Life offices are keeping quiet on guarantees of no market value reductions on with-profits bonds sold in the 1990s that could put reserves under pressure.
A report on MVRs by Chartwell Investment Management claims Scottish Provident, Clerical Medical, AMP NPI, Britannic Assurance, CIS, Legal & General, Liverpool Victoria, MGM Assurance, Pearl, Royal & Sun Alliance, Scottish Equitable and Scottish Widows are among those that have all sold with-profits bonds that included a promise that, if cashed in at a specific time, generally the fifth or 10th anniversary, no MVR would be applied.
Alan Steel Asset Management consultant Alan Adam believes life offices are keen not to point out the guarantees which are available on hundreds of thousands of the bonds sold predominantly by IFAs. He believes life offices' reserves could come under pressure if clients took up the guarantees. He says MVRs can now be at least 20 to 25 per cent. He is concerned that new IFAs may not be aware of the guarantees as insurers have largely abandoned them.
Scottish Provident head of communications Christine McAllister says it has reserved for the guarantee and has 8,700 bonds that include the guarantee. She says it is up to IFAs to inform their clients of the guarantee.
She says: “The adviser knows the individual and their circumstances, as well as the make up of their entire investment portfolio. From that wider context, they can advise on what would be the right course of action for that specific client.”
Adam says: “People are being kept in the dark. Clients can get a lot more value by taking the money and investing it elsewhere.”