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NUKI&#39S EYE

Two weeks ago I urged all you IFA chappies to rise up and help smite Axa, which is trying to take over more than £1bn belonging to Sun Life and Equity & Law policyholders.

Since then, a fair bit of smiting has been going on. Several of you have written to clients with Sun Life and Equity & Law policies to warn them against accepting Axa&#39s deal.

Others have taken more direct action, with one IFA calling to tell me he had spent an entire morning on the telephone giving several Axa executives a “piece of his mind”. Meanwhile, my old mate Jeff Prestridge at the Mail on Sunday has moved into carpet-bombing mode. Last week, he dedicated a full four pages to exposing Axa&#39s dastardly Napoleonic scam.

For those of you who are new to this subject, let me explain what this war is all about. Once informed, I am sure you will want to join with the rest of us.

The row centres on £1.7bn in so-called “orphan assets” that Axa holds in the Sun Life and Equity & Law life funds. Axa wants to get its hands on this cash but is prevented from simply taking it by rules which stipulate that 90 per cent ofit belongs to the company&#39spolicyholders.

Axa has decided to attempt to ask its policyholders into signing away their right to the loot. In return for a miserly £400 each up front, Axa is effectively asking its policyholders to exchange £1.7bn for £525m, with the company&#39s shareholders pocketing the balance. It is a derisory deal that would probably not stand up to scrutiny in the courts but Axa is hoping that policyholders will accept it without complaint.

The detail of the Axa deal is bad enough but, if it succeeds, several other insurers will follow suit. If that happens, the 660,000 policyholders Axa intends to fleece will be joined by millions more who hold policies with companies, including Legal & General and Prudential.

In short, the British life industry – and IFAs with it – will be reduced to nothing more than a sick national joke.

If you are still unconvinced that this cause is worth fighting for, consider for a moment how “orphan assets” are built up in the first place.

The answer is that proprietary companies have been diddling their with-profits policy- holders for decades.

Instead of calculating surrender and maturity values accurately and giving each policyholder their correct share of a fund&#39s assets, actuaries have been paying policyholders as little as they can get away with. Shareholders have always been able to count on pocketing 10 per cent of the money the actuaries hold back, now they are looking for more.

Writing in the Mail On Sunday at the weekend, John Chapman, a former Office of Fair Trading official, put forward evidence to suggest that this scam is continuing.

Is it just coincidence, he wonders, that the companies most keen to liberate their orphan assets (Axa, L&G and the Pru) have much lower early surrender and maturity values their competitors?

Chapman also wonders why we do not solve the orphan assets&#39 problem simply by giving the money back to those policyholders who were shortchanged in the first place. A policyholder underpaid £500 by Sun Life when their policy matured in 1990 would be owed about £1,600 by Axa today. Someone underpaid £2,000 by Equity & Law in 1970 would be owed £68,000.

No doubt, Axa would claim that it would be far too difficult to find its former policyholders and give them back the money they are owed. Much easier, they say, just to pocket the money themselves.

IFAs might take a different view. Ask yourselves how many former Sun Life and Equity & Law policyholders you have on your books. Why not contact them and suggest they get in contact with Axa?

They should ask if they were underpaid in the past, what the money is worth now and when they can expect to see it transferred out of Axa&#39s “orphan asset” fund and into their bank account.

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