Scrutiny of AXA’s takeover deal by Resolution has revealed that one million with-profits policyholders missed out on £1 billion special bonus windfall when it was distributed a decade ago.
Which? campaigned on behalf of thousands of with-profits policyholders when AXA offered to buy the interests in its inherited estate, the surplus in the amount of cash needed to meet the guaranteed payouts for policyholders, back in 2000, in order to get fair treatment for policyholders. We represented policyholders at the High Court.
Reduced with-profits payout for AXA policyholders
AXA eventually paid with-profits policyholders around £300 million in return for giving up any claim to the inherited estate, despite it being valued at £1.43 billion at the time, stating that if policyholders did not accept the money and waive their right to the estate, they would be unlikely to get a payout in the future. Policyholders usually have a 90% interest in the inherited estate and any pay-outs from it.
Which? said that this was an unfair deal and that with-profits policyholders rights to the money were not being protected.
Despite our objections to the inherited estate payout deal, it was approved by the regulator, the Financial Services Authority (FSA) and the High Court.
Policyholders missed out on £1 billion
But when Which? looked at the small print of the Resolution deal, which has seen AXA’s life and pensions business transfer over to the consolidation company to join other recent purchase Friends Provident in a £2.75 billion deal, we found that the inherited estate is now worth £2.2 billion, and that Resolution will be able to take over £1 billion out next year.
This means that if we had been successful in preventing AXA’s payout back in 2000, policyholders still in the fund would have been entitled to 90% of a £1 billion bonus payout and a significant uplift in what they eventually received from the fund.
New chance to get a special bonus
However, for those with-profits policyholders that refused the deal ten years ago (around 13%), they have retained the right to receive any future payouts of the estate.
If you refused the deal back in 2000 and have an AXA with-profits policy in the what is known as the ‘Old With-Profits Fund’ that is due to still be in the fund next year, you could be in line for a substantial bonus. Contact AXA to find out if you have been placed in the old with-profits fund and take independent financial advice before you think about cashing in your policy.
Which? Money when you need it
You can follow @WhichMoney on Twitter to keep up-to-date with our Best Rates and Recommended Provider product and service reviews.
Sign up for the latest money news, best rates and recommended providers in your newsletter every Friday.
Or for money-saving tips, and news of how what’s going on in the world of finance affects you, join Melanie Dowding and James Daley for the Which? Money weekly money podcast
For daily consumer news, subscribe to the Which? news RSS feed here. And to find out how we work for you on money issues, visit our personal finance campaigns pages.