The FSA today proposes income protection plans with a 'small' investment element, better known as Holloway policies, should be exempt from the RDR's adviser charging and professionalism rules.
Advised sales of the plans originally fell under the RDR's remuneration scope because of their investment component, even if it was very small.
But in today's quarterly consultation paper (chapter 8), the regulator proposes a softening of the RDR requirements to only include policies with a "significant" investment element.
Where this is the case, the FSA says it will consider the policies comparable to other with-profit savings products.
It adds that, following discussions with the Association of Financial Mutuals, it is consulting on a threshold where the projected maturity value contained in the key features illustration is 20% or less of accumulated premiums, using the mid-rate projection of the Holloway provider.
Anything under this will be deemed exempt under the FSA's new proposals.
The about-turn will please a number of UK friendly societies, which argued the products would have to be discontinued if they fell under the RDR's remuneration requirements.
Under the original proposals, Holloway plans' investment element meant IFAs would have to charge a fee for advising on them after 2012.
As Holloway plans are targeted at lower-paid blue collar workers who otherwise struggle to get cover, the mutuals argued this would make the plans too expensive for their target clients.
