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&#39Providers must pay for endowment shortfalls&#39

IFAs are calling for providers to compensate endowment policyholders

facing shortfalls because they used assumed charges lower than actual

charges to calculate illustrations given at outset.

But some providers believe the responsibility lies with the regulator

which they say forced them to use this method of working out illustrations

until 1995.

IFAs are increasing the pressure to force providers to follow the example

set by Clerical Medical, which is compensating policyholders who had their

policies illustrated using assumed charges.

LM Kellands IFA Mike Yeatman says: “There is a moral obligation on

providers to make up the difference caused by charges being higher than

Lautro&#39s.”

However, life offices argue that they were not allowed to use actual

charge illustrations.

Winterthur Life actuarial technical manager Andy Dillie says: “In my

personal view, the onus is on the regulator.”

Windsor Life wrote to clients explaining Lautro&#39s instruction to use an

assumed charging structure, which is one factor affecting current projected

maturity value rates. It says it is in discussions with the FSA about what

action it can take, including making up projected shortfalls generated by

using assumed charges.

The FSA confirms it is looking at how policies are priced as part of its

monitoring.

Riach IFA Bob Riach says: “Providers have to take responsibility unless

this was made clear to clients. But more responsibility lies with Lautro.”

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