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Orphan Assets

What is an Orphan Asset?

Orphan assets are surplus assets within a with-profits fund that have been accumulated in previous years. Frequently these are assets that belonged to policyholders who are no longer alive, or have moved and are no longer contactable. Whatever the reason, these are assets that cannot be attributed to any person or policyholder: they are called “orphan” assets because no one can say who owns them.

At present, it is estimated that UK insurers hold an estimated £20 billion of orphan assets in their with-profits funds (source: The Times).

Why Orphan Assets are a problem for the Insurance Company

Orphan assets create a significant problem for the company managing the with-profits fund. This is because they can never be sure that the asset which is being managed (but is not attributable to any investor) might suddenly be claimed by some long lost policyholder, who might find a document in their attic from 20 years ago which they had long since forgotten. Legally the Company cannot easily dish out these orphan assets or funds to the other policyholders because they are not theirs to distribute.

The Current Position

Certain companies are now looking at the orphan asset, sometimes referred as to the unclaimed estate, and working out how to distribute these excess monies back to other policyholders and/or the company’s shareholders. If they can do this they will create a one off boost or windfall bonus to the other policyholders. The position is far from clear and varies from company to company so it is important if you are considering taking any steps with your policy to first check out the position with the Company you are invested with.

How do Orphan Assets affect the investor?

Unfortunately, there is no standard method of distributing orphan assets. In some cases insurers will issue a one-off payment to its policy holders, however, in many others, insurers will give enhanced pay-outs when a policy reaches maturity, or is surrendered or transferred.

Issuing enhanced pay-outs when a policy reaches maturity however, further prevents investors from cashing in their policies until they have received their pay-outs, which may not be for many years to come.

Orphan assets enable insurers to keep their policy holders guessing about their likely level of payouts, maintaining a level of obscurity which can further confuse and cloud the judgements of insurers. To discover your options, talk to an expert by clicking here.

How can I find out more?

Our local IFAs are constantly on hand to provide you with any information or advise that you may need.

To contact an IFA, please fill out an enquiry form.

The information on this website is to be viewed as general information and does not constitute advice. Views and opinions expressed are those of the individual contributors. Individuals reading the site should not rely on any of the information contained within the site in making any decisions. DMP Financial cannot be held responsible for any liability suffered by any individual as a result of information contained within the site. In the event that advice or help is required then independent advice should be sought from a regulated independent adviser.