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

parcival

As my figures and those of old slaphead show - not everyone is delighted by WP funds - I can't see how the advisors can quote all these marvellous returns when MVA's are being applied - they are meaningless until the MVA is removed.

Perhaps the majority of the happy WP people are those counting commissions..................

casey_junior

What is an MVA, and how do I know if I've caught it?

dunstonh

As my figures and those of old slaphead show - not everyone is delighted by WP funds

Exactly the point being made by us. Not everyone is happy but that doesnt mean everyone has bad ones.

I can't see how the advisors can quote all these marvellous returns when MVA's are being applied

The figures I quoted were real examples.

they are meaningless until the MVA is removed.

No they are not. MVR only hits those taking out more than the annual MVR free allowance. When you look at the typical person that would be using WP funds they are likely to be to the end of their life or very long term making the MVRs irrelevant.

Perhaps the majority of the happy WP people are those counting commissions..................

Whats the point of that comment? As there is no commission difference on unit linked and with profits and I dont care as I'm fee based. Why add incorrect comments about commission when that has nothing to do with the discussion? All it does is put off people from joining in the discussion as there is no point talking with people who cannot be objective and engage without adding pathetic digs.

TMFTP

casey_junior wrote: »

How can any one answer that without knowing what you put in?

What I put in was £10k in 1988 in respect of 21 years contributions (contracted in) with my first employer which was projected to give me a pension of between £14k and £18k pa. The present value is £43k not guaranteed with an estimated retirement fund of £61k next year at 65. Going by data available this should buy a pension of c. 2050pa. This compares with a pension of £4150pa which I calculate I would have received had I preserved my pension with my employer.

Is there a typo there? You expected £10k total contributions to provide you with a pension of £14k-£18k pa, presumably for c. 20-25 years?

£10k to provide between £280k-£450k of benefit payments?

Did you mean £100k total contributions?

TMFTP

casey_junior wrote: »

What is an MVA, and how do I know if I've caught it?

It's a "Market Value Adjustment" - aka MVR, with "Reduction" in place of adjustment.

It's typically applied if you want to remove money from a fund before the specified date of disinvestment (e.g., in this case, typically retirement date). This protects the people left in the fund.

So:

- IF you are in a strong WP fund, and;
- IF you intend to remain invested for the full term, THEN;
- YOUR money and your profits are being protected by applying MVAs to other people.

IF, of course, MVAs apply.

If you don't understand the product can be a bit like buying shares. If you buy shares when the price is very high, then sell them when the price is very low (e.g. stock market crash) then you stand to make losses.

And, as has been said a lot in this thread, the way the adjustments are calculated is next to impossible to follow - so it's very easy to point the finger at the fund instead of holding your hands up to a bad investment decision.

casey_junior

TMFTP wrote: »

Is there a typo there? You expected £10k total contributions to provide you with a pension of £14k-£18k pa, presumably for c. 20-25 years?

£10k to provide between £280k-£450k of benefit payments?

Did you mean £100k total contributions?

There is no typo, that is what enticed myself and an awful lot of others to buy into this instead of hanging on in the original scheme which was in my case projecting a pension of £6848 pa.

I have the documents but I don't know how to display them here.

Old_Slaphead

Not quite so weird as it now sounds.

In 1980 (high inflation) before GBs pensions taxgrab, returns of 8-10% were possible.

Commpounding £10k for approx 30 years gives about £180,000 - all you then need is an annuity rate of 8-10% (and there were plenty of guarantees around that figure ie Equitable Life) to give a £14-18k pension.

Things have changed an aweful lot since then for private pensions (including much lower inflation and much higher life expectancy) !!

Batchy

TMFTP wrote: »

Is there a typo there? You expected £10k total contributions to provide you with a pension of £14k-£18k pa, presumably for c. 20-25 years?

£10k to provide between £280k-£450k of benefit payments?

Did you mean £100k total contributions?

With expectations like these its no wonder your disappointed.

Its a shame, that companies were able to predict high inflation/ hence high returns. Even if there is high inflation, you need the returns to maintain the value so it doesn't go up in value, it just maintains its spending power.

IMO, if you predict anything greater than 5.1% growth OVER inflation, your in dream land in the long term, as its unprecedented (over the last 110 years with equities anyway) without Major Luck, or Supreme knowledge. Of course a couple of good years, could make all the difference. But say on a rolling 30-40 year period, thats what im expecting, is it reasonable?... who knows. But time will tell ( a long time).

TMFTP

Just checked back. In 1990 we were offering c. 15% annuity rates. More likely than 1980 - if he had a 21-year pot in 1980 that'd put cj well past pension age.

So for a pot of £10k total to grow into £14-18k income since then, you'd be looking for 15% growth in pot EVERY year (or double your money every 5 years), plus a 10% annuity rate at the end of it?

That's a staggering set of assumptions to believe. Doubt there's been a period in history that's done that for for any investment for that duration. And - if you DID believe it, you'd have to take into account the effects of inflation as you say. The "14k - 18k" income wouldn't be worth that in real terms at the point of investment.

If inflation doesn't soar as you assume you end up with a lower income. But that lower income will buy the same amount, as things will cost less.

Casey - did your projections put things into "real terms" for you? If not, it's no wonder your eyes popped. Or, rather, are popping now...

dunstonh

In 1980 (high inflation) before GBs pensions taxgrab, returns of 8-10% were possible.

in 1980 you typically saw investments triple in value over 10 years. in the 70s they quadrupled. in the 90s they doubled and in the 2000s they ended where they started. (generalisation but more or less there).

The problem was back then they could not predict the changes that occurred. Those that have kept their finances under review have adapted. Those that kept their 1980s products going without review or adjustment usually end up disappointed. However, its nothing to do with pensions. Its to do with lack of understanding and unrealistic expectations. The same expectations and disappointment would have occured had you used savings accounts or ISAs (PEPs) or any other form of investment. The wrapper you place them in is largely irrelevant.

So for a pot of £10k total to grow into £14-18k income since then, you'd be looking for 15% growth in pot EVERY year (or double your money every 5 years), plus a 10% annuity rate at the end of it?

Weren't the projection rates back in the late 80s 9%,11% & 13%? (compared to 5, 7 & 9% now). So, its feasible that the figures would have shown it back then.

However, relying on 1980s information and not reviewing things and adapting to change is a common problem. Back in 1988, paying £20-30pm into a pension was a good contribution. Now, paying £200-£300 pm is a good contribution. Yet I am forever coming across people who are still paying what they were paying 20 years ago without increasing it.