Scottish Widows Cut Bonuses
Scottish Widows have cut the bonus rates on their with-profits (such an ironic name for a product that does not actually produce a profit for the hapless policy holder) policies. Scottish Widows claim that the £14BN with-profits fund fell by 17.5% in 2008.
The majority of the 775,000 policies will therefore pay out less than they did last year.
The concept of "with-profits", as told to hapless investors by the life assurance companies, was that the life assurance comapnies would smooth the bonuses during the life of the policy. The fact that companies are having to cut bonuses indicates that this smoothing clearly has not taken place, and the bonus payments in earlier years were too high.
Why would the companies pay out bonuses that were too high in earlier years?
Simple, so that they could attract more investors by showing that their policies were high profit yielding products (some cynics might argue that these policies were a scam).
Showing posts with label bonus. Show all posts
Showing posts with label bonus. Show all posts
Friday, February 13, 2009
Monday, January 19, 2009
Norwich Union Cuts Bonuses
Norwich Union Cuts Bonuses
The annual bonus season is upon us again and, unsurprisingly, cuts are in the offing.
Norwich Union has announced a cut in bonus payments on its "with profits" (such an ironic name!) policies. The 2.3 million people who hold a Norwich "with profits" policy suffered a cut of up to 16%.
This means that the majority of Norwich's endowment mortgage customers are likely to face a shortfall when their policy matures.
David Barral, Norwich Union Director, is quoted in the Guardian:
"Our with-profits funds have continued to prove their worth by delivering attractive long-term returns for investors while protecting them from the ups and downs of the stockmarket."
Could someone from the financial services industry care to explain to the millions of hapless "with profits" policy holders why "with profits" smoothing, in poor years, is never applied (as evidenced by the sharp cuts in bonuses); yet in good years it is applied?
Other companies will be announcing their cuts in due course, and it is certain that they will be as bad or worse than Norwich Union.
The annual bonus season is upon us again and, unsurprisingly, cuts are in the offing.
Norwich Union has announced a cut in bonus payments on its "with profits" (such an ironic name!) policies. The 2.3 million people who hold a Norwich "with profits" policy suffered a cut of up to 16%.
This means that the majority of Norwich's endowment mortgage customers are likely to face a shortfall when their policy matures.
David Barral, Norwich Union Director, is quoted in the Guardian:
"Our with-profits funds have continued to prove their worth by delivering attractive long-term returns for investors while protecting them from the ups and downs of the stockmarket."
Could someone from the financial services industry care to explain to the millions of hapless "with profits" policy holders why "with profits" smoothing, in poor years, is never applied (as evidenced by the sharp cuts in bonuses); yet in good years it is applied?
Other companies will be announcing their cuts in due course, and it is certain that they will be as bad or worse than Norwich Union.
Wednesday, January 07, 2009
Bonus Cuts
Bonus Cuts
The Times warns that holders of with profits funds will find that their maturity values will be cut again this year, because of poor performance.
Friends Provident will announce bonuses this week, Norwich Union next week.
Standard Life will declare at the end of this month, with Prudential and Legal & General making their announcements in February.
Many "with profits" (a contradiction in terms) policy holders are of course relying on these policies to pay off their endowment mortgages. A fine example, among many (eg PPI, credit card charges, bank charges, commissions etc), of how the City has ripped off the ordinary British citizen.
The Times warns that holders of with profits funds will find that their maturity values will be cut again this year, because of poor performance.
Friends Provident will announce bonuses this week, Norwich Union next week.
Standard Life will declare at the end of this month, with Prudential and Legal & General making their announcements in February.
Many "with profits" (a contradiction in terms) policy holders are of course relying on these policies to pay off their endowment mortgages. A fine example, among many (eg PPI, credit card charges, bank charges, commissions etc), of how the City has ripped off the ordinary British citizen.
Monday, September 08, 2008
Norwich Union Cut Bonuses
Norwich Union Cut Bonuses
Norwich Union have delivered another blow to the tattered reputation of the life assurance industry, and its much derided and failed product of endowment policies.
Norwich have told their 2.4M with-profits policy fund holders that it will cut policies maturing this year by 11%, in comparison with those that matured last year.
