Responses to the latest Incisive Buzz survey
The latest Incisive Buzz survey asked whether the FSA is right to limit the size and use of MVRs on closed with-profits funds. A selection of answers are below.
• If MVRs are controlled too extensively by the FSA, other policyholders (those that stay in the fund) may be penalised. If every client transfers out, there will not be sufficient money in the pot. Will the FSA make up the shortfall? MVRs should be applied fairly by the company concerned. The FSA should only be involved when the penalties are unfair.
• It should be a commercial decision for the companies concerned.
• On what basis could they possibly restrict them if the underlying investments fell very substantially
• Of course they should but I don't know how effective it will be. I'm more concerned about the current funds as that is where the majority of my client money is. It doesn't fill you with any confidence when broker consultants tell you it could be another five years before they look at reducing them. The how long is a piece of string technique is completely unacceptable.
• If the FSA really understood the market it regulates we might have more money available to investors rather than the payments made by insurers to maintain the supper plus offices of the FSA.
• MVRs are an insidious rip-off, because policyholders and IFAs were totally unaware of the possibility that MVRs could be applied when policies were sold many years ago. On the contrary, I remember hearing the then Chief Executive of a major life office pointing out that, once bonuses were added to a policy, they became a contractual liability of the life office in just the same way as the basic benefit. The FSA should ban MVRs entirely.
• MVR's are being used as a fund protection scheme and what was misleadingly presented by the provider as a short term measure looks more and more as a charge to keep funds under management.
• The FSA should investigate the charges and penalties on closed funds to protect consumers. They should not be trying to run life offices as a part-time job.
• Having been in the business since 1968, I was always told by life offices that once bonuses were added they could not be taken away. Now we see the companies in their true colours. They are just as bad as general insurers who try to squirm from paying out. They should honor their contracts. Like every one (I think), I am not a great fan of the FSA, however, I it is right to intervene in this matter.