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Confusion as MVR is included in projections

Leading IFAs are calling for the FSA to tighten the rules on the

methods used by providers to calculate mortgage endowment statements,

claiming the current array of methods are resulting in consumer


Informed Choice managing director Nick Bamford is warning that some

product providers such as Standard Life are reducing the value of

clients&#39 policies by applying a market value reduction and then

projecting forward from this figure.

He says that because the MVR does not apply at maturity, it creates

an immediate and unnecessary shortfall dragging down the value of the


The FSA says it does not prescribe a basis for statements as

providers are not obligated to provide them as they form part of an

existing contract and are not part of the point of sale.

Bamford says: “I can see why providers think it is best to warn

clients now but the MVR will not apply at mat-urity. Talk about let&#39s

create a problem where there might not be one. Common sense says the

FSA should prescribe the illustration basis and it should not include

the MVR.”

Charcol financial planning director Roderic Rennison says: “All life

insurers calculate in different ways but I am not sure how aware IFAs

are of this. Bamford&#39s concerns serve to highlight the value of a

good IFA to help customers understand the value of their policy.”

Standard Life marketing manager Andrew Black says: “We calculate our

illustrations based on FSA guidelines. We base them on the surrender

value of the policy which would include the MVR. This is an

illustration and the policy will work out at around these figures, it

will not be spot-on.”


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