Are Norwich Union Crooks? - What gives them the right to mess with With Profits?

hedgehunter_2

Since you asked so nicely:-

My interest is much the same as any other poster on this website, to contribute to posts made by others.

Here is what you really want to know. I am neither a policyholder, shareholder nor an employee of Aviva.

What is reattribution? I suggest that you read the blub sent by NU it explains what it is. Further information is on its website.

The simplist way I can explain it to you is; suppose that I had agreed to pay you 90% of £1.00 at some unspecified date in the future, would you accept 50p now if I offered it to you? By accepting my offer you would have "a bird in the hand", by rejecting my offer I still might or might not have to pay you 90p some time in the future.

The offer is for you to accept or reject, but if you reject it there may be no requirement in the future for me to pay you anything.

A bribe is illegal, what I am offering you is an inducement to give up a potential future larger payment for something now.

Look at it from my point of view, why would I offer you 90p now if i dont have to give it to you until many years into the future or not at all.

The thorney question of whether 50p is fair is what the policyholder advocate, the CGNU eligible policyholders and the aviva shareholders have to decide.

By the way, any payment offered by CGNU comes from the shareholders pockets, not the with profit fund or the inherited estate.

peterbaker

Well thank you for answering so nicely HH . I have of course read what reattribution is. It's a thirteen letter word AVIVA and a few others dreamed up to label a particular type of bribe they are toying with making to us.

Stating that Bribes are illegal with the implication that it could not possibly be the case that AVIVA would stoop so low, is a rather impotent and misleading suggestion, don't you think? Cartels are illegal too, but a notable cartel member reported record profits today and no journalist has even dared mentioned the "C" word so far about that.

My question now is if AVIVA, Commercial Union, Norwich Union, General Accident or CGNU or whatever they now wish to call themselves are so intent on handing back part of our pension fund early instead of investing it for a better pension, and in a new spurious way that appears to be against any rule of a licensed pension provision product, then why on earth should the DTI or FSA or whoever 'regulates' let them remain licensed?

Simply put, it sounds like they don't want to be pension providers anymore. Instead of looking for ways they can optimise the funds for the benefit of policyholders pensions e.g. for smoothing the annual bonuses after volatile conditions like we have just witnessed, they have their eye on part for themselves. So, after getting their sticky mits on it, at some stage in the future they'll say "Everso sorry, but your fund transfer value has just plummetted because we've plummetted the terminal bonus to reflect the plummets in the market".

That would be instead of saying "Don't worry, the inherited estate which we didn't squander on inducements to you and gravy for us has instead been used to smooth the bonuses so actually our projections now are as solid as they ever were despite the market volatility."

Anyway, how on earth can they set a "future liability" projection anyway when so much of the fund is for deferred members with only limited original contributions? With profit funds are supposed to accrue non-reduceable bonuses steadily and thereby to be a low risk investment. The introduction of a precarious-looking but significant terminal bonus (a bit like a pot at the end of a rainbow) is in my long experience a sign of a fund being managed by crooks. What liabilities do they think they have? They seem damned good at ideas for shedding them.

Please don't tell me their "future liabilities" when calculating the "inherited estate" are approximated by looking at GMP figures for policyholders like me? If that were so, I think I would go round and throw a brick through a big window at St Helens this afternoon to release some tension.

hedgehunter_2

Is it a bribe if I offer you £200k for your house and you accept, and can you come back to me a couple of years later for more money if its value has increased to 300K? No

Cartels are not illegal. It is illegal for cartels to collude, or monopolise.

Reattribution is not handing back part of your pension, it is buying off your interest in any future estate distribution.

Reattribution makes CGNU no less of a pension provider, and they will still have to pay you any policy guarantees such as GMP when they are due.

Yes you policy may increase or decrease in value in the future that is the nature of almost any investment.

Terminal bonus is not guaranteed and therefore you cannot guarantee it.

Paul_Herring

hedgehunter wrote: »

<snip>

Reattribution would appear to be not a real word:

http://www.google.co.uk/search?num=100&hl=en&q=define%3AReattribution

Google wrote:

No definitions were found for Reattribution.

Suggestions:- Make sure all words are spelled correctly.
- Search the Web for documents that contain "Reattribution"

http://en.wikipedia.org/wiki/Special:Search?search=reattribution&go=Go

Wikipedia wrote:

Search

From Wikipedia, the free encyclopedia

You searched for reattribution [Index]

[...]

No page with that title exists.

peterbaker

Don't worry Paul, I am sure someone from AVIVA will be tasked with writing a new Wiki entry first thing in the morning

'Terminal Bonus' wasn't a real word either until some slippery actuaries / life insurance company directors dreamed it up in the early 80s in order to grab market share from the leading with profits markets, which in those days were Royal Insurance (in the red corner) and Norwich Union (the blue). Both were too nice in those days to call their new upstart competitors 'crooks', and eventually after a good five years of trying to do it right whilst the crooks were misleading the public, the traditional markets gave up and introduced the same kind of nefarious terminal bonuses on their own products, effectively becoming almost as bad as the upstarts overnight.

