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Be constructive

The current media craze seems to be to bash with-profits at every possible


Never mind that (the better) with-profits funds have served investors very

well for centuries or that they have been the cornerstone of life office

mutuality. The Treasury and Consumers&#39 Association have decided they do not

like them so, rather than press for reform, with-profits funds are to be

gutted like a fish and rendered unworkable.

Okay, with-profits may be in need of reform but the industry has tried to

respond to this. We have unitised with-profits available via contracts

which impose no penalties for early cessation of contributions.

We now have relatively easy interchangeability between equity-linked and

with-profits funds. For a while we had endowment contracts such as that

offered by Standard Life, which allowed full surrender at any time without


We also have with-profits bonds that allow encashments of up to

£25,000 in any 12-month period with no MVA. But, for the Government&#39s

interfering busybodies, even these measures are not enough. Profit margins

are being so mercilessly squeezed as a result of policies dictated by

people on public sector salaries that reversionary bonuses are being

reduced and offices are having to rely more on terminal bonuses to maintain

decent payouts.

One thing which seems to have been conveniently overlooked in all this is

the alternative investment options to withprofits (apart from Skandia&#39s

guaranteed pension fund, which is a relatively safe bet for them as the

great majority of its investors are tied in long term).

If you invest in a fund in which the value of units is linked to the value

of the fund&#39s underlying assets, then in the event of a stockmarket fall

you are 100 per cent guaranteed a 100 per cent MVA, whether you encash or

not. Perhaps the Treasury, CA and PIA might be good enough to offer some

constructive criticism for a change instead of sticking in the knife at

every opportunity.

Julian Stevens

WDS Independent Financial Advisers,

Kingswood, Bristol


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