Oral question asked in the House of Lords, by Lord Elton (Conservative). It was answered on Tuesday, 22 April 2008.

Finance: Inherited Estates

Question: My Lords, have not successive Governments, including the present Government, said that the reallocation of this money should be in the proportions mentioned by the noble Lord, Lord Joffe? Have the insurers not overprovided with money that was taken from the policyholders? Surely they must have a prior claim.

Answer: My Lords, I emphasise again the distinction I sought to make in my Answer. Where bonuses are paid on surplus funds, the allocation is generally on the basis of 90 per cent to policyholders and 10 per cent to shareholders, a formula that the FSA has recommended. The difficulties occur on reallocation, when shareholders are buying out policyholders. In that context, not just the interests of existing policyholders but the future operations of the company have to be taken into account. That is why the formula there is bound to be different from the 90 per cent plus 10 per cent that obtains on straight surpluses.

Secondary information