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Phoenix wins court wrangle over with-profits payments

by Brian Cantwell on Feb 15, 2013 at 10:14

Phoenix wins court wrangle over with-profits payments

Closed life company Phoenix Life has averted higher payments to around 22,000 savers after a High Court judge ruled in its favour over payments to with-profits policyholders.

Phoenix had taken the case to the courts, following talks with the Financial Services Authority (FSA) over the returns for holders of the Pearl Freedom Bond.

The case centred on how a guaranteed level of annuity featured as part of the bond was calculated. The bonds promised savers a guaranteed nominal capital sum, which would contribute towards the guaranteed level of annuity. If the capital sum was not enough to provide that level of annuity, Phoenix would have made up the difference.

Phoenix had claimed the nominal capital sum included bonus payments made as part of the policy. But the FSA, acting as defendant in ‘co-operative litigation’, claimed the sum should not include bonus payments.

Judge Andrew Smith said: ‘To my mind, there can be no real doubt about the proper interpretation of the Freedom Bond on the point in issue. It seems clear to me from the wording itself, given the nature of the instrument.’

A spokesman for the FSA said: ‘We had been in discussions with Phoenix in relation to how this product operates, and considered there was sufficient uncertainty regarding the wording of the insurance policy contract to seek an authoritative decision from the court as to how the policy operates.’

6 comments so far. Why not have your say?


Feb 15, 2013 at 11:07

Well, that's all right then. Despite the FSA feeling the guarantee did not include bonus, a judge agreed with the second hand purchasing company.

So if Phoenix bought a liability in the shape of the Freedom Bond that it did not understand at purchase, how good was its due dilligence? Maybe the FSA could get the fine book out. We will see.

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The Rumpo Kid

Feb 15, 2013 at 11:08

Don't you just love With profits funds?

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Feb 15, 2013 at 11:08

p.s. I just realised that Howard Davis, ex FSA chairman in chairman of Phoenix. No chance of a fine.

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Bob Donaldson

Feb 15, 2013 at 11:59

Smoke and mirrors and how many poor people are stuck in these things!

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Darren Mason

Feb 15, 2013 at 12:09


The frightening thing is that so many savers remain in these without profits plans through inertia and do not realise the impact until it is too late to do anything about it.

Perhaps the FSA or FCA could start a new expensive marketing campaign to educate the masses that life is not fair and even more unfair if you hold with profits investments in a closed life office fund!

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Feb 15, 2013 at 14:02

It is time the FSA dug deep into the consolidators, they are the only ones making a profit. I thought With Profits meant profits were distributed to policyholders.

There is too much smoke around With Profits. Bonus rates fell and have not recoverded over the last 10 years despite the FSA making insurers hold more in bonds which over the last 10 years have delivered significantly higher rates of returns than bonus rates.

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