The actions were taken following exclusions by AMP of the tax benefit of imputation credits and other tax allowances in the unit prices of some products, which were reported promptly by AMP. AMP has fully cooperated with both regulators on this matter.

The directions, given under the Life Insurance Act 1995, require AMP Life to compensate policyholders of the affected funds, which will be funded largely from relevant tax refunds. The directions also require AMP Life to obtain an independent, external review of its unit pricing processes to ensure that similar issues do not recur.

The EU, accepted by ASIC under the ASIC Act 2001, requires AMP to do all acts and things reasonably necessary to ensure that affected fund members are identified, properly notified of the errors, and correctly and promptly compensated. The EU also requires AMP to report to ASIC.

Both APRA and ASIC are satisfied that the proposals put by AMP to compensate policyholders are reasonable. AMP will contact affected policyholders over the next few weeks with details of the compensation arrangements.

‘The time lag in the incorporation of the tax benefit of imputation credits and other tax allowances into the calculation of unit prices is a problem for the industry as a whole. There are no uniform industry practices or guidelines about how to deal with the time lag issue’, APRA Deputy Chairman Mr Ross Jones said.

‘Unit pricing issues are of concern to regulators across the globe. APRA and ASIC will review practices in the Australian marketplace’, ASIC Executive Director of Financial Services Regulation Mr Ian Johnston said.

APRA and ASIC have commenced a joint project to look at unit pricing practices in the funds management and superannuation industry.

The Australian Prudential Regulation Authority (APRA) is the prudential regulator of the financial services industry.It oversees banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, friendly societies, and most members of the superannuation industry.APRA is funded largely by the industries that it supervises.It was established on 1 July 1998.APRA currently supervises institutions holding approximately $1.7 trillion in assets for 20 million Australian depositors, policyholders and superannuation fund members.