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With-profits must change to survive

Malcolm Lindley&#39s letter (Money Marketing, December 6) neatly demonstrates all that is bad about with-profits at the current time and why radical change is so vital if the concept is to survive.

The letter documents the process for getting an increased payout on a with-profits policy – hope for a coincidence (in this case, getting a letter at the same time from another life office using discretion to determine terminal bonuses in a different way) and then complain.

This raises a number of simple questions – how can the regulators allow the size of the payout on a with-profits policy to vary according to the level of coincidences and complaints?

Was this procedure for determining payouts docum-ented in the key features and the with-profits guide?

How many other investors are losing out to discretion and could have been paid more?

Is the money that could have been paid out used to build the orphan assets?

Using discretion in ways such as this just discredits the with-profits concept and highlights why there is so much suspicion over published past performance figures.

Let us hope that the Sandler and FSA reviews can sort out with-profits, put a stop to this nonsense and lead the way for the concept to be re-invented in a transparent way fit for the 21st Century.

Brian Newbould

Senior manager, (pensions development),




SEI rethinks Dublin arm as bond is put on hold

Scottish Equitable Intern-ational is considering its options for its Dublin-based offshoot after having to put its with-profits bond on ice. SEI opened offices in Dub-lin with the intention of offering the with-profits bond. But following the events of September 11, the launch was delayed, with the company claiming that the climate was now too unfavourable, […]

Anne McMeehan

Lives: Kensington,West London and SouthamptonBorn: April 25, 1954Age: 47Education and qualifications: Portsmouth High School, Degree in Economics Politics French and German from Loughborough University of Technology Career to date: Hambro Life, Arbuthnot Latham, Framlington 1985-1996 managing director of Unit Trusts, 1995-6 Deputy Chairman of Autif then communications director 1997 to present. Career ambition:”To have it […]

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Japan Economic Insight

James Dowey, Chief Economist, and Paul Caruana-Galizia, Economist

The conventional wisdom is that following a roughly 50 per cent rise in the stock market in 2013 in Yen terms, the Japan trade is over and done*. So the story goes, those big gains were due to a one-off boost from quantitative easing (QE) and a depreciation of the Yen — policies that one should think of as a palliative to Japan’s economic weakness, but not a cure. Rather the cure, and by implication the necessary condition for a longer-term investment case, is deep structural reforms — a painstaking re-weaving of Japan’s economic and social fabric, no less. The story continues: this is a much tougher test than launching a blast of QE, and one that prime minister Shinzo Abe, although well intentioned and well supported by the public thus far, is likely to fail. Stick a fork in Japan, it’s done…continue reading


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