Aviva With-Profits £61,000,000,000 hidden from 1,800,000 policyholders - on whose authority?

peterbaker

Whilst responding to someone else's thread earlier in the week, I discovered the published numbers in the title of this thread in the introduction of a new April 2018 report on the Aviva website:
Board report to with-profits policyholders (including Annex - With Profits Actuary Report) (PDF 437KB)

Aviva manages approximately £61 billion of investments in its with-profit funds, on behalf of around 1.8 million policyholders.

I am not sure exactly which year of account those figures come from (2017?) but they work out at approximately £34,000 per policyholder. How much of that is actually declared to policyholders? Does it include what is in the with-profits funds which Aviva has redesignated via FCA/PRA/High Court agreed "Schemes" as belonging to their shareholders? I have three policies with Aviva. I don't know the answers to these questions. I think I should be told very clearly, and so should 1.8 million others.

I can see none of my three online, and I have to speak to three different sections of Aviva's business (by phone to contact teams who have very poor knowledge of the products) to get an updated value for each. Right now I have been waiting a week for confirmed values on all of them. Yet I know that Aviva manages all its with-profits funds via a single area controlled in York.

Despite there being so many Aviva with-profits policyholders, and apart from my own threads, there is very little written in this forum about Aviva With-Profits. I say that this is indicative of Aviva improperly hiding our policies from us. Keeping their with-profits policyholders deliverately in the dark like proverbial mushrooms. But that's just my take on it. What do the other 1.8 million policyholders say? Do they know enough even to notice what's missing?

Surely some do. Where are they? Who are they? Are they for example typical members of significant old occupational pension groups who feel a false sense of continuing safety in numbers? How much of the £61bn is endowment policies? How much is pensions investment? How much is other long term business? In what ways is it corrupted now by being mixed with shareholder funds? Isn't that a basic No No? For decades, other insurance businesses have been forced to keep policyholder designated funds ring-fenced from their own - why is that obvious rule varied for with-profits providers? Clearly there is a constant risk of fraud and insolvency when funds are continually redesignated, split, recombined, and renamed?

It is plain to me that after previous regulators and even Treasury Select Committees had begun to gain some much needed traction in the previous decade (e.g. this FSA report from 2010), current regulators FCA and PRA completely lost the initiative in 2014 with regard to regulation of With-Profits. Even now, they have scarcely issued any dictate for policyholder benefit. They (particularly PRA) seem to spend their time constantly tweaking rules and issuing waivers upon request of the insurance companies. No tweaking or dictate seems to have taken hold for benefit of policyholders.

Here is one of the worst examples of lip service paid to real regulation that I have seen for a while - it is indeed an indicator that we are back to light-touch regulation by lightweights:

"Looking out for the policyholder" - Speech given by Sam Woods, Deputy Governor, Prudential Regulation and Chief Executive Officer, Prudential Regulation Authority at the Association of British Insurers Annual Conference 2018, London, 27 February 2018

"Insurance regulation is fun", right? Yes, sure - for the likes of hoards of ridiculously high paid Bank of England employees on the PRA gravy train.

And what on earth was achieved by splitting regulation particularly with regard to with-profits business between FCA and PRA??

The continually changing small-print issued by providers and FSA and FCA and PRA which affects with-profits policyholders like us is mind-boggling compared to the limited small print we bought as our policies.

Do we remember when policies were awarded Plain English awards? I think we can forget that :mad: Do we even remember when we could at least find the policy numbers of our AXA and Norwich Union pension policies online, and some values too? And do we remember when our annual statements provided lots of values including transfer values?

Why not now, if not through deliberate obfuscation? And how and why have financial advisers let this happen without blowing the whistle?

sandsy

I'm an Aviva with profits policyholder. I have no issues with the way my contract is managed and administered. I receive annual bonus statements which are clear. I can access my policy online and see an estimated surrender value, inc estimated terminal bonus. I understand the 90/10 concept although I accept many wouldn't have a clue. I understand the constraints of capital management and increasingly maturing portfolios of business.

I take comfort from the creation of separate actuarial function holder and with profits actuary roles in the early 2000s instead of a single appointed actuary. And the setting up of with profits committes that have a regulatory responsibility act in my - and other policyholders - best interests.

I prefer twin regulation where one regulator has oversight of prudential matters and a separate one focuses on conduct issues - instead of most of the focus being on prudential as it was in the past. It means companies have to think about how to handle conflicts between prudential and conduct issues.

I see pro-active regulatory action to see if companies are managing with profits well - think of the FCa's long standing customers review and the yet to report with profits review, reported in the financial press earlier this year.

With profits is as transparent today as it has ever been. For many people, the concept of smoothed returns suits their risk profile better than accepting the volatility of the markets directly. Speak for yourself if you don't like it (and why stick with something you don't like?) but don't attempt to speak for the other 1.8m.

peterbaker

sandsy wrote: »

I'm an Aviva with profits policyholder. I have no issues with the way my contract is managed and administered. I receive annual bonus statements which are clear. I can access my policy online and see an estimated surrender value, inc estimated terminal bonus.

Interesting - is that because yours is a conventional with-profits as opposed to unitised do you think? My three are unitised even though two commenced in 1989.

I understand the 90/10 concept although I accept many wouldn't have a clue.

Is yours a policy that was subject to the 2008/9 Reattribution "vote" or the AXA one in 2001? Because for around 87% of those policies thereafter, clearly the policyholders who voted "yes please" didn't have a clue, and the 90:10 "rule" has been completely corrupted in their case, hasn't it?

I understand the constraints of capital management and increasingly maturing portfolios of business.

Can you share some of that understanding, and why might it mean that my three policies are not viewable online, and your one is?

I take comfort from the creation of separate actuarial function holder and with profits actuary roles in the early 2000s instead of a single appointed actuary. And the setting up of with profits committes that have a regulatory responsibility act in my - and other policyholders - best interests.

Can you share the reasons for your comfort? As you may have deduced, I take no comfort in the abdication of regulatory powers in that way by the regulator. None of the people you are talking about are truly independent, are they? Even the Policyholder Advocate's office was funded by Aviva in 2006-2009 wasn't it?

I prefer twin regulation where one regulator has oversight of prudential matters and a separate one focuses on conduct issues - instead of most of the focus being on prudential as it was in the past.

I think regulation was a complete mishmash until 2010/11 when FSA demonstrated that they had finally grown a pair. Then with the successful drumming out of the arch enemy to some providers, Clive Adamson, the companies regained the upper hand.

It means companies have to think about how to handle conflicts between prudential and conduct issues.

No I think the Memo of Understanding between FCA and PRA clearly states that they (PRA & FCA) have to do all the thinking about conflicts of interest (if anyone ever points it out to them and if they ever get time to resolve it for policyholders' benefits).

I see pro-active regulatory action to see if companies are managing with profits well - think of the FCa's long standing customers review and the yet to report with profits review, reported in the financial press earlier this year.

Got a link to that financial press report? The last review was by FSA in 2010 as far as I can see, and scarcely got started on the real problems. That one was probably a direct but delayed result following the Treasury Select Committee inquiry in 2007/8. Actually, now you mention it, I do see various shallow reports of something that seems to have started mid 2017 and isn't expected to see the light of day as a published report until sometime in 2019 e.g. http://citywire.co.uk/new-model-adviser/news/fca-asks-30-firms-to-take-part-in-with-profits-review/a1088001?section=new-model-adviser

With profits is as transparent today as it has ever been.

Really? Is that because the small print describing the management usually exists somewhere before the next change is announced? Is that what you call transparency? I don't - my policy was reltively transparent, but the small print associated with it is now never ending and would fill around three loose leaf ledger files if I was to print it out. Even the customer contact teams can't keep up with it all - they can't even see it on their Aviva screens in many cases because their IT department blocks access to PDFs :rotfl:

For many people, the concept of smoothed returns suits their risk profile better than accepting the volatility of the markets directly.

