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Standard Life raises MVRs for some with-profits policyholders

Standard Life has raised the market value reductions on with-profit unitised pensions but has reduced the MVRs on with-profit bonds.

The MVR on 0 per cent fund regular payments unitised pensions has risen from 6.1 per cent in January to 7 per cent in August.

Those policyholders with repriced funds regular payments unitised pensions will see their MVR jump from 4.1 per cent to 6.8 per cent.

But with-profits bonds MVRs will reduce from 10.7 per cent in January to 9.9 per cent in August.

It has maintained the annual bonus rates on its with-profits funds but says many plan values will be lower than a year ago due to poor returns from investment markets.

The life office says that many customers will benefit from payout guarantees and the smoothing that we are applying to maturity and retirement payouts.

A 20-year savings endowment plan taken out on 11 August 1989 by a man aged 29 for £50 per month has a maturity value today of £17,986.

A 20-year individual pension plan taken out on 11 August 1989 by a man retiring at age 65 for £200 per month has a retirement value today of £83,086.

A with-profits bond investment of £10,000 on 1 August 2004 has a cash-in value today of £12,046.

Intelligent Pensions technical director David Trenner says: “With-profits was designed to protect investors from falling markets, which it has failed to do in recent years. Investors need to bite the bullet now and get out of these funds into something which does what it says on the tin, whether that is guaranteed equity or equity funds which can rise and fall. Ironically Standard’s stakeholder with-profits fund is their only fund to be unaffected, and that is precisely because it is not a true with-profits fund.

“Guarantees would have been great if they had protected clients when markets were tumbling, but because of MVRs they didn’t. Standard Life with-profits policyholders are now being hit by a double whammy, with funds underweight in equities as the market fights back.”

Standard Life Assurance with-profits communications manager Margaret Flaherty says: “Despite the very recent positive movements in the stock market, investment returns have in general been poor over the last year and market volatility has continued. Because with-profits is designed to limit the effects of fluctuations many customers will be shielded from the full impact of this market volatility at their maturity and retirement dates.

“While payouts in many cases may be lower than a year ago, most investors with plans maturing now will not have been affected to the same extent as direct investors in the stock market. They may also have guarantees on their plans which are especially valuable in a depressed market.”

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