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Rough on the smoothing

I refer to the letter from Terrence O&#39Halloran, 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&#39s Raising Standards initiative includes a specimen simplified

guide to with-profits investment and, for these investors, section 7.3

says:”We don&#39t 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&#39 orphan assets?”

Brian Newbould

Senior manager (pensions development),

Skandia Life,



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