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£5bn of with-profit bonds can be withdrawn MVR-free this year, says Skandia

Skandia has said with-profits bonds held by around 500,000 clients will this year hit their tenth anniversaries, triggering a penalty-free exit period on a third of them.

The group says it believes of the £15bn in with-profits bonds that hit ten-years this year around £5bn can be withdrawn with no market value reductions.

Advisers should review their clients’ investments now to decide whether to take advantage of this opportunity, Skandia says.

Skandia head of proposition marketing Graham Bentley says: “With-profits funds are like the mobile phones of the 1980’s. They served a purpose at the time but have been replaced by the more modern, flexible options available today and the original now looks pre-historic when compared to these newer options.”

The group’s research calculates that 90 with-profits bond funds have penalty-fee exit dates in 2011. It says these funds paid an average bonus rate in 2010 of 1 per cent.

At the same time 34 per cent of the funds are making an explicit charge to meet the cost of the guarantees offered to investors  but often these charges did not apply at the time the product was bought, it adds.

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England vs Australia: pensions

Well, the cricket season is here, and England and Australia are stepping up to the wicket. Although we compete with each other in the sporting world, when it comes to pensions, Australia’s pension programme is held up as a model for our auto-enrolment initiative. Auto-enrolment was introduced because people weren’t saving enough into their pensions, and it is still early days but signs are positive. However, in Australia, saving into a pension is compulsory, and in fact employers are the ones who have to pay in. Employees in Australia can make additional contributions into their pensions, but they don’t have to. Should the onus be on the employer or employee to save? Well in the UK we think it’s both, but to get ‘adequate’ savings for retirement it’s the employee who has to pay more in.

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