We commenced our review with an assessment of all the areas across the with-profits market where there is potential for customer harm. After identifying those areas we regard as presenting the highest potential for customer harm, we conducted a detailed review of firms’ practices in these areas, with the key focus being whether these are resulting in the fair treatment of with-profits customers.
August 2025 update: This review is historical. See our what we publish[1] page for more information and current views.
The key focus areas of our review were:
- Investment strategy and management.
- Capital management in relation to areas such as estate distribution and fund resolution.
- Fair allocation of risk and reward between stakeholders in capital management decisions.
- Governance of with-profits business, principally in relation to the above 3 areas.
Who this applies to
Our findings are likely to be of interest to all firms that are managing with-profits business, whether or not funds are still open to new business. Consumer groups, charities, trade bodies and organisations dealing with financial products that include with-profits investments may also be interested in the findings. Many with-profits products are historic products and therefore organisations with an interest in the ageing population will find this of particular interest.
Our scope
At the end of 2017 there were 98 with-profits funds across 37 firms. After reviewing information from most of the firms we conducted a detailed assessment of with-profits funds within 8 firms in the areas highlighted above. This sample formed approximately 80% of with-profits assets within the market and included a mix of open and closed funds across mutual and proprietary firms of varying sizes.
What we found
- Most firms we assessed were taking reasonable care to manage the risk of customer harm.
- Where funds were closed to new business we found firms did not always use their run-off plans appropriately, as intended and described in our rules and guidance.
- We identified weaknesses in assessments for and distribution of excess surplus.
- We identified examples of insufficiently robust fund-level capital management approaches.
- These practices have the potential to cause customer harm if not corrected.
- In most cases there was no evidence of actual customer harm having occurred.
- In the limited instances where we found practices presenting a higher risk of customer harm a key cause was failure of governance.
Next Steps
Feedback has been provided to all firms that participated in the review. We have requested firms to take action where we have identified poor practice. The CEOs of all firms operating with-profits business will be asked to ensure that their firm takes full account of our findings. Round-table events are also planned later this year for senior managers so that we can understand what actions firms are taking to address our findings.