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online technical resource

management actions in closed or open "with-profits" funds


If a with-profits fund is under financial pressure, there are three main actions a financial business might consider taking to improve the fund’s financial position:

  1. seeking additional money from outside the fund;
  2. reducing the payout to policyholders; or
  3. moving the with-profits fund into lower risk investments.

The second and third of these are known as "management actions" – and we occasionally see complaints about these actions.

The complaints we see sometimes relate to with-profits funds that have suffered from a past downturn in equities – and they will not benefit from any future upturn in equities because the funds are now largely invested in fixed-interest securities (such as gilts and corporate bonds).

cases that turn on individual circumstances

Some of the complaints we see about with-profits funds relate to the original sale of the investment. Whether the investment was suitable for the consumer, or whether the consumer made the investment as a result of a misrepresentation, will depend on the individual circumstances of each case. We will be consider these issues in the usual way.

There is more information about our general approach to complaints about “with- profits” bonds and market value adjusters in our online technical resource.

cases that involve the regulator

Some of the complaints we see about with-profits funds involve management actions in relation to the fund after the investment was acquired. Complaints like this can have implications beyond the individual case – so might fall within the Financial Conduct Authority's (and previously the Financial Services Authority's) supervisory remit.

what will the regulator do?

The regulator will not consider individual complaints. But if we think a complaint raises issues that could have wider implications, we might ask the regulator to consider whether it has any concerns about the overall management of a particular fund. It might be necessary for the regulator to investigate the management actions in more detail before it forms a view.

If the regulator does not raise any objections to the management actions, we will explain that to the consumer. And if the management of the fund was the only issue raised in the complaint, we may dismiss the complaint on the grounds that the actions were a legitimate exercise of the business’s commercial judgement.

If the regulator tells us that it is investigating further, we will probably think about deferring our consideration of the complaint until the regulator has completed its investigation.

help for businesses and consumer advisers

contact our technical advice desk on 020 7964 1400

This is part of our online technical resource which sets out our general approach to complaints about a wide range of financial products and issues. We would like your feedback on how helpful you found it. Please also use the feedback form below to tell us about anything you think we could clarify or explain better.

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  • The law requires us to decide each case on the basis of our existing powers and what is fair in the circumstances of that particular case.
    We take into account the law, regulators' rules and guidance, relevant codes and good industry practice at the relevant time.
    We do not have power to make rules for financial businesses.
    Our current approach may develop in the light of circumstances disclosed by further cases we receive.
    We may decide that fairness requires a different approach in a particular case.