It always did, but that's not what they are getting now unless perhaps they have a conventional with profits policy, not a unitised one. Even then, you have no idea what extra final bonus might recently have been announced for your benefit via the Sub-Fund you are invested in ... or do you?

Speak for yourself if you don't like it (and why stick with something you don't like?) but don't attempt to speak for the other 1.8m.

Not so fast! I think I will continue to speak for them sandsy until someone with your apparent knowledge convincingly explains the difference between my three very uncertain policies and your single apparent beacon of complete happiness:p. On that score, chances are my experience is three times more likely to apply to Aviva's 1.8m with-profits policyholders than yours ...

Where does your knowledge come from, incidentally ?

sandsy

I have an ex-NU conventional WP endowment.

And I have over 30 years work experience in financial services, some of which, back in the day, was on life insurance products, including with profits. Different focus now though

peterbaker

Sounds like our early backgrounds may have been similar - I think I sold my first s226 in early 1979 (before 6th April - as we did seasonally, back in the day )

I bought my first low cost house purchase endowment (conventional W-P) back in 1980, and then topped up with three additional policies with each move up to 1987.

By then things had changed rather fast. Still got the original literature and rating guide somewhere.

But surely, sandsy, you can see what I am getting at? Can you help the masses who didn't share our original market experiences, and clearly haven't shared you more recent focus, with your thoughts on any of my other questions?

bowlhead99

peterbaker wrote: »

I can see none of my three online, and I have to speak to three different sections of Aviva's business (by phone to contact teams who have very poor knowledge of the products) to get an updated value for each. Right now I have been waiting a week for confirmed values on all of them. Yet I know that Aviva manages all its with-profits funds via a single area controlled in York.

When you bought the policies in 1989 did you expect to be able to see them online? How frequently do you need to know the confirmed values at a point in time and is it really a problem that it takes more than a week?

Despite there being so many Aviva with-profits policyholders, and apart from my own threads, there is very little written in this forum about Aviva With-Profits. I say that this is indicative of Aviva improperly hiding our policies from us. Keeping their with-profits policyholders deliverately in the dark like proverbial mushrooms. But that's just my take on it.

If there are nearly a couple of million people with policies but very few of them feel the need to complain or comment about them on online discussion forums, I don't see how that it is indicative of a company doing something improper. It would perhaps refute rather than support your argument.

Maybe most of them are happy (or at least not-unhappy) customers with their investment broadly doing the job they expect it to with a reasonable level of service, and only the conspiracy theorist nutcases feel the need to start online discussion threads as a form of catharsis. But that's just my take on it.

peterbaker wrote: »

sandsy wrote: »

Speak for yourself if you don't like it (and why stick with something you don't like?) but don't attempt to speak for the other 1.8m.

Not so fast! I think I will continue to speak for them sandsy

You said there are 1.8 million people with policies, and noted that very few of them are on here discussing or complaining. You gave your take on the issues at hand and then posted the rhetorical question "What do the other 1.8 million policyholders say?".

Perhaps they are fine and do not feel the need to create an account on an online forum to rant about how their contract operates. One of those policyholders showed up and confirmed that they have no issues with the way their contract is managed and administered, while zero showed up to be shocked by your revelations.

To presume that the other 1.8 million need 'enlightenment' and if you don't actually know what they would say you will put words into their mouths, projecting your own opinions and speaking for them... seems like the beginnings of egomania. But that's just my take on it.

peterbaker

bowlhead99 wrote: »

When you bought the policies in 1989 did you expect to be able to see them online? How frequently do you need to know the confirmed values at a point in time and is it really a problem that it takes more than a week?

I need to know the values every single day at the moment because I wish to put one policy into drawdown and Aviva won't let me until it is worth £30,000. Ten days ago it was apparently worth £29,919 and that as it was £81 short of their arbitrary limit they wouldn't entertain drawdown and even very incorrectly advised me that I could transfer it (thus losing an enhanced 40% tax free lump sum entitlement).

