February Update 5
Dear Policyholder,
I thought you would be interested to know that the Treasury Select Committee has maintained its interest in reattributions and is to hold hearings. Clare has welcomed this and below you can read the two media releases.
Yours faithfully
Jonathan Haslam
Media release 26 February 2008
Spottiswoode Welcomes Treasury Select Committee Inquiry into Inherited Estates of With-Profits Funds
The Treasury Select Committee has today announced that it is to hold hearings into the reattribution of inherited estates in with-profits funds and has called for written evidence by 14 April.
Clare Spottiswoode has welcomed the inquiry and today said:
'I am pleased that the Treasury select Committee has decided to hold these hearings on a matter of such public importance. The outcome of this reattribution and that being considered by Prudential will affect some 5.5 million people and involves about £13 billion, now that Norwich Union has agreed to a pre-reattribution distribution of some £2.3 billion on the normal basis of 90 per cent to policyholders and 10 per cent to shareholders.
'There are many issues to take into account and detailed consideration by the Select Committee will help to bring into focus the main areas of contention to ensure that policyholders are treated fairly in a reattribution.
'Foremost among them will be the way in which the FSA allows companies to subsidise the writing of new business, which has the effect in a reattribution of transferring value from the estate directly to shareholders. Further, the way in which the FSA allows companies to pay shareholder tax from the estate is costly to policyholders and requires explanation.
'These and other matters will benefit from being discussed in public. The hearings will provide a vital spotlight on the issues for policyholders before they are asked to consider possible offers from companies.'
Clare Spottiswoode is available for interview.
Contact Jonathan Haslam
Notes to editors
Clare Spottiswoode was appointed policyholder advocate in the possible Norwich Union reattribution on 21 November 2006. High resolution images are available free of charge from www.vismedia.co.uk Further background is available on www.policyholderadvocate.org
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Select Committee Announcement
26 February 2008: For Immediate Release
Treasury Committee announces new inquiry into Inherited estate and invites written evidence
New inquiry The Treasury Committee has decided to undertake an inquiry into the Inherited estate, held by life assurance companies' with-profits endowment funds.
Invitation to submit written evidence The Treasury Committee invites written evidence as part of its inquiry into Inherited estate. Suggested areas which written evidence might address are given below. Written evidence should reach the Treasury Committee by 12 noon on Monday 14 April 2008.
Information about topics for written evidence The Committee would welcome, in particular, written evidence that relates to the following topics:
The regulatory definition of the inherited estate in a with-profits fund. The extent to which life assurance companies should be permitted to diminish inherited estate in order to subsidise corporate activity, including financing new business, making strategic investments, paying shareholder tax and paying the costs of compensation for mis-selling. Whether allowing life assurance companies to use inherited estate to subsidise corporate activity has any adverse effects on competition. The principles that should guide the division of inherited estates in 90:10 funds between policyholders and shareholders upon reattribution of the estate. The appropriate sharing of inherited estate between current and future policyholders. Whether policyholders' reasonable expectations of distributions from inherited estate should be zero or have a positive value. Whether any distribution of benefits from the inherited estate should be made in a single payment or phased over several years. The role and responsibilities of the Policyholder Advocate. The framework for negotiation between the Policyholder Advocate and the life assurance companies. The role of the with-profits committees of life assurance companies. The approach of the Financial Services Authority to the issue of inherited estate. Background to the inquiry
Inherited estate (or 'orphan assets') is money that has built up in with-profits funds. This money accumulates because, from year to year, insurers can withhold a portion of policyholders' payments to smooth returns between good and bad years. Despite these funds being contributed by policyholders, some insurance companies use some of these funds for the benefit of their shareholders rather than policyholders. Some insurers have also decided to buy these estates from policyholders, which has caused consumer concern about the fairness of the distribution of funds between shareholders and policyholders. In 2000, AXA paid out 31% of its inherited estate to policyholders, following which the Financial Services Authority created the post of Policyholder Advocate. The holder of that post in respect of Norwich Union policyholders is Claire Spottiswoode, who is currently engaged in negotiations with Norwich Union about the proposed distribution of their inherited estate.
NOTES:
Written evidence should be in Word or rich text format-not PDF format-and sent by e-mail to treascom@parliament.uk. The body of the e-mail must include a contact name, telephone number and postal address. The e-mail should also make clear who the submission is from. The deadline is Monday 14 April 2008 at 12.00 noon.
Submissions should be in the format of a self-contained memorandum. Paragraphs should be numbered for ease of reference, and the document must include an executive summary. Further guidance on the submission of evidence can be found at www.parliament.uk/parliamentary_committees/witness.cfm.
Submissions should be original work, not previously published or circulated elsewhere. Once submitted, your submission becomes the property of the Committee and no public use should be made of it unless you have first obtained permission from the Clerk of the Committee. Please bear in mind that Committees are not able to investigate individual cases.
The Committee normally, though not always, chooses to publish the written evidence it receives, either by printing the evidence, publishing it on the internet or by making it publicly available through the Parliamentary Archives. If there is any information you believe to be sensitive you should highlight it and explain what harm you believe would result from its disclosure; the Committee will take this into account in deciding whether to publish or further disclose the evidence.
For data protection purposes, it would be helpful if individuals wishing to submit written evidence send their contact details in a covering letter. You should be aware that there may be circumstances in which the House of Commons will be required to communicate information to third parties on request, in order to comply with its obligations under the Freedom of Information Act 2000.
FURTHER INFORMATION:
Committee Membership is as follows: Rt Hon John McFall (Chairman), Nick Ainger, Mr Graham Brady, Mr Colin Breed, Jim Cousins, Mr Philip Dunne, Mr Michael Fallon (Sub-Committee Chairman), Ms Sally Keeble, Mr Andrew Love, Mr George Mudie, Mr Siôn Simon, John Thurso, Mr Mark Todd, Peter Viggers.
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