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FCA on 'zombie' fund probe: we won't review 30 million policies

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FCA on 'zombie' fund probe: we won't review 30 million policies

The Financial Conduct Authority has confirmed it intends to launch an investigation into the sale of old closed insurance policies.

The investigation into these 'zombie' funds will cover pensions, endowments, life insurance policies and investment bonds sold in the UK between the 1970s and 2000.

There are around 30 million policies in this market, which is worth around £150 billion.

In a statement sent out on Friday afternoon, following a sell-off that has hit a number of insurers, the financial watchdog said: 'We will be looking at how people in closed accounts are being treated.

'These accounts have been closed for many years in some cases, but there are still valid issues to be looked at around the question of the service that consumers receive in relation to those accounts. Are they getting the right information? Are they getting the right level of service? Are these investments still appropriate?'

However, the FCA stressed it would not examine each individual policy and force new rules retrospectively.

'We are not planning to individually review 30 million policies, nor do we intend to look at removing exit fees from those policies providing they were compliant at the time.  

'This is not a review of the sales practices for these legacy customers and we are not looking at applying current standards retrospectively – for example on exit charges.'

It added: 'This work will commence in the summer and we will be speaking to firms about how we can undertake that review. As a forward looking regulator, we want to examine areas that are of interest and relevance to consumers and to firms and assess whether there is an issue that requires any action. No conclusions have been reached as work has not started.'

The financial watchdog will reveal more details of its investigation when it publishes its business plan on 31 March.

Market reaction

Insurers have recovered some ground after suffering heavy losses in the morning on the news, which was broken in the Telegraph.

At 2.36pm Legal & General was down 3% at 205p, rallying from a day low of 193p and Aviva was off 3.6% at 465.9p versus a day low of 442.5p

Resolution, which had been hit hardest, had recovered from a low of 266.6p to 290.7p, a loss of 8.9% on the day.

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