Without Profits?

baby_boomer

The Mail reports Money Management figures which show that many 10 year with profit £50 pm endowments are returning less than the money paid in

In the case of London Life, 10%+ less :eek:

Does anyone else have a bad with profits experience, perhaps on a longer term policy or a with profit bond?

Lokolo

You say many.

Article says some.

"New figures from specialist magazine Money Management, show that, in some cases, savers are even getting 10% less than they paid in."

baby_boomer

The article lists ten companies returning less than the monies invested - Worst performers first.

London Life
Pearl
Sun Alliance & London
Royal Life
Scottish Life
Friends Provident
Colonial Life
Abbey Life
Equitable Life

How many is many?

Certainly too many.

turbobob

They are an investment and there is no guarantee you'll get back what you put in. I would imagine that if you took out a similar policy with similar charges investing in a UK Equity fund and it was maturing now, you might well be worse off than a WP policy.

They have much higher charges than a monthly ISA, and less flexibility.

baby_boomer

Another factor to take into account is inflation.

At 34% over 10 years, that means that a WP policy has to return 17% to "stand still".

You make a semi-valid point, turbob. It would be wrong to compare WP with an equity fund, however, as they aren't fully invested in equities since their purpose was to provide greater stability, which they were supposed to achieve by a) greater variety of investment and b) by "smoothing".

turbobob wrote: »

They are an investment and there is no guarantee you'll get back what you put in.

That's true. But I bet less than 10% of those investing in WP funds in 1998 knew it

Will this be the first 15 year WP policy to show a loss?

The MSE Axa Sun Life policy - as sold by Carol Smillie et al via the Express and the Sun newspapers among others

dunstonh

The issue has nothing to do with With Profits but to do with it being a bad 10 years. Many unit linked funds have suffered far worse. That includes trackers.

Edit: to follow that up with fact, I just input £20pm for 10 years using a selection of funds. 10x12x£20= £2400 contribution. Results are after annual management charge but dont include set up charges (which would be the same in each case but would probably knock around £300-£400 in each investment case from cases from that era).

Savings account average £2806.60
NU With Profits £2773.20
NU Cautious managed £2641.10
NU Balanced managed £2379.50
NU International Equity £2321.30

So, we can see that the 10 year period seems to have suited the lowest risk and With Profits has come out better than the main unit linked alternatives that would have typically been used 10 years ago.

However, if we go back 6 months then the best options were the higher risk ones with international equity, balanced managed and cautious managed all beating WP and cash. Hence, why its down to timing rather than being just a WP issue.

The mail is not a reliable source for information and it puts a spin on whatever subject it wants. On this occasion it has decided to go anti With Profits but you can see that unit linked funds would have been worse. Yet no mention of that in their article. Towry Law are considered a bit of a joke in financial services because they are anti anything that doesnt suit their current business model (whatever it happens to be at this time as it changes so much). Towry Law was one of the largest drains on the FSCS (from advice channels) when it 'died' and magically phoenixed into its present incarnation (due to miss-selling). You have to question their double standards and using hindsight to see which has come out best without looking at why and comparing the alternatives. By all means, have a dig at With Profits but at least do it in context and do it with the right information and reasoning.