The FSA has issued new guidelines for the fair treatment of with profits policyholders. The proposals include publishing target ranges for payouts and MVRs only applied if there has been either a significant change in the value of the fund's assets or if a high volume of surrenders has occurred or is expected.
It also suggests restrictions on what firms can charge to their with-profits and that compensation for policy holders should be paid first from any inherited estate and second from shareholders funds.
On distribution of surplus firms would have to consider whether the surplus exceed what is necessary to support current and future business. Firms will have to notify policyholders within 28 days of fund closure and submit a run off plan to the FSA.
CP207 includes guidance for firms on informing consumers about how their with-profits funds are run.