I feel bound to write to you with regard to Eagle Star and the application of the market value reduction on clients' with-profits bonds.
Under with-profits plans, regular withdrawals can be set up at up to 5 per cent, with no tax implications for 20 years. Many clients over the years have adopted this route, particularly when bonus rates were in excess of this amount.
With falling bonus rates, many clients have reduced their withdrawals to come in line with the ongoing bonus rates. However, there are other clients who, due to their age, wish to keep withdrawals at the higher level and accept the fact that there will be a reduction in the value of their investment.
Eagle Star has been applying the market value reduction on regular withdrawals but has not written to the clients informing them that this action was being taken.
As most clients are confused by the regular statements that are sent out, they were unable to identify that the amount that they have been withdrawing is lower than the amount that has been debited against their investment.
Eagle Star, in its wisdom, also did not write to the IFAs to confirm that this action was to be taken.
Eagle Star has been one of the bastions of the insurance world for many years and clients have trusted it and its investment performance. For clients to be treated in such a shabby and immoral way is very disappointing.
I believe that the industry should be made aware that this cavalier attitude to clients is untenable.
Julian Mumford Senior partner, Marshallsay Mumford, Slimbridge, Gloucester