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Consumers&#39 Association says FSA fails orphan test

The Consumers&#39 Association has criticised the FSA over its proposals for inherited estates, saying they fail to address who owns the funds or what they are worth.

The proposals, which are part of the FSA&#39s with-profits review, set out how life offices should handle the process of attributing and distributing inherited estates.

The FSA&#39s consultation paper outlines options for improving policyholder representation when a company looks at attributing its estates. These include using the FSA, an independent actuary or proxy negotiator to act on behalf of policyholders. Another option is for totally open consultation by the company with policyholders.

But the CA, which campaigned to get policyholders a greater share of Axa&#39s inherited estate last year, says the proposals only make the process of attributing orphan estates clearer once a scheme has been decided upon.

It says the industry has £30bn of orphan assets but the FSA is failing to ensure policyholders and shareholder interests are on an equal footing over its ownership.

Prudential, which is looking to distribute its orphan asset estate, says its discussions with the FSA are continuing and it will be responding to the consultation paper. Industry estimates put Pru&#39s estate between £7bn to £9bn.

The deadline for responses to the consultation paper is December 7.

CA public affairs officer Delroy Corinaldi says: “The priority for the regulator must be to stop companies raiding policyholder funds. By failing to consult on the ownership of orphan assets, the FSA is failing to learn from the lessons of Axa.”

Baronworth Investment Services director Colin Jack-son says: “The FSA should identify where the money should go rather than these processes of negotiation and compromise which are leng-thy and expensive. With a bit of effort, life offices could clarify ownership.”


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