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Tillinghast warns with-profits firms on ppfm problems

Tillinghast has warned companies running with-profits investments that they could be accumulating future problems for themselves by not fully addressing new industry regulations.

Since April 2004, companies operating with-profits business in the UK have been required to publish their principles and practices of financial management.

But Tillinghast believe some firms are not providing the clarity and transparency required of them in their PPFM.

Tillinghast principal Ian Maidens says the level of detail in the PPFM varies greatly between companies and, for a number of them, it is difficult to interpret what actions they are taking in managing their with-profit funds.

It provides specific examples of areas that need to be addressed. For example, some companies provide little detail regarding the proportion of the maturing value targeted as terminal bonus as well as the level of smoothing costs they are willing to tolerate..

Other PPFMs fail to explain the governance arrangements they have put in place to provide independent verification that funds are being managed in accordance with the PPFM.

Tillinghast consultant Phil Roberts says: “Overall, we found the quality of the PPFM varied greatly. Some have been drafted in a very precise way and contain a high level of well thought out detail without placing undue constraints on the management of the business.” However, other companies have produced PPFMs which remain very unclear and we believe that they will be under pressure to tighten these up in the near future.”

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