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With-profits not suitable for 9 out of 10 people, says research

With-profits policies are only appropriate for 11 per cent of clients today, according to advisers surveyed by Skandia.

The poll of over 600 financial advisers found that just over a quarter of clients (27 per cent) were satisfied with any with-profits policies they hold. 

Seventy per cent of advisers said Market Value Reductions are the biggest barrier for clients who might otherwise consider transferring out of their with-profits fund. The value of guarantees, apathy, and being unaware of the potential benefits of a transfer were also cited as problematic for people exiting with-profits funds.

Sixty per cent of advisers said that half or fewer clients are aware of their MVR-free exit dates.

Skandia recently launched a with-profits bond analysis tool to help identify penalty-free exit opportunities and offer performance comparisons with any combination of alternative tax wrappers.

Head of proposition marketing Peter Jordan says: “The initial decision to invest in with-profits may well have been a sound one, but times have changed so it is imperative to take another look and see whether the investment is still appropriate or whether a clearer and less opaque proposition would make more sense.”

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. I hope people see this for what it is. I personally hate life offices telling me that this or that is an independent asseessment when it blatantly isn’t. They should look at the lack of transparency on what they are charging. OOOOH maybe the RDR or Mifid will force them to come out of the closet

  2. Richard Brown, Managing Director, Moneynotion Limi 12th February 2010 at 5:02 pm

    There was little wrong with with profits policies when the mutuals were selling them. It was after demutualisation that the problems came. We have many policyholders who have been delighted with the outcomes of their with profits policies.

    I had some shares from one demutualisation. The dividends were far better than the profits on policies, so I know who the provider looked after, and I don’t think it was the policyholders!

    One product which I regret is no longer available is the whole life with profits policy. Ok, its use may have had limitations, but it was an excellent vehicle for estate planning, especially where someone relatively young took it out.

    A point – I don’t regard “advisers surveyed by” any product provider as “research.” Subjective answers to a provider’s questions, especially if the questions were loaded (even inadvertently) cannot be safely regarded as scientific research.

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