The FSA's plan for elderly with-profits policyholders' compensation is a 'backward step', according to one group.
An attempt at resolving previously-discovered mis-selling among some with-profits savings providers has met with industry criticism.
The Financial Services Authority (FSA) is currently consulting on the matter - and has suggested that firms would be allowed to repay elderly customers who they had mis-sold to in the past with money from their own with-profits policyholder funds. Future cases are to be paid from the company's own profits.
This move is facing criticism from another group, the Financial Services Consumer Panel (FSCP), who said that it was unfair on the customers. In a strongly-worded statement, acting chairman Adam Phillips pointed out that the FSA's recommendation contradicted previous guidance it had issued on the matter - which suggested that both past and future claims should be paid out by the firm without tapping into the with-profits funds.
"The FSA is proposing to let shareholders off the hook for corporate mismanagement in the past," he added. "The new proposals mean that policyholders will still have to continue to pay costs for past mis-selling and only mis-selling which occurs in future will become the responsibility of shareholders."
With-profits funds are a common investment alternative for many cash savers - and encompass some life insurance, pensions and endowment policies. The funds have been subjected to severe criticism from industry observers over recent years, for not offering acceptable returns and being difficult to understand.
Specific allegations of mis-selling by some providers led to the FSA compensation consultation, which closes later this month.
