Traded Life Policy Investments banned by FSA

Despite the fact investors in the UK have ploughed more than a billion pounds into high risk traded life investment policies, the FSA have banned the schemes, claiming they are unsuitable to be used as life insurance. The majority of these schemes see the money invested into the life policies of people living in the USA, but with many living longer than previously expected some of the policies have lost significant value.

According to a report from the FSA, there is evidence of significant problems in the way policies are sold, designed and marketed in the UK, and many of the policies have failed as a result. As unregulated collective investment schemes the FSA claim they should not be promoted to investors within the realms of the law, and they have introduced the ban as a result.

The ban on such life insurance policies will be issued as an “interim measure” according to the regulator, whilst they draw up new rules governing the products. The new rules are likely to impose several restrictions on the promotion of the products, particularly to standard retail customers and investors.

Head of Investment Policy at the FSA, Peter Smith explained, “The TLPI retail market is worth £1 billion in the UK and we were very concerned that it was likely to grow even more. At the time that we published our guidance over half of existing retail investments were in financial difficulty – even so, we were hearing about the development of new products intended to be sold to UK retail customers.

He added, “The threat to new customers was significant and growing: the potential for substantial future detriment was clear. There was a concern that we were witnessing a repeating cycle of unsuitable sales followed by significant customer detriment in this market.

“This is an interim measure – we believe that TLPIs and all unregulated collective investment schemes should not generally be marketed to retail investors in the UK and will be publishing proposals soon to prevent them being promoted except in rare circumstances.”

Despite the ban on traded life policies there are still many different standard life insurance, and whole of life insurance policies available, and you can compare the prices online at life insurance quotes.

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