Cashing in a With-Profits Policy with Life Cover

red.barchetta_2

Hi,
Back in 1998 I took out a with-profits policy for £5k with Scottish Widows.
The investment was done after the birth of our new born with a view to have a saving plan which upon maturity would pay anything above £5k (the initial investment). The policy has life cover built into it.

Its been running since and I had it valued last week and it was worth £6.2K

Given it has not performed much for 15-years, I decided to perhaps consider cashing it in.

This is when the fun started. Scottish Widows asked me why would I want to cash in the policy, a question which was of no concern to the agent, and told him so in those words. I was told I would have to complete some forms, send them back, for someone to then work out what I would get as a final payment!

I received these forms today, and to my horror, some of the questions are, "where did the money come from for the original investment", together with providing ID, and signatures by an authorised bank clerk, accountant etc... - incidentally I have no issues in providing that information, but makes me think why this wasn't asked at the time of purchase of the policy? Almost putting me off cashing it!!!

There is a mention of MVR (market value reduction) which is applied at that time of cashing but NOT on the 10th anniversary, and each 10th year thereafter suggesting my final cash figure can loose approx 20% of its value if cashed outside of 10th anniversary!!! Is that correct and market standard?

I am not exactly hard-up for cash, but given the policy has not been performing too well, would the advice be not to cash it now, but rather on its 20th anniversary?

Sorry if this has been discussed elsewhere.
Thanks,
Red.

opinions4u

They have to comply with Money Laundering Regulations, hence being nosey. Interpretation of those regulations has become stricter over the last few years.

MVRs are normal, although I'd expect it to be less than 20% in the current market. I can't second guess future performance, but I'd probably hang fire until there is no MVR.

TCA

You might also want to consider selling it rather than surrender it back to the life company. I did this and it was worth several hundred pounds more. It was a bit more hassle but sounds like that's what you're getting anyway. You can submit your details once at the link below for multiple no obligation quotes:

http://www.apmm.org/

dunstonh

The money laundering regulations were changed some years back to not only include investment amounts going in but also maturities and surrenders. Insurance policy surrenders are treated as higher risk from an anti money laundering point of view.

I received these forms today, and to my horror, some of the questions are, "where did the money come from for the original investment", together with providing ID, and signatures by an authorised bank clerk, accountant etc... - incidentally I have no issues in providing that information, but makes me think why this wasn't asked at the time of purchase of the policy? Almost putting me off cashing it!!!

Requirements in 2013 are different to requirements in 1998. In 98, it may have only been ID on you such as passport or driving licence.

Also, you may have part brought this upon yourself. By telling the agent it was no concern to him and being evasive, the agent probably flagged it as such and they taking extra care. There have been a number of fines running into many millions of pounds each this year for failings in systems and controls in respect of money laundering etc. So, it is a current hot potato and firms are typically on extra guard.

Ifts

If its been going for 15 years (and as you say 'I am not exactly hard-up for cash') I would be inclined to let it run for the next 5 years. Cash it in on the 20th anniversary to avoid the 20% MVR (does sound high).

Ideally the time to cash it in was on the 10th anniversary.

If you do cash it in early and put the money to work elsewhere, you would have to clear the 20% MVR charge over the next 5 years to break even.

red.barchetta_2

Thanks to all those who have replied.
I think it will be fine to hold onto for another 5-years and cash it in on the 20th anniversary.

Best,
Red

planteria

that sounds like the best course of action, to me.
but if you request the value from SW they will give you the information. there may be no MVR at all now, following some good months in the UK stock market.