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Orphan Assets

Orphan Assets are a bit of a confusing issue. On one hand they are assets that have been derived from unclaimed policies and on the other hand, are amounts held back from annual bonuses in the good years to build up reserves.
The controversy surrounding these assets made the news again this week because the Financial Services Authority (FSA) and AXA Sun Life have finally reached an agreement.

Initially each policyholder will be offered £400 cash payment while an additional £225m will be added to maturing policies. If accepted though the policyholders would give up their right to any future claim to orphan assets.

Until recently the great debate over orphan assets was a matter of ownership. Did they belong to policyholders or shareholders?

The Consumers’ Association is outrage and rightly so, because policyholders are being told many with-profit endowment plans are performing badly while huge sums of orphan assets are piling up.

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