The Consumers' Association is calling on Chancellor Gor don Brown to take the FSA to task over its handling of the Axa orphan assets case.
Axa won its High Court battle against policyholders who had demanded a higher proportion of its inherited estate. The CA is waiting for an explanation of the ruling before deciding whether to lodge an appeal.
It is asking the Gov ern ment to set up a formal inq uiry into with-profits funds and says other life offices will be “lining up to do an Axa”.
Prudential policyholders have already started a legal challenge.
But analysts warn that life offices do not have huge res erves of cash and policyholders should take heed from Equitable Life which closed because it did not have sufficient reserves.
Ned Cazalet of Cazalet Financial Consulting says: “If Axa had been forced to give away 90 per cent of its orphan assets it would have been in a worse situation than Equitable. “This £20bn of inherited estate in the life industry is a myth.”
CA spokeswoman says Jenny Driscoll says: “It is a symptom of the process which is not working for policyholders. Axa sat with the FSA for two years working out this deal and no one was there to represent consumers.”
Informed Choice managing director Nick Bamford says: “I was not surprised by the decision. These companies are bearing huge costs because of lower charges and this kind of money is necessary. The wider issue coming out of this is what is a with-profits fund and who owns it?” Axa media relations manager Phil Hickley says: “We have maintained that the only surplus in the fund was £250m, as identified by the independent actuary, and it is being distributed 90/10 following industry convention. To distribute more than £250m would have made the fund unnecessarily fragile.”