Aviva pulls out of offshore bonds
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Aviva Life International will no longer offer new offshore bonds to customers from February 26.
The decision follows a strategic review of the firm’s business and a significant decline in demand for offshore investments from UK customers and advisers.
From April 1, Aviva will transfer the administration of its closed book of business to Capita Life & Pensions Services, Ireland, as part of a third party supplier agreement.
The administration of the closed book will be managed out of Dublin by Capita and a small Aviva team will be retained to oversee the operations. Most of the 75 employees will transfer to Capita in Dublin under TUPE regulations.
Existing customers and their policies are not affected by this decision and a mailing is being sent to them and to advisers.
Aviva Life International is based in Dublin and provides investment solutions to customers resident in its core UK market. It specialises in offshore investment solutions and is separate to Aviva’s other operations in Ireland.
Aviva Life International managing director Tim Madigan says: “Our decision to close offshore bonds to new business reflects the significant decline in new business sales across the offshore bonds market. However, we will continue to support our existing customers and their policies, and there is no change for them at all.”
In its latest new business results for the year ending December 31, 2009, Royal London 360 reported a difficult year for the offshore market with sales down in most markets by around 40 per cent at the half year and single premium investments particularly badly hit.
Standard Life also said its offshore bond sales were 44 per cent lower at £370m compared to £661m in 2008 due to the impact of the weak economic conditions experienced during the year.
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Readers' comments (11)
Anonymous | 8 Feb 2010 3:10 pm
A shameful day for Aviva...
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Anonymous | 8 Feb 2010 3:22 pm
This is certainly due to the 18% CGT rate vs 50% income tax rate. AILO and ABI have to do something. Not long before the onshore bond market is affected as well
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Anonymous | 8 Feb 2010 3:42 pm
I've always been amazed at the level of investment bond sales. They're great for discretionary trusts and very little else. Is this an indication that advisers really are getting better qualified and understanding the arguments for mutual funds v bonds? Are Confunds, Funds Network etc throwing their hats in the air with delight as I type......
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Anonymous | 8 Feb 2010 3:51 pm
As an Aviva policyholder I'm saddened by this move...Another step towards the race to the bottom!!
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Anonymous | 8 Feb 2010 3:54 pm
Another example of AVIVA putting profit before their staff
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R.Turpin | 8 Feb 2010 3:57 pm
Agree with the tax position as the cause of the demise in bond sales as well as reduction in use of cash inside offshore bonds. Also key is the very high cost of doing business in Dublin IFDS for what is relatively low volume business.
I fully expect the next budget to absolutley clobber CGT based products unless the Chancellor is an utter twit...hmm on second thoughts.
Anon 1 but if nobody wants to buy offshore and the fixed costs are high what would you do? Is your usrname Ostrich?
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john - Hard to see CGT rates not going up | 8 Feb 2010 4:37 pm
Given where income tax has gone to, it is hard to see CGT not going up, and whilst we are at it EIS's, VCT's etc getting squeezed.
I don't know if the commission bias issue has disappeared, but there is a tax bias which feels like it will go soon
I agree with Dick Turpin
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Anonymous | 8 Feb 2010 5:06 pm
I agree the tax situation will have had a major impact. CGT at 18% (currently) is clearly much more attractive than Income Tax at up to 50% wef April. Collectives have historically had tax advantages anyway because of taper relief, so the Chancellor may not "absolutely clobber CGT based products" in the next budget. Given that very few individuals use their annual CGT allowance (even fewer via Trusts) CGT based products are likely to be the way forward. There are nil-distributable yield funds available that can be used by Discretionary Trusts to avoid the 50% Income Tax charges wef April. How many Trustees have/will have reviewed existing Trusts to ensure that the investments are suitable for the Trust? Very few. There will be another Nestle vs Nat West case at some point. Trustees must start reviewing investments now
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Anonymous | 8 Feb 2010 5:20 pm
Should read: A significant decline in demand for AVIVA offshore investments from UK customers and advisers.
Rather like wraps Norwich Onion failed to break into this market. There future is tied distribution with the likes Tesco's.
Any adviser with a choice will exercise that choice and go elsewhere. This also accounts for the enthusiasm of AVIVA Norwich Onion for the Retail "Redistribution" Review and its push towards tied advice.
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Anonymous | 8 Feb 2010 5:33 pm
No no he's not dead, he's, he's restin'! Remarkable bird, the Norwegian Blue, idn'it, ay? Beautiful plumage!
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