Market Value Reduction

ELJOR

Hi

I have a pension policy with Norwich Union and when I went to take it I was told that there would be a MVR of over £18,000 because of poor performance in 2008. I should have taken my pension in Sept 2008 agreed retirement age but didn't so I am now being penalised. I know this is not quite the same as a Bond but it is the same principal. How can this be allowed?

Reaper

ELJOR wrote: »

How can this be allowed?

See all previous posts on MVR. The pot of money they have to pay out has gone down in value so they have less to pay out. They can't pay out money they haven't got. Why is everybody always so surprised?

I think it must be a fundamental misunderstanding as to how With Profits policies work.

Having got that off my chest are you sure MVR applies to you? Often it doesn't if you complete the term of your policy and if you have passed the agreed retirement age it probably doesn't apply to you. However the terminal bonus will be small or non-existant in current conditions which will affect the value of your pension.

dunstonh

I know this is not quite the same as a Bond but it is the same principal.

Its exactly the same principle. The underlying fund went down and unless you are at your selected retirement date, you are potentially liable for the MVR.

How can this be allowed?

Because its logical. If the underlying fund was worth £20 billion say and it dropped to £15 billion but all the balances remained at £20 billion, what would happen if everyone drew the money out?

I should have taken my pension in Sept 2008 agreed retirement age

Problem is that it takes about 5-7 days to activate the annuity and tax free cash. You tend to get the paperwork in around 2-3 months in advance so its ready for your selected date. So, why is it that you are more than 6 months past that date?

I think it must be a fundamental misunderstanding as to how With Profits policies work.

MVRs had rarely been charged in the past. The dot.com crash was the first time in a very long time. The insurers absorbed most of the 2007 and early 2008 drops but the October decline was too significant to avoid.