Legal and General WPF sell off ?

Monty205

When the product was sold to me back in 2002, the advisor explained that there were two types of With Profits Income bond. He simplified the explanation thus:

One type of bond paid out a fixed monthly income BUT the capital could/would /might end up being reduced depending upon how the investments performed.

The other protected the capital so that it would not fall below the level of the initial deposit, BUT monthly income payments were less, and fluctuated according to market behaviours.

I had a pension lump sum to invest so I took out four bonds. Two with capital protected, and two without.

I knocked the two with unprotected investment capital on the head many years back, but the two 'With Profits Income Funds', one run by L&G and the other by The Prudential have been kept running.

The L&G has paid out more over the past 17 years than the Pru, BUT the value of the initial capital investment in the Pru's bond has increased by almost 50%, whereas the L&G's is virtually the same.

Between these two bonds, over the past 17 years I have received an income varying from £90 to £210 per month, and the capital, although it may not have kept pace with inflation, has increased by about 19%.

There was also a clause related to the amount of the monthly withdrawals not exceeding 5% of the initial capital investment.

The only really poor year was, as I recall 2008/9.

So there we have it.

Stick, Twist .......................... or Bust !

Malthusian

Based on your post my understanding is that the L&G bond has no special guarantees but the Pru one does - although after 17 years of growth a guarantee to protect your original capital is virtually worthless. It's like a guarantee to replace your bond if it's stolen by pixies.

So both will continue to fluctuate in value whenever the insurer adjusts final bonuses.

Monty205 wrote: »

There was also a clause related to the amount of the monthly withdrawals not exceeding 5% of the initial capital investment.

You can withdraw as much as you want. Withdrawals above 5% in a policy year would however be chargeable gains and not tax-deferred.

5% withdrawals would also usually have been exempt from exit charges back in the day, but those would have dropped off years ago.

SonOf

...and with the changes in taxation that has taken place over the years, an investment bond has become a niche option that isnt used much any more. Modern options, such as S&S ISAs and unwrapped funds would likely be more tax efficient for most people.

So, sticking with an investment tax wrapper that is seeing you pay nearly 20% of your gains a year in tax when you can get returns tax free elsewhere may not be the best thing to do with your money.

Monty205

SonOf wrote: »

...and with the changes in taxation that has taken place over the years, an investment bond has become a niche option that isnt used much any more. Modern options, such as S&S ISAs and unwrapped funds would likely be more tax efficient for most people.

So, sticking with an investment tax wrapper that is seeing you pay nearly 20% of your gains a year in tax when you can get returns tax free elsewhere may not be the best thing to do with your money.

I am a little confused here ?

An ISA that will generate the equivalent of an income of £90 per month, based on a deposit of £25,000? No cash ISAs that I know of have interest rates that could create that income, and,as I mentioned earlier, the Stock market and long term investments are not for me, at my age.

I have not exceeded the 5% limit in any tax year except one, when a chargeable event arose. The income has not, therefore been subject to taxation, so I do not understand where you get 'Paying 20% of my gains in tax', from. Could you clarify that for me, please?

Regardless; it would seem that, in my position, most of you gentlemen would knock this investment on the head, pay any MVA, and invest elsewhere. Am I right, or have I failed to comprehend the posted information.

As an aside, these financial institutions do like to keep things simple, don't they? I have been advised that should I wish to terminate, then I need to send a letter of formal instruction together with the original issuing document, my driving licence and passport, not forgetting the obligatory utility bill and a copy of my most recent bank statement signed by the bank. I suppose that little lot is intended to encourage me to sit on my backside and do nothing.

They could have asked for my Grandmother's maiden name, my father's WWII Military Service number,my Grandfather's blood group, not forgetting my Mum's Co-oP dividend number from 1948, I suppose. :rotfl:

SonOf

An ISA that will generate the equivalent of an income of £90 per month, based on a deposit of £25,000? No cash ISAs that I know of have interest rates that could create that income, and,as I mentioned earlier, the Stock market and long term investments are not for me, at my age.

You have risk based investments. Not cash based. The funds you are in have stockmarket investments internally.

I have not exceeded the 5% limit in any tax year except one, when a chargeable event arose. The income has not, therefore been subject to taxation, so I do not understand where you get 'Paying 20% of my gains in tax', from. Could you clarify that for me, please?

