HC Deb 15 June 2004 vol 422 cc833-4W
Harry Cohen

To ask the Chancellor of the Exchequer whether his Department maintains a record of the annual percentage which financial institutions add to their with profits endowments, mortgage annuities and pension financial vehicles for their investors; whether any financial regulatory body keeps such a record; if he will require such a record to be made available in the public domain; what steps he is taking to(a) encourage competition between such financial institutions and the financial vehicles they promote and (b) enable investors to make an informed choice; and if he will make a statement. [178400]

Ruth Kelly

With-profits bonus decisions are publicly available through a variety of sources including statements to policyholders, annual reports and accounts, regulatory returns made to the Financial Services Authority and reports in both the general and the specialist financial press. There are no plans to compile and make available a comprehensive record. These are medium and long-term r olicies for which one year's annual bonus percentage provides only part of the information relevant to understanding the policy.

The Financial Services Authority tells me that it regards improving transparency for existing and potential policyholders and treating customers fairly as the cornerstones of the changes that are being introduced for with-profits. Enabling consumers and those who advise consumers on their choice of investment to make rational choices on the basis of clearer and more transparent information will encourage healthy competition within the industry.

Harry Cohen

To ask the Chancellor of the Exchequer what plans he has to improve investment competition by reducing penalties upon investors who wish to opt out of very low paying annual percentage additions to with profits endowments, mortgage annuities and pension financial vehicles; if he will instruct the Financial Services Authority to bring forward proposals to ensure that investors are not effectively locked in to uncompetitive financial vehicles; and if he will make a statement. [178401]

Ruth Kelly

The value of with-profits funds depends on the interaction between annual bonuses over the lifetime of the policy and the level of terminal bonus. Surrender values sometimes incorporate market value reductions where the nominal value of a policyholders funds is in excess of the value of the underlying assets and the terms of the insurance contract allow one to be imposed. It is important that the amounts paid to departing policyholders are fair both to those who leave the fund and to those who wish to remain invested for the longer term.

The Financial Services Authority has already made a number of proposals relating to closed with-profits funds including better provision of information to policyholders explaining the circumstances of closure, setting out the options available to policyholders and better planning for the run-off of the fund.