Scottish Widows Flexible Option Bond-good for 2%!

RammieD

jem16,

Thanks for the advice. I think this is the route we shall take.

It is the longer term that we are interested in with this investment, so the shorter term loss against the potential longer term gain would be quite acceptable.

jem16

You might want to bring up with the IFA the possibility of a missale by Lloyds as Dunstonh suggested on the other thread.

Wurz

RammieD, my tied FA quit Lloyds a few months after the sale and any others I talked to since "could not give advice". I have had complaints regarding poor service against Lloyds/Swids over the past year and I found an IFA a few months ago.

The IFA agreed with me last week that I was right to pull out of Scottish Widows saying that "there is something serious going on at Scottish Widows" and his contact at Lloyds/Swids was giving nothing away. Hence my (was it tongue in cheek?) comment "Is Scottish Widows the next Northern Rock?"

I would pick a figure that you would not go below (like I did) and pull the plug when it gets too close for comfort. As for the FA and his meeting next week, what can he possibly do, I wonder........

jem16

Wurz wrote: »

I would pick a figure that you would not go below (like I did) and pull the plug when it gets too close for comfort. As for the FA and his meeting next week, what can he possibly do, I wonder........

The only problem with that is that RammieD could lose another £9k just by pulling out early. I have no idea what the early encashment fee is on this bond but on mine it is 8% if cashed in during the 2nd year.

RammieD

jem16,

The investment was £150K, less £6,250 in monthly withdrawals = £143,750

The cash-in value on 22nd January was £135,821 (charge for cashing-in early stated as £4,570 on a fund value of £140,391) according to the online statement.

From what Wurz was saying about the values today, we expect it will be well under £135K when we see the figure for 23rd January.

jem16

RammieD wrote: »

jem16,
The cash-in value on 22nd January was £135,821 (charge for cashing-in early stated as £4,570 on a fund value of £140,391) according to the online statement.

At least not as bad as £9k but still an awful lot to lose by cashing in early.

jamesd

RammieD, from the brochure it looks as though you have a fair range of externally managed funds available as well as other options not included in the single multi-manager fund that you appear to have invested in within the bond. Simply changing funds may be sufficient to improve the performance, without getting rid of the whole investment bond wrapper and paying the penalty.

You should also check the annual management charge (taken in daily pieces) for the funds since that is variable and can make it a very poor investment if it's at the top of the range.

Some damage from the market and the initial fund choice has been done but this sort of product does let you switch funds so you can go more cautious now while the markets may fall further and less cautious once the markets start to recover. When next week is the meeting with the FA? Do you have any reason to believe that the markets will continue to rise rather than continue to fall or if you think that they will fall, to stay invested the way you are? If you think that they will fall I'm wondering why you're not switching funds today.

How was the use of an investment bond wrapper for justified? Did you select it yourself or did they suggest it because you were a higher rate tax payer or potentially subject to age allowance reduction? I'm wondering if there's any potential for it to be a mis-sale.

munk

RammieD, as jamesd mentions above there are a number of externally managed funds available in the Flexible Options Bond - they all come under the title 'SW ...' (for example 'SW Invesco Perpetual Corporate Bond'). If you look in your documentation pack there should be a list of these funds titled 'Flexible Options Bond - Fund Charges'. In fact this is the exact list here on the SW site:

Flexible Options Bond - Fund Charges

If you look down onto the second page and onwards in that document you'll see all the externally managed funds available for investment via the FOB wrapper. You can have holdings in up to 10 funds within the FOB and you can make up to 12 switches per year without being charged (switching from one single fund to (up to) 10 different funds counts as a single 'switch').

There should be a form in your FOB documentation pack for switching funds, you just need to fill that out and send it off to them (though I'd recommend getting advice first from an IFA).

I did make a shortlist of the better performing externally available funds within the FOB some time back on this forum so if you want to look it over. However given the current market situation it'd probably be best to talk to an IFA who might suggest moving to a more defensive array of funds for a while within the FOB such as lower risk bond funds.

I wouldn't switch out of the FOB if you've only been in for 2 years given the exorbitant charges SW charge for the FOB wrapper - I'm actually in the same position at present with an FOB (3 years in) and am just counting the days until the 5 year establishment charging period is over to move to something that doesn't charge so much annually.

As mentioned above be careful when talking to Lloyds bank tied agents as they can't offer financial advice and at best will probably just suggest you move all of the money into another single fund within the FOB (probably a fixed interest / bond fund of theirs like the SW Cautious Portfolio/Solution fund(s) - which are really poor at best, there are much better external bond based funds available within the wrapper).

Horrible situation to be in though (as I know too well right now )- whether to shift over to a portfolio of funds that has some potential to make the money back (but which right now will also have as much chance as diving with the markets) or whether to move over to a more defensive list of funds (which won't drop so much in value going forward but at the same time won't grow much either, at east not enough to make up the deficit since the recent falls).

Good luck anyway, would be interesting to know what your adviser ends up advising with all the current turmoil!

jem16

jamesd wrote: »

How was the use of an investment bond wrapper for justified? Did you select it yourself or did they suggest it because you were a higher rate tax payer or potentially subject to age allowance reduction? I'm wondering if there's any potential for it to be a mis-sale.

James,

RammieD's situation was discussed in this thread. Read from post 137 for more info. Dunstonh suggested the missale because of lack of use of an ISA first although wording suggests RammieD "chose" it.

RammieD

Thanks to jamesd, jem16 and munk for your suggestions and interest in our predicament.

We have this morning made contact with an Independent Financial Adviser from whom we hope to decide at least a 'basic strategy' for the meeting with the tied FA on Tuesday next week.

We will post developments of our ongoing situation after the meeting.