Aviva - over 2 years my pension fund (100% in Deposit S2) loses £4,000 + inflation.

Earthling42

Hello all,
I'm having a difficult time trying to get an understandable explanation from Aviva as to why the value of my pension pot (approx £100K) invested in what they call their safest on-deposit fund has lost £ 4,000 + inflation in the 1st year move from equity funds (£3k were their charges - not sure where the other £1k went). This year they have managed to increase my £100k fund by £285 - a nett increase of 0.28%. Their charge for 'managing' the fund is 1% - so they benefit by at least £1,000.

How is it possible to lose money on a deposit only investment? We know times are tough but I could have made a better return putting the money into any high street deposit bank account.

Anyone know what I can do in terms of complaining to Aviva or an ombudsman or anything that would force them to face up to what seems on the surface a completely incompetent performance. I have had 2 conversations with Aviva staff with each one passing me on to someone more senior - so far a complete waste of time.

Is it correct that Aviva has the highest number complaints made to the financial ombudsman? and what benefit could I derive by adding to the deluge of complaints against Aviva?

It feels as if the individual punter has no chance against financial institutions and there is no protection or redress against a financial company’s incompetent stewardship of hard earned savings. To add insult to injury I moved my pension pot from Equitable Life, after their downfall, at considerable loss into Aviva (Norwich Union as was).

dunstonh

in what they call their safest on-deposit fund

Whilst it is their safest fund (other than actual cash accounts on some of their contracts) it is still a risk based fund (risk 2 on our 1-10 scale). That is because it will invest in risk based assets that can make a loss.

How is it possible to lose money on a deposit only investment?

Because it is not a savings account. It is not a deposit only investment. It invests in the money markets. A quick look at the S2 version shows that 88.4% is invested in certificates of deposit and 10.9% in cash deposits with 0.7% in commercial paper.

I could have made a better return putting the money into any high street deposit bank account.

If my car had wings it could fly. You need to compare like for like.

Anyone know what I can do in terms of complaining to Aviva or an ombudsman or anything that would force them to face up to what seems on the surface a completely incompetent performance. I have had 2 conversations with Aviva staff with each one passing me on to someone more senior - so far a complete waste of time.

What is it that you think Aviva have done wrong? The FSA do not permit complaints about investment returns.

Aviva are not incorrectly disclosing information either. Here is a copy and paste of the summary fund objective:

The fund aims to protect capital by investing typically in deposit investments and similar assets with governments, first class banks and major companies. Although the fund aims to provide a lower risk return, the value can fall.

Clearly they state it can fall in value and is lower risk (but not risk free).

Is it correct that Aviva has the highest number complaints made to the financial ombudsman? and what benefit could I derive by adding to the deluge of complaints against Aviva?

Aviva are the only insurer left in the UK that has it's finger in virtually all insurance and investment areas. I dont know if they have the most complaints for an insurer or not but if you asked me to guess then I would say yes by reason of their size. The volume is irrelevant to you though.

It feels as if the individual punter has no chance against financial institutions and there is no protection or redress against a financial company’s incompetent stewardship of hard earned savings.

Again, you seem to think this fund is a savings account. It is not. It would appear that the problem is more your own research than Aviva. Aviva dont appear to have broken any rules or done anything wrong. The fund is a victim of the low interest rates and cash risks that were never really thought of prior to the credit crunch. When you read the fund objective that says the value can fall, what bit of that did you think meant it would act like a savings account?

I thought about editing the post as it appears a little blunt (even for me) but the problem is that I cant really re-word it given the context on how you have worded yours. You clearly have a bee in your bonnet over it but it appears you expect your car to have wings and are complaining that it does not despite no-one ever telling you that it had wings.... if you get the point.

squeeks

Perhaps it would have been better to for the OP to post something along the lines of.

I've currently invested 100k in Y fund. The fund is dropping in value, what do you think I should do? Stick with it and hope it rises or change funds? If I am to change funds, which funds would be best for me?

I am currently X years away from retirement and have a Z attitude towards risk.

atush

I want to know why his pension is in a deposit fund at all?

Earthling42

dunstonh I like blunt ... but what you're saying is not helpful in that most of us are ignorant about finance. A 'safe' on-deposit fund I took to imply would produce at least an equivelent performance to a standard deposit account. I would be more than happy with a deposit account as opposed to some financially savvy way of losing money via the money markets - it's hardly a competent performance is it.

