This includes principles relating to solvency capital coverage.
The PPFM also describes how the company manages its with-profits fund and responds to shorter-term challenges. In addition, it sets out the rules governing the calculation of bonuses or market value reductions.
Professional boards
Even smaller providers now have professional boards with a good understanding of solvency and capital requirements. The days of member-led boards setting bonus rates on their own investments are long gone.
Providers have to understand exactly where investors’ funds are placed.
Even when collective investments are used by with-profits funds, providers are required to look through those collective vehicles on a line-by-line basis to ensure they understand every constituent investment in the fund.
Providers should publish their annual management charges, which will include the cost of any capital and growth guarantees.
Most will now also publish their tactical asset allocations and largest individual investments, enabling investors to understand where their money is held.
They should, at advisers’ request, also be able to share their investment look-through data on the assets that make up their funds.
Many advisers have over recent years dismissed with-profits as having non-transparent charging structures and bonus declarations.
It is true with-profits products include an element of human discretion, which means disclosure cannot be boiled down to the same few key numbers as would be published by, say, a unit trust.
However, stringent PRA and FCA regulation, enhanced disclosure by providers and clear asset share boundaries mean this discretion is precisely what sets with-profits products apart.
Peter Green is chief executive of Healthy Investment
