The thing that mystified me most about the PIA's forced review of low-cost endowments was their apparent determination, whatever the cost, to make them look bad.
Never mind that those from the better life companies have for decades been consistently delivering maturity values in excess of target and still are.
Or that with-profits endowments offer a combination of lower risk coupled with better returns than any other investment medium on the planet.
Why, suddenly, do none of these factors in the eyes of the PIA count for anything? From where has this hatred of all things with-profits come?
Evidently, the Treasury and the PIA between them are determined to twist without mercy the bayonet already jammed 12 inches into the industry's guts.
Presumably this was because the first round of reviews failed to paint a sufficiently bleak picture or arouse enough panic amongst consumers.
Now, however, the smokescreen is starting to thin. More and more, we read of the financial strains to which life companies scrabbling for a share of the stakeholder market will be subjecting themselves for the next 10 years (so why are they bothering?)
Next is a review and reform of with-profits because the Treasury feel this medium offers consumers “poor value”.
Clearly they have no concept at all of either how or why with-profits has worked so well for so long for so many millions of policyholders and have decided therefore to make it such an unworkable vehicle for life companies to operate that it will no longer be worth investing in. Don't you just hate politicians?
WDS Independent Financial Advisers,Bristol
The pension transfer review still continues, which was shortly followed by the alleged misselling AVC/FSAVC review and the endowment review.
Many financial advisers have since been heard asking the question “What next?” Well, it seems there is unlikely to be a shortage of future material for the financial journalists and regulators. The latest scheme from a major bank and IFA offering a loan to mop up unused relief before carry-forward ceases would appear to be just another example.
One journalist wrote in the Financial Times that the downside with the scheme is the exposure to interest rate risk. Now where did I hear that before? That's it, I remember – home income plans in the 1980s before the Ship schemes, I think. It cost one building society dearly, I recall.
Something about unexpected increases in interest rates.
Partner, Finmor Associates,Swindon