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Closed funds under scrutiny

Charging structures on closed with-profits funds are to be scrutinised by the FSA to ensure that investors are not being ripped off.

FSA sector leader for insurance David Strachan told a Cazalet Consulting conference in London this week that he expects charges on with-profits funds to fall after they are closed as new business acquisition costs are stripped out.

He said when the new regulatory regime on with-profits comes into force in the middle of next year, the FSA will be better armed with information to ensure this is the case.

Strachan was keen to stress that closed with-profits funds are not universally poor performers and a number have outperformed open funds.

Cazalet Consulting principal Ned Cazalet said he expects many closed WP funds to convert to unit-linked while providers will look to outsource activities such as admin.

Strachan said: “There is a danger that closed funds become the latest albatross around the industry&#39s neck. We will look very closely at charges on closed funds. They should fall, given the fall in costs of customer acquisition. It is not unreasonable to think transaction and asset management charges should also fall.”

•Cazalet report, p80

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