A question about MVA's

derrick

Bearing in mind the banks are being hit back re the "illegal " charges issue, could MVA's not be the same, i.e. "illegal" as they are keeping our money as a penalty?

As my understanding is penalties are illegal in this country.

Chrismaths

Your understanding is wrong. It was part of the contract of with profits. Penalties are not illegal. They just have to be a fair representation of the costs. MVAs are on sound legal (if not investment) ground.

cheerfulcat

MVAs are not a penalty as such; that is, they are not a punishment. Rather they are intended to prevent you from taking more than your fair share from a badly performing pooled investment.

derrick

cheerfulcat wrote:

MVAs are not a penalty as such; that is, they are not a punishment. Rather they are intended to prevent you from taking more than your fair share from a badly performing pooled investment.

I am not asking for more than my fair share, if they send out a statement saying my fund value is £20000,( if 5 statements are sent out with the same fund value that is £100000 the plans are worth, so multiply by the number of investors and the plan values cannot be more than the company value,therefore the money must be there). then that is how much I should receive, the original purchase date of the plan was June 1999, I have passed all early years encashment penalties and as the fund has performed deplorably I just wanted my own money back, but am going to be hit for a 6% MVA, which I think is totally unfair and is no wonder the financial industry has a bad name.

See THIS POST for more info

cheerfulcat

if 5 statements are sent out with the same fund value that is £100000 the plans are worth, so multiply by the number of investors and the plan values cannot be more than the company value,therefore the money must be there

I'm afraid not. With profits funds are diabolically complicated IMO and not very transparent but one thing is for sure; there is far more money promised than there is in the pot.

derrick

cheerfulcat wrote:

I'm afraid not. With profits funds are diabolically complicated IMO and not very transparent but one thing is for sure; there is far more money promised than there is in the pot.

But surely they cannot promise more than there is,is that not fraud, or something?

cheerfulcat

The people who invested with Equitable Life will agree that it is very like fraud however the powers that be don't seem to take that view (link). I hasten to add that I am not accusing any company of illegal activity; it seems to be the way that with profits works.

EdInvestor

Bearing in mind the banks are being hit back re the "illegal " charges issue, could MVA's not be the same, i.e. "illegal" as they are keeping our money as a penalty?

It's an interesting point but not quite in the way you mean IMHO. An MVA ( market value adjuster) is not a penalty - it is a reduction in the face value of your policy (as seen on your last statement) to bring it into line with what has happened in the markets.If they have gone down, so does your policy value, otherwise it could mean you are taking an unfair share of the WP fund.

The face value of a WP policy is only guaranteed to be available at maturlty - and thus the money need not be there right now.

But life companies have traditionally also imposed other penalties on those who leave or transfer early - such penalties were known to be a source of profit for their WP funds for many years.[Equitable used this in its marketing campaigns - claiming to pay out the full value of a policy, with no penalties on early transfer or switch out of the WP fund - unlike other lifecos.]

The line between MVAs and penalties has now become blurred.