I refer to the letter from Terrence O'Halloran, Who can beat the returns
on with-profits? (Money Marketing, August 16).
One of the problems with with-profits is determining what the returns have
Surveys of maturity values on with-profits funds are often quoted but
these only cover a tiny fraction of the policies on the books and by no
means represent the returns on with-profits funds.
Of major concern is the treatment of the much larger number of investors
who leave a with-profits fund before their maturity date.
The ABI's Raising Standards initiative includes a specimen simplified
guide to with-profits investment and, for these investors, section 7.3
says:”We don't smooth your return as normal because the smoothing is
designed to benefit investors who remain with us for the full term of their
policy. We decide how much of the smoothing benefit to take into account.”
I guess we all know what that means!
In his letter, Terrence also asks the Treasury: “What about the £44bn
that went missing over 20 years from Serps funds?”
The Treasury may just reply: “What about the £40bn that went missing,
primarily, from those leaving with-profits funds before their maturity date
– money that now resides in the insurers' orphan assets?”
Senior manager (pensions development),