Transfer investment fund?

romfordroyal

Hi, I received a letter from NU last week telling me there is a high risk my endowment may not meet its intended target and has given me the option to swap from my current Provident Mutual with profit fund to the CGNU with profit fund.

I have only got about 4 years to go and I am not sure if I should swap or not.

Any help would be greatly appreciated

dunstonh

The CGNU fund is of higher quality and is paying higher bonuses. If there are no charges involved or loss of existing bonuses, then I would consider moving it over.

EdInvestor

Hi rr,

If they have given you any details of the terms in re bonuses,charges etc, feel free to post them so we can take a view. I imagine there's no terminal bonus left in the PM policy? What are the guaranted sum assured + declared bonuses so far worth ( this is what you are guaranteed to get on maturity).Will these transfer to the new fund?

Compensationitis

I wonder why they have made this offer, ask Ned Cazalet.

romfordroyal

Editor wrote:

Hi rr,

If they have given you any details of the terms in re bonuses,charges etc, feel free to post them so we can take a view. I imagine there's no terminal bonus left in the PM policy? What are the guaranted sum assured + declared bonuses so far worth ( this is what you are guaranteed to get on maturity).Will these transfer to the new fund?

Hi Editor

Thanks for your quick reply

I have my statement in front of me but there is no mention of terminal bonus.
The plan started on March 1984 and finishes in March 2009
The monthly premium is £41.33
We need £27,250
Minimum life insurance amount £12,236
Bonus this year £0
Bonus from previous years £10,413.13

The letter about redirecting my investment from the Provident Mutual to the CGNU Mutual fund asks
'if I wish to redirect all future investment of both my current policy value and future premiums from the Provident Mutual With Profit fund to the CGNU With Profit fund'.

There is no mention of any fees they wish to charge me for this change over.

Does it sound like the right option?

romfordroyal

Who's Ned Cazalet?

dunstonh

A highly regarded analysist/consultant who looks into the financial strength of insurance companies and their with profits funds.

He was highlighting problems long before they happened and often got laughed at by insurers for what he said. However, he had the last laugh as much of what he said came to pass.

EdInvestor

Hi RR,

Assuming those guaranteed bonuses and sum assured go with you and remain guaranteed, looks like you should move, as you won't get any bonuses in the current fund.

You're guaranteed 22.6k at maturity before any additional bonuses, so a 5k shortfall at present. Reasonable chance the new fund will close the gap, but keep an eye on it and be prepared to stump up a bit if not.

Let me know the surrender value if you want an idea whether it's worth doing that.

Compensationitis

Let's look at this from the point of view of a policyholder who has been with NU, CU, GA from the beginning. Why should someone from another unrelated fund share in what they have built up? Why?

Being of simple intelligence I would have thought ALL WP funds were in the same spread of investments, give or take a few percentage points in this and that. Why is Prov Mut devoid of any bonuses? Did someone pay over the odds for the company and if so why?

What is so wrong with the old fund that CGNU or whatever they are called bought into by taking over the smaller life office?

Although I never used the likes of Prov Mut I often wondered why the big boys did this, look at AMP when they pillaged the Pearl and reduced it to junk.

There is more to this than meets the eye.

romfordroyal

Hi Editor
Thanks for your advice, based on your reply I think I know what I will do.

Regards

EdInvestor

What is so wrong with the old fund that CGNU or whatever they are called bought into by taking over the smaller life office?

#There's nothing actually wrong with it, but if you look at the size of RR's guaranteed fund, it is quite high given the time left before maturity. It's possible that his underlying fund is not worth as much as his guarantees, because of the market falls. That would also explain why he's got no terminal bonus left and isn't getting any more annual guaranteed bonuses.

Quite a few life companies handed out guarantees like confetti in the past, and this didn't matter much before, but since Equitable,things have changed.Now the FSA is being strict about the lifecos setting money aside in safe investments to cover guarantees, so this has meant returns are even lower.

I suspect that the Provident Mutual fund may be quite small, and that it might make more financial sense for NU to offer its members a better deal, move them to a fund where they will get bonuses, and then end Provident Mutual's zombie status with a quiet "mercy killing".

If so, it's a positive move.Being marooned in a closed With profits fund with no bonuses and a high exit penalty is no joke and there are millions in this position now