Standard Life With Profits Performance Info

Dougality

Hello,

I'm wondering if someone can point me towards a performance guide for the Standard Life With Profits Fund that can show how the fund has supposed to perform over the last 20 years - heck even the last 10 years will do.

I took out one of those Versatile Investment Funds linked to a Life Policy back in 1995 when I was only 20 years old. Now it wasn't a huge amount per month only £20 and the sum assured was only £3600 - but at the time I was a student and the advisor (Standard Life Salesperson) implied that when I hit 40 it would worth a good amount what with all the bonuses etc.

However over the last few years it seems the projected pay out has dropped every single year and this week I got a letter telling me that the maturity amount including the Final bonus would be £6001. Now obviously all investments can go down and up etc - but I had been under the impression that I could expect a final bonus of about 10~15% of the fund value (far less than the 30~40% I was told was likely when I took out the policy I should add). The fund value is estimated at £5780 at maturity date in Nov and the final bonus is £221.

This seems incredibly low even for a 100% with profits investment and the only way I can get my calculations to come close to that amount (taking into account the annual charges and that the net investment was likely £19.20 per month after the life cover) is if the With Profits Fund has performed at 3.05% (before charges) annually over the last 20 years.

I was trying to find a guide the Standard Life With Profits Fund's Performance over the last 20 years to figure out if that is what has actually happened or if something has gone wrong - or indeed I was given terrible advice. However I can't seem to find a proper performance guide - and the examples Standard Life have produced seem to have far more invested per month and seem to have much much better percentage performance at maturity. So I can't figure out if I have grounds to complain or not.

Any advice or directing me to the correct info would be most welcome.

Thanks in advance.

dunstonh

Standard Life publish data on the various WP funds on their website.

However over the last few years it seems the projected pay out has dropped every single year

That would be mostly down to almost annual adjustments to the projection methods. For example, moving from monetary growth basis (no inflation) to SMPI basis (2.5% inflation adjustment) and the reduction in the growth rates used in the examples.

This seems incredibly low even for a 100% with profits investment and the only way I can get my calculations to come close to that amount (taking into account the annual charges and that the net investment was likely £19.20 per month after the life cover) is if the With Profits Fund has performed at 3.05% (before charges) annually over the last 20 years.

How have you got an 80p pm figure for the life cover? Life assurance was expensive in the 90s. I would have expected more than 80p being the cost of life assurance on a £20pm premium. There would have also been around 18 months worth of initial charges. So, the investment term is more like 18-19 years.

- or indeed I was given terrible advice.

Product was obsolete within a few years of you buying it. PEPs came into play a couple of years after that for small premiums (typically min premium on a PEP or reg saver unit trust was £100pm at that time - small premium business still used endowments).

and the examples Standard Life have produced seem to have far more invested per month and seem to have much much better percentage performance at maturity. So I can't figure out if I have grounds to complain or not.

investment returns are not something you can complain about.

I suspect this is mostly down to unfortunate timing. Your 20 year period saw two drops of the level that typically only occur once in a generation. Plus, you have had the recent decline.

Dougality

dunstonh wrote: »

Standard Life publish data on the various WP funds on their website.

I had a look at the website and perhaps I'm looking at the wrong section but for all the performance pages where they compare funds etc none of the WP have performance values - other funds do but not WP.
I was looking at the advisorszone site if that's no the right place that would explain why I couldn't find the info.

That would be mostly down to almost annual adjustments to the projection methods. For example, moving from monetary growth basis (no inflation) to SMPI basis (2.5% inflation adjustment) and the reduction in the growth rates used in the examples.

I was aware that growth rates had trailed off considerably in recent years (well since 2010 approx) but I hadn't factored that the projection method could have changed. This is making some sense.

How have you got an 80p pm figure for the life cover? Life assurance was expensive in the 90s. I would have expected more than 80p being the cost of life assurance on a £20pm premium. There would have also been around 18 months worth of initial charges. So, the investment term is more like 18-19 years.

I dragged out the old documentation and it said it was £19.20 going on units each month. But then I'm now thinking I've not factored the service charge correctly in the breakdown. I had factored in the commission paid which was 8 months worth of premiums.

Product was obsolete within a few years of you buying it. PEPs came into play a couple of years after that for small premiums (typically min premium on a PEP or reg saver unit trust was £100pm at that time - small premium business still used endowments).

Indeed in retrospect we would have been better off putting the money into a TESSA/ISA each month best I can tell. Of course all hindsight is 20/20.

investment returns are not something you can complain about.

I suspect this is mostly down to unfortunate timing. Your 20 year period saw two drops of the level that typically only occur once in a generation. Plus, you have had the recent decline.

I'm aware that we can't complain about the core investment returns - however it is somewhat galling that I thought at the time that a With Profits policy reflected on the profits of the company in question (Standard Life) who have done rather well in the 20 years.

However the advisor at the time strongly recommended this policy, I recall he said it would always beat cash because the fund minimum "would never be worse than the BOE interest rate and you will get the with profit bonuses on top and a great terminal bonus". This was plainly not the case as even investing in a TESSA/ISA cash at the same amount of £19.20 for 20 years at BOE rates would come out higher.

What most tickles me is that in the letter this week I was offered the choice to keep the investment going with Standard life and as I wanted to check the fund performance to see if it was worth it - I started running the numbers and am very shocked at how badly it has gone. Even if the current decline recovers it doesn't make clear if I would actually get much / anything more out of the investment if I left there to try and "weather the current storm".

Thanks for shedding considerable light on this mater it's certainly more helpful to ask than try and find out info and understand as a lay person.

dunstonh

Indeed in retrospect we would have been better off putting the money into a TESSA/ISA each month best I can tell. Of course all hindsight is 20/20.

ISA didnt exist at the time. Which is why I said PEP. However, PEPs in that period were £100pm minimum typically. There were a couple that did £20pm but you used a Standard Life rep. So, they can only retail what they offered. Not what was available on the market. So, whilst an IFA would have been able to offer better, a tied agent of the insurer would not.

however it is somewhat galling that I thought at the time that a With Profits policy reflected on the profits of the company in question (Standard Life) who have done rather well in the 20 years

The returns reflect the underlying performance of the investments within the fund with a bit of smoothing. Its not based on Std Life's own performance.

Std life were late pulling out of equities after the dot.com crash. They took the approach that they should just punch through it. However, the regulator was putting pressure on insurers to prioritise solvency and Std Life caved eventually and reduced their equity content after most of the drop and missed most of the recovery.

However the advisor at the time strongly recommended this policy, I recall he said it would always beat cash because the fund minimum "would never be worse than the BOE interest rate and you will get the with profit bonuses on top and a great terminal bonus". This was plainly not the case as even investing in a TESSA/ISA cash at the same amount of £19.20 for 20 years at BOE rates would come out higher.

At point of sale, that would have been the case and you are still not far off that now despite the fact the product went obsolete and had a dire investment period.

It's very easy to look back and compare to later products. Today, flexibility and ability to change is very easy. Back then it was not. It was a black and white TV in a large widescreen HD world.

vectistim

As an aside, when thinking of the overall performance, don't forget the value of your demutualization shares and dividends.