Legal and General WPF sell off ?
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Monty205
Posts: 7 Forumite
I am new to this financial arena, and so please forgive me if I am in the wrong shop !
I was made aware some time ago that Legal and General were shutting down several of their financial products. Included in these fiscal packages was the With Profits Fund. Back in 2015 they announced that no further financial activity would be allowed with regard to this WPF, although it would continue to be 'managed'.
I am now in receipt of a 39 page brochure explaining that they are in the process of selling off this fund to a financial outfit of whom I have never heard.
I have read the brochure, and a lot of 'bumff' on the internet, about a company called "ReAssure". They would appear to be an offshoot of a Swiss outfit of which, similarly, I have never heard, and who's major activity would seem to be trawling the financial world, buying up products that, for one reason or another, other financial institutions wish to sell. My instant thoughts sprang to "Asset Stripping".
I have not been ReAssured by anything that I have read, and the telephone conversation I had with the L&G help line did little to ReAssure me.
I have two options, and the terminology known well to card players fits the bill nicely. I can stick or I can twist !
As a pensioner the monthly income that I draw is essential to supplement my meagre state pension. So if I terminate my fund holding, I will need to find somewhere else to place the money in order to generate as much monthly income as possible.
In current times this is no easy task, with interest rates at an all-time low. I may also be hit with an MVA applied by L&G to 'protect' the investments of those who remain in the fund. I should add that at the moment there is no MVA in place, but for how long that will be the case, I do not know.
If I remain in the fund, after the sell-off, I may find that I am trapped in it by heavy exit clauses applied by the new owners, and that my monthly income is somewhat diminished.
This is a big problem for me, and I was wondering if there is anyone out there in a similar situation, who may be considering their options with regard to this sell-off.
Included in the 'on-line' reading provided by L&G and ReAssure, I find that the sum of £50,000,000 will be extracted from the fund to be used as part of the cost of the transaction. I also found that ReAssure can pretty much do what they like with the fund once the High Court has given the go-ahead for the sale. They can wind the fund up, amalgamate it with other funds, split the fund, or modify the investment objectives in pretty much any way they want.
Is anybody in the same boat as I am, or does anybody have any thoughts about this issue?
It goes without saying that, like a lot of folk, I have pretty much lost faith with financial institutions over recent years, Skulduggery amongst the higher echelons, compulsory relocation of people's accounts by transference to banks that they had no wish to transfer to, horrendous IT failures, and taxpayer bail outs have not generated confidence or trust.
Such is life, I guess ?
I was made aware some time ago that Legal and General were shutting down several of their financial products. Included in these fiscal packages was the With Profits Fund. Back in 2015 they announced that no further financial activity would be allowed with regard to this WPF, although it would continue to be 'managed'.
I am now in receipt of a 39 page brochure explaining that they are in the process of selling off this fund to a financial outfit of whom I have never heard.
I have read the brochure, and a lot of 'bumff' on the internet, about a company called "ReAssure". They would appear to be an offshoot of a Swiss outfit of which, similarly, I have never heard, and who's major activity would seem to be trawling the financial world, buying up products that, for one reason or another, other financial institutions wish to sell. My instant thoughts sprang to "Asset Stripping".
I have not been ReAssured by anything that I have read, and the telephone conversation I had with the L&G help line did little to ReAssure me.
I have two options, and the terminology known well to card players fits the bill nicely. I can stick or I can twist !
As a pensioner the monthly income that I draw is essential to supplement my meagre state pension. So if I terminate my fund holding, I will need to find somewhere else to place the money in order to generate as much monthly income as possible.
In current times this is no easy task, with interest rates at an all-time low. I may also be hit with an MVA applied by L&G to 'protect' the investments of those who remain in the fund. I should add that at the moment there is no MVA in place, but for how long that will be the case, I do not know.
If I remain in the fund, after the sell-off, I may find that I am trapped in it by heavy exit clauses applied by the new owners, and that my monthly income is somewhat diminished.
This is a big problem for me, and I was wondering if there is anyone out there in a similar situation, who may be considering their options with regard to this sell-off.
