Unit-linked funds are a type of pooled investment offered by insurance companies through their life or pension policies. Millions of consumers invest in these funds either individually or through their employers’ pension schemes. Over £900bn is invested in unit-linked funds, approximately 85% of which is pension savings.
Considering the size and importance of this market and the need to ensure that customers’ pensions and investments are protected, we wanted to check that firms were meeting our standards and treating customers fairly. So we reviewed 12 firms, which between them manage a significant proportion of the total amount invested in unit-linked funds.
This thematic review was pre-emptive and focused on ensuring that firms have arrangements in place to ensure that customers’ interests are protected effectively.
We found no material issues evident throughout our sample of firms that could have posed a serious threat to customers’ investments. So we do not believe there is any significant widespread, systemic failings in the sector. We did, however, find some specific problems in individual firms, which – if left unchecked – could have led to customers being disadvantaged.
This review is primarily aimed at insurers that operate in the unit-linked market, however our findings will also be of interest to other firms, including asset managers and other outsource service providers that are involved in the operation of unit-linked funds. It may also interest consumers, pension trustees, trade associations and consultancy firms.
We have required the firms in our sample to make improvements in response to our detailed findings. Much of this work has now been completed.
We will continue to work with the Association of British Insurers (ABI) which has committed to enhance its ‘Guide to good practice for unit-linked funds’ in light of our findings. This will make it clearer what good practice looks like and help introduce improvements across the whole of the unit-linked industry.
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