Investments in AIG Life UK

ShelM3

Hi there

Wonder if you guys can help.
Just discovered that my mum invested her pension in an AIG Life UK Capital Portfolio Bond a few years ago when she retired. She has not looked at the value until recently and was unaware of the problems with AIG US. The value has lost a third from what she originally invested.

Her adviser is telling her to cash it in and take the losses.
My question is why didnt he advise her much sooner first of all? And wouldnt she better hanging off for a couple of years and seeing if it comes back up?

Is AIG UK really in that much trouble? Would she be covered with the Financial services compensation.

She worked her whole life for this and dont want her losing out but if she can afford to wait - I would have thought that this was better than losing it all - no?

And i have told her to sack the adviser who hadnt bothered with her for over two years!

any help appreciated.
thanks
shelby

dunstonh

My question is why didnt he advise her much sooner first of all?

No reason to probably. And no reason to exit either really. Although you dont say what amount, tax wrapper or investments are utilised. So, its hard to say.

The value has lost a third from what she originally invested.

Which suggests a cautious spread as its less than general stockmarket losses.

She worked her whole life for this and dont want her losing out but if she can afford to wait

Perhaps thats why hes telling her to cash it in.

ShelM3

hi dunstonh

thanks for quick reply.

Orginal investment was £70K
Invested in 4 funds, New Star Property, Invesco Perpetual Income, CF Midas Balanced and Schroder Mid250.

Not sure about tax wrapper that you mention.

So do you think she would be just as well to sit it out and wait for a few years recovered (hopefully) ?

thanks
shelby

dunstonh

Not sure about tax wrapper that you mention.

Its probably an invesmtent bond in a life assurance wrapper which gives her 100% FSCS protection on first £2000 and 90% on rest with no upper limit.

So, cashing out on grounds of FSCS protection (or lack of) is not a good reason.

Invested in 4 funds, New Star Property, Invesco Perpetual Income, CF Midas Balanced and Schroder Mid250.

Property is low/medium risk. Balanced is medium risk. Inv Perp Income is medium high and Schroder 250 is fractionally above that. So, it looks like medium risk spread, possibly a tad higher or lower depending on weightings of the funds. its not a great spread (4 funds with one being a managed suggest no strategy or reasoning). However, the funds themselves are not bad.

So do you think she would be just as well to sit it out and wait for a few years recovered (hopefully) ?

Crystal ball job. Conventional wisdom is you see it through. nine times out of 10 that recovery happens within a 5 year period. However, there is always that 1 time it takes longer. So, it comes back to perhaps her age and risk profile and understanding of investments and how they zig zag.

whiteflag_3

ShelM3 wrote: »

Hi there

Wonder if you guys can help.
Just discovered that my mum invested her pension in an AIG Life UK Capital Portfolio Bond a few years ago when she retired. She has not looked at the value until recently and was unaware of the problems with AIG US. The value has lost a third from what she originally invested.

Her adviser is telling her to cash it in and take the losses.
My question is why didnt he advise her much sooner first of all? And wouldnt she better hanging off for a couple of years and seeing if it comes back up?

Is AIG UK really in that much trouble? Would she be covered with the Financial services compensation.

She worked her whole life for this and dont want her losing out but if she can afford to wait - I would have thought that this was better than losing it all - no?

And i have told her to sack the adviser who hadnt bothered with her for over two years!

any help appreciated.
thanks
shelby

Tax wrapper is an invesrtment bond so nothing has changed ( with investment bonds) to mean it should be cashed in.

Whats gone on with AIG in the US will not effect the investment as it is in ringfenced funds, so no need panic there.

If the fund perfomance is a problem a fund switch would be the easiest and cheapest solution. But then the "adviser" wouldnt make anything by churning into another product.

http://www.aiglife.co.uk/AIGLifeUK/default/templateFund.jsf

For your info Shelby, many advisers have been using the AIG (US) problems to panic their clients into cashing in , when there is simply no need . Ive been told on good authority one firm did £7 million in two months!!

I also think from memory that there may be a loyalty bonus on AIG products.

MikeJones_2

Hi ShelM3,

I can understand your angst and what you have described must be a common situation right now across the UK.

As a voluntary mediator, I expect to see many more complaints of this nature.

However, before you jump in consider first what was the adviser's original role and what were your mother's expectations of his ongoing services - if any were agreed at all.

If the adviser was engaged in an original capacity to give only the initial advice - but not ongoing advice - then there's little argument you can muster against the adviser (assuming that her risk profile was matched correctly).

If your mother's expectation was to receive ongoing advice (a) how was this communicated to the adviser (or the other way around) and (b) what was agreed as a remuneration basis for the adviser?

Did the adviser, for example, set up the investments whereby he receives an annual management charge from the product provider - and if so is this the reason your mother is expecting ongoing advice?

I'm not defending the adviser - just pointing out that both parties (your mother and the adviser) might have differing expectations.

The scenario is very much the same as is happening all over the country in boardrooms as trustees are having their periodic meetings with their scheme's advisers. In fact I blogged about it this morning if you're interested - and there's a cracking article in The Telegraph too, that I've referred to:

- Pension trustees and advisers: in the driving seat or in the line of fire?

Hope my comment above doesn't offend - it's meant as a balanced viewpoint.

Mike

I work in the field of Pension Education and Pension Guidance in the UK. I am a member of the Specialist Pensions Forum as well as being a Voluntary Adviser for The Pensions Advisory Service. I work with scheme members, employers, trustees, scheme administrators and advisers on most things to do with employer sponsored pension schemes. The views expressed by me in this thread are my personal opinions. You should seek professional advice from an appropriately experienced and qualified adviser. I am not an IFA.