The phrase "with-profits" sounds somewhat hollow does it not?
I wonder why it is that no one has tried to sue the life assurance industry for misrepresenting their product by using that phrase?
The theory of with-profits policies is that they are meant to smooth returns. However, given the ongoing cuts in these policies, that theory appears to be half baked. The life assuring companies have quite clearly mismanaged these policies.
The cuts made by Norwich Union are in line with the fall in the FTSE 100 index over the past 12 months, and that means that the "smoothing" has had no benefit or effect whatsoever.
The changes mean that payouts from Norwich's top-paying mortgage endowment fund dropped by 5%, or £2,144, overnight.
Those who hold these useless, mismanaged polices should take a class action against the life assurance industry for:
-misrepresentation
-mis-selling
-mismanagement
-overcharging
Norwich Union have delivered another blow to the tattered reputation of the life assurance industry, and its much derided and failed product of endowment policies.
Norwich have told their 2.4M with-profits policy fund holders that it will cut policies maturing this year by 11%, in comparison with those that matured last year.
The phrase "with-profits" sounds somewhat hollow does it not?
I wonder why it is that no one has tried to sue the life assurance industry for misrepresenting their product by using that phrase?
The theory of with-profits policies is that they are meant to smooth returns. However, given the ongoing cuts in these policies, that theory appears to be half baked. The life assuring companies have quite clearly mismanaged these policies.
The cuts made by Norwich Union are in line with the fall in the FTSE 100 index over the past 12 months, and that means that the "smoothing" has had no benefit or effect whatsoever.
The changes mean that payouts from Norwich's top-paying mortgage endowment fund dropped by 5%, or £2,144, overnight.
Those who hold these useless, mismanaged polices should take a class action against the life assurance industry for:
-misrepresentation
-mis-selling
-mismanagement
-overcharging
Wednesday, May 07, 2008
Worse Than Worthless
Worse Than Worthless
According to a recent survey by Investment, Life & Pensions Moneyfacts the vast majority of 25 year with-profits endowment policies are now are producing lower returns than they did last year and the year before that.
That's not too good!
Are the people who sold us these useless products, and the people who continue to mismanage them ,receiving lower bonuses as a result of their failure?
I doubt it!
The Motley Fool has some advice about the options available to holders of these useless products.
According to a recent survey by Investment, Life & Pensions Moneyfacts the vast majority of 25 year with-profits endowment policies are now are producing lower returns than they did last year and the year before that.
That's not too good!
Are the people who sold us these useless products, and the people who continue to mismanage them ,receiving lower bonuses as a result of their failure?
I doubt it!
The Motley Fool has some advice about the options available to holders of these useless products.
Tuesday, March 11, 2008
Scottish Widows
Scottish Widows
Lats year holders of endowment policies with Scottish Widows were bitterly disappointed to be told that they would not be receiving any bonus on their policies, in spite of the fact that the underlying with-profits fund grew by 10%.
However, this year Scottish Widows, despite only showing a return of 5%, has added bonuses to 239,000 polices.
Needless to say, what is given with one hand is taken with the other, the final payout to mortgage endowment customers has fallen compared to 2007.
A typical 25 year, £50 a month mortgage endowment policy maturing in January paid out £38,136 this year, last year it paid out £38,758.
A mind numbing 88% of Scottish Widows endowment policy holders will not receive payouts large enough to cover the mortgages that their policies were designed to cover.
The blindingly obvious question therefore arises, what is the point of these policies if they do not do what they were designed and sold to do?
Lats year holders of endowment policies with Scottish Widows were bitterly disappointed to be told that they would not be receiving any bonus on their policies, in spite of the fact that the underlying with-profits fund grew by 10%.
However, this year Scottish Widows, despite only showing a return of 5%, has added bonuses to 239,000 polices.
Needless to say, what is given with one hand is taken with the other, the final payout to mortgage endowment customers has fallen compared to 2007.
A typical 25 year, £50 a month mortgage endowment policy maturing in January paid out £38,136 this year, last year it paid out £38,758.
A mind numbing 88% of Scottish Widows endowment policy holders will not receive payouts large enough to cover the mortgages that their policies were designed to cover.
The blindingly obvious question therefore arises, what is the point of these policies if they do not do what they were designed and sold to do?
