Mother in Law's With profit Policy

ok_go

Hi all,

This is my second attempt at posting, not sure where the first one went ...

Anyway please accept my appologies first up for the very vague nature of this query. I appreciate that I don't have all the info to hand, but that is part of the problem.

I have just had a phone call from my MiL who tells me that she is very unsure what to do. She was advised by an IFA to take out a Standard Life Heritage with profits bond back in 2001 that wil mature upon her death (so she tells me ... and no Mother in Law gags please). She has NO idea what sort of product she has bought and is not really able to describe it to me either.

This is exemplified to my mind by her telling me that she has been keeing a monthly check on the redemption value !!! and has recently seen this start to fall. SO far she tells me that she has seen 'profits' of £1500 which she has taken out of the bond and withdrawn (or redeemed) £5000 of what she percieves to be her capital. Her latest check this morning told her that the current redemtion value was £5060. She is primarily interested in the security of her cash (hence withdrawing the £5K) and has now called me to ask what she should do with the remaining investment? I have found the following so far

http://www.standardlife.co.uk/content/policy/withprofits/index.html?redirect=withprofits

http://www.standardlife.co.uk/content/policy/withprofits/understandingwithprofits.html

My reading of this is that she has massively misunderstood what this investment is about so I would really appreciate your advice as to:

1. Should she act quickly to redeem the rest (my gut feeling is NO as there may be other profit locked in there somewhere. But she is telling me that in her mind she is seeing the value of her investment (as represented to her by the redemption value) approaching the value of the capital she invested and so feels some internal pressure to sell before her redemption value falls below £5k.
2. Where should she go for some advice (I am reluctant to suggest she goes back to the IFA at B&B who sold her this as I don't rate any advisor who would be prepared to sell an elderly lady a product like this that she does not appear to understand.
3. IF she does choose to redeem will she get a better price from anyone other than Standard Life??
4. Would this constitute mis selling??
5. Does anyone have any suggestions as to whether it is appropriate to do any of the above i.e redeem or not??

Your advice will be very very much appreciated. And sorry once again for the vagueness of both the information and the queries

REgards

Go

EdInvestor

What is the surrender value of the bond, compared with the current value?

How much did she originally invest? How much has she withdrawn?

You can't sell these bonds, you have to surrender them.There are usually extra penalties for surrender in the first five years. Withdrawals of 5% of the original capital can be made every year penalty free.

These bonds are also subject to MVR exit penalties if markets fall, as they have , and IIRC Standard life has no penalty free exit date.

You could make a misselling complaint, but it's not clear she has made a loss so she might not get any compensation.

jack_spratt_2

My suggestion is that you and your MiL go and see the IFA who sold her the with profits bond and get a full explanation of the terms of the bond !! by doing so you are not committing yourself to accept his advice !!! but until you know the full facts regarding the investment you cannot make any decision on what to do .
I am pretty sure the bond will have a market value reduction..
If after you have found out the full facts try and find another IFA they are not all the same some are extremely good some are not !! try and get a recommendation if possible

To be honest if you are withdrawing profits out of the bond on a yearly basis it will not grow that much.and seven years is not a long time for a Bond these are longer term investments .
Whether this was the right investment for your MiL nobody can really advise you on that as we do not know your Mil full financial position

ok_go

EdInvestor said:

What is the surrender value of the bond, compared with the current value?

She has no idea she has only ever asked about the redemption value. I will try and get to find out.

How much did she originally invest? How much has she withdrawn?

Originally invested £10,000, and IIRC she withdrew £1000 in 2006 and £500 the year after. I think she also withdrew £5000 this year. after all this the redemption value she was quoted today was approx £5060

These bonds are also subject to MVR exit penalties if markets fall, as they have , and IIRC Standard life has no penalty free exit date.

Would this be represented in the redemtion value that she is currently being quoted?

You could make a misselling complaint, but it's not clear she has made a loss so she might not get any compensation.

Thanks ... she hasn't made a loss as far as I can see just been sold something completely inappropriate for her needs.

Thanks for the quick reply

REgards
Go

ok_go

Jack Spratt

Thanks. I will try and look into the MVR

Regards

Go

EdInvestor

New MVRs just announced.


WP bondholders the worst hit - up to 30% penalties.

http://www.citywire.co.uk/personal/-/news/markets-companies-and-funds/content.aspx?ID=319124&re=4051&ea=156896

dunstonh

Better than the 40% hit directly on equities. With profits are not some "always goes up" option. They have certain levels of security but they are not capital guaranteed.

In any case, the OP says the mother was going to hold it until death. In which case MVRs dont matter. Its only those surrendering at the wrong end of a market drop that get hit with MVRs.