The firm designed its flexible income annuity to counter the run-off of with-profits policies, which Evans says is “a big threat” to mutuals. Investors in the product are given a share in the profits of the business, becoming members. FSA concerns regarding this contributed to a delay to launch of more than six months.
Speaking in an interview with Money Marketing, Evans says: “The FSA takes the very clear view that the capital within a mutual belongs to its with-profits policyholders, so mutuals feel cornered because they need to either sell with-profits or close to new business or find another way out.
“We had a long, long debate with the FSA over whether the new product could work. They needed to be clear the interests of the current with-profits holders were being looked after and that the new policyholders were genuinely going to benefit from the profits of the society.
“It took a very long time for both parties to go through the minutiae. If the FSA did not agree, we would have had to look at other options, such as closing to new business. We work for our members so if we do not have members, we have no reason to generate value.”