Wednesday, March 05, 2008
Sir Nicholas Montagu
Sir Nicholas Montagu
Liberal Democrat Treasury spokesman, Vince Cable, has questioned the impartiality, effectiveness and independence of the Norwich Union With-Profits Committee (set up to protect the interests of policyholders).
He is concerned about Norwich Union's plans to distribute a proportion of its inherited estate to policyholders over three years, as opposed to a one off lump sum payment.
Mr Cable wrote to Sir Nicholas Montagu, chairman of the committee, questioning the committee's role in allowing the special bonus to be phased over three years.
Quote:
"Your committee has been established to protect the interests of policyholders and yet in your first public act you seem to have destroyed any prospect of being seen as a credible champion for them."
Montagu, a former civil servant who presided over the Inland Revenue during a period of bungles and who now gives after-dinner speeches for £5K a time, is seemingly reluctant to answer questions from "This Is Money" about this decision.
However, Montagu is paid from policyholders' funds to safeguard their interests therefore he is obliged to answer questions from policyholders.
Policyholders should send their complaints, comments and any queries relating to his role to:
Sir Nicholas Montagu,
Norwich Union With-Profits Committee,
Norwich Union Life,
2 Rougier Street,
York
YO90 1UU.
With-profits committees, if they are to really serve the policyholders that they claim to represent, need to be independent, impartial and effective.
It would appear that some fall short of this.
Liberal Democrat Treasury spokesman, Vince Cable, has questioned the impartiality, effectiveness and independence of the Norwich Union With-Profits Committee (set up to protect the interests of policyholders).
He is concerned about Norwich Union's plans to distribute a proportion of its inherited estate to policyholders over three years, as opposed to a one off lump sum payment.
Mr Cable wrote to Sir Nicholas Montagu, chairman of the committee, questioning the committee's role in allowing the special bonus to be phased over three years.
Quote:
"Your committee has been established to protect the interests of policyholders and yet in your first public act you seem to have destroyed any prospect of being seen as a credible champion for them."
Montagu, a former civil servant who presided over the Inland Revenue during a period of bungles and who now gives after-dinner speeches for £5K a time, is seemingly reluctant to answer questions from "This Is Money" about this decision.
However, Montagu is paid from policyholders' funds to safeguard their interests therefore he is obliged to answer questions from policyholders.
Policyholders should send their complaints, comments and any queries relating to his role to:
Sir Nicholas Montagu,
Norwich Union With-Profits Committee,
Norwich Union Life,
2 Rougier Street,
York
YO90 1UU.
With-profits committees, if they are to really serve the policyholders that they claim to represent, need to be independent, impartial and effective.
It would appear that some fall short of this.
Thursday, August 30, 2007
A Bumper Year
A Bumper Year
I received my 2006 with profits statement from my endowment provider (Legal & General) yesterday. Imagine my delight when I read the following in the covering note:
"We're pleased to be able to tell you that the investments underlying your policies have performed well during 2006 generating a return of 12% (before tax and charges) over the year."
Splendid!
Unfortunately, on delving deeper into the document I saw that the actual portion of that 12% allocated to me (re annual bonus rate applied to existing bonus and annual bonus rate applied to basic sum assured) was a less than staggering 2%.
The reason for this disparity?
I wonder why L&G don't disclose their charges in this this document?
What a joke!
I received my 2006 with profits statement from my endowment provider (Legal & General) yesterday. Imagine my delight when I read the following in the covering note:
"We're pleased to be able to tell you that the investments underlying your policies have performed well during 2006 generating a return of 12% (before tax and charges) over the year."
Splendid!
Unfortunately, on delving deeper into the document I saw that the actual portion of that 12% allocated to me (re annual bonus rate applied to existing bonus and annual bonus rate applied to basic sum assured) was a less than staggering 2%.
The reason for this disparity?
- Tax, fair enough, that takes the 12% down to 11% according to L&G
- Charges, which are not disclosed
- Smoothing, to ensure that "short term fluctuations" in the value of investments are not immediately reflected in payouts
I wonder why L&G don't disclose their charges in this this document?
What a joke!
Tuesday, August 14, 2007
Making Money on Endowments
Making Money on