensions.