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With-profits in ‘irreversible decline’ as L&G exits

With-profits funds are in “irreversible decline” despite providers professing their commitment to the market, advisers say.

Last week, Legal & General said it was closing its with-profit funds to new business because of falling sales as a result of the introduction of the RDR.

Prudential, Aviva, Royal London and LV= insist they have no plans to follow suit but advisers say the products have been replaced by modern investments.

Hargreaves Lansdown head of communications and chartered financial planner Danny Cox says: “With-profits has been in irreversible decline for 10-plus years. To be honest, I had assumed L&G had already closed to new business.

“We haven’t recommended people putting money into with-profits since about 2002. People will still be topping up here and there but there have been far better places for your money for many years.

“So many of the big with-profits funds went pop through a combination of reasons – including being over-ambitious with bonus rates, taking too much risk and then getting hit by big falls in the stock markets in the early 2000s.”

Aspect8 chartered financial planner Bernardo Hunte agrees the products have “outlived their usefulness”.

He adds: “For today’s investors they can be hard to explain, modern investments are easier to understand and more transparent”.

But a Prudential spokeswoman says with-profits investments are “hugely relevant to consumers” looking for “consistent, medium to long-term returns and access to a wide range of asset classes”.

An LV= spokeswoman says low interest rates have led to an increase in demand for its with-profits offering.

She says: “We are seeing customers use with-profits products as part of their general investment plans and more specifically we’ve seen an increase in people using them for their retirement plans.”


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