Through the Looking-Glass: Assets in Wonderland

Share

Lewis Carroll should have worked in life assurance. "Orphan assets" is the latest adventure in Wonderland that this particular branch of the personal finance industry has arranged for us. They are, crudely, a sort of contingency fund that looks as though they will not be needed and could now safely be distributed. The tricky bit is working out to whom: hence the nickname. The Consumers' Association has taken an interest in the proposals by the insurance company Axa to deal with its orphan funds. The CA thinks that too much is being given to Axa's shareholders. Axa disagrees and will fight them in court.

Lewis Carroll should have worked in life assurance. "Orphan assets" is the latest adventure in Wonderland that this particular branch of the personal finance industry has arranged for us. They are, crudely, a sort of contingency fund that looks as though they will not be needed and could now safely be distributed. The tricky bit is working out to whom: hence the nickname. The Consumers' Association has taken an interest in the proposals by the insurance company Axa to deal with its orphan funds. The CA thinks that too much is being given to Axa's shareholders. Axa disagrees and will fight them in court.

One can imagine how the conversation might go with a bemused Alice if she were to stumble into the court room and encounter the gaggle of executives, actuaries, lawyers and regulators upon whom we rely to settle these matters for us.

"What are you doing?" Alice might ask. "Arguing about orphan assets." "Who do the assets belong to?" "No one." "So what are you going to do with them?" "We're going to give them to those who own them." "Who are they?" "We don't know." "So what will you do?" "We'll give some to the life policy holders and hand the shareholders the rest." "What will happen to the money for the policy holders?" "They can have about £400 now, or opt for something - maybe nothing - in the future." "And so shareholders get a windfall?" "Oh no, the shareholders' money will be reinvested in the business, which might make more profits for them in the future." "Does any one understand this? "Not really." "Can they explain it?" "Certainly not! See you in court!"

It should not be decided in court. First, Axa is looking only at an interim solution (although if your policy expires before any final settlement it won't be interim for you), so it is unfair to some policy holders. Second, because even if the Axa case is satisfactorily resolved, there are many more companies, like the Prudential and CGNU, with even bigger orphan assets which will have to go through similar processes but with potentially different outcomes.

The Treasury's well-established guidelines state that 90 per cent of orphan funds should go to the policy holders. This seems fair and sensible. But such guidance seems to have little effect in practice, and certainly not in the case of Axa. The sums of money are too great and the principles too important to be left to the courts. It is a case for legislation. And some hard homework for all those involved.

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

PPC Co-Ordinator – Permanent - West Sussex – £24-£30k

£24000 - £30000 Per Annum: Clearwater People Solutions Ltd: Are you a Marketin...

Senior Asset Manager

£70000 - £75000 Per Annum: The Green Recruitment Company: Katie Robinson +44 (...

Special Needs Teacher

Negotiable: Randstad Education Birmingham: Special needs teachers required! Sh...

EBD Teacher

Negotiable: Randstad Education Birmingham: EBD teachers re West Midlands

Day In a Page

Read Next
 

I was raped at university. Afterwards, the Police pressured me into dropping charges. Why?

Maria Marcello
 

In Sickness and in Health: It’s been lonely in bed without my sleep soulmate

Rebecca Armstrong
Alexander Fury: The designer names to look for at fashion week this season

The big names to look for this fashion week

This week, designers begin to show their spring 2015 collections in New York
Will Self: 'I like Orwell's writing as much as the next talented mediocrity'

'I like Orwell's writing as much as the next talented mediocrity'

Will Self takes aim at Orwell's rules for writing plain English
Meet Afghanistan's middle-class paint-ballers

Meet Afghanistan's middle-class paint-ballers

Toy guns proving a popular diversion in a country flooded with the real thing
Al Pacino wows Venice

Al Pacino wows Venice

Ham among the brilliance as actor premieres two films at festival
Neil Lawson Baker interview: ‘I’ve gained so much from art. It’s only right to give something back’.

Neil Lawson Baker interview

‘I’ve gained so much from art. It’s only right to give something back’.
The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model for a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
Fashion walks away from the celebrity runway show

Fashion walks away from the celebrity runway show

As the collections start, fashion editor Alexander Fury finds video and the internet are proving more attractive
Meet the stars of TV's Wolf Hall... and it's not the cast of the Tudor trilogy

Meet the stars of TV's Wolf Hall...

... and it's not the cast of the Tudor trilogy
Weekend at the Asylum: Europe's biggest steampunk convention heads to Lincoln

Europe's biggest steampunk convention

Jake Wallis Simons discovers how Victorian ray guns and the martial art of biscuit dunking are precisely what the 21st century needs
Don't swallow the tripe – a user's guide to weasel words

Don't swallow the tripe – a user's guide to weasel words

Lying is dangerous and unnecessary. A new book explains the strategies needed to avoid it. John Rentoul on the art of 'uncommunication'
Daddy, who was Richard Attenborough? Was the beloved thespian the last of the cross-generation stars?

Daddy, who was Richard Attenborough?

The atomisation of culture means that few of those we regard as stars are universally loved any more, says DJ Taylor