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FSA review chief sees no future for with-profits

The FSA has sounded the death knell of the with-profits name after its head of with-profits review Eleanor Linton described the term as a misnomer and questioned its future.

Speaking in London last week at the IBC conference on the future of with-profits, Linton said the with-profits name created confusion and questioned whether it applied to funds that did not participate in companies&#39 profits.

Linton also indicated that companies could be forced to rename their with-profits funds as smoothed managed in cases where policyholders do not share in the profits of the fund. Such a move raises the prospect of mutual offices being able to offer with-profits but not proprietary firms.

Linton said there could be a role for Cat standards for with-profits but said the FSA was not looking to design products by regulation.

She said: “Does the term with-profits really apply? It is very difficult to carry on with the name with-profits. It is a misnomer as it is applied to many funds.”

Also speaking at the conference, ABI head of life assurance Kate Flavell said: “The with-profits name has mud clinging to it. Perhaps it is time to change the name.”

Speaking to Money Marketing, Linton said the FSA and Sandler – who is predicted to recommend the ringfencing of with-profits – had shared their findings. She said what companies could call their funds could depend on whether they are mutual or proprietary.

Standard Life head of with-profits communications David Hare says: “A lot of what is called with-profits is, in fact, investment returns plus smoothing. If the name was changed, I suspect that people will carry on calling them with-profits. The important thing is that people understand the difference between the different products and providers.”

•ABI attacks Sandler, p3

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