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IFA zeroes in on Widows with-profits

An IFA has sent a letter to Scottish Widows chief executive Archie Kane asking him to explain why the firm’s with-profits fund has had a zero bonus rate for the last four years despite being invested over 50 per cent in equities.

Radical Financial Services director Derek Richings says he sent the letter to Kane after reading an article in Money Marketing which cited research from Moneyfacts saying with-profits returns are rising. He says he is appalled that Widows has not paid any bonuses since 2003, accusing the insurer of not treating customers fairly.

He asks Kane to explain why his client has received a bonus rate of 0 per cent “given that your fund details show 51 per cent in shares, 34 per cent fixed interest and 11 per cent in property. Where have all of the yields from these holdings gone? Shares pay dividends, fixed interest pays interest and property pays rents.”

The average with-profits fund has returned 35.5 per cent over the past four years, according to Moneyfacts research.

In a letter to his client, Richings says he expected any response from Widows to be “a lot of waffle with very little substance, much like your with-profits fund performance. I suspect we will not get a satisfactory response and it may well be necessary for you to write to somebody to highlight this ‘daylight robbery’.”

Widows has responded to Richings and says that by focusing on bonus rates, he is not comparing funds on a like for like basis.

The Widows letter says: “You will see from the enclosed table that, contrary to your perception, the value of the bond, as represented by the cash-in value at any time (excluding any early surrender value penalty) in fact shows growth of 28.2 per cent, 31.5 per cent and 15.8 per cent over the three, four and five years periods respectively. This gives a much more favourable comparison.”


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