Life Assurance ISA

MJC_2

Hi,
I started Life Assurance ISA with the Pearl about five years ago as a savings fund for my son.
I pay in £50 a month, but looking at the statements it looks like it has only made about £50 in all the time it has been running.
It is predicting that I may get back £11,700 after 15 years, which would be a profit of £2,700.
I'm sure there must be a better way of investing this money for a better return. I can't transfer the money but I can withdraw it with no penalties.
Any tips would be much appreciated.
Thanks

ReportInvestor

Unfortunately your investment sounds like it could be in a closed "zombie" with profits fund. If so it has been sold to Resolution Life, another company that specialises in managing funds closed to new business.

Could you let us know the fund name it is invested in?

It may prove to be best to take action by April 5.

Life Assurance ISAs have generally proved to be a poor investment .

Life Assurance ISAs are now classed as share ISAs, so if you continue contributions after April 5 you will be deemed to have used your £4,000 share ISA for 2006/7.

dunstonh

The Pearl ISA bonus account started well when it launched as it had no MVR and had a daily bonus rate and additional bonus rate. The additional bonus rate is not paid on the financial strength of the company but on the underlying value of the investments compared to when you made each contribution.

However, timing was bad for Pearl. Plus I recall seeing somewhere that the product cost them around £1.16 for £1 earned. Many put the product as one key reasons why Pearl closed down as it was one of the most sold products by their salesforce.

There is a five year step down penalty from commencement. After that 5th anniversary you are free to transfer it to any Stocks and Shares ISA or make a full withdrawal at no cost.

Continuing it until 15 years is not an option I would consider. For reference I have transferred three away from Pearl this year already, and a number last year. So I have a fair bit of research and understanding on this product.

MJC_2

Hi,
Thanks for your replies, I have been told that this is "closed book" and that the funds can't be transferred. I have passed the five year penalty and so can withdraw the money without loss.
The only thing I can see about the investment says "ISA with profits fund (Life Bonus series 5)"
I think my best bet is to withdraw the money and start investing it elsewhere, do you have any suggestions. Would I be as well to just start up a normal ISA savings account.

ReportInvestor

That sounds a sensible choice.

You may have your £3K Cash ISA allowance left for 2005/6 (April 5).
Then you've got the full £7K ISA option for 2006/7 (from April 6th 2006) which can be £7K in shares or split £3K Cash ISA and £4K shares ISA.

But only invest in equities if it's suitable for you, not just to get some tax advantages which are minimal if you are a basic rate taxpayer without a large investment portfolio.

P.S. Just check that "without loss" means without a market value adjustor (MVA) or market value reduction (MVR) being applied, not just "without additional penalties in addition to the MVR".

dh will be able to say if this might apply.

EdInvestor

iP.S. Just check that "without loss" means without a market value adjustor (MVA) or market value reduction (MVR) being applied, not just "without additional penalties in addition to the MVR".

IIRC Pearl sold many products with no MVR clause - which, as it (or rather its former owner) then discovered - was a great way to go almost broke.;)

dunstonh

Thanks for your replies, I have been told that this is "closed book" and that the funds can't be transferred. I have passed the five year penalty and so can withdraw the money without loss.

This is incorrect. I have successfully transferred about a dozen in the last 12 months.

There is no MVR on this product (like most of the Pearl plans). As Ed said, it was almost total suicide for AMP, one of the three previous owners in the last 3 years.

MJC_2

Thanks again for all your responses,
I think I will just withdraw the money from Pearl and open a normal ISA.
Any quick tips on who is offering the best deals!!