FCA publishes report on fair treatment of with-profits customers

On 25 April, the FCA published its thematic review on Fair Treatment of With-Profits Customers.  The review aimed to consider how management of with-profits funds can be improved, thus improving customer outcomes.  The FCA assessed the practices of a sample of firms in the areas it believed presented some of the

highest potential risks of significant harm to with-profits customers, including investment strategy, capital management approach, risk/reward allocation between stakeholders and governance.


The FCA’s key finding was that most firms are taking reasonable care to manage the risk of customer harm in their with-profits business, but there were some areas which needed improvement. The highest risks arose due to a failure of governance, particularly ineffective oversight and challenge.  The areas of poor practice included:

  • Some closed with-profits funds were not using their run-off plans as a tool to manage the ongoing run-off of a closed with-profits fund in a fair manner on a day-to-day basis nor keeping them up to date.
  • Some firms were not carrying out annual assessments of excess surplus leading to higher risk of unfair distribution of the fund’s estate.
  • Some firms had not clearly defined the desired level of reserves to protect against risks in their funds, eg through fund-level capital risk appetites, and therefore risked not appropriately balancing fair payouts for exiting customers and the security of benefits for continuing customers.


With-profits firms with should consider their practices in light of the thematic review and identify any necessary actions.