The attack on the regulator comes as Aviva and Spottiswoode announce a reattribution deal has been agreed for policyholders.
The FSA allows life companies to use inherited estates to pay misselling fines, shareholder tax and fund new business. After a detailed inquiry last year, the Treasury select committee urged the FSA to change the rules but the regulator has failed to act.
Spottiswoode says: “We got a good deal for policyholders in the circumstances but it would have been significantly more if the FSA had different rules. The regulator allows companies to use inherited estates to pay for things that they would otherwise have to fork out for themselves and that just does not seem right.
“This has been going on for years so the estate would have been much bigger if the FSA had not allowed this activity in the past. Given the size of this deal, it would have made quite a difference. The FSA is undoubtedly company-focused in its approach rather than policyholder-focused, otherwise it would not have these rules in place.”
Which? claims the FSA “looked the other way” while Aviva “plundered” the estate to the detriment of policyholders.
Chief executive Peter Vicary-Smith says: “Policyholders will be disappointed by the cut in the payout. The FSA’s continual failure to defend policyholders’ interests has cost them a substantial amount of money.
“The FSA effectively looked the other way while Aviva plundered the inherited estate to pay shareholder tax bills, subsidise new business, pay misselling compensation costs.
“Policyholders deserve a regulatory framework based on a clear set of principles which guarantees that all of the inherited estate is used in their best interests. The FSA needs to act now instead of ignoring the criticism of Which? and the Treasury select committee.”