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FSA in MVR move to give equal deal to policyholders

The FSA is proposing moves to cut out any preferential treatment of shareholders over with-profits policyholders when market value reductions are applied.

The move could see policyholders benefit from redistribution that could boost their plans by up to 3 per cent.

The FSA says it wants to make the proposed revision to the handbook after realising that in a proprietary with-profits fund there is often no parallel mechanism to ensure reductions in bonuses applied to policyholders through an MVR also apply to shareholder dividends.

The regulator says, subject to consultation, the new rule will require firms to take full account of the interests of policyholders and shareholders in any distribution.

It estimates a potential redistribution of around 3 per cent in terms of shareholders’ payouts being moved across to policyholders.

It says for a minority of firms there could be a significant cost to implement the new rule as it may involve setting up new accounting systems to maintain accurate records of MVRs.

Spokesman Robin Gordon-Walker says: “The proposals look to ensure the familiar 90:10 rule is applied fairly between shareholder and policyholder. It will reinforce consumer confidence that they are being treated fairly by firms and give greater confidence in the market.”

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