A sterling defence of Aviva but to what point ....... you're in the financial sector & you may well be fed up with all the criticism but you are living off the commissions & bonuses generated from people like me putting their trust in organisations like aviva & occasionally in supposed qualified advisers. The only competence I've seen from people in the finance business is how to maximise your piece of the action.

I bet we would see better results from these money making machines (mostly for themselves) if their fees / commissions were based on the benefit they provided to their poor customers (or are we 'clients' in this modern age).

squeeks - I'm about to be 62 and it was my intention to take this pension at 60 but because of annuity rates are so low have postponed until 65 - something I now regret. I was advised / browbeaten into moving from equities by aviva as I was within months of my original retirement date. This was probably sensible advice (if it had been delivered a couple of years prior to my retirement it would have been excellent advice) but what aviva meant by 'safe' and my understanding of what that means seem to be 2 different things. I'm irritated that aviva are making considerably more out of my pension pot than I am and that they don't suffer any penalty when they lose my pension money. My benefit for 2011-12 was 0.28% whilst aviva make 1% does not seem equitable (pun intended).

oscarward

OP did you go to an IFA for advice or go direct to Aviva?

If you used an IFA you should have had a risk assesment to see which strategey suited you best.

jem16

Earthling42 wrote: »

putting their trust in organisations like aviva & occasionally in supposed qualified advisers.

The main problem I can see here is that you didn't take advice. Aviva cannot provide advice as they are not regulated to do so.

I was advised / browbeaten into moving from equities by aviva as I was within months of my original retirement date. This was probably sensible advice (if it had been delivered a couple of years prior to my retirement it would have been excellent advice) but what aviva meant by 'safe' and my understanding of what that means seem to be 2 different things.

As I said Aviva are not regulated to offer advice and will be very careful not to say it's advice. They are only the providers and it's plastered all over their webiste about seeing an advisor to make sure the product is suitable for you.

If you did not understand you really should have seen an IFA which it sounds like you did not do. Most people try to DIY in the hope of saving themselves money but unless you really know what you are doing it can ultimately cost you money.

Earthling42

aviva did advise me of options via a telephone conversation and strongly recommended the move from equities to cash. My understanding is that they can legitimately give advice about their own products and, at the time, I did not see any reason to involve a 3rd party as then I trusted aviva - I don't now.
As for IFA's, my experience of them is not good either - yet more people making a wage out of the hard earned cash of people that actual do something useful for a living.
It must be my age but I cannot raise any enthusiasm for an industry that makes money out of money and not from doing something useful with it - like loans or investments for businesses that create jobs. That's probably too prosaic for those involved with the financial sector.

Linton

Earthling42 wrote: »

aviva did advise me of options via a telephone conversation and strongly recommended the move from equities to cash. My understanding is that they can legitimately give advice about their own products and, at the time, I did not see any reason to involve a 3rd party as then I trusted aviva - I don't now.
...

AIUI Aviva can advise you what on the nature of their products and for what circumstances they are intended. They cant advise you on what is best for you.

Assuming that Aviva did give you the advice to move into cash on the basis of your original retirement date, ISTM that the advice was excellent. You lost according to your figures £3K in charges and £1K in decrease in investment value. If you were fully in equities you could well have lost say 20-30% in investment value had the world economy recrunched. A guarantee of not losing more than 1% in value in the environment of world economic turmoil is rather good. You are unlikely to find any safer short term investment in Aviva's or anyone else's list of Pension funds.

Earthling42

Linton - what is AIUI & ISTM.
As I said in an earlier post "This was probably sensible advice (if it had been delivered a couple of years prior to my retirement it would have been excellent advice)"
I transferred to norwich union funds 1999/2000. My IFA recommended leaving the fund with equitable life and I am so glad I ignored that advice. Having said that, norwich union / aviva have not been that great either.
Discussing this has been helpful in that I realise now that they did not tell me about the costs of converting my equity funds into a cash fund. If I had known that I would incur £3,000 of charges & a £1,000 loss it would have prompted me to take 3rd party advice.
I now realise how sloppy they were in understating the issues involved in moving funds and how sloppy I am when it comes to money issues.

jem16

Earthling42 wrote: »

Linton - what is AIUI & ISTM.

AIUI = As I understand it
ISTM = It seems to me

Discussing this has been helpful in that I realise now that they did not tell me about the costs of converting my equity funds into a cash fund. If I had known that I would incur £3,000 of charges & a £1,000 loss it would have prompted me to take 3rd party advice.

Were you with Aviva in equity funds before the move to the deposit fund?