Overall, yours are strange questions perhaps posed from the perspective of n otherwise knowledgeable contributor to this forum who has skin in the game of financial services, has little with-profits experience either as an adviser or customer, and simply doesn't like me on the forum rocking any boats? Tough luck. I'm here.

Why on earth do I need to wait over a week now to learn the effects of a single notice about an unexpected event posted by Aviva (their sudden need to distribute massive surplused because they have yet again been holding back too much from policyholders)?

If there are nearly a couple of million people with policies but very few of them feel the need to complain or comment about them on online discussion forums, I don't see how that it is indicative of a company doing something improper. It would perhaps refute rather than support your argument.

Yes I realise the simplistic alternative take on it, but long term investment business is not the same as annual business where claims arise from time to time to test performance and give policyholders a chance to comment.

"With-profits business" means nothing to most policyholders until they are planning to use it and someone tells them it is W-P (especially with-profits business which is paid-up long ago and to which they have not been contributing for decades and which possibly is comprised of the business of the majority of the 1.8 million. W-P is now extraordinarily complex - most policyholders haven't a clue, as sandsy has confirmed. Sandsy has also confirmed that like me, he is not an ordinary customer. He has sold with-profits policies in the dim distant past. He knows something about conventional with-profits. I may know a little more about unitised with-profits as a customer on three fronts.

Maybe most of them are happy (or at least not-unhappy) customers with their investment broadly doing the job they expect it to with a reasonable level of service

Maybe, but their expectation has been knocked about so much over two decades that my take on it is that those that were most peed off have gone, and those with least ability to know what on earth to expect remain and probably a large proportion of the remainder do not even know what "with-profits" is, or that they have a policy invested in with-profits.

..., and only the conspiracy theorist nutcases feel the need to start online discussion threads as a form of catharsis. But that's just my take on it.

Well I'd thank you to take comments like that elsewhere as they reflect an over pompous view of one's own importance and an intellect evidently more limited than one expects (a la Boris Johnson and the stupid suicide vest comment) if nothing else.

Anynick

Until a few weeks ago I had a small deferred pension, from a brief employment in the 1980's, in Aviva with-profits. It was originally with Guardian, who were bought by Provident Mutual, who were bought by CGU, who were bought by Norwich Union, who kind of morphed into Aviva, who changed the legal entities looking after it a couple of times. I received annual 'valuations' from Aviva - each name change tended to alter the anniversary but 18 months is close enough to annual that I didn't mind much. It was with somebody with 'Aviva' in the name for about the last 10 years or so.

At no point have they ever confirmed to me which with-profits fund, or more particularly which sub-fund, the pension was invested in. I always assumed I was in the Aviva with-profits fund, Provident Mutual sub-fund. I never received any information on bonus awards. Aviva do publish bonuses for some of their with-profits funds/sub-funds, but I never found anything for the Provident Mutual sub-fund - only fund value reports, which are virtually useless for a smoothed product; OK the fund is doing nicely, but how much of that are you going to attribute to the policy holders? Having gone through a with-profits endowment policy to buy my house in the 80's, 90's, and 00's, I kind of assumed that there were no interim bonuses to declare, and it would all rely on a terminal bonus calculation at the more or less arbitrary whim of the actuary, at the point of 'maturity'.

I assumed that the annual pension values were some kind of 'what-if' calculation - if I had retired on that date, the terminal bonus applicable would have yielded the value they sent me. But I was never very certain, what with loopholes for MVA etc.

