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It’s not an open and shut case

Resolution and Pearl closed funds are languishing at the bottom of the latest AKG rankings for with-profits maturity payouts, although Resolution funds also make up the top three funds.

Actuarial and consulting firm AKG has produced itsUK life offices with-profits report which ranks funds on their maturity payouts as at March 2007.

The top-performing fund is the Resolution Phoenix Life 100 per cent with-profits fund which would have paid out £342,949 for a person with a 25-year endowment paying £50 a month.

This is far higher than the second-best-performing fund, Resolution Phoenix Life 90 per cent, formerly Swiss Life, which would have paid out £119,730.

The markedly bigger mat-urity payouts of the toptwo funds compared with other funds in this category is due to the small number of people in the fund and the surplus capital that has built up over the years.

AKG communications director Guy Vanner says: “They are small funds in terms of the number of investors which have done quite well and have built up a large base of capital. The maturity payout reflects the surplus funds which are being distributed now on top of the bonuses and returns so investors are on to a good thing.”

Bottom is the Resolution Phoenix Life Alba with-profits fund, originally from Life Association of Scotland, paying out £24,780.

Languishing in 69th, 68th and 67th place respectively are the Pearl Group National Provident Life fund, Resolution Phoenix Life Alba with-profits fund Crusader, and Lincoln National with-profits assurance fund.

Vanner says: “Even within the same group of funds, there is a real disparity. Resolution and Pearl are not doing a bad job considering what they have got.

“IFAs sometimes think all closed funds are bad and open funds are good and that is not necessarily true at all.”

Vanner says some closed funds are performing better due to the release of cash reserves to policyholders and because they are often efficient at running these funds.

Top-performing funds in the open sector include Norwich Union, Prudential, Friends Provident and LV=.

For a 25-year endowment paying £50 a month, LV= with-profits fund would pay £63,905 while Friends Provident London & Manchester Assurance with-profits fund would pay £59,320.

Equitable Life is ranked 58th in the same table with a maturity payout of £36,572.

For a 10-year with-profits bond with a £10,000 single premium, LV= is ranked top with a payout of £19,288 while Equitable Life is placed bottom with a payout of £11,765.

Prudential is in second place while MGM Assurance and Friends Provident are ranked third and fourth respectively.

Looking ahead to this year, Vanner says that he thinks market value reductions may be increased or even reintroduced by some companiesin a bid to counter the continuing market volatility.

He says: “In autumn last year, people would have said the trend is to remove the MVR but this year, with the market volatility, there is much more of a chance that MVRs will remain and even be increased or reimposed. There is an uncertain position with them now.”

He says regular bonus rates will remain flat in most cases because companies are tending to manage risk in the fund better and would rather give higher final bonuses than high regular bonuses.

He says: “The days of sexy with-profits bonuses have gone. We expect to see more consolidation of funds this year too. Life offices are concentrating only on what they are excellent at now. Unless they are really serious about running large books, they are probably better off lookingat other options.”

Payout

67: Lincoln National – Lincoln Assurance -with-profits fund (Imperial Life of Canada -later Laurentian Life) £30,06268: Resolution – Phoenix LifeAlba with-profits fund (Crusader) £28,08569: Pearl Group – National Provident Lifewith-profits fund £27,49170: Resolution – Phoenix LifeAlba with-profits fund(Life Association of Scotland) £24,780Source: AKG Actuaries & ConsultantsBased on 25-year endowment, £50 a month

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