Liverpool Victoria (LV=) Savings Plan poor returns

Broadsword

I enrolled 10 years ago in their 10 year savings plan and invested £25 per month every month- £3000 over the term. The plan has now matured and returns to me, including the wonderfully named final bonus, £3083.64. They still offer the plan and claim

• We offer a Tax Free Savings Plan for both adults and children, so most people can save with LV=.
• Save £25 a month for ten years.
• Get a tax free lump sum when your plan matures, as long as you've kept up your monthly payments.
• Invests in our with-profits fund which invests in shares, property and fixed interest investments.

I think the blurb gives an expectation of more than £83 gain over 10 years. I certainly expected more than my money back with some pocket money on top

I hope they enjoyed looking after my money!

dunstonh

I certainly expected more than my money back with some pocket money on top

Shame you didnt get advice at the time you took it out.

1- the product you bought was obsolete before you bought it.
2- the charges are far too high by modern standards and higher than an advised product on full commission let alone discounted for execution only.
3- the investment fund was largely obsolete when you bought it, let alone today.

The other issue is that you are suffering the effects of a major stockmarket crash just before maturity. Always a risk with fixed term plans. Open ended plans allow you to adjust timing. So, if an economic event occurs you can wait it out and come through the other side or get out early if you feel the gains have been good. Of course, you could still put the maturity back into a modern open ended investment and wait until its gone up more.

magpiecottage

There has also been a subtle change in the way With Profits plans are operated. The maturity value consists of a guaranteed death benefit/maturity value and bonuses which are added from time to time (usually annually) and at the end.

The bonus added annually becomes part of the guaranteed death benefit/maturity value. You have to keep paying the premium but are sure to get it at the end.

The terminal bonus is at the discretion of the insurer at the time so it is not guaranteed.

Because there has been a move away from annual bonus to terminal bonus, these plans have become far more volatile.

Of course, people do not want to pay for advice but this does illustrate the point that whilst knowledge may seem expensive you will only find out later how much ignorance has cost you!

That is something which most people would not have been aware of in 2000 but the trend was already developing and IFAs were already considering alternatives for that reason as well as the charges issue.

Broadsword

Helpful advice guys, thank you, but remember that their current marketing, reproduced above, still gives the expectation of a healthy return, not matched by the abysmal 10 year return. Their marketing then, as now is misleading. No wonder they do not give sample returns to promote the product.

If the product was obsolete 10 years ago, pity the poor s*ds who buy into it today who may well fall into the same trap another 10 years in! Of course 10 years ago I did not have the benefit of this forum but at least others will now avoid the trap I fell into, my main purpose in posting

I suggest investors march with their feet then where will their marketing get them.......

ElDuderino

Hi Guys,

My 10 year savings plan is also about to mature. £20 per month. I have just recieved a letter advising me that the current value is £2552, not including the final bonus. Should I take it from your posts that I should not be exoecting much from my final bonus? Is there any way to estimate it?

Thanks,

Tim.

Baldur

ElDuderino wrote: »

My 10 year savings plan is also about to mature. £20 per month. I have just recieved a letter advising me that the current value is £2552, not including the final bonus. Should I take it from your posts that I should not be exoecting much from my final bonus? Is there any way to estimate it?

Certainly wouldn't plan on ordering a Ferrari on the profits, Tim (unless, maybe, a small die-cast model of one).

Loughton_Monkey

Broadsword wrote: »

Their marketing then, as now is misleading. No wonder they do not give sample returns to promote the product.

They still offer the plan and claim

• We offer a Tax Free Savings Plan for both adults and children, so most people can save with LV=.
• Save £25 a month for ten years.
• Get a tax free lump sum when your plan matures, as long as you've kept up your monthly payments.
• Invests in our with-profits fund which invests in shares, property and fixed interest investments.

Technically, there is nothing in the above that is wrong, or even mis-leading.

However, as you have demonstrated, it turned out to be a highly miserable 'return'. I have never seen Liverpool Vic as a dynamic or competitive company, and being quite small, their expense ratios would be high.

middlepuss

Me too.

I was suckered in 10 years ago by the tax rebate blurb. Think I got back about £3,300 for £3,000 invested. Still, could have been worse. All part of the learning process that many investors go through. Now the first thing I look at before investing in a fund is its charges.

As another thread suggests, you're very very unlikely to pick a high-charges fund that will outperform the market over the long term. So go for a very-low-charge index tracker or a large, low-charge investment trust such as Foreign & Colonial.

jimjames

Its rather misleading with LV marketing it as a tax-free plan which will encourage some people into it based on this tax-free status alone.

I'm sure if you ask most people they would prefer to pay no tax on an investment but if the other option was paying tax because the investment had performed so well I guess the answer would be somewhat different.

Which is better a £3083 tax-free return on your £3000 or £15000 return that would be liable to CGT on £2000 of the final balance? (£15000-£3000 investment - £10000 CGT tax free limit) I think paying tax would be a small price to pay for the vastly increased payout.

Over the last 10 years I have used various investment trust savings plans which have performed exceptionally well - mainly due to the selection of funds - but you also have completely flexibility to change monthly savings, stop saving and withdraw funds at any point. Its just a shame that they are not widely known about probably because they do not generally pay commission and are less recommended than other plans.

dunstonh

Its rather misleading with LV marketing it as a tax-free plan which will encourage some people into it based on this tax-free status alone.

Its not misleading as it is a fact that it is tax free (as much as its can be). If people choose to buy something without research and understanding then that is their choice to make.

Over the last 10 years I have used various investment trust savings plans which have performed exceptionally well - mainly due to the selection of funds - but you also have completely flexibility to change monthly savings, stop saving and withdraw funds at any point. Its just a shame that they are not widely known about probably because they do not generally pay commission and are less recommended than other plans.

You can do all that with unit trust funds as well. However, ITs are not normally recommended because most advisers do not have the remit to recommend them. They are outside the scope of permissions. There are also negatives with ITs as well as positives. Its not all one way. Especially for inexperienced investors (who would typically be the type that by friendly society "savings" plans).

jimjames

Ok, maybe misleading was the wrong choice of word but I think stressing the tax free nature so heavily above any mention of returns is wrong.

For a basic rate taxpayer investing the sums mentioned above they would have no tax to pay anyway so there is zero benefit from a scheme of this sort indeed they would have been far better putting money in a bank or ISA without any tie in or massive charges. Not mentioning that being tax free is of no benefit to the majority of people is, in my view, misleading.