We'd like to remind Forumites to please avoid political debate on the Forum... Read More »
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
AVIVA's MVR ate my profit
Comments
-
To get back to the original thread re MVR's..................
My WP policy with Aviva that is 9.5 years old has had an MVR for most of it's wretched life.
Just checked today and it's been removed - gone.
No penalties for withdrawal of anysort and a very small TB to boot.
I always said what a good investment it was - LOL0 -
We still haven't seen five year investment returns that match the long term average return, so while it's done better than say a FTSE tracker fund, it's still done les well than expected.I was under the impression that MRVs are only applied in certain circumstances, e.g. when property went down, it was reasonable to apply MRV to the funds involved. It's not so clear why it is being applied in the with-profits bond after five years, where the leaflet on the fund claims that it has done well, and when the company is doing well.
A with profits fund is effectively a deliberate lie that increases the value predictably by something close to the long term average market performance, regardless of actual market performance. If the market performance is less good than the long term average and you want to transfer out, you get told the real value instead of the fake one - it's the fake value less the MVR. If the markets do better than average then a bonus might be added instead.
This use of fake values reassures people who want to see lower fluctuations. The problem comes in part because five years isn't a long time and we've had a very tumultuous five years. It's a method that works better over 25 years or so when there's less chance of fluctuations hurting a lot (though a drop in the last years or two can still cause a large MVR).
MVRs may be reviewed weekly but what they do is have assigned levels of expected performance for each year (or maybe even each week). As long as the market is below the expected value, there can still be an MVR for a year.
Part of what you paid for was the inflation guarantee. That means you'll end up with more than savings accounts have paid over the same time period. This doesn't mean that the fund did well, rather that it did sufficiently badly (along with the FTSE index) that the guarantee had to be invoked to top it up.
I do wonder, though, why your IFA used this product and this investment within the product. Did you say that you were planning on taking a regular income? I'm wondering whether an appropriate product for you was recommended. The use of a product with a ten year MVR clause while you were contemplating a five year duration is a concern. There were other investments available within this that wouldn't have had any MR at all, but perhaps you said you were interested in the inflation protection that this offered? Or maybe you have the limited edition five year version but missed some cutoff date for using it, or haven't quite reached it yet?
That's a good idea. The standard rule for investment bonds is up to 5% a year and if you don't use the full 5% it's saved up and available for use in later years. But this is only the tax rule, the with profits fund might have a different rule that has a lower limit without MVR. I don't know whether the 7.5% that dunstonh mentioned can be accumulated for later use or not. If not then 7.5% a year until there's no MVR might be one approach, since the tax rule gives you 5% a year plus an accumulated pot of 21% to use (assuming you're now in the sixth year).I did take out some money in the first year, when things went well. I shall ask AVIVA how much I can take out without tax implications and incurring the dreaded MVR.
Just so you're prepared, this is completely normal practice with unit trusts, OEICs and SICAVs. Small deals normally won't have a dilution levy or similar but larger trades can have one applied. For an OEIC the daily price is adjusted based on relative sale and purchase demand to cover part of this but there can still be a levy applied in addition to larger deals. Unit trusts switch between bid basis and offer basis (as distinct from bid price and offer price) as part of how they manage it. This isn't limited to just investments managed by insurance companies, it's standard practice in the industry and a legal obligation in the case of unit trusts.Rollinghome wrote: »I haven't followed this thread but the idea that customers shouldn't complain against insurance companies because that will reduce their profits and so impact on other customers seems more than usually wacky even for this board.0 -
Outcome (provisional):
AVIVA rang in response to my complaint to the FO. Current MVR for my bond is £20. They admitted that it was £900 when I rang them. They reviewed and unless something drastic happens, it may reduce further by the time the guarantee kicks in early May. Have no idea why the major change but I'm very happy today.0 -
Have no idea why the major change
Yes they do. However, they probably cant be bothered to tell you over the phone. Shame really as an explanation helps understanding.it may reduce further by the time the guarantee kicks in early May.
So you do have a guarantee point after 5 years then? Have you checked to see if you get one after 10 as well? That could be key to deciding whether to keep it or notI am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
Outcome (provisional):
AVIVA rang in response to my complaint to the FO. Current MVR for my bond is £20. They admitted that it was £900 when I rang them. They reviewed and unless something drastic happens, it may reduce further by the time the guarantee kicks in early May. Have no idea why the major change but I'm very happy today.
They adjusted MVAs around this time in 2010.
One on my pension has just gone down by around 90% too.0 -
Outcome (provisional):AVIVA rang in response to my complaint to the FO. Current MVR for my bond is £20. They admitted that it was £900 when I rang them. They reviewed and unless something drastic happens, it may reduce further by the time the guarantee kicks in early May. Have no idea why the major change but I'm very happy today.
Thank you for updating this thread - I am pleased that you are happy now.Impression is that the criteria for MVR are not met at this moment so unless something dreadful happens before May 6th, I will cash in this bond,
The criteria for the MVR must still be being met otherwise they would not have applied the £20 MVR.
If you wait until May 6th you will lose that MVR altogether but you take the chance of your valuation going up/down.
A few lessons to be learned from this thread.
1. Make sure you understand the product that the IFA is recommending. If you don't understand then ask questions to make sure you do. Your IFA should be happy to do this - if not find another IFA.
2. If later on, you are not happy give your IFA (if you have one) or company a chance to explain. Whilst there are no doubt a few rotten eggs just like every profession, most want you to do well and be happy. If there is a genuine error it will be rectified. However be prepared to find out that you may be wrong also and keep an open mind.
3. If you still feel unhappy then put in an official complaint to the IFA or company and wait for their response.
4. If still unresolved and you feel you still have grounds for complaint then go to the FOS.0 -
Thank you but all the above were done. Indeed, IFA was very supportive. Cannot cash in before five year mark because of penalties etc.
That's not much of a surprise to me. I thought it was quite usual for wpb providers to charge a MVR and/or other penalties if the policy is withdrawn within the first five years?
JamesU0 -
-
No. You've misunderstood again. I don't have a no MVR guarantee.
Only going by what you wrote;Outcome (provisional):
AVIVA rang in response to my complaint to the FO. Current MVR for my bond is £20. They admitted that it was £900 when I rang them. They reviewed and unless something drastic happens, it may reduce further by the time the guarantee kicks in early May. Have no idea why the major change but I'm very happy today.
What guarantee were you referring to then?Had no idea of the time period. Still don't.
Perhaps ask the question in black and white?0
This discussion has been closed.
Confirm your email address to Create Threads and Reply
Categories
- All Categories
- 351.3K Banking & Borrowing
- 253.2K Reduce Debt & Boost Income
- 453.8K Spending & Discounts
- 244.3K Work, Benefits & Business
- 599.5K Mortgages, Homes & Bills
- 177.1K Life & Family
- 257.8K Travel & Transport
- 1.5M Hobbies & Leisure
- 16.2K Discuss & Feedback
- 37.6K Read-Only Boards