View more on these topics

Britannic makes it clear

Britannic Assurance has introduced a with-profits bond that aims to be more transparent than traditional with-profits bonds.

The Britannic Assurance with-profits bond builds on the concept behind the Britannic with-profits pension annuity, which brought transparency to with-profits annuities.

The bond invests in Britannic&#39s with-profits fund and unlike traditional with-profits bonds, investors will be kept informed of performance and how the smoothing operates in practice. The charges will be explicit, which contrasts with the way traditional with-profits funds are run. Usually, the charges are deducted before the announcement of bonuses and it is difficult to find out the value of the investment until such an announcement is made.

Instead of presenting the value as units, annual bonus and terminal bonus, the value of the bond will be presented as one figure, which takes into account the smoothing process. Investors will also be notified of the actual returns, so they can compare this with the smoothed value of their investment.

The bond also guarantees that where a withdrawal is made on the tenth anniversary of the bond, and on subsequent anniversaries, the value of the investment will be at least 75 per cent of the value of the highest smoothed value. While this can be seen as a positive feature, another way of looking at it is that investors may be penalised up to 25 per cent if they make withdrawals after ten years.

Although Britannic may be applauded for trying to bring transparency to with-profits, it could end up confusing investors with too much detail as charges, stockmarket performance and asset allocation will all need to be explained. This is not easy to do, especially where investors have little investment experience.

Recommended

Insurance protects investors&#39 estates

Rothschild Asset Management is adding a new life insurance feature to its wealth management service to protect an investor&#39s estate from the effect of falling stockmarkets.The Five Arrows Protected Wealth Management Service provides insurance cover to protect clients&#39 beneficiaries by guaranteeing a protected value of the fund in the event of death.The protected value is […]

Brown attacks high street banks

Chancellor Gordon Brown has launched an attack on the largest high street banks for the huge profits they make off of charges paid by SMEs.In a speech yesterday Brown announced the Government has accepted in full the findings and recommendations of the independent Competition Commission following its investigation into the supply of banking services to […]

Vanguard launches new fund

Vanguard Investments Europe is adding a new US fund to its range of Ireland-based funds available in the UK. The US Government Bond Index fund is domiciled in Ireland and brings the number of Vanguard funds authorised for sale in the UK up to nine. The fund will investment in a risk-matched portfolio of investment […]

The life of Equitable

For a long time, Equitable Life traded on its venerable history. As a national institution it was as hidebound as the tomes on the shelves of the lawyers who have bought its policies.According to Cornelius Walford, the Victorian biographer of the once eminent and recently disgraced institution: “The history of the Equitable is the history […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment