View more on these topics

Regulator looks at limits on MVAs

The FSA is issuing a consultation paper on with-profits that could see new restrictions on market value adjustments and target payout ranges for maturity and surrender values.

The proposals, put forward by head of insurance firms division David Strachan this week, call for MVAs only to be applied when they are needed to protect the interests of remaining policyholders.

Under the proposals, which would take effect in March 2005, firms would be required to manage with-profits business with the aim of achieving their target ranges for payouts, taking into account the impact that future market conditions could have on their ability to pay.

Advisers and life companies say this could lead to a more cautious investment policy and lower headline rates of return.

Strachan says: “MVAs should only be applied in the event that they are actually needed to protect the interests of remaining policyholders.”

Clerical Medical pensions strategy manager Nigel Stammers says: “The difficulty with setting out target payout ranges in advance is that it becomes like a guarantee,creating problems like those with guaranteed annuity holders. This, in turn, will lead to less freedom to invest to reflect that risk.”

Wentworth Rose managing director Philip Rose says: “They seem to be looking at creating what is effectively a five-year smoothed managed fund. With-profits needs its tarnished reputation cleaned up but it is difficult when there are likely to be further cuts in with-profits bonus rates in the coming years.”


Watchdog&#39s view is critical

The Financial Services Ombudsman is reckoned to be looking warily at the trend towards reviewable premiums on critical-illness policies, with some product providers saying that the watchdog has indicated that such contracts may fall foul of unfair contract principles. It has indicated its concerns that policyholders may not understand the premiums they are being quoted […]

FSA in pledge to crack down on misselling by bank salesforces

The FSA is pledging to come down hard on banks which fail to bring in controls to end misselling to customers who lack adequate financial product knowledge. Chairman Callum McCarthy warned delegates at the annual British Bankers&#39 Association conference in London this week that the FSA would exercise its enforcement powers in a bid to […]

Market boosts endowments

The number of underperforming mortgage endowment policies has fallen to 1.5m because of improvements in the stockmarket, according to ABI research. The Consumers&#39 Association website says more than 4.4m endowment mortgages may suffer a shortfall but the ABI says campaign groups have inflated numbers of people affected.

&#39Small pension funds squeezed out of Omo&#39

An employee benefits consultant says Legal & General&#39s decision to raise its minimum fund requirement for annuity purchase from £1,000 to £5,000 could hit tax-free cash and block the open-market option. Standard Life is now the only provider to accept applications for open-market annuities for values under £5,000. Its minimum is £2,000. Jardine Lloyd Thompson […]

'Feeling the Squeeze'

Royal London carried out a UK wide survey with 2,500 consumers age 35-44 over the summer. The survey found that over a third, 34 per cent, said their finances felt Squeezed and so were struggling to meet day-to-day expenses, despite 87 per cent being aware that they need to save more. However, the survey did […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment