Money Helpdesk: Company splashes out - but not on bonuses

HOW does a company like Resolution have millions of pounds available to buy Alba Life, Phoenix Life, and other insurance institutions, yet cannot pay any bonuses on endowments year on year, and has the audacity to send out red letter shortfalls advising how to make up the difference?

C G, via e-mail

Danny Cox of Hargreaves Lansdown writes:

As I understand it, Resolution is under no obligation to add to the with-profits fund other than to ensure any contractual guarantees are met. In reality these are met by the fund and at the expense of other policyholders. Many funds they take over are effectively in deficit and Resolution makes money by administering these policies rather than ensuring they perform well.