Office of the Policyholder Advocate: the jargon explained

Inherited Estate

the inherited estate – often described by the media as orphan assets - is the expression used to describe surplus assets in a with-profits fund (in other words, assets not required to meet the liabilities of the fund). An inherited estate will often build up over many years. Whilst an inherited estate, like other assets allocated to a with-profits fund, is owned by the company, it cannot be used entirely freely by the company but is used for a variety of things including:

to provide investment flexibility (for investment in shares, which offer higher returns than some other investments, but are also higher risk);
to smooth bonuses;
to provide extra security against unexpected calls on reserves;
to support the sale of new business;
to pay shareholder tax;
to pay for the costs of mis-selling;
to make strategic investments.