MVA Can anyone tell me it's not just robbery?

zygurat789

From what I have seen the MVA is to make the fund liabilities ie the policy holders value equal to the market value of the fund. Doesn't this mean that the fund has lost value and therefore that the managers haven't been doing a good job?

TMFTP

casey_junior wrote: »

Financial advisers are the dogs !!!!!!!!, they will sell you each new product as the best thing since sliced bread and when it goes wrong they will smile at you and tell you its your own fault.

What makes you think the OP was advised in their purchasing decisions? Everything they've said indicates ill-informed self-decisions.

They've put an awful lot of their eggs in one (fragile) basket. WP funds CAN do quite well. Aviva, Pru (whom I work for) both have stron funds.

The other thing you're (possibly) missing, along with the OP, is that bonuses are applied a year behind - so you may still be receiving the effects of the credit-crunch dip. Next year's bonus will reflect the subsequent market uplift.

TMFTP

zygurat789 wrote: »

From what I have seen the MVA is to make the fund liabilities ie the policy holders value equal to the market value of the fund. Doesn't this mean that the fund has lost value and therefore that the managers haven't been doing a good job?

Not necessarily. If you had a shareholding you expected to rise 20% in the next 3 months but were told you HAD to sell it now, you wouldn't get the full value of the share.

The MVR helps to protect the fund from mass disinvestment if lots of fundholders decide to withdraw.

Old_Slaphead

TMFTP wrote: »

The other thing you're (possibly) missing, along with the OP, is that bonuses are applied a year behind - so you may still be receiving the effects of the credit-crunch dip. Next year's bonus will reflect the subsequent market uplift.

It's not very fair though to adjust MVAs & TBs annually when stockmarket goes up but more frequently when it goes down.

I've recently needed to cash a portion of a WP bond. Both Aviva & CM told me that current MVAs were applied to reflect a 4800 FTSE (ie last Summer). Neither would adjust their encashment payout to reflect a 20% market increase since then (with a 40% ish equity content this should have added around 8% to policy value)

TMFTP

Old_Slaphead wrote: »

It's not very fair though to adjust MVAs & TBs annually when stockmarket goes up but more frequently when it goes down.

I've recently needed to cash a portion of a WP bond. Both Aviva & CM told me that current MVAs were applied to reflect a 4800 FTSE (ie last Summer). Neither would adjust their encashment payout to reflect a 20% market increase since then (with a 40% ish equity content this should have added around 8% to policy value)

I sympathise with anyone trying to make sense of what is a very detailed actuarial calculation. The lag in bonus years doesn't help - as you've found. If you did the same check next year you should find an assumed stock market position significantly higher.

What you illustrate is the need for an adequate "emergency fund" - to save you the need to disinvest during bad periods.

Please don't take that as a "personal judgement" - I'm not suggesting you had an inadequate emergency fund. Your emergency fund may have spared you the pain of having to take MORE of an MVR hit.

Your position does illustrate the benefits - or necessity of - an emergency fund to others who may not have considered the impact of having to surrender investments early (which is typically the situation in which an MVR is applied).

Old_Slaphead

I had ample emergency funds - I was just getting a bit fed up of the abysmal performance during a buoyant period and wanted more exposure to equities to benefit from the market rise. Since encashment in February - WP fund has increased less than 1% whilst reinvested funds have increased +20%.

My observation was that MVAs/TBs etc seem much more responsive to downturns than upturns

Just explain to me how, 2 years ago when stockmarkets were pretty much as they are now, my WPB had a 10% TB and 0% MVA. Now it has no TB and a 10% MVA. !!

casey_junior

TMFTP wrote: »

What makes you think the OP was advised in their purchasing decisions? Everything they've said indicates ill-informed self-decisions.

They've put an awful lot of their eggs in one (fragile) basket. WP funds CAN do quite well. Aviva, Pru (whom I work for) both have stron funds.

The other thing you're (possibly) missing, along with the OP, is that bonuses are applied a year behind - so you may still be receiving the effects of the credit-crunch dip. Next year's bonus will reflect the subsequent market uplift.

Mine was a transfer 32 with Aviva taken out in 1988 re the contributions of a superann scheme .I was also paying SERPS. There has been no bonus added since 2001 They tell me my fund is worth £47k and next year on retirement it might be worth £61k, IMO they can say whatever they like, no one can argue with them, they have a captive audience.

TMFTP

In which case, Casey, you may have guarantees on your transfer which make the fund value irrelevant. Without a review of the value of your contributions, growth and effect of guarantees, it's impossible to comment on the fund value.

Your fund may also have benefitted from the reattribution exercise Aviva undertook last year.

CHeck:
https://www.lifeft.qs.aviva.co.uk/fundtransfer/announce/am-i-nv-eligible.do

FWIW, the reason many of the bank bosses were criticised in the aftermath of the credit crunch was for "not understanding the assets they were investing in." Very hard to jump on that bandwagon when we commonly make the same mistakes ourselves. At least - it SHOULD be... And no. I'm NOT Fred Goodwin.

parcival

You have to understand that MVA's are applied to reflect the fall in the value of the underlying assets - fair enough..... BUT the problem is that With Profits are all smoke and mirrors. There is absolutely no transparency whatsoever.

The so called smoothing only ever seems to work in the providers favour. With the FTSE (and other assets) having recovered so strongly there should be place for MVA's at all.

IMO With Profits have been found out - no one should be selling them anymore..

TMFTP

Based on what, precisely, parcival?

I can hold up comparitive figures for our (Prudential's) WP fund over the past however many years you care to compare that show it's performance against typical "Managed" investments. The type of investment you'd make if you were a "not-interested-in-the-day-to-day-management" type of investor.

Our (and, I would assume, Aviva's, as they're a similarly strong fund, but obviously I'm not as close to their returns) WP fund significantly outperforms.

Our publicised annualised return for the fund are 3.7% over the last 10years, 5.9% over 15 years, and 6.2% over 20years for a 10k pot.

Not ALL WP funds are shaky. If you don't believe in them - by all means don't invest in them. If you wanted to learn and actively manage your own funds it should be relatively simple to outperform these figures.

But don't judge a product you don't understand. It's like saying Toyotas had faulty brakes, so all cars are bad.