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How can MVR be applied to terminal bonus?

I am mostly in agreement with Peter Hargreaves’ remarks regarding with-profits bonds. I have not recommended them for years and cannot imagine a set of circumstances that would convince me to do so.

I do not, however, follow Peter’s logic in his comment that “surely the time to use with-profits is when markets are high and likely to decline”. Maybe he has forgotten about MVRs.

I certainly haven’t, in fact, I received a statement today from Scottish Widows regarding a client’s investment with them. £10,000 was invested in Febuary 1999, no withdrawals have been taken and the current bid value is £11,952.

What about the terminal bonus, I hear you ask? Well, the good news is it is £1,912, almost as much as the reversionary bonuses added to date, pushing the overall value to £13,864, representing a return of 3.5 per cent net per annum. Wow.

The bad news, as if I needed more, is that there is currently an MVR of £717, bringing the overall value back down to £13,147, or an annual return of just under 3 per cent.

Steve Laird

Certified financial planner Belfast

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