Then, as we now, before the decade was out, the whole industry sold endowment and other promises down the river, and instead started promoting that wonderful phrase about going down (as well as up) whilst maintaining the Colgate smiles and holding out their pens for signatures on the dotted line. Well they had to say it, didn't they? And having said it, it would be rude not to exploit it...and thence forecast terminal bonuses started disappearing before maturity. Many name changes, reverse takeovers and misselling (sic) scandals later, they are all as bad as one another...

Hedgehunter - I think you probably have a limited experience in all these matters. Am I right? Your hilariously funny attempt at disenjoining cartels from exactly that which defines them is the clincher for me :rotfl:

hedgehunter_2

I have sufficient experience to know that terminal bonus was not dreamed up in the 1980's it has been part of with profits for as long as anyone can remember and represents the difference between the investment value of the policy and any guaranteed benefits.

Since the value of investments can rise and fall then in order to do its job of moderating the policy value than it has to be able to increase or decrease.

peterbaker

Really hedgehunter? Then why did the leading players (the reds and the blues for example) never mention it in their early 80s illustrations when they built up their huge with profits funds with millions of low cost endowments sold via Building Society agencies, and even went as far as using the difference e.g. "we don't use terminal bonuses ... all ours are guaranteed 'reversionary' or 'compound reversionary' ... i.e. once declared/added, they cannot be removed" as a sales pitch ?

My memory is obviously one which you have overlooked in propounding your upstartedly selective view of the history of with profits funds. I don't know if you are trying to rewrite history or are simply not old enough to have witnessed it, in which case, I almost forgive you because not much was written down in any policy document about it. You'd have to look at marketing bumf to see how it was really done. Either way, apart from a massive nationwide with profits bumf-burning you'll have to shoot me to erase the notion completely.

hedgehunter_2

The standard design of a low cost endowment was that 80% of the current reversionary bonus rate at the outset would continue over the term and when added to the sum assured would be sufficient to repay the traget amount.

In theory this would lead if those assumptions turned out to be correct for an excess to the policyholder above the target amount at maturity of 20% of the reversionary bonus plus all the terminal bonus.

Unfortunately since the 1980's the investment world changed, and much less reversionary bonus has been added to policies than originally assumed at the outset, and even including terminal bonus has led to shortfalls arising.

You have as usual jumped to the conclusion that I am young without any evidence to support it, other than thats what you think. Duuuude

Find me a gun!

Experience is all very well, but not if its one years experience repeated 30 times. This only amounts to one years experience.

peterbaker

Look hedgehunter, I simply do not understand why you are suggesting that terminal bonus has always been a feature of With Profits funds when I cannot see it applied in 1980 when I first bought a low cost endowment. I bought three others before 1988, and I think only the last included the concept.

You mention a standard 80% safeguard as if it applied to all low cost endowments. The company I bought from originally had two main low costs called H an G, plus of course the "full cream" (full cost) endowment. By 1987 when I bought my last, they were selling a 'full-skimmed' product in ways that we now know could only be supported in illustration by the introduction of that nefarious terminal bonus idea. Nevertheless, all of these products of varying strengths and quality utilised the one With Profits fund AFAIK.

Huge parts of that With Profits book were undoubtedly almost terminally ravaged by the so-called Endowments Misselling scandal, and the avalanche of claims made as a result of it. Goodness knows how they have fudged the separation of monies that should have been given as compensation but haven't been, from the continuing funds of those who did claim and did not surrender, from those who simply made no claim, and how they then separated all that from those who have bought other products under the questionnable banner of "With Profits", and are now finding that their money has now been intermingled with the dregs of all those big-time failed, sold off and cancelled products....and that someone has had their eye on the those rather interesting dregs and is now making a move. That is where I find my own funds I believe - now in some big mixing pot, or manipulated array of mixing pots - not so unlike an array of Iranian centrifuges perhaps, and with about as much ultimate benefit to me as a stockpile of enriched uranium is in the wrong hands. Irrespective of whether the whole With Profits fund then gets blown to kingdom come, the current AVIVA plans would surely leave me holding something deliberately depleted.

So I don't really care what the excuse is for you propounding myths, HH. I thought it might mean you were too young to have seen what happened. But if I'm wrong in that, then it appears you either had your eyes shut to large parts of the industry whilst you gained your experience, or are simply some kind of Propogandistic Denier :rolleyes:

dunstonh

I wasnt transacting back in the 80s but I have dealt with tons of plans from that era (and earlier) and all had terminal bonuses.

I wonder if the confusion is due to the fact that terminal bonus data never used to be as easily available as it is now. It never used to be included in values or projections. Indeed, some providers still dont include it. Norwich Union is a good example of that with a number of their plans. Often when I get values on NU plans the surrender value is higher than the current value because of it.

Endowment projections often dont include terminal bonuses either. A few years back standard life were giving projections which were lower than the guaranteed minimum maturity and current surrender value. They fixed that by artificially increasing the value but still understating the likely outcome.

I think this is more a case of the TBs being there but you just were not aware of them as the values never appeared until the policy matured. Something all with profits policyholders need to be aware of (evidenced for example with Standard Life 3 month maturity notices showing values not including terminal bonus but on maturity including the terminal bonus and showing quite a jump up and often hitting target despite 3-12 months earlier showing a shortfall).