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&#39End MVA discretion in contract&#39

Life office discretion over the implementation of market value adjusters on with-profits policies should be abolished, said leading IFA and FSA Small Practitioners Panel joint chairman Roger Sanders.

Speaking at the FSA&#39s with-profits open meeting this week, Sanders said providers should be forced to state their policy on MVAs in the form of a contractual statement.

He said IFAs, who were accused of commission bias in the meeting, want clear bonus policy statements, asset class benchmarks and risk-graded funds to improve transparency.

Life offices were accused by IFAs and consumer groups of misleading investors by advertising headline terminal bonuses that are paid on maturity, when many policies are surrendered early.

Actuaries came under fire after Clerical Medical chief executive Robert Walther claimed that to ensure appointed actuaries give unbiased advice they should not be board directors.

He said boards should receive two bonus recommendation reports, a chief executive report from a commercial perspective and an appointed actuary report ignoring commercial or competitive considerations.

Sanders says: “There is a danger of complacency but there is also a danger of losing a product consumers value. The review is perfectly timed for the FSA to take control rather than accept the findings of other reviews.”

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