View more on these topics

Axa blow could fall on millions of policyholders

It is one of the oddities of Parl iamentary procedure that I can write about the Axa orp han assets case in the col umns of Money Mar keting and Treasury economic secretary Melanie Johnson can write about the matter in the Daily Mail but both of us were ruled out of order for trying to discuss it in the House of Commons.

Yet it is an issue that aff ects millions of our constit uents – not just the 660,000 with-profits policyholders who are dispu ting the £163;1.68bn of Axa inherited estate or orphan assets but those with a potential claim on the £163;20bn of unallocated orp han assets in other insurance companies.

It is an issue which involves public policy, not just the courts, since there are important unanswered questions about the role of Treasury guidance and the involvement of the FSA and Inland Revenue.

The argument put forward by the Consumers&#39 Associa tion, which has taken up the cause of policyholders, is that ministerial guidance set out in 1995, based on the Govern ment&#39s historic role as regulator, alloc ated 90 per cent of orphan assets to with-profits policyholders and the remaining 10 per cent to shareholders.

The underlying reason behind the 90 per cent rule is that orphan assets accumulate because of conservative payouts in the past. The rule is written into the articles of association of insurance companies.

The Axa Sun Life deal is unacceptable for several reasons. First, it clearly breaches the 90 per cent rule. The formula is very complex but, put simply, 31 per cent is allocated to policyholders, 19 per cent to shareholders and 50 per cent is set aside for future purposes including tax liabilities, most of which will, in practice, accrue to shareholders.

Second, the ballot of Axa policy holders was a travesty and would have been the subject of an international outcry if similar electo ral techniques had been used by dodgy politicians. Policy holders were given a “take it or leave it” cash offer of £163;400, not the £163;1,200 which KPMG actuaries judged them to be entitled to.

The ballot was not secret and only those who voted in favour of the offer were entitled to the cash. Imagine the outcry if Chancellor Gordon Brown&#39s state pension increase was only given to those who could prove they voted Labour.

That the FSA authorised this vote beggars belief and casts serious doubt on its ability to act in the interests of small investors in the future.

Third, where was the Inl and Revenue? No one ever accused this Government of being reti cent about cracking down on tax dodgers but it seems not have noticed a neat bit of tax avoidance designed to benefit shareholders rather than policyholders.

This week, the courts were due to dec ide on the legal merits of the particular case. But, whatever the outcome, the Government will now have to give very clear ministerial guidance on the future apportionment of orphan assets.

Failing that, millions of policyholders will lose the best part of £163;20bn to insurance company shareholders. The cry of Rip-off Britain has often pro ved very hollow but here is a blatant example which it is choosing not to overcome.


Crossed line for stakeholder

The Occupational Pensions Advisory Service&#39s helpline to guide consumers through stakeholder pensions is getting a mixed reception from the industry.The helpline will be manned by “trained experts” to talk consumers through stakeholder material provided by the Government and the FSA.The initiative is faced with one obstacle straight away. It was supposed to be launched in […]

MM reporter James Daley wins award

Money Marketing investment reporter James Daley has won Friends Ivory & Sime Venture Capitalist Trust personal finance journalist of the year. Daley, 23, beat national journalists to the prize which was presented by Patricia Hewitt MP minister for small business and e-commerce. This is the first year of the competition which awards journalists who further […]

Mortgage Business designs flexible buy to let

The Mortgage Business has designed a flexible buy-to-let mortgage that allows borrowers to buy up to ten properties. Investment Portfolio has a maximum loan to valuation of 85 per cent and tracks the Bank of England base rate for the mortgage term. Flexibility is ensured by the ability to make overpayments, underpayments, payment holidays and […]

October mortgage lending down 20%

Mortgage lending slumped by 20 per cent last month compared with the same period last year, according to figures from the Council of Mortgage Lenders.The monthly CML and Department of Environment, Transport and the Regions survey found loans for home purchase fell in October to £163;6.1bn from £163;6.4bn in the same month last year.Despite the […]

Inheritance tax when it is relevant

Neil Jones is Technical Support Manager with Canada Life’s ican Technical Services Team. Canada Life offers a range of wealth management solutions, including retirement income planning, estate planning and investment solutions from a choice of jurisdictions, including the UK, Isle of Man and Republic of Ireland. A trust can offer significant advantages when an individual is […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers. Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm