Bond return only 1300 over 20 years ?

Targetpractice2

I am in the process of completing my Mother in Laws estate and cashing in various investments. One Pheonix Life with profits bond £25,000 invested with them for near 20 years returned £1300 after tax.

They never show their charges on the statements for the period so no idea whether they have actually taken 2% (which is the minimum they state in attachments they will take). Plus the wonderful MVR = to nearly £6000.

Whilst I understand not all investments will offer a fantastic return especially during 2008 period this just feels wrong. Even sitting for the first 10 years at 1% return pa would earn more.

They use the wonderful excuse to raise charges if the bond is not performing, so ultimately you are getting paid out of charges not the manager actively investing correctly. So really cheap cash for the firm without risk. just stick the charges up.

Charges should reduce based on the underperformance..

feels wrong in so many ways.

dunstonh

One Pheonix Life with profits bond £25,000 invested with them for near 20 years returned £1300 after tax.

You need to take withdrawals into account. You cant just look at money in and current value. You need to look at all the withdrawals taken over the years. There is not one Phoenix fund that has had a return that low. So, there must have been withdrawals.

Charges should reduce based on the underperformance..

no they shouldnt. It would increase charges and create a risk bias. No sensible investor would want that option.

Linton

Is this the stated value of the bond or have you actually withdrawn the money? I am surprised there is an MVR at death.

bowlhead99

Was it 25000 for the full 20 years, or ongoing regular investments adding to 25000 but only (on average) invested half way through that period?

You mention it was only £1300 after tax, and you also mention later "plus the MVR = to 6000". Presumably you are not saying the MVR had reduced the entire payout to 6000 but perhaps the 1300 profit after tax is after 6000 of market value reduction for early encashment? So before that reduction and the tax it was actually a bigger number. Has any money been taken out of the bond over the last 20 years? If there is a MVR for encashing it now, is it an option to retain the product until maturity so as not to suffer the penalty?

Charges should reduce based on the underperformance

Should they? Did your mother agree some sort of special charging mechanism where they could charge more if they delivered more performance and would reduce if they did not?

What did you, or your mother's independent adviser, say when recommending this product be bought? Was she expecting to get the same returns as equity markets? Or a lower return with capital protection?