Did you ask for your with-profits investment? ? ?

We are finding more and more people who have with-profits plans who simply didn’t ask for them in the first place.

It seems with-profits were sold by certain distribution outlets (e.g. banks and insurance companies) to people as straight forward alternatives to deposit accounts. Nothing could be further from the truth: with-profits couldn’t be MORE different to a deposit account.

What is interesting is that if there is any resemblance of evidence of this then the plan holder may (and we need to stress that it is only may) be able to get their position straightened as if they had been in a deposit account.

So if you think you are in this boat there may be a glimmer of light that you might be able to get yourself back in the position you were told you were in.

For example if you were sold a with-profits bond 8 years ago on the premise that it was going to be a straight alternative to a deposit account, and you invested £50,000 and now it is worth £51,000 (allowing for penalties) then you may be able to get “redress” which means had you been in a deposit account you would now have £62,000, which means you may be able to claim against the company and get the difference £11,000 repaid to you.

If you think this is you then why not test this? We have a service which enables you to test if your situation “qualifies” to take you down this route: you have absolutely nothing to lose and everything to gain if this does work. To find out more click HERE. We should stress that for technical reasons this only applies to either people in with-profits pensions or with-profits bonds: unfortunately endowment holders have already had their chance to claim redress and this door is now shut for endowment investors. However anyone with an endowment should use our review service to see if they can do anything about their position.

Going Green is a Good thing!

“Survey after survey continues to show that much of the with-profits market remains vulnerable to difficulty. The conundrum for savers who have these plans is to understand which category their plan falls into. Are they in the vulnerable category or in the safer category? We try through our site to produce a traffic light system which provides an indication of the position companies are in according to our research. Red companies are in the risky category; amber in the middle, green is looking OK. But it is very important to stress that this is a situation where the summaries are generalised and subjective. Two people with very similar situations could be in totally different territory when it comes to asking what should they do for the best? As an example this may be because one is in serious ill health and needs the value of the death benefit, the other in good health and looking at virtually no future bonus prospect and ever increasing penalties.

So although our traffic light system may tell you which companies are looking good and which aren’t, this only helps to a point. Our stress test is to suggest that the generalised position is put up against a specified and tailored report produced for an individual. The individual report is a bit like a health check. “Prevention is better than cure” is a well worn phrase but it really does apply here: most investors in with-profits will suffer a surprise if they suddenly find increasing penalties or a company running into trouble. Our health check (the individual review) will hopefully stop such a shock from occurring.”

With-profits hike exit fees despite rally

We have recently been working in partnership with “this is money” to explain the current state of with-profits – click here to see our Article.

Is the with-profits industry guilty of mis-selling?

My view is that far too many of the people who we come across asking for help from our site are people who really didn’t want to have a with-profits investment in the first place. They were normally sold on the idea by their bank or a representative from the insurance company, and often, on the basis that this was a safe house almost akin to a deposit account (but with a better return). This is rubbish, always was rubbish, and we believe that anyone in this position should be able to go back to the company and/or the adviser that advised them and ask for their money back in full.”

“Is this ambulance chasing? No, not at all, it is simply saying that if the process which led to a with-profits investor getting into the fund was flawed then the investor has been mis-sold a product, which should be compensated. It is clear that with-profits (in particular with-profit bonds) were hugely profitable for banks and building societies in the past. If someone walked into the bank in 1999 with £100,000 to deposit imagine the difference in earnings to the bank that putting that in their high interest deposit account (were the bank might have a margin of 0.5% per year) would make compared to persuading the same person to putting it in a with-profits bond (which often produced an upfront commission to the bank of upto 8%). Now call me a cynic but I suspect that many banks encouraged their staff to steer investors towards with-profits bonds almost regardless of their situations and/or requirements.”

“Indeed I even know an ex bank employee who was charged with doing this and have seen many victims of this across our site, so I know this is relevant. Fortunately our financial system now reflects this by allowing and entitling anyone who feels this sort of situation was relevant to them to make a claim through the Financial Ombudsman Service (FOS). However whilst this is great we urge caution, the FOS is a very specific service which requires a lot of documentation and argument, evidence and presentation. Many a potentially successful claim fails simply on grounds of bad presentation. Remember the companies defending any claims have whole departments that do nothing else so an individual claimant can often be up against it simply through a lack of requisite skill in presenting and managing their claim.”

