View more on these topics

&#39Bondholders in the dark over pledges of no MVRs&#39

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&#39 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.”

Recommended

Double trouble

A new UK/US double-taxation treaty came into force on March 31, replacing the previous 1975 treaty. The new treaty is long and complex and space prevents any detailed analysis so I am confining the contents of this article to the possible impact that the treaty might have on pension arrangements. In the past, one of […]

Advisers criticise DWP over new CETV rules

Trustees will no longer need to provide details of why cash-equivalent transfer values have been reduced under new Department for Work and Pensions rules published this month. Advisers say the change means that individuals wanting to transfer their pension rights out of occupational schemes have no way of knowing whether CETVs have been calculated in […]

IFAs face added burden on money-laundering rules

IFAs may be forced to collect significantly more information when establishing relationships with new clients under the latest set of FSA proposals aimed at combating money laundering. Discussion Paper 22, Reducing Money Laundering Risk – Know Your Customer and Anti-Money Laundering Monitoring, published by the FSA this week, proposes extending the information that must be […]

Single minded

The adoption of electronic new business in the life and pension market can at best be described as erratic but there are increasing signs that online submission is becoming the norm in the mortgage market. It is not difficult to identify the reason for this. On the whole, mortgages are far more time-driven than most […]

Life cover for life

When someone mentions whole of life plans, most people will think of a niche product that serves as an inheritance tax planning tool for high-net-worth clients. And it’s really not surprising they’ve been pigeonholed in that waybecause before the arrival of RDR in 2013, that’s more or less exactly what they were. For advisers thinking […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com