Friendly Bond Forester Life was Children's Mutual

jonnym6

We took out several bonds many years ago after taking advice from a financial adviser. We wanted minimum risk so settled on a with profits friendly bond with Children's Mutual who then transferred their business to Forester Life. We have 4 bonds with them for our children - maturing at different times - 2 we have paid in £50 a month and 2 at £25 a month. A recent statement suggests that our guaranteed benefits are £10,374 (over 19 years) and £4758 (over 17 years) - but at the end of the term we will have paid in £11400 and £5100.

It does not seem right that our guaranteed figure can be less than what we have paid in when it is with profits - surely we must get back what we have actually paid in plus some small profit at the very least? I have just had a very frustrating call with an adviser and I am none the wiser. Has anybody had a similar experience? Got to the end and lost out? Know who I can complain to about this? I feel like we have been completely mis-sold this product.

Over the period of the investments (from 2004 and 2010) we appear to have had very little bonuses added (£21.57 on the £50 a month bond and £184 on the £25 a month bond). I am very confused! Is there anybody who understands how this works that can advise me on what I can do about it?

Thanks

xylophone

http://prodwww.foresters.com/en-gb/products/tw-fund/tw-fund-products

You refer to the above?

Malthusian

All With Profits investments are capital-at-risk investment. The society has the right to apply a Market Value Reduction at any time, which can result in you getting out less than you put in.

Are you sure £10,374 and £4,758 aren't the bonds' current values, rather than guaranteed maturity values?

If they are guaranteed maturity values, what would you get for the bonds if you encashed them today?

Who did you take advice from? Friendly society bonds are not popular with advisers, certainly not in 2010. It was more likely to have been a bank or friendly society salesperson.

jonnym6

Financial adviser came to see us in 2004 when my children were born and we were looking for a trust fund type investment for them. The later one was made with same company which may be a mistake seemingly!

jonnym6

I just expected to get back at the very least the amount invested. But the predicted amount, and I have queried it with them today, appears to be about 10% less that we will have invested. They say there is a chance of a final bonus but no guarantee of it and it sounds like they have not added one for a while. Just seems to have been a pretty poor investment on our part and was almost certainly mis-sold or very badly advised to us by a financial adviser.

dunstonh

But the predicted amount, and I have queried it with them today, appears to be about 10% less that we will have invested.

You are not issued with predictions. You are issued with projections. Big difference. Projections are examples of what you may get back if a certain rate of return occurs. Nothing to do with real world. Its a calculation using assumptions.

They say there is a chance of a final bonus but no guarantee of it and it sounds like they have not added one for a while.

Standard risk warning.

Just seems to have been a pretty poor investment on our part and was almost certainly mis-sold or very badly advised to us by a financial adviser.

Doesn't sound missold. Trust based, small premium 2004 product with a provider that was going in big with the child trust funds. Many old posters here will remember this site recommending them.

Its obsolete and out of date certainly for 2018 but not really for 2004. Small premium levels left very few options. Most of these were put in place by direct marketing and sales reps. It's unusual to see a financial adviser one. Doing another one in 2010 wasnt a good idea. By then, it was widely accepted that they were past their best that only direct sales were being taken (non-advised marketing methods)

jonnym6

But we were very clear with the adviser that we wanted something with zero risk and were led to believe that the return would be at the very least what we would be investing otherwise we would not have done it. So basically we would have been better placing the funds in a 0% interest account. So with another 11 years left on our £100 a month investment would it be advisable to stop the investment and look elsewhere?

dunstonh

But we were very clear with the adviser that we wanted something with zero risk

No such thing exists. You got one of the few options available that gets as close to that. Cash savings suffer inflation risk/shortfall risk. Investments suffer investment risk. There is no zero risk option.

So basically we would have been better placing the funds in a 0% interest account.

I doubt it. I have seen several of these over the years and all made fairly low returns. Better than cash. Not as good as conventional investments. Basically, exactly where you expect them to sit.

So with another 11 years left on our £100 a month investment would it be advisable to stop the investment and look elsewhere?

Before any decision is made, I think you need to clarify the basis of the valuations and the projections.

Was the valuation a surrender value or current value?
if current value, did it include any final bonus accrued to date?
Is there a guaranteed sum assured to which the bonuses are added to?
What were the assumptions used in the projections?

The assumptions used in a projection are important. I did a £20k top into an ISA today and both the low rate and mid rate used negative growth rates. Both showing a projection that the person will get less than they pay in. However, that nowhere reflects the reality or expectation. Its just because the FCA have the current projection rate on investments and pensions set so low. Unless you understand the assumptions (which are normally stated on the projection) the information they give can be next to useless. Making decisions on useless information usually results in making useless decisions.

jonnym6

But what I don't understand is that the return seems to be about 10% less than that invested, If I had put the money in a 0% account I will still have the money invested over the same timescale. Even with inflation I would have been better off sticking the money in a piggy bank as I would actually have what I put in rather than 10% less plus inflation?

dunstonh

But what I don't understand is that the return seems to be about 10% less than that invested, If I had put the money in a 0% account I will still have the money invested over the same timescale.

Its a paper projection using example rates.

jonnym6

So I won't know for sure until the bond matures in 3 years time. I just didn't expect to be receiving less than I will have invested - but that appears to be naive from advice I am getting.