Included in the 'on-line' reading provided by L&G and ReAssure, I find that the sum of £50,000,000 will be extracted from the fund to be used as part of the cost of the transaction. I also found that ReAssure can pretty much do what they like with the fund once the High Court has given the go-ahead for the sale. They can wind the fund up, amalgamate it with other funds, split the fund, or modify the investment objectives in pretty much any way they want.
Is anybody in the same boat as I am, or does anybody have any thoughts about this issue?
It goes without saying that, like a lot of folk, I have pretty much lost faith with financial institutions over recent years, Skulduggery amongst the higher echelons, compulsory relocation of people's accounts by transference to banks that they had no wish to transfer to, horrendous IT failures, and taxpayer bail outs have not generated confidence or trust.
Such is life, I guess ?
0
Comments
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Already discussed - see https://forums.moneysavingexpert.com/showthread.php?t=60345060
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Really? Already discussed in a thread that so far like this one has only two replies, neither of which you have contributed to?Already discussed - see https://forums.moneysavingexpert.com/showthread.php?t=6034506
The OP here is right not to be much reassured. The whole scandal of UK With Profits being skimmed improperly for shareholders through myriads of back to back routine High Court approved "Transfer" schemes designed by spivs including high powered London lawyers and "expert" actuaries who would sell their grandmothers, has been kicked down the road for decades now by FSA and then FCA and various successive governments.IT is well over 10 years since a Treasury Select Committee got close to having the drains up over who is entitled to the £billions in "inherited estates" within these funds.
It is useful to look upon these legacy funds as a possible tontine when trying to decide whether to stick or twist (last man still in wins).
The new fund providers want you to twist, because the more policyholders who accept too little to leave now, the more gets left behind in the fund for the providers to further skim off for their shareholders by devious arrangements.
An older thread on the same subject is this one: https://forums.moneysavingexpert.com/showthread.php?t=58933610 -
I am now in receipt of a 39 page brochure explaining that they are in the process of selling off this fund to a financial outfit of whom I have never heard.
Being realistic, would you have heard of any of the best financial firms? I am sure you know the names of many legacy insuers but they mostly closed their doors and sold up to ReAssure or Phoenix.I have read the brochure, and a lot of 'bumff' on the internet, about a company called "ReAssure". They would appear to be an offshoot of a Swiss outfit of which, similarly, I have never heard, and who's major activity would seem to be trawling the financial world, buying up products that, for one reason or another, other financial institutions wish to sell. My instant thoughts sprang to "Asset Stripping".
Its not asset stripping as they do not sell it on. Consolidation is their main aim. They buy a book cheaper than its asset value and then keep it until its run down. They can consolidate them onto other systems and call centres over time and make a saving on running costs.
There are no changes to any of the terms of the product you are in.If I remain in the fund, after the sell-off, I may find that I am trapped in it by heavy exit clauses applied by the new owners, and that my monthly income is somewhat diminished.
There have been multiple threads, mostly in the pension section. The bottom line is that L&G dont want this old book and have treated it poorly for many years. The move to Reassure should actually improve things over time.
There is no issue here. You are on an obsolete product with L&G and you will remain in an obsolete product with Reassure. Some obsolete products can be gems worth keeping. Most are improved upon with modern options.0 -
Really? Tell us how and why they can buy it at less than its asset value (bearing in mind that 90% of the profits on such assets belong to policyholders not shareholders).Its not asset stripping as they do not sell it on. Consolidation is their main aim. They buy a book cheaper than its asset value and then keep it until its run down. They can consolidate them onto other systems and call centres over time and make a saving on running costs.
That's not very true is it? Bigwig lawyer interpretation of how far terms can be stretched is what dictates these products now. FCA regulation of With Profits is laughably inadequate, but it doesn't mean you should bale out if you own one of these. Legacy With Profits business used to be run by people you could trust who grew your money conservatively smoothing the best years with the not so good years giving an almost linear upward performance each year and never downward. Now the funds that used to be used for smoothing and the fact that the upward linear performance has been deliberately depressed means the inherited estate in many of these old major brand name WP funds is seen as a goldmine for certain types of ruthless actuaries and predatory boards of directors who regularly go before High Court judges to bamboozle them for an approval for the next scheme to strip the assets out for their shareholders.There are no changes to any of the terms of the product you are in.
