Five-year wait for MVR-free day
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Aviva has come under attack for pushing back the MVR-free day on a with-profits policy by five years as a result of the changes to the minimum retirement age.
Lumley Baxter Asset Management partner Richard Baxter has a with-profits investment within his pension and Aviva has written to tell him the MVR-free day will be pushed back to 55 due to the rise in retirement age from 50 to 55 from April 10.
Baxter says: “This is grossly unfair in that I am potentially being locked into a fund I do not want to be in for five years more than I want to be in it. This is the complete antithesis of treating customers fairly and I will be taking this to the ombudsman.”
An Aviva spokesman says: “Aviva decided that for policies where the specified retirement date was between 50 and 55, the fairest course of action would be to raise the minimum age at which the MVR guarantee can be applied to 55.”
Hargreaves Lansdown pensions analyst Laith Khalaf says: “Few people will be affected but those who are will justifiably have a bee in their bonnet.”
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Readers' comments (6)
How funny!! | 25 Feb 2010 3:33 pm
To Richard Baxter:
Why ... oh, why ... do you STILL have a WP investment - given ALL the issues with WPs (opaqueness/rules determined by Actuaries/MVAs/etc etc)??
Why ... oh why ... did you not see the MVA issue coming with the 'new' 50/55 rule changes coming??
Why do you have a NU (ok, Aviva) pension??
Sorry, but come on - you're a Partner in an AM company ... ... no sympathy, sadly!!
Ditched all my WPs investments many years ago & adv clients to do same!!
Look forward to all the acidic comments ... ...
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Lee Duff | 25 Feb 2010 4:39 pm
In which case, I hope your clients don't sue. The fund went up through the crunch, plus they'll have potentially lost out in the reattribution.
Yes, WP are not clear, and yes, they can lock you in with MVRs. But not all WP funds are bad funds. And the Aviva one is in no danger of going bust. Bit mean with their reattribution mind, if you're looking at all the downsides of them specifically.
Better safe than sorry, though - if you don't understand them, you shouldn't sell them.
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Miles Hendy | 25 Feb 2010 5:33 pm
I think this is a difficult situation for Aviva because for anyone with no intention of switching or transferring, having an MVR free date which is no longer accessible makes it useless. If they didn't make this change you could see a situation where in a few years time a 55 year old might retire and have an MVR applying and complain that the original MVR-free date at 50 couldn't be used.
In effect the MVR free date if it stayed at 50 after 5/4/10 would only be one which applies if you switch or transfer rather than actually retire. But if switching or transferring is what someone wants to do, I think under the "policyholder reasonable expectation" rules he should reasonably expect to be allowed to do so. The concern for the policyholder is whether the MVR free clause related to taking retirement benefits - if so, we know from experience with Standard Life that they are on fairly safe grounds legally (though not morally in my opinion).
The fair way for Aviva to deal with this is to write and give policyholders the choice rather than unilaterally withdraw a guarantee which I suspect at this point in time is worth a fair amount to affected policyholders.
Good luck with the battle Richard.
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Martyn Sinclair | 25 Feb 2010 9:21 pm
its grossly unfair that i cant repay my mortgage capital becasue my pension scheme had a SRA of 50 and now due to the pensions changes, I cant take the tfc until 55. The pension was correctly funded and the tax free cash amount next year hits the mortgage debt spot on! So it costing me extra years of interest payments not budgeted for.
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How funny!! | 26 Feb 2010 10:59 am
Re Martyn Sinclair
Tax & pensions legislation changes on an alarmingly regular basis - this is what Advisers/Accountants have to deal with through careful planning, etc ... ...
I'm guessing here, you didn't seek any advice (as this changes have been 'common knowledge' for ages!!)
Grossly unfair - no, not really, just a shame you didn't plan properly
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Phil Castle | 26 Feb 2010 12:11 pm
Nothing more to add than what Miles Hendy said....
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