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About 96 per cent of Provident Mutual’s policyholders with endowment-linked mortgages are likely to suffer a shortfall on their policies when they mature. Only 4 per cent will get a green letter telling them that their investment is on target to pay off the mortgage. But the opportunity to switch into the CGNU fund – which has a much higher equ-ity content – could reduce the amount of the shortfall as well as the number of policies which will not make their target. NU has reduced the holding of shares and property in the Provident Mutual with-profits fund from 24 per cent to 10 per cent to meet commitments to guarantees. This will inhibit future performance and the firm is reducing the projected annual investment return on these policies from 6 per cent to 4 per cent. But to compensate, NU is offering mortgage-linked end-owment policyholders the opportunity to switch into the CGNU with-profits fund which is 67 per cent invested in equities and much more likely to turn in a good performance. Even better, policyholders can make the switch and retain all the accrued benefits and guarantees attaching to the policies. This is an offer that most investors will not want to refuse. NU should be applauded for taking such a positive move and it is already looking at what it can do for those endowment holders, some 20,000 of them, whose policies are not linked to the repayment of a mortgage, who remain in the Provident Mutual fund. These inv-estors must be feeling somewhat aggrieved that they have not yet been offered the opportunity to switch funds. There are also 45,000 pension policyholders in the fund but these are expected to remain as they already have considerable extra benefits in the form of guaranteed annuity rates. The initiative raises the wider question of attitude in the life industry, a problem which has bugged the industry for as long as anyone can remember. Life office management should be regularly reminded that the money they control belongs to policyholders. They are simply custodians of inv-estors’ money charged with making the best return they can on these precious life savings. Many behave as it if were their personal wealth. Why haven’t other life off-ices made similar concessions to policyholders trapped in poorly-performing funds? There are 110 with-profits funds, 66 of them closed to new business, which hold some 191bn of savers’ money. Many of these funds are paying little or no bonuses. Surely some of these could be merged with the parent company’s with-profits fund using the same innovative technique employed by NU. This ensures that investors in the receiving fund are not disadvantaged by the influx of policyholders from another with-profits fund. The Treasury select committee looking at long-term savings urged the FSA to look at ways of releasing these inv-estors from the closed fund trap. NU’s solution could be the way. While they are at it, it is time that life company management dragged itself into the 21st Century and took a look at their contracts, making sure they do not fall foul of the “unfair terms in consumer contracts” legislation. Many of them are so one-sided. They give the impression that policyholders should be grateful that the life company has agreed to take their money. NU has shown the way forward for life companies to restore their battered image in the eyes of investors. Life companies operate in the retail customer services industry and they forget that at their peril. For decades, life companies have treated the intermediary as the client, not the policyholder. They have ignored their policyholders and frequently given them a raw deal, charging high fees and not delivering on investment ret-urns. It is time for change.