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FSA plans to hand lifeline to with-profits mutuals
by William Robins on Dec 19, 2012 at 15:59
The Financial Services Authority (FSA) is planning on handing with-profits mutuals a lifeline by making it easier for them to develop new areas of business and share benefits with customers.
The FSA is consulting on new rules for the sector in response to the threat of mutuals closing due to a decline in new with-profits business.
Under the proposals, mutuals that operate a single common fund will be able to separate this into a so-called mutual members’ fund and a with-profits fund. The mutual members’ fund would be treated as sitting outside the with-profits fund.
The new approach will enable with-profits mutuals to provide financial services to new and existing customers using the mutual members’ fund, even if the with-profits fund were to go into run-off.
Martin Shaw (pictured), chief executive of the Associaton of Financial Mutuals, said the rules would make it easier to hand benefits to members of mutuals who are not with-profits policy holders.
'Under these plans mutuals will be able to apply to the FCA to avoid an uncessary early wind-up by showing the best interests of its customers are not served by closing a perfectly viable business,' he said.
David Geale, FSA head of retail investment policy, said: ‘We have worked extensively with the mutual with-profits sector to develop these proposals. They recognise the need for some mutuals to develop new areas of business, while continuing to protect with-profits policyholders.’
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