New research reveals that around 5m investors hold with-profits policies that are, it is being suggested, ”doomed to fail”. Apparently, over £150bn is invested in these troubled funds according to Matthew Morris, who claims to be a specialist with-profits adviser. He suggests that prospects for those with pensions, endowment, or with-profits investment bonds in these funds is “bleak”. We suggest that you might wish to act because if you are in a poor pension fund the best annuity rates at retirement won’t really help you.
This research, undertaken by exitwith-profits.co.uk attempts to identify the good, the bad and the downright ugly with profits funds within that particular sector. Mr Morris states that there are 35 different insurance companies in the UK offering with-profits funds. Some are actually closed funds, some are open, some offer conventional with-profits investment plans, others have some unit-linked options, some are funds which are 100% invested in gilts, others offer a much more balanced portfolio, some have guarantees built in and others do not. Further, he suggests that some funds are really pretty good, some quite toxic: the only problem is individual investors don’t realy know much about which is which.
This research undertaken analysed detailed information from Morning Star, the leading actuaries AKG, annual returns published by the regulators (FSA) as well as the life insurers own information that they have published detailing the strength and holdings of each with profits fund. From this exitwith-profits.co.uk has compiled a list of funds they consider most at risk. These include Axa Sun Life, Pearl Assurance, Scottish Widows, and Equitable Life.
Mr. Morris adds that it’s true not all companies’ funds are actually doomed, but enough of the market has bombed out to cause immense great concern for millions of policyholders. However, the with-profits actuary at Scottish Equitable has disputed the findings made by this report, stating that they would strongly deny that theirs is a fund that is doomed to failure. The bonus rates paid on this fund had increased in value over the past five year period, and should continue to rise in future, and, many of the investors in this fund hold valuable guarantees which give them a fixed growth rate of 5.5% a year, or a guaranteed annuity rate.
If you do hold a with profits pension fund it might be worth checking out it’s viability. You might be better off moving it.