You mean their shareholders are impatient with them because they couldn't bring themselves as an old trusted brand name to do the dirty themselves, so they've sold it to those who exist for no other reason.There have been multiple threads, mostly in the pension section. The bottom line is that L&G dont want this old book and have treated it poorly for many years.
Please say exactly how.The move to Reassure should actually improve things over time.
How dare you call it obsolete? It was sold as "long term insurance" business. Do you even know what that means, or doesn't anyone in insurance care for the term any longer as it is indicates a long term commitment from the provider?There is no issue here. You are on an obsolete product with L&G and you will remain in an obsolete product with Reassure.
Finally some straight-talk ^^^Some obsolete products can be gems worth keeping.
What's that supposed to mean? You've already said the terms will remain the same. Sounds like you mean it would be useful to the financial adviser industry if owners of these legacy products let the advisers sell them something "modern" - using the never questioned (by any FA) cash-in value quoted by the provider of the "obsolete" product? Why would that be a good idea if financial advisers generally haven't a clue themselves about these huge legacy with profits funds because it's not something most of them ever had much to do with, and certainly can't be bothered to investigate. As far as they are concerned it is potential new money and new fees to them, never mind the detail of the bloody things. They wouldn't score many points with providers if they kept asking damned awkward questions instead of just being grateful for a quick turnaround of a quote for a cash-in (and/or transfer value in the case of a pension).Most are improved upon with modern options.0 -
Really? Tell us how and why they can buy it at less than its asset value (bearing in mind that 90% of the profits on such assets belong to policyholders not shareholders).
You are mixing things up. Maybe have a read on the subject.
Yes it is very true.That's not very true is it?How dare you call it obsolete?
Sorry if the facts don't match your beliefs.What's that supposed to mean?
If you have a black and white TV, you can still watch television. However, the world has moved on and better options may be out there.0 -
Based upon what you chaps are saying, fundamentally folks, it would seem that fund-members are to be screwed if they stay, and equally screwed if they leave. It's a great shame really as this WPF has been paying me a decent monthly amount over recent years. The monthly income generated, taken together with the increase in the initial investment, has, percentage-wise, bettered any short term investment currently doing the rounds.
I intend to have another chat with the 'Help Line' and ask if my interpretation of the 'bumff' is correct in respect of the fund being used to help pay for the cost of the deal, and the ability of ReAssure to do what they like with the fund after the take-over.
What I then decide to do will depend upon the answers that I get.
L&G sold this product as an ongoing scheme, having no fixed term or fixed ending date, but it seems that ReAssure will not have to honour that promise..
If they do intend to extract £50,000,000 from the fund to help towards the cost of the wheeling and dealing, while saying that such an action will have no effect upon fund-holders, then I guess I will pull the plug before any mass exit creates an MVA.
As an analogy, of sorts, if somebody took £50 out of my current account, I would notice it straight away, and this expert says that extracting £50mil from the WPF will make no difference to fund-holders. Sadly I can not get my head around that !
Ah well, onward and upward.0 -
The monthly income generated, taken together with the increase in the initial investment, has, percentage-wise, bettered any short term investment currently doing the rounds.
You're very easily pleased. Bettering a short term investment is the absolute least you would expect as it's not a short term investment option. It's a capital at risk product just like any investment in the stockmarket.
Yes they will. It will still have no fixed term or fixed ending date.L&G sold this product as an ongoing scheme, having no fixed term or fixed ending date, but it seems that ReAssure will not have to honour that promise..
A mass exit wouldn't create an MVA.If they do intend to extract £50,000,000 from the fund to help towards the cost of the wheeling and dealing, while saying that such an action will have no effect upon fund-holders, then I guess I will pull the plug before any mass exit creates an MVA.
