With-profits funds explainedHow you are affected

Policyholders will benefit if the FSA tightens regulations

Will I get a pay out?

There are two different ways in which policyholders may receive payouts from the inherited estate: with a ‘special bonus’ payment, or through a reattribution.

Due to lax regulation policyholders are less likely to receive payouts than we think they should be, and these payouts may be smaller and phased over time. We want to see rule changes to stop policyholders losing out.

What is a 'special bonus' payment?

Companies are only allowed to use the money in the inherited estate for number of defined purposes. If there is money over and above what is needed to meet these purposes it is deemed and 'excess surplus' and the company must give 90% of the money back to policyholders. 

Will I get a special bonus?

Unfortunately these payments are very rare. It was not until Norwich Union decided to undertake a reattribution that the company announced that £2.4 billion of its inherited estate was excess surplus.

It seems extraordinary to us that Norwich Union was able to build up such an amount of excess capital without anyone taking action to ensure that this money was paid out to policyholders.

We believe that more scrutiny is needed and want an independent assessment of companies’ inherited estates to determine whether any of this money is 'excess surplus'. If it is, it should be paid out to policyholders immediately.

What is a reattribution?

In a 'reattribution', policyholders are offered a one-off cash payment in return for their rights to future 'special bonus' payments from the inherited estate.

The company can offer policyholders much less than the 90% they would receive in a distribution. In the recent deal proposed by Norwich Union, the company offered policyholders payouts worth less than 50% of the value of the inherited estate for their rights to the entire estate.

Part of the reason why this payout is far less than 90% is because the company is allowed to make allowances to pay for things like shareholders' tax bills, mis-selling compensation costs, and new business subsidies. We think this practice should be stopped and policyholders should receive a fair deal.

Get in touch

If you would like to find out more about our campaign, and what you can do to support it, please email us and let us know you have a policy with Norwich Union or Prudential. We'll keep you updated with our campaign, and let you know how you can make your voice heard.

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