Mutual societies that sell Holloway income protection products do not have to adhere to the Retail Distribution Review’s criteria, meaning that advisers can still receive commission and do not have to hold level four qualifications, following a Financial Services Authority consultation.
The exemption from the RDR rules, called Holloway Policy Special Application Conditions, means that advisers who do not hold level 4 qualifications can continue to sell qualifying Holloway policies and commission can be paid on such sales.
Although income protection policies do not fall under the RDR, Wiltshire Friendly, who has benefited from the exemption, said these policies have an investment element to them as they are ‘with profit’ style income protection plans.
The exemption is a general one from the RDR rules, which the FSA consulted on, for all Holloway products which meet certain criteria. The FSA made a small correction in December, following consultation in the October QCP (CP12/27).
The plans written under the ‘Holloway’ system primarily provide for income protection, but also, as part of the plan, membership of the Society. Society members are entitled to participate in the Society’s profits which potentially will provide a tax free/tax paid cash sum at retirement.
According to Wiltshire Friendly, the FSA has laid out strict guidelines under which qualifying plans can meet the RDR exemption criteria. This requires illustrations provided at the inception of a plan to show a projected maturity value, at the mid-rate of the stated returns, not exceeding 20 per cent of the premiums paid in over the lifetime of the plan.
The company said this exemption has provided it with the opportunity to completely review their individual income protection plans and significantly improve the terms and conditions, with the emphasis on protection as opposed to potential returns.
John Sanders, chief executive of Wiltshire Friendly, said: “Whilst we already offer a number of bespoke IP plans for IFAs, we want to appeal to the wider IFA market and this exemption has given us the opportunity to completely overhaul the range.
“Standard features now include an own occupation definition for 24 months for all applicants, waiver of premium, an option to escalate cover at a fixed percentage, fewer standard policy exclusions, separate smoker rates and a maximum retirement age of 68.”
