To my mind, there is no question about where the money belongs. It belongs to the policyholders and nobody else.
The policyholders pay their life insurance premiums, make their investments into insurance bonds and their pension contributions to the insurance company to be invested in whatever funds are relevant.
One of these funds is undoubtedly the withprofits fund.
One would like to believe that the company includes in its rates an allowance for the costs involved and, of course, an element of profit. The balance is invested.
That is where some will say that the naivety comes in.
Have you ever tried to obtain a charging structure from an insurance company for contracts invested in the with-profits fund?
It is impossible, especially where “traditional” or “conventional” with-profits are involved. the costs are built into the rates and are not known until the bonuses are calculated.
Within the with-profits fund, an allowance will be made for fluctuations in the instalments so that, as far as possible, the investment in that particular fund will, hopefully rise or at least not fall.
This reserve remains the property of the policyholders for distribution at a latter date as bonuses.
Why do the with-profits companies continually attempt to bamboozle everyone by implying that the “excess” money, that is, the orphan cash belongs to somebody else other than the policyholders.
The point is that it does not, never has done and never should do.
Where is the justification for saying otherwise?
senior pensions adviser,