View more on these topics

Be constructive

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

opportunity.

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

penalties.

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

Recommended

Let the games begin

Will the stakeholder market degenerate into the bloody battle as analystNed Cazalet is predicting? Stammers: Yes. Even with my rudimentary grasp of mathematics, 10 or moreproviders each seeking 20 per cent market share is bound to lead todisappointment. And cost-controlled mass markets leave little scope forniche players. Possibly, continuing industry consolidation and the impactof all […]

Govt puts pension advice on the web

The Government is trying to provide a one-stop retirement advisory servicewith a pension link on its main public website. The Life Episode for Pensions and Retirement service appears on theukonline.gov.UK website alongside inf-ormation on going on holiday,bereavement and having a baby. The advice is divided into four stages – planning for retirement,approaching retirement, reaching statutory […]

Death in zenith?

The state of the market and, in particular, distribution were the subjectsof a debate on the former Royal Yacht Britannia recently. The event, entitled Depol-arisation, the end of the IFA? was the first ofa series o ganised for senior industry executives by IBM, as part of itsInsurance Executive Impact programme, sponsored by Siebel. A panel […]

Independent view – Tony Byrne

“…As judge and jury, I find you, IFA, guilty until proveninnocent…” This could easily be the summing up of a PIA ombudsman in acomplaint against an IFA these days. Newspaper comment might go something like this: “The commission-hungrysalesman took advantage of the hapless misselling victim” and so on. How tired are you hardworking, decent, honest […]

Solving the income puzzle

There is a puzzle at the centre of financial markets. The global economy is growing, there are signs of inflation and interest rates are going up, yet yields remain low. In this article, James Foster, manager of the Artemis Monthly Distribution fund, unpicks this conundrum and looks at where investors can find income. There is […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment