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MPs force disclosure of surrender options

The FSA has bowed to political pressure to force life offices to disclose all options available to customers wanting to surrender their endowment policy.

The move will make life offices obligated to disclose all options available to policyholders including selling their plan through the traded endowment policy market.

In a memo to the Comm ons Treasury select committee, the FSA has invited the PIA to instruct life offices to issue guidance to endowment policyholders who ask about the value of their endowment if they were to surrender it.

It follows political press-ure from backbenchers inc luding Labour&#39s Jim Cousins and Liberal Democrat Edw-ard Davey.

The climbdown comes after pressure on the FSA at a Treasury select committee meeting in November.

At the meeting, Davey pushed FSA chairman How ard Davies to act immediately, as it was “so clearly in the consumer interests that some sort of regulatory guidance be issued”.

The FSA claimed that, under the current regulation, it was powerless to act until after N2 which is scheduled for July.

But after Davy contested the claim under advice from the Association of Policy Market Makers, Davies said he would “write to the chair on this particular point.”

Tep market-makers welcome the FSA&#39s decision and say it was in the interests of the consumer.

They say the average pol icyholder could sell their endowment for up to 15 per cent more than the surrender value offered by life offices on the traded market.

Association of Policy Market Makers chief executive Lee Portnoi says: “Hallelujah and about time. The FSA has given no guidance whatsoever in deinvestment.”

FSA spokeswoman Louise Buckley says: “The regulator has focused on point of sale. The FSA is looking at the whole Tep scenario within one of its themed products.”

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