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Who is policing policy changes?

It was interesting to read in Product Matters about Norwich Union&#39s commitment to with-profits (Money Marketing, February 19). The strange thing is that it does not offer a with-profits contract any more.

You can call a bed a chair because you can sit on it but the other way round it becomes a very restless night.

I have just received an email from the actuarial department at Norwich Union where it confirms that its with-profits policies have not been with-profits policies since 1998.

The definition of with-profits has been quite specific in history. It is not just a managed fund, it is in effect a managed fund that also participates in the profitability of the underwriting office. That is what with-profits policyholders buy in to.

The full dedicated shareholders can expect a portion of the gains but with-profits policyholders expect their bit too.

Unless I have completely misread the missive, which has taken four months for Norwich Union to produce, in 1998 it unilaterally decided that it would change the definition and the make-up of a contract. Should there be a regulator that stops that happening?

Standard Life has proved by the dextrous way it has dealt with its recent transfer of a large slice of its equity holdings that it is every bit as capable of looking after other people&#39s money as the next man. But it does seem that all the insurance companies have developed an arrogance that allows Norwich Union to disenfranchise its with-profits policyholders from the only thing that gives them a differentiation from a managed fund and Standard Life the authority to backdate the terms and conditional of its policies to November 16 without thought for the amount of work it takes to explain these contracts and get them on the books.

While the FSA fiddles with perception, the facts are being left to look after themselves.

With-profits is about sharing in the trading success or otherwise of the office. Let us have it spelled out and use the term with-profits only if and when it is appropriately applicable.

Terence O&#39Halloran Chartered insurance practitioner, Lincoln


Liverpool Vic says realistic regime will not hit capital

Liverpool Victoria has trimmed with-profits policy bonus rates but claims its financial strength holds strong, with the FSA&#39s realistic reporting regime not expected to have any negative effects on its capital position. Cuts to annual bonus rates range from 0.2 per cent to 0.35 per cent, with final bonuses dropping by between 5.1 per cent […]


“No. Unless there is a dramatic increase in interest rates, I do not think house prices will fall at all.” Paul Harrold, Harrold Financial Planning ” No. House prices will steady back a little way but I cannot see them dropping that dramatically. However, the first-time buyer market has dried up and this is what […]

Gartmore does balancing act

GARTMORE Gartmore Portfolio: Balanced Strategy Type: Oeic fund of funds Aim: Growth by investing in a managed portfolio of investment funds Minimum investment: Lump sum £1,000, monthly £50 Investment split: 55.6% UK equities, 12.4% bonds, 8.9% Europe ex UK, 9.3% US equities, 6% Asia ex Japan equities, 4.5% Japanese equitie, 1.5% emerging markets, 1.8% cash […]

When is a with-profits policy not with-profits? When it is invested in bonds

Many with-profits funds are now entirely invested in bonds. Who ever would have thought that Pearl, NPI, London Life, or the Equitable Life, Royal, Sun Alliance and indeed many other WP funds would eventually be exclusively, or at least nearly so, invested in bonds? The impact of this will be to guarantee that investment returns […]

Cricket - thumbnail

England vs Australia: pensions

Well, the cricket season is here, and England and Australia are stepping up to the wicket. Although we compete with each other in the sporting world, when it comes to pensions, Australia’s pension programme is held up as a model for our auto-enrolment initiative. Auto-enrolment was introduced because people weren’t saving enough into their pensions, and it is still early days but signs are positive. However, in Australia, saving into a pension is compulsory, and in fact employers are the ones who have to pay in. Employees in Australia can make additional contributions into their pensions, but they don’t have to. Should the onus be on the employer or employee to save? Well in the UK we think it’s both, but to get ‘adequate’ savings for retirement it’s the employee who has to pay more in.


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