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Turmoil sees ScotLife withdraw Riley bond

Scottish Life has withdrawn its Riley bond from the market until further notice.

In a note to advisers, chief executive John Deane says stockmarket volatility has pushed up the cost of protection, a core component of the bond, meaning that the product was no longer the best deal for cautious investors.

He said: “In the extreme situation of recent weeks, the suitability of an investment in Riley, relative to a deposit investment, becomes difficult to justify. We have therefore taken the decision to temporarily withdraw Riley for new business.”

Launched in August 2006, the Riley bond divides investments between either a tracker or actively managed fund and an insurance fund to soften blows. But the increased cost of protection means that at the moment less than 60 per cent of the bond would be invested in the tracker or managed fund. Deane said this limited the potential for the value of the bond to grow above the protected amount.

Existing customers will be unable to make additional investments, increase the protected amount or bring forward the insured date until the product returns to the market.

But Royal London group head of communications Alasdair Buchanan says this is unlikely to happen until markets improve.

He says: “It will take however long it takes for the market sentiment about future investment returns to return to a reasonable level and be likely to be sustained there.”

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