Speaking at a TSC inherited estates hearing, McFall asked Norwich Union chief executive Mark Hodges and Prudential chief executive Nick Prettejohn whether the product was worthwhile, given that the firms can dip into their inherited estates, which policyholders may receive a slice of, to pay shareholder tax and miselling costs and supplement staff pension schemes.
He said: “It seems the cards are stacked in the firm’s favour and if we leave aside the reattribution process and just consider what normally happens to the inherited estate, you can do the following: you can underwrite new business, you can pay shareholder tax, you can pay miselling costs and indeed you can support the staff pension fund. The question arises, what safeguards are there for policyholders? Why would anybody want to invest in a product where part of the fund that might be distributed to them could be raided at any time by those who are trusted to invest that money for them?”
Prudential admitted it had used £1.1bn of the fund to pay misselling compensation and a further £500m on administrative costs involved in paying this compensation. Norwich Union said £183m had already been spent to pay misselling costs and another £80m had been set aside for future compensation.
McFall said the FSA seemed to be dragging its feet and queried whether the with-profits committee was “robust” enough to stand up to shareholders.
He said: “It seems to me the FSA is sitting about and actually looking at things in the round and not treating things as they should. The with-profits committee exists to protect the interests of policyholders in general. Certainly the question in my mind is how much of a robust challenge do they offer.”