With Profit Pension statement

dunstonh wrote:

OP wrote:

Interesting, in a year the plan value has increased by £400 but the transfer value has jumped by 7k.

Sounds perfectly normal. Due to the regulatory requirements regarding solvency, most of the returns on with profit funds are within the terminal bonus nowadays and not the annual bonus.

This is hardly normal. It is however par for the course which since they brought the bulldozers in, has no turf, no smooth greens just more dust, and no numbered flags so you know where you are. The 19th is a cash business, managed worse than the greasy spoon at the lorry park, and most people play elsewhere. So I'd say any view of normality is just an industry insider's view of where the industry is currently at after messing terribly with With-Profits funds, but where said industry insider may have no appetite for questioning what the industry has been up to.

The biggest names are guilty of hiding true value of our investments in with-profits funds.

Aviva is a good example, isn't it, dunstonh?

I have a WP pension with Aviva where the transfer value (including terminal bonus) jumped 10% overnight recently. Before that happened, I'd been quoted a transfer value which was already 40% higher than the so-called "Fund Value" of my policy, which is the only thing which gets quoted to me in my Yearly Statement thesedays. That makes the Yearly Statements meaningless, and they know it, but don't seem to care.

Dunstonh has access to much more material than most punters, so can best explain how and why these things pass for okay.

Indeed, there are some with profit funds out there with zero bonus for the last decade but continue to make fairly decent returns via the terminal bonus.

Are these decently managed with profit funds or indecently managed with-profit funds? Did we touch them with our bargepoles originally because they promised zero bonus until termination and a pot luck bonus at termination ? I think not.

Can the transfer value fall

Yes. Whilst the annual bonus cannot be taken away, the terminal bonus can fall to zero. That bit will fluctuate with the returns of the underlying fund.

Note that the returns of the underlying fund do not flutuate with market performance. They fluctuate primarily with perceived reputational risk to the provider's future business plans in the event they decide to fluctuate the bonus.

For the avoidance of doubt, most providers have progressively set themselves up so they have no significant reputation to risk, so they will do what they want, when they want.

Pincher wrote: »

Just to confuse things, Equitable Life seems to be calling the Terminal Bonus a "capital distribution amount".

It would appear that Equitable Life is releasing some of their reserves, which are distributed to the With Profits policy holders who have not abandoned ship.

The dream is there are millions left in the reserve "undistributed" pot, so that as the other policy holders depart, one way or another, the Terminal Bonus gets bigger for the remainder policy holders

Yes each of these "providers" calls what it does what it likes. Remember when three part buzzwords were in vogue? Well it looks like the financial services industry invented it and never grew out of it.

You are quite right with your theory. It is a variation of your "last man standing ideas" except it is rigged not for the benefit of lucky "last man" policyholders, but for the benefit of conniving always there covetous greedy fund managers and ALM specialists seeking the approbation of complicit greedy shareholders.

It is of course the reason my Aviva terminal bonus jumped 10% overnight. They just invented a new special distribution out of the blue and announced it in February.

It isn't for everyone of course - only the few of us who saw through their contrived windfall games and spiels in 2007-2009 and gave them the finger whilst remaining on their ship. Our small group doesn't get invited to the Captains table much now ... but when the company hold becomes so full to bursting that they have to put some of the assets in full sight on deck, it's us in the special cabins they have to share it with on a 90%/10% basis if they wish to shift it quick before the hoi polloi start sniffing around it - it then gets stored behind a magic curtain in our cabins

Trouble is, the way Aviva has done it, there's still the problem of the magic curtain being drawn back sometime and there being nothing behind it (terminal bonus not guaranteed - even this special bit). :mad:

I too have an AXA Equity & Law WP Pension purchased in the early nineties - doesn't everybody ?

AXA were first at trying (and largely succeeding) in separating inherited estate within their with-profits funds from the rightful owners - us, the policyholders! That was in 2000/2001.

Your policy will have done well if you did not take the bribe offered in 2001.

In many cases the bribe was around £400.

In 2007 in my case by not taking it in 2001, my policy received a special bonus added to the fund value of about £800.

In 2011 a further special bonus was added - about £4,500 that time! If the ½million plus policyholders who took the bribe in 2001 had not done so, that may have meant that within 10 years, around £1bn would have been distributed to them instead of to shareholders. No small beer that, eh?

And guess what? I am due another one as at 31 December 2015 and so might you

Only for contrarians, mind.

Were you a contrarian or perhaps simply one too busy to notice that you'd been offered a bribe in 2001, ringer? Sounds like you may be because you refer to your fund as the Friends Life Old With-Profits fund. Those who took the bribe were moved to the AXA New With Profits Fund in 2001. The names have been changed a few times since, but perhaps FL Old WP Fund was one of the successor names of the AXA Old WP Fund. If so you'll be with me in a small minority group of just 13% of the original WP policyholders in 2001 who still have rights to a 90% share of distributions from the inherited estate. Those who took the bribes gave that up.

As for what Aviva will do with the 31 December 2015 distribution which apparently Friends Life are already working on, who knows. Will they try to turn it into an unguaranteed terminal bonus like they've just done with their own WP funds?

I would imagine that might be a step too far since Friends Life have already created precedent by distributing two tranches as actual bonus already added to policy fund values.

They can try it of course ...

Sounds like you stand side by side with me in the old wp fund then? I'd say we should perhaps share notes, but are you sure you're not a ringer?

The only thing which now looks odd about yours compared to mine is the thing you first mentioned - the apparent £7K increase in transfer value over the past year alone. Although I have an Aviva one that upticked by four figures overnight in February, I am pretty certain my Friends Life one has done no such thing since 2011 - but I am hoping it will again at the end of this year!

By the way, you say you had a military FS scheme transfer value of £4,000 in early 90s?

I had 10 years in an FS scheme which luckily is still live and which had a transfer value in the early 90s of about £12,000. The transfer value now is £180K i.e. 15x greater, and I happen to know that mine is not a particularly generous 2015 FS scheme cash equivalent transfer value.

It's only a rough comparison of course, but even with the special old wp fund bonuses, your £4,000 has only increased by 7x it seems.

Commiserations. Ever considered claiming for a mis-sale?