NU With Profits Bond

missile

I invested £100,000 (enhanced to £108,000 by rebate of initial FA commission) in a NU with profits bonds in 2002, payment out £7,500 pa. I considered cashing it in when the MVR was removed in 2008, however I held it as I expected to gain from the re-attribution. As with most (if not all?) investments in stock market it has done poorly this year. Should I hold or sell?

@ 07.01.2008
cash in value £100,170.92
total payments out £45,000

@ 07.01.2009
cash in value £80,606.01
total payments payments out £52,500

gozomark

do you think the stockmarkets etc its invested in will go up ?

you've done OK really -100,000 invested, 133,000 return

dunstonh

You have been drawing out £7500 a year. Thats 7.5% p.a. net. Try and find a savings account that does that.

NU WP funds from 2002 have been very good. Of course, they will be down because of recent events but when you look at the alternatives, these are pretty good. You do have access to the whole unit linked fund range if you want so you can always move into those (partially or fully) if you are looking for something different. You charges drop after year 5 as well so you are now benefitting from it being low cost. (assuming portfolio step down version which is the most common version used).

missile

Many thanks for your comments. I felt inclined to hold, but thought a reality check would be beneficial.

Please correct me if I am wrong, but I calculate circa 3.67% net return over seven years. Cash I have held in a number of saving accounts seem to have done a little better over the same period.

I have benefited from reduced charges since year 5

dunstonh

What is your current value (rather than surrender value)?

Remember that this is still an investment. It will have short term periods when it is not as good as cash. It will have periods when its a lot better. NU bonus rate for 2009 is 3.50%. You will also have the special bonus paid in December (expected to be around 3%).

The WP fund is quite heavy in corp bonds and there is a lot of positive opinion on those right now. Equities are volatile but there has been a floor now for a few months. So, we could be past the worst (of course no-one knows). NU have also cut some of the MVRs recently. So, if this is as bad as it gets, then that would be quite positive.

7.5% on withdrawals is a bit on the heavy side. Erosion of capital is always likely in the short term.

missile

The "total bond value" at 07.01.08 was £100,170.92
The "total bond value" at 07.01.09 was £86,691.05

I realise 7.5% is high. I am looking for income rather than growth.

In light of events, I have not been disappointed with performance and hope the special bonuses and the reattribution will boost future performance over the next few years.

I understand the first special bonus was added to my fund Dec 08. It is hard to keep track / see the effect as there is no mention on their statements.

Reatribution is taking longer than the original schedule. Latest info, the voting packs to be issued "spring 2009".

Geoffo_M

Are your figures net of MVR. There is a 15% MVR on purchases made in 2002

dunstonh

S/V should include the MVR.

I was tracking a few bonds in Dec and early Jan and the number of units went up (along with the value) when the bonus was added. It should appear on the next statement as they will need to show how the units increased.

missile

Many thanks for your comments.

Please be advised, @ 07.01.09
Units brought forward 42,772.7831
5 Dec 2008 Special bonus £3,946.63
1 Jan 2009 Special bonus £3,060.71
2 Jan 2009 Withdrawal - £7,500
Final bonus £13.98
Total units 42,594.1655

Values updated @ 23.01.09
Fund value 83,441.97
MVR 6,091.27
Cash in value 80,688.38

I can switch funds up to four times per year without penalty.

I have guarantees re withdrawals @ my next 5 year anniversary.

For info, I invested £100,000 (enhanced to £108,000 by rebate of initial FA commission) unit price £1.593 No of units 67,796.610

gozomark

was your initial investment 100,000 as per first post, or 108,000 ?

missile

My initial investment was £100,000, which was enhanced to £108,000 by rebate of initial FA commission.