An insurance industry expert has predicted that three-quarters of life insurance firms' with-profits funds will disappear within five years. Consolidation within the insurance industry along with declining stock markets could see the closure of with-profit funds, Richard Craven of investment management firm Willis Owen told a gathering of leading actuaries.
What is more, Mr Craven warned that another Equitable Life situation could be just around the corner as insurers struggle to stay solvent against a backdrop of declining assets and escalating costs.
Equitable Life policyholders have seen the value of their pension funds, in the form of an annuity, slashed to a fraction of their value in the past year.
With-profits funds are supposed to smooth out the peaks and troughs of the stock market by storing up investment returns made in the good years in order to pay out to investors in the form of bonuses when markets suffer a downturn.
However, three years of sustained stock market falls have meant that many with-profit funds have cut payouts to investors and introduced swingeing penalties for those looking to move their money elsewhere.
"There is an awful lot of rubbish within the with-profits sector and eventually market forces will root it out. We are strongly urging investors not to put their money with second rate with profits houses," Mr Craven said.
One-Minute World News 
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