No you wouldn't. If you have £10,000 in your current account and the bank made a rate of return of 1% on its customers' deposits, but nonetheless it held the interest rate at 0.5%, you wouldn't notice at all. This is what is happening here.As an analogy, of sorts, if somebody took £50 out of my current account, I would notice it straight away
You would notice if the bank took £50 out of your account because the bank owes you that £50. The WPF doesn't owe you the £50 million. It's surplus to what it needs to pay what it does owe.and this expert says that extracting £50mil from the WPF will make no difference to fund-holders. Sadly I can not get my head around that !
L&G could have extracted it themselves if they felt like it, but it's more profitable to pay it to ReAssure to take it off their hands.
In non-With-Profits unit linked investment, this whole malarkey can't happen because at any one time the fund manager owes you your share of the fund.
With With Profits however, you let the fund manager keep some of your share of the fund, in exchange they use it to keep paying you bonuses when the fund hasn't performed well enough to support them. At their discretion.0 -
Several points arise from your response Mr.Malthusian.
1. At my age, short term investments are all I can really consider, or make any comparisons with, from an investment point of view..
2. This is not a 'capital at risk' bond. The initial investment with L&G was/is protected.
3. According to the jargonised bumff, available on line, these fellows can take this WPF and merge it into any other WPF, or merge any other WPF into it; they can even turn it into a not for profit fund if they feel so inclined. That leaves them scope to do pretty much as they please.
4. I was informed by a very nice gentleman from the L&G that the whole purpose of an MVA is to protect the interests of those wishing to remain in the fund. It is a device which penalises the person leaving the fund and to some extent is intended to discourage them from so doing. So, surely it would be in the best interests of L&G and ReAssure to apply an MVA, if it was seen that many people wished to exit the fund before the sell-off date ?
5. I did not read anywhere in the documentation that the £50million, was surplus. I am assuming you have inside information?
Finally, I rang the 'Help Line' again this morning, and after posing questions about some of my concerns I was informed that the chap on the end of the phone could not answer my questions, and he would have to get somebody to call me back by the end of the week.
Not much of a help line really.0 -
2. This is not a 'capital at risk' bond. The initial investment with L&G was/is protected.
Protected in what way?3. According to the jargonised bumff, available on line, these fellows can take this WPF and merge it into any other WPF, or merge any other WPF into it; they can even turn it into a not for profit fund if they feel so inclined. That leaves them scope to do pretty much as they please.
In time, they will look to merge most of the L&G funds. For example, there is little point Reassure running 30 different version of a UK equity fund with 30 different fund managers, support staff, compliance regimes etc.
It does not allow them to do pretty much as they please. They still have to comply with contract terms and regulations. A better way of putting it is that they can do pretty much the same as L&G could do.4. I was informed by a very nice gentleman from the L&G that the whole purpose of an MVA is to protect the interests of those wishing to remain in the fund. It is a device which penalises the person leaving the fund and to some extent is intended to discourage them from so doing. So, surely it would be in the best interests of L&G and ReAssure to apply an MVA, if it was seen that many people wished to exit the fund before the sell-off date ?
The MVR exists only when the value of the underlying assets is less than the value of the plans. As market returns are the key driver to that, ReAssure have little or no influence on those apart from the selection of asset allocation. And the FCA have a greater influence on asset allocation due to their solvency requirements that put solvency ahead of returns potential.5. I did not read anywhere in the documentation that the £50million, was surplus. I am assuming you have inside information?
Its not inside information.Not much of a help line really.
Your questions are not really the sort of thing people normally ask. And you dont have skilled workers on a call centre helpline.0 -
1. At my age, short term investments are all I can really consider, or make any comparisons with, from an investment point of view..
If that is true then your L&G / ReAssure bond is unsuitable. However it doesn't automatically follow from your age. Most people have an investment timeframe beyond their own life.
In the absence of any special guarantees, it is capital at risk because L&G can reduce the final bonus and/or apply a Market Value Reduction at any time. This means that at any time there is a risk that the value of your capital could fall, exactly as with a normal unit-linked investment.2. This is not a 'capital at risk' bond. The initial investment with L&G was/is protected.0
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