So, to a large extent, I agree with you that the opacity is unacceptable. Having said that, I have believed for 25 years that people are missing the point about the real problem with with-profits, which is the arbitrary allocation of costs into the with-profits fund and hence huge reduction in the returns for policy holders. When with-profits were popular, the providers were mutual, and the actuaries ran the fund for the benefit of the policy-holders. Once demutualisation happened, it was open season on the with-profits funds. These with-profits providers are all huge complex organisations, with at least 50% of the investments in DC/unit fund type products. It was very easy for the accountants to 'prove' that 60% of business costs were associated with the with-profits funds: "they are harder to sell, most of the sales-force training costs are for with-profits, they are harder to administer, most of our admin support costs are for with-profits" and bang, millions of costs get dumped into the fund - thus taking them from the shareholders to the policyholders. With-profits bonuses disappeared, not because the underlying funds performed badly, but because the costs were exorbitant. And this is the underlying reason for the opacity - if the actuaries had to make plain the relationship between fund value and bonus declaration, the cat would be out of the bag. This is just as true now that modest bonuses have returned as it was during the initial rape and pillage in the 90's.

peterbaker

https://www.aviva.co.uk/adviser/documents/view/in16033c.pdf

There's a section in there referencing the Provident Mutual Sub-Fund (mid page 8)

I don't quite understand what they were getting at but when I see disclaimers like "no animals were hurt during the making of this epic" I always wonder ...

Anynick

I had seen that document, but it's just 'look here, we've got some rules we've set ourselves in the PPFM, and having had a jolly good look at the funds, we're satisfied that last year we've kept by our rules'. That particular reference to the PM fund seems to say 'we like to make sure 90% of payouts are within a range that we can't tell you but we deem to be reasonable as a target. In the case of the PM fund, we had to make more than 10% of payouts that exceeded the secret range, but if you weren't in the 10%, don't worry, it was a special case and you aren't much worse off'. The document definitely only reports fund performance and says nothing about bonuses, other than they will be calculated in a way they won't tell us about.
I should say that the amount I had in this policy was really quite small, especially until they started awarding bonuses again (I assume they did, the annual 'valuation' started growing) about 6-7 years ago, so each year I would get the valuation, harrumph grumpily to myself, search the internet for half an hour for something concrete, and give up, figuring the amount involved wasn't worth the heartache - lazy I know.

peterbaker

Anynick wrote: »

... so each year I would get the valuation, harrumph grumpily to myself, search the internet for half an hour for something concrete, and give up, figuring the amount involved wasn't worth the heartache - lazy I know.

Aviva relies heavily on that quite typical policyholder reaction to their thousands of pages of with-profits small print now issued annually without a murmur from FCA or PRA.

Take a look at this - the so-called 2017 Court Scheme which contains within its 203 pages of ambiguously drafted legalese all manner of shady arrangements including apparent backdating of a internal reassurance agreement to a Reattribution Date in 2009, and the suggestion that Non-Profit policies can be issued and held within the with-profits fund and that Hybrid policies they have so issued can contain guarantees. What on earth is all that about? Is it not some kind of cooking of books? Perhaps the more worrying part is that mention of "internal reassurance". What is it for? Why did it have to be amended retrospectively last year and effectively backdated 8 years? You can't do that with motor insurance. Why should it be permitted with any other insurance? Isn't it a bit like laying bets when the result of a game is already known?

Reassurance is supposed to be about optimising the potential liabilities of the ceding company (the company which wishes to divest itself of some of the risk it took on) by the laying off of some of those potential liabilities to a third party reassurer in return for payment of an agreed premium or fee.

However, reassurance or reinsurance is notorious for being a a major part of the so-called shadow-banking system, and is only really understood by insiders. The biggest, and for many the most surprising, bail-out in the 2007-8 financial crisis was not of a bank, but of a insurance company, AIG - ultimately $182M i read in some places. How much of that was because of bets placed after results were known by some of the parties involved?

Massive sums can change hands in the insurance industry without any transactions being recorded via traditional banking. The entities involved can quickly have their names changed and acronyms subsituted to make audit trails hazy. Had AIG not been able to perform its derivative contracts i.e. not received a US government bailout, then it was thought it might have brought down a large part of the global financial system with it.