“We have linked up with a specialist, properly registered and regulated, firm of compensation advisers to help potential claimants. They are able to tell in one call if a claimant has a valid claim which is worth taking to the Ombudsman and then they are able to manage this claim on the claimant’s behalf. They do not charge for this other than on a no win, no fee basis, giving with-profit investors who think they have been mis-sold a plan a chance to have their claim professionally presented and managed without any worry about fees if they fail.”

Aviva Reattribution

I feel for the Norwich Union with-profits policyholders trying to get their money out as it is never an easy task given the nature of the products and they are right to bring attention to the issue. However, the action group’s focus on reattribution misses the bigger point and that is that falling asset values mean many with-profit funds are struggling and insurance companies are hiking their penalties or market value reductions (MVRs) meaning any “bonus” from reattributions could easily be wiped out by the companies incrementing penalties.

With-profits plans are held by about 12 million people in the UK and it appears that the penalty situation for these people is generally worsening, despite the recovery this year in markets. This fact should be setting deafeningly loud alarm bells ringing as if penalties are getting worse this year during this backdrop, then what on earth will happen to values and penalties if markets turn the other way?

With-profits warrant a thorough examination, and reattribution should be marked out for special attention but it is one of a long list of areas and is comes a poor second to rising MVRs in a recovering market.

Should I Stay or Should I Go?

I was confronted yesterday by an all too common scenario: two with-profits policies, both held with CIS by two different people who approached www.exitwith-profits.co.uk for advice. The plans were almost identical on this occasion but a number subtle variations dictated two very different courses of action were taken. One policy screamed run for the hills but with the second policy it made sense to keep the money put for the time being.

If you invested money in with-profits you will constantly be faced with the challenging question of should you leave the investment in place or should you cut and run?

For the most part trying to compare one with-profits policy with another is a thankless task as under the umbrella term ‘with-profits’ sits a multitude of hugely different product characteristics and the term includes:

• With-profits bonds
• With-profits endowments
• With-profits pensions

The decision on what to do will be almost entirely dependent on your own personal circumstances, but there will be some consistent factors that you need to consider:

1. What is the purpose of the plan you have? If you have an endowment it will probably be for the purpose of paying off a mortgage. Is the plan producing a return that is sufficient to pay off the mortgage? Is the plan in the red, amber or green category?  If you have a bond then this will probably be for savings, maybe to help produce an income. If it is an income producing bond, what return are you getting: is it sufficient to cover the income you are taking?  If you have a pension then this will be geared to producing a sum at retirement: is the return sufficient to give you the expected level of pension?
2. What is the bonus situation? Are you receiving a bonus? If yes, what is the level, how has this varied in the past few years? Are bonuses solid or are they under pressure?
3. What are the bonus prospects? Are bonuses on the way up or down? If down is this a temporary blip or something that is more of a long term worry and trend?
4. What are the penalties? Is there a penalty on withdrawals from your plan? Are regular contributions (if you are making them) subject to penalties? Why is the penalty in place, how much is it, can you avoid it, is it likely to be reduced or increased?
5. What are the alternatives? If you take the money out what else can you do with it? If you are paying in regularly (e.g. with an endowment or a pension) what else could you be doing with this money? Can you allocate the money in a more efficient fashion?

These are just some of the key questions you need to consider and answer, some are known quantities (such as current values and penalties), and some are unknown (such as future bonus prospects).

There is only one firm way you can assess your position accurately: get an individual, tailored review of your plan.

The tailored review will produce a report which will contain all the various elements that need to be taken into account. The report will summarise the existing position, what the plan or investment is worth, what the penalties are, what the latest bonuses are, how these have varied, what the prospects are, how the company you are with has performed, what it’s financial position is like, where the underlying assets are invested and how all of this compares to the alternatives you could be using.

This report is individual to your situation and at the very least will provide you with a clear understanding of your position to then make a decision about whether to keep your money where it is or cut and run.