mvr, market value reduction

ruthwilliams

hello, i'm new to posting a thread and to this site so i appologise if i am doing this wrong or in the wrong area.

i just wanted to ask if anyone knew anything about mvr's on a bond.
my hubby and i took out a five yr investment plan two years ago of £35,000 and have recently needed to take some money out, we contacted norwich union who told us we would have to apply in writing for the £5,000 we wanted and that we would pay a percentage charge which worked out at £376. that was fine as we need the money now so we sent off, in the mean time we rec'd a letter saying that ' we now have to pay an mvr on our with profit funds of £846, making a total charge of £1222 to withdraw £5,000'.

i am worried as i was not told about this at the time of investing or at the time of making the initial phone call. my hubby called them and they said we have to pay the fees if we want the money.

thank u for reading, any advice would be really helpful

ruth

turbobob

Do you understand what an MVR is and why they are used?

dunstonh

my hubby and i took out a five yr investment plan two years ago of £35,000 and have recently needed to take some money out

Are you sure?

The Aviva plans from that period that invest in with profits are open ended and not for 5 years. This is important as there is no MVR charged on maturity. Only in the interim. If you do have one that matures, then leave it till then and it wont be levied.

If it was an open ended one, as i suspect it is, then Aviva plans from that period did have an MVR free exit point at the 5th anniversary.

i am worried as i was not told about this at the time of investing or at the time of making the initial phone call.

I find it very unlikely that a with profits fund utilised two years ago (assuming bought via advice and not direct offer) would not have any reference to an MVR. The reasons being:
1 - there cannot be a compliance department out there that would not insist on the MVR being documented.
2 - One of the benefits of using Aviva was their guarantee on 5th anniversary and MVR free exit point. So, it would be logical to assume that it some reference to that would be made.

I suggest you read the recommendation report that was issued by the adviser at point of sale. If it doesnt mention MVR then you may very well have a case but I suspect you will find it in there.

The reasons for the MVR are quite logical as well. The last 2 years have seen the stockmarkets and property fall significantly. They are starting to recover.

Your guarantee would have been for the 5th anniversary. Not in the interim. That is quite normal for investments.

BULLNOTBEAR

I agree that there is probably an MVR as markets have fallen over the last 2 years and it will definately be in your KFD/illustration given to you at the time.

I would imagine that the £376 is the early encashment penalty (£376 is 7.5% of £5,000 (the amount you are withdrawing) and this sounds right to me.

You state that you took out a five year plan but an Investment Bond does not have a fixed 5 year life but would have had early encashment penalty if amounts in excess of 7.5% per annum taken from the policy the first 5 years.

I would ask them if there is a way of avoiding this early encashment penalty as I think you could take out 7.5% per annum without a charge and if you haven't taken any income yet you could definately ask for 7.5% penalty free for this year and ask if you can have. You may have to take an income from the Bond to avoid a penalty on this so it may take longer to access the money.

Ring them again and ask some more questions. Let me know if I can be of further help.

ruthwilliams

hi, thanks for all your replies.
after i posted this i called aviva again and i asked about the guarateed plan, they said that i have a with profit fund not a guaranteed plan and that if i want to withdraw all of it i will have to pay £200 early penalty charges and £5000 mvr charges.
i explained to them that the advisor at principality sold me a guaranteed plan and told me that my money would be safe. if it went up as long as i didn't withdraw then that would be a bonus. he said to think of it as an investment.
i also explained that when my hubby called at the start of oct to enquire about how to withdraw, we were told the same again (after being passed from pillar to post and on hold in various departments).
they said if i felt i had been mis-sold a policy i could complain, which i have and they have 8 weeks to respond. i also asked for a copy of the conversation my hubby had with the advisor.
in the mean time i have contacted the fsa and the fos.
it seems to me that i thought i had and was told i had a plan that i didn't.
something that confuses me is that on the letter the ref says g bond but the content refers to a with profit bond. unfortunately i spoke to a trainee who was passing the complaint on .

dunstonh

after i posted this i called aviva again and i asked about the guarateed plan, they said that i have a with profit fund not a guaranteed plan and that if i want to withdraw all of it i will have to pay £200 early penalty charges and £5000 mvr charges.

The plan is not called the guaranteed plan and you dont have the guaranteed fund. However, you have the with profits fund and most of these up to fairly recently had an MVR free exit point after 5 years.

i explained to them that the advisor at principality sold me a guaranteed plan and told me that my money would be safe. if it went up as long as i didn't withdraw then that would be a bonus. he said to think of it as an investment.

It is an investment and it is capital secure providing you go to at least the 5th anniversary.

in the mean time i have contacted the fsa and the fos.

Neither of whom will deal with your complaint. The FSA dont handle consumer complaints and the FOS will only look at a complaint once you are deadlocked by the advising company. In both cases, any complaint made to them will be forwarded on to the advising company.

it seems to me that i thought i had and was told i had a plan that i didn't.

You have what you thought you had. However, you are drawing funds after 2 years so the guarantees that would be in place after 5 years dont apply.

something that confuses me is that on the letter the ref says g bond but the content refers to a with profit bond.

The product is an investment bond. The fund will either by the with profits fund or the with profits guaranteed fund (not the unit linked guaranteed fund or any of the other 130 odd funds they offer on that contract).

unfortunately i spoke to a trainee who was passing the complaint on .

Some poor sod is going to get a complaint record on their file because you have the product you think you had but dont realise it but couldnt wait to discuss it with the adviser.

Have you even checked your suitability report (the letter the adviser writes which states what you have, why you have it and the risk factors involved)?

All the complaints team are going to do is check the factfind (personal data about you and what you wanted), check that suitability report to see if the risk warnings were mentioned and if so reject your complaint.

You have admitted in this thread you knew it was linked to 5 years and that you want money out early. How is that the fault of the adviser that sold it to you?

BULLNOTBEAR

I do agree with Dunstonh on many of the points raised Ruth. I think you have reacted with haste here. The suitability report as stated should include the risk warnings.

It does sound like you have an Investment Bond invested in the With Profits Fund with a guarantee in place at the 5 year anniversary.

I think you should have spoken to the adviser you dealt with first before lodging a complaint.

EdInvestor

You need to check the issue of the 5 year guarantee and and mention of MVRs and how they work in your small print.

You can normally draw an annual penalty free income from these bonds so it would be cheaper to withdraw part of the £5k as income and the other part as capital (which would incur the penalty.)

The original adviser may not have explained the way the bond works very well. They are quite complicated products.


This article mentions a new guarantee offer.

http://www.ftadviser.com/FTAdviser/Investments/Products/WithProfits/News/article/20091111/08ccdfd4-cec2-11de-9040-00144f2af8e8/Aviva-offers-with-profits-cash-back-guarantee.jsp

The OP should investigate more deeply the exact product she has.

jem16

EdInvestor wrote: »

The original adviser may not have explained the way the bond works very well. They are quite complicated products.

There is nothing complicated about the product at all.

I have an Aviva (Norwich Union) Investment Bond. Everything is quite clearly laid out in all the literature sent out by Aviva and early penalty charges for withdrawal before 5 years are obvious.

This may all have been clearly explained by the adviser at the time but unfortunately some people don't take it all in at the time and then don't read the literature sent either.

whiteflag_3

jem16 wrote: »

This may all have been clearly explained by the adviser at the time

Equally it may not of, especially where they are sold by bank workers (or building society in this case) . I've come across plenty of retired people who were sold Norwich Union Bonds by RBS, B&B & Skipton that believe they had a deposit bond.

I have alot of sympathy for you Ruth, as you would appear to be yet another innocent victim of a tied salesforce. As you clearly dont understand what you have then in my mind the advice was inappropriate.

Im at a loss to explain what I regard as a hostile attitude towards you from some of the posters on this thread and i'm also surprised an adviser with a tied salesforce would be regarded as a "poor sod"

I hope you keep going with your complaint despite what has been said earlier in the thread.

dunstonh

Im at a loss to explain what I regard as a hostile attitude towards you from some of the posters on this thread

The OP has gone straight for the jugular. No effort has been made to find out if the advice was wrong or not.

and i'm also surprised an adviser with a tied salesforce would be regarded as a "poor sod"

They are still human. If they have done their job right then you should feel sorry for them. The fact they dont have the product range available that an IFA would or the lower charged products doesnt matter in this case. They now have the stress of having to deal with a complaint and there may not be any grounds for it. Certainly doesnt appear to any grounds based on the content of this thread. The OP knew it was 5 years. The fund has a guarantee point is on the 5th anniversary. So, clearly the objective and the product match. The fact they now want some out after 2 years is not the fault of the rep.

If it wasnt documented correctly then a complaint is fair enough but going straight to complaint without checking the documentation is too much too quick. There are consequences of complaints to advisers, even if they are not upheld. There is absolutely nothing wrong with valid complaints but try-it-ons should not be encouraged.