26 February 2008: For Immediate Release

Treasury Committee announces new inquiry into Inherited estate and invites written evidence

New inquiry
The Treasury Committee has decided to undertake an inquiry into the Inherited estate, held by life assurance companies’ with-profits endowment funds.

Invitation to submit written evidence
The Treasury Committee invites written evidence as part of its inquiry into Inherited estate. Suggested areas which written evidence might address are given below. Written evidence should reach the Treasury Committee by 12 noon on Monday 14 April 2008.

Information about topics for written evidence
The Committee would welcome, in particular, written evidence that relates to the following topics:

• The regulatory definition of the inherited estate in a with-profits fund.

• The extent to which life assurance companies should be permitted to diminish inherited estate in order to subsidise corporate activity, including financing new business, making strategic investments, paying shareholder tax and paying the costs of compensation for mis-selling.

• Whether allowing life assurance companies to use inherited estate to subsidise corporate activity has any adverse effects on competition.

• The principles that should guide the division of inherited estates in 90:10 funds  between policyholders and shareholders upon reattribution of the estate.

• The appropriate sharing of inherited estate between current and future policyholders.

• Whether policyholders’ reasonable expectations of distributions from inherited estate should be zero or have a positive value.

• Whether any distribution of benefits from the inherited estate should be made in a single payment or phased over several years.

• The role and responsibilities of the Policyholder Advocate.

• The framework for negotiation between the Policyholder Advocate and the life assurance companies.

• The role of the with-profits committees of life assurance companies.

• The approach of the Financial Services Authority to the issue of inherited estate.

Background to the inquiry
Inherited estate (or ‘orphan assets’) is money that has built up in with-profits funds. This money accumulates because, from year to year, insurers can withhold a portion of policyholders’ payments to smooth returns between good and bad years. Despite these funds being contributed by policyholders, some insurance companies use some of these funds for the benefit of their shareholders rather than policyholders. Some insurers have also decided to buy these estates from policyholders, which has caused consumer concern about the fairness of the distribution of funds between shareholders and policyholders. In 2000, AXA paid out 31% of its inherited estate to policyholders, following which the Financial Services Authority created the post of Policyholder Advocate. The holder of that post in respect of Norwich Union policyholders is Claire Spottiswoode, who is currently engaged in negotiations with Norwich Union about the proposed distribution of their inherited estate.

Written evidence should be in Word or rich text format-not PDF format-and sent by e-mail to The body of the e-mail must include a contact name, telephone number and postal address. The e-mail should also make clear who the submission is from. The deadline is Monday 14 April 2008 at 12.00 noon.

Submissions should be in the format of a self-contained memorandum. Paragraphs should be numbered for ease of reference, and the document must include an executive summary. Further guidance on the submission of evidence can be found at

Submissions should be original work, not previously published or circulated elsewhere. Once submitted, your submission becomes the property of the Committee and no public use should be made of it unless you have first obtained permission from the Clerk of the Committee. Please bear in mind that Committees are not able to investigate individual cases.

The Committee normally, though not always, chooses to publish the written evidence it receives, either by printing the evidence, publishing it on the internet or by making it publicly available through the Parliamentary Archives. If there is any information you believe to be sensitive you should highlight it and explain what harm you believe would result from its disclosure; the Committee will take this into account in deciding whether to publish or further disclose the evidence.

For data protection purposes, it would be helpful if individuals wishing to submit written evidence send their contact details in a covering letter. You should be aware that there may be circumstances in which the House of Commons will be required to communicate information to third parties on request, in order to comply with its obligations under the Freedom of Information Act 2000.