Zombie fund victims lose out on £3bn

ReportInvestor

Sunday Times

The Sunday Times latches onto research by AKG Consulting that those funds that were bought by "zombie fund consolidators" like Resolution Life have performed worse than other closed with profits funds - allegedly "losing out" on £2.7bn in the process.

This "research" may just reflects that insurers were keener to sell the worst funds than the less worse funds :rolleyes: but the article doesn't make it clear.

There is also talk from FS Complaints Handling of forming an action group and going for a judicial review if the FSA does not "sort out" the issue of exit penalties and the LibDems' Vince Cable (he's the one who is proposing to reduce your annual capital gains tax allowance to £1K ) also jumps on this bandwagon.

From the article

"....The scale of the scandal is astonishing: savers have a total of £95 billion tied up in closed with-profits funds via endowments, bonds and pensions. Another £332 billion is in funds that are still open for business...."

EdInvestor

The ST has been deluged with outraged complaints from people with money trapped in zombie funds.

Victims at Pearl and Resolution/Phoenix are especially angry, not surprisingly

MortgageMamma

Interesting article thanks

dunstonh

I doubt the Govt will do too much in public. After all, they do carry the can for a lot of the reasons why these funds are no longer performing.

This subject is a bit of pain and the different parties involved seem to have some strength in certain quarters. I say that because a few years ago the FSA released two documents on pension switching rules and with profits. The aim was to support IFAs in getting people out of these duff funds/products into better.

It appears to have worked because you now have a number of insurance companies that are threatening IFAs with various degrees of action if they continue taking money away from them.

The ST has been deluged with outraged complaints from people with money trapped in zombie funds.

Victims at Pearl and Resolution/Phoenix are especially angry, not surprisingly

Pearl is an easy one to get your money out of. Most of their plans had a 5 year tie in and after that you are penalty free to remove your money. Their mortgage endomwents were surrender penalty free after 10 years. Its only the pensions where they charge heavy penalties but that is tempered by their pre 1988 plans having guaranteed annuity rates (GAR) and only V1 and V2 plans suffering penalties. Their V3 and V4 plans do not.

So, in reality, unless you have a GAR on a pension, there is no
reason to stick with them. Yet people do....

EdInvestor

There's an obvious problem here with some of the pension investors, who think their plans are performing very badly, and clearly don't realise they have very valuable GARs and thus the performance is basically irrelevant.

Note to other Moneysavers: if you ( or your parents) have an oldish "with profits" pension plan which isn't performing ALWAYs check if it has a guaranteed annuity rate (GAR) or a guaranteed minimum pension (GMP) before disturbing the pension in any way. A GMP might be much bigger than what it says on your original document due to revaluation over the years and a GAR might entitle to you a pension double what is available now.

Don't ever transfer these pensions without checking on the guarantees: you could lose a lot of money.