With Profit Bond

missile

I invested £100,000 in a with Profit Bond with Liverpool Victoria in Jan 2002.

Summary @ 04.01.07
Value of Bond £97,335.75
MVA £730.15
Final bonus 0
Surrender Value £97,335.73
Withdrawals to date £20,000

The investment has not perfomed as well as I would hope and I am considering closing it.

The charges are now lower, 0.057% per month, so bond ought to perform better in the future, if I choose to keep it? I understand MVA may be reduced to zero and final bonus may increase. Anyone got any info when? and ought I wait until then?

Please note I want a LOW risk for this portion of my portfolio.

Many Thanks in advance for any advice/comments you may have :T

EdInvestor

Often you can cash in WP bonds penalty free on the bond's 5th anniversary, which would be this month.Check the fine print and don't delay or you could miss the date.

If you can't do that or have missed the date, the annual bonus season will be underway over the next few months, so you may as well wait until this year's bonus is added before leaving - possibly the MVA will be taken off as well.

dunstonh

Your timing was awful with hindsight. You may not have made anything but you could have easily picked a GEB at that time and now be sitting here in a worse position. So, whilst we are generally critical of with profits nowadays, you havent done too badly.

Going forward, I wouldnt have confidence in LVFS with profits fund and would be reviewing my options.

missile

Many thanks for your very prompt responses.

Please be advised this bond is an open ended investment and after 5 years (i.e. now) I can encash at any time without exit penalty.

My timing was not good, but I am not too unhappy this bond has done better than some of my other investments.

I note your comment re looking forward, always a difficult choice. If it were your money would you leave it where it is or put it into a deposit account, until I decide what to do next? My own guess is that the bond ought to do better than a high interest account.

dunstonh

If it were your money would you leave it where it is or put it into a deposit account, until I decide what to do next?

I wouldnt put it in either of those. Currently you are invested in a medium risk investment. Deposit account is low risk (nil risk apart from inflation). I would build a portfolio to match the risk profile.

I wouldnt dream of using LVFS with profits and at this time I wouldnt consider the best two with profit investments there are in NU and Pru let alone anyone else.

There are much better alternatives.

missile

The IFA described with profit bonds as low risk when I took it out.

For info to anyone with an LV with profit bond: The MVA in Jan 2005 was 10.03% it is now 0.055% and LV suggest it is likely to be zero by end of January.

dunstonh

The IFA described with profit bonds as low risk when I took it out.

Up until the early 2000s they were generally classed as lower risk than they are now. Even the FOS has accepted that when dealing with complaints.

with profits with an MVR chargeable are higher risk than one that isnt chargeable. You have probably seen mention of the crude risk scale of 1-10. With profits would be 6 if MVR is possible but 5 if not. Back in the 90s, MVR wasnt a consideration as it had never been levied and 4-5 would be the sort of level of risk that it would have been treated as.

By 2002, they should have been classing it as medium risk on par with a balanced managed fund. Some are slow to move with the times!!!

missile

Yes, I was not really blaming the IFA. There is no excuse for not doing ones own research. I thought I understood the product and made an informed choice but .... I put too much faith in the smoothing effects associated with these products.

What kind of return might I have achieved on an average performing balanced managed fund over the same period?

oldfella

recent article in the FT on with profit bonds - http://www.ft.com/cms/s/f2db164c-9caf-11db-8ec6-0000779e2340.html

Mike

EdInvestor

Balanced managed fund performance - scroll down for the sector average, +31%

Of course you are paying much higher charges and taxes in an investment bond than you would if you invested direct, which doesn't help.

missile

You would advocate buying stocks and managing my own portfolio?