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NU calls for stakeholder rules rethink over with-profits loans

Norwich Union is calling on the Government and regulator to change stakeholder rules to allow ringfenced with-profits funds to borrow from established funds if they fail to meet their guarantees.

The change would allow two-way traffic between the new ringfenced policy and the life office&#39s existing with-profits funds or free assets in the form of loans. This would allow the cross-subsidisation if the new fund underperforms.

NU is also hitting back at criticism of its proposed subsidisation of its with-profits stakeholder from existing funds, arguing that this would only occur as a last resort and would not effect existing policyholders.

Chief actuary Mike Urmston says the life office is not satisfied with the current legislation as it does not provide the flexibility for the stakeholder fund to pay back any sums taken from the established fund should the guarantee not be met by the ringfenced fund&#39s performance.

He says: “Our view is that the regulator should change the rules to allow any loans required to support the with-profits fund to be paid back to shareholders and policyholders. We will continue to press for change.”

The Department of Social Security says it has not ruled out changes to the restrictions. A spokesman says: “We have had lots of different representations from many different parties and we will continue to look at ringfencing and other stakeholder issues in light of experience.”

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