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With or without with-profits?

Time is running out for with-profits as we currently know it. With two major competing forces, the FSA and the Sandler review, fighting over control of reform, with-profits is set for a radical overhaul.

The FSA seems determined to rain on Sandler&#39s parade. The regulator appears to be playing the good cop as opposed to Sandler&#39s bad. It has conducted its review overtly with the industry, publishing issue papers and speaking openly of its views.

Sandler and his team have come under fire for their lack of openness when garnering the information on which their findings are based.

Speaking at the Future of With-Profits Policies in the UK conference last week, the FSA head of the with-profits review Eleanor Linton warned life offices that with-profits must do exactly what it says on the tin and should mean policyholders share in the profits of the fund.

She warned that the name with-profits was a misnomer and that in the future only mutuals may be able to offer with-profits funds, while proprietary offices could be forced into renaming their funds as smooth managed.

Linton spelt out the FSA&#39s opposition to product design through regulation. The implication could be that Sandler, as widely predicted, is about to scupper with-profits through ringfencing. In a clear hint of what may be to come, Linton accepted that Catmarking may have a role to play.

Whatever the future is for with-profits, Money Marketing has long been of the belief that it is in need of reform. Both Sandler and the regulator should recognise that with-profits has, and continues, to provide risk-averse investors with steady growth – something a tracker or unit-linked fund would not have provided over recent years.

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