Axa under fire over 'orphan' distribution

With-profits policyholders in Axa Sun Life could lose out on a cash payment of about £400 unless within the next week they return papers to the insurer supporting Axa's proposals on distributing its 'orphan assets'. Policyholders who don't show their support in this way, whatever they truly think of the proposals, will get nothing - at least in the short-term.

Axa's proposals are highly controversial, bringing accu sations of unfairness and manipulation from the Consumers' Association (CA) and from lawyers. The association believes policyholders are being shortchanged in order to pass on a large chunk of the £1.7 billion orphan assets to shareholders.

In the past, orphan assets - unclaimed policy funds - have traditionally been split on a 90:10 basis between policyholders and shareholders. But CA calcula tions, produced by accountant KPMG, suggest that policyholders stand to get as little as 35 per cent in the Axa scheme.

Policyholders must return their paperwork to Axa by 16 October to be included in the ballot. But there is a sting in the tail: the paperwork only allows policyholders to support the proposal. Anyone who wants to show their dissent only has the option of not sending back the form.

As of last week, about 350,000 policyholders - out of a total of 750,000 - had yet to send in the forms. The February payments will aver age £400 per policyholder, and some will be as much as £1,000. The CA will hope to see its concerns aired in a High Court hearing on 20 November. Arrangements of this kind - occurring as the result of the merger of Axa and Sun Life's with-profits funds - always need court approval.

The CA is also concerned that the balloting procedure has been unfair. Its spokesman Ashley Holmes is unhappy with the way that Axa has announced that more than 51 per cent of policyholders have already sent in their papers. He says: 'This is rotten. It will clearly influence people who haven't already voted.'

Electoral Reform Services, a subsidiary of the Electoral Reform Society, which is overseeing the ballot, says it is happy with Axa's plan to stop payments to those who do not send in their forms.

?2 billion opportunity goes begging

Pensions lawyer Robin Ellison of Eversheds is calling on insurers, the Government and other bodies who sometimes end up with orphan funds to ask people building up their pensions or life assurance to sign a form donating all such funds to charity.

Many people pay into their funds - whether through National Insurance or through contributions into actual pensions and life policies - and then never claim on the money they have built up.

Ellison estimates orphan funds worth ?2 billion a year would be given to charities if a new charitable scheme of this kind happened. It would also avoid the type of row that is engulfing the Axa scheme.