If you are an insurance company, who is to say what the correct premium or fee is if you are intent on moving a certain sum of money from the accounts of one of your own companies to another and in the process dressing it up as reassurance or some other not very well understood instrument? Even if you refer to it "in plain sight" in documents like the 2017 Court Scheme and get a High Court stamp on it, who understands what it means when they see it?

I don't trust any such arrangements to be automatically in the policyholder interest, especially if it means money is leaving the with profits fund I am invested in and going elsewhere outside of such minimal with-profits regulation that exists, into something less defined or even undefined that eventually gets redesignated as shareholders' own funds earned through reassurance "profits" or "fees", or as Anynick implies, perhaps even more simply gets used to diffray the insurer's own costs, for example such as bailing out its own staff pension scheme.

The fact that our judiciary and the regulators are so frequently strung along by high paid lawyers and asked to rubber stamp what they cannot possibly understand, as true intentions are not revealed until later, rather sickens me.

Finally, something else that doesn't look too kosher for me is the definition of "Elected Policies" on page 25 of the pdf (numbered page 4 of the Schedule to the Scheme Document)

Elected Policy” means:
(a) a Policy in respect of which an Election was made pursuant to the UKLAP Reattribution Scheme (including for the avoidance of doubt the HLDAC Elected Reassurance Agreement); and
(b) any Policy which terminated or converted into a Non-Profit Policy prior to the UKLAP Reattribution Scheme Effective Date as a result of an event which occurred prior to the UKLAP Reattribution Scheme Effective Date that did not result from a voluntary act or omission on the part of the holder or the life assured (including as
a result of death, maturity or normal age retirement before the UKLAP Reattribution Scheme Effective Date) or which was deemed to have been In Force under the proviso to paragraph D of the definition of “In Force” (as defined in the UKLAP Reattribution Scheme) (provided in either case that the holder of such Policy had not responded prior to the UKLAP Reattribution Scheme Effective Date electing not to accept an incentive payment in which case such Policy shall be treated as a Non-Elected Policy);
“Election” means an Election in accordance with the UKLAP Reattribution Scheme;

The long clause (b) looks extremely suspect when you consider that during the run up to the actual reattribution, Aviva were most anxious to get as many people on board as "Elected Policy"holders as possible - writing to us most enthusiastically several times to remind us to vote for something that turned out for Yes voters to be a very bad deal indeed. They even extended the voting period. Very odd at the time, and odder still now.

Now we see that they weren't satisfied with a simple clause (a) which might have read "Elected Policy means a Policy in respect of which an Election was made pursuant to the UKLAP Reattribution Scheme". They for some reason needed to extend it with reference now to the backdated reassurance scheme plus that very unclear clause (b).

It makes me wonder - Did Aviva really have enough votes to see through the Reattribution at the time? They shouted that they did, but why did they have to write so many times and extend? Does clause (b) entitle them to count dead and/or already matured (retired) policyholders as "yes" voters? Wouldn't that be a bit desperate of them?

If regulators finally had the with-profits drains up (they have been meaning to for over a decade) and found something awry, could they force Aviva to undo the 2009 scheme now, and to award a backdated special distribution of estate surplus to every 2009 "Yes" voter of the sort I am entitled to on mine - which is already around ten times the value of the bribe they offered me for a "Yes" vote in 2009 which I refused to accept? Or would any such move be a City law firm's paradise for the next 10 years - a bit like Equitable Life but with brass knobs, funded of course by our with-profits funds?

And I haven't even mentioned the Friends Life sub-funds yet which are also covered by this one 2017 Court Scheme (with reference to previous schemes of course in typical Russian Doll fashion, except the details of earlier schemes aren't so easy to discover online - will have to resort to my paper files for those). Or maybe if I don't soon find something concrete, I'll have to give up figuring out what Aviva have been doing, and instead figure that the amounts involved weren't ever worth the heartache ? Or I could simply die and get counted as a Yes man like so may others ...