View more on these topics

CII warns of looming with-profits scandal

With-profits annuities and income withdrawal will be at the centre of the next finan-cial services scandal, accor-ding to a damning report from the Chartered Insurance Institute.

The stark warning comes as the CII issues an appeal to life offices to clean up their act or face being dragged over the coals by the FSA and the national press.

The warning is part of an explosive report by the CII&#39s Fellows&#39 working party on Retirement Planning in the Current Legislative Framework.

The report was published this week at Westminster and City Programme&#39s fourth annual annuities conference in London.

Chairman of the CII working party and Evergreen Retirement Assurance corporate development director Robert Bullivant said one of the key concerns is whether with-profits members are subsidising “imprudent commission” on stakeholder-friendly plans.

The institute also warns that the with-profits market is ripe for exploitation through high and hidden charges, poor service and opaque returns from life offices.

Bullivant highlighted how with-profits returns and deductions are only known to actuaries, making it impossible for IFAs to make sound recommendations.

Bullivant accused life offices of using outdated mortality projections to generate higher annuity rates to win market share. The CII is urging IFAs to boycott life offices which do not disclose mortality calculations.

The CII revealed a “worrying” lack of investment in direct equities within income- drawdown products and a bias for with-profits and fixed-interest funds, raising alarm over whether the required yields needed to pay the client&#39s income can be met.

The CII also says the commission issue needs to be urgently reviewed.

Bullivant said: “There is considerable commission bias for with-profits annuities and fund withdrawal. Life offices need to deal with this in order to give the national press one less thing to attack the financial services industry for.”

Recommended

Green is this season&#39s black

There are more than 40 ethical funds in the marketplace and this number is set to increase dramatically. While selecting the right one may not be easy, I believe the extra effort means IFAs can add significant value.Every client has different concerns when choosing an ethical fund manager. Some might have specific worries which will […]

High-net-worth clients targeted by Abbey service

Abbey National is setting up an IFA wealth manage-ment service for high-net-worth individuals by the end of the year.The project, codenamed Prosper, will offer independent advice on a range of investment products. Abbey is intending to use Prosper to provide advice and access to products managed by leading fund managers worldwide.The service is aimed at […]

ScotLife Intl to reissue 10.3% bond

Scottish Life International is rolling out a third issue of its income & growth bonus bond offering investors the choice of capital growth or income.The bond offers annual income of up to 10.3 per cent gross or 2.25 per cent gross quarterly. The growth option pays 33.25 per cent gross after three years.The bond is […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment