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Friday 27th June 2008
Just a few months ago it was suggested that the Prudential was looking at the possibility of authorising a one-off payment to policy holders in exchange for giving up their future rights to the company’s so called orphan assets. There were rumours that the payment would have been several hundred pounds for each of the company’s 4.5 million policyholders, but the company has decided not to proceed.
The problem seems to have been finding a mutually acceptable rate of payment with shareholders and policyholders looking at the situation from different angles. While the problem of orphan fund assets (returns on older with-profits funds which now have no home) is not a new one, it is one which is proving very difficult to resolve.
However, the decision to cancel the suggested one off payment has upset many people as some insurance companies have used orphan funds in the past to cover some expenses associated with the business, with compensation payments one which springs to mind. Even though some policy holders are annoyed at the change of plans there may be light at the end of the tunnel with the FSA set to rule on the ownership rights of orphan funds over the next few months. This may be the real reason why Prudential has cancelled the payments. |
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