Technically, it is not income. It is a regular withdrawal. A bit like drawing money from the cashpoint each month. There is tax being paid on the investments. 20% minus some reliefs. So around 13-18% p.a. depending on asset mix. That means your returns are lower compared to ISAs and unwrapped investments because of the tax paid.

Regardless; it would seem that, in my position, most of you gentlemen would knock this investment on the head, pay any MVA, and invest elsewhere. Am I right, or have I failed to comprehend the posted information.

We dont have enough info to give you a 100% answer and as that would be classed as regulated advice, we couldnt actually say that even if we wanted to. The best we could do is tell you to investigate your options.

However, old Pru WP plans tend to be viable even though they are obsolete by modern methods and standards. They do exactly what they say on the tin and do it well, even with the internal taxation. L&G not so much.

As an aside, these financial institutions do like to keep things simple, don't they? I have been advised that should I wish to terminate, then I need to send a letter of formal instruction together with the original issuing document, my driving licence and passport, not forgetting the obligatory utility bill and a copy of my most recent bank statement signed by the bank. I suppose that little lot is intended to encourage me to sit on my backside and do nothing.

These are old fashioned products which were built back in the day when such things were normal. Plus, in your case, they predate some of the Anti money laundering rules. So, they didnt get the same detail at the start. So, they have to get it on exit.

I suppose that little lot is intended to encourage me to sit on my backside and do nothing.

No. its to comply with the EU anti-money laundering regulations.

Malthusian

Monty205 wrote: »

An ISA that will generate the equivalent of an income of £90 per month, based on a deposit of £25,000?

A perfectly reasonable rate of withdrawal, although just as with your L&G bond, it can't be guaranteed.

No cash ISAs that I know of have interest rates that could create that income, and,as I mentioned earlier, the Stock market and long term investments are not for me, at my age.

The L&G and Pru bonds are stock market long term investments.

Monty205

There are naturally a few more questions, and observations I would like to put to you chaps, but as things stand, I will probably just suck it and see.
I would say, that when I took out this investment, I was a good deal younger than I am now, and longer term investments via stock market 'machinery' was not a problem. Now I am in my dotage, all I am really interested in is short term investment.
One thing that does annoy me about this issue, is that the folk manning the help desk (yes I know they are just people reading bumff from a pre-ordained list of things that they are legally allowed to say) on two occasions promised that somebody with some clarifying information would get back to me.
It goes without saying that, as is usually the case in such situations, I am still waiting. :sad:

As an aside, I see that Clydesdale have now taken all Virgin Money's ISAs, (including mine), off their hands. I guess some folk may well end up in Dicky's meadow with regard to the FSA compensation scheme ?

Monty205

As a further 'aside', (I am quite partial to 'asides') I wonder if the L&G's latest move into the 'property development' market is, perhaps, coincidentally related to the WPF sell off. Maybe the deal is going some way towards funding this latest development, …………….. then again it may just be a happy coincidence.

Legal & General announces that it has exchanged contracts on its largest Build To Rent (BTR) site to date located in Woolwich. This scheme has been acquired by co-investors Legal & General Capital and PGGM, as well as pension fund capital raised by LGIM Real Assets through its open-ended BTR fund.

Having slated-off L&G for not getting back to me on the issue of the transference, this morning a very nice chap rang me and answered some of my questions.

Indeed the £50,000,000 is being taken out of the fund, but as an earlier contributor to this thread stated, it is verily a drop in the ocean. This chap stated that once the deal goes through, as he is convinced it will, the fund itself will still be managed by the same people who managed it at L&G.

As for IT hic-ups, all eventualities have been covered, and if the "software system" change over goes well then he will be out of a job, along with umpteen other staff.

He also stated that it had been hoped that some of the surplus cash (orphan funds, I think was the term he used) would have been distributed via the bonus system to fund-holders, before the sell-off, but the "powers that be", decided against it.

It would seem that L&G are now moving in a different financial direction than in days of yore.

:beer:

SonOf

I wonder if the L&G's latest move into the 'property development' market is, perhaps, coincidentally related to the WPF sell off.

L&G have been involved in property development for decades.

It would seem that L&G are now moving in a different financial direction than in days of yore.

They havent really been active in retail financial services for over a decade. They held on to their end of life products longer than they should have done and sold their share in their platform to Aegon. The only area they had activity of any sort was workplace pensions.

This is a long decline and not just a recent thing.