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R&SA pulling out of with-profits sector

Royal & Sun Alliance is pulling out of the with-profits market by closing its funds to new business following months of uncertainty over the future of its life business.

It says the decision was motivated by “market uncertainty surrounding with-profits and the significant investment in time and capital needed to develop with-profits of the future”.

The company will no longer offer unitised with-profits opt-ions on new policies but its with-profits funds will stay open for increments to existing policies and pension schemes.

It says demand for more transparent products is the main driver behind the decision and it blames industry reviews for putting significant additional cost burdens on with-profits business.

Bonus rates, due to be dec-lared in the coming weeks,

will be lower than last year&#39s declarations, in line with fall-ing assets throughout 2001.

IFAs believe this shows that only product providers with deep pockets can survive in

the with-profits market.

R&SA had intended to sell the life book this year but plans have now been shelved. Its Sun Alliance & London fund is crippled by guaranteed annuity liabilities of more than £1bn.

Wentworth Rose director Philip Rose says: “I would have preferred to have seen R&SA put forward a transparent alternative to with-profits rather than just pull out. Otherwise, it does just seem like a financial need. This smacks of desperation from R&SA.”

R&SA UK finance director Keith Greenshield says: “This is essentially just withdrawing a fund link from our products in anticipation of market changes towards more disclosure. Providers have to judge if the benefits of with-profits are outweighed by reform. Bonuses will be lower than last year&#39s as with-profits is not impervious to markets.”

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