With profits fund: Throwing good money after bad

dunstonh

Although they may now be less volatile, they still seem spritely enough to impliment MVAs and reduce bonuses at the first hint of stockmarket falls and are slow to put them back up.

Partly as most have yet to recover their losses from the dot.com crash let alone the more recent recession.

The blokie at Clerical Medical told me that TBs were last adjusted when FTSE100 was 4800 so hopefully there's some upside coming.

Clerical Medical have one fund that was so heavy in gilts that, whilst that was holding it back in the growth years, it jumped up during the recession when gilts suddenly became attractive and their fund became ranked number 1 with profits fund for that period.

CM have about 6 WP funds and most are poor. But that one just got lucky with timing when typically you would have said that the low equity backed ratio was holding it back.

It just goes to show that whilst its easy to knock these funds for various reasons, the returns do generally follow the performance of the underlying assets. Albeit with tracking that is more in line with a oil tanker.

EdInvestor

dunstonh wrote: »

Clerical Medical have one fund that was so heavy in gilts that, whilst that was holding it back in the growth years, it jumped up during the recession when gilts suddenly became attractive and their fund became ranked number 1 with profits fund for that period.
id issue quite generous s

The changes have indeed thrown up some unexpected anomalies like this one.:)

There are also some smaller companies which are not very exposed to guarantees - mostly companies that stayed away from pension business.They have not been hit anything like as badly by the requirements to reserve, though some of them did issue quite generous guaranteed sums assured and terminal bonuses over the years..Anyone sitting on a big GSA/TB at such a company could do quite well as the firm will still have the freedom to put big chunks of money in equities.

Though this is a minority area, it's still unwise to generalise about WP funds, except perhaps to say that the onward march of the zombies shows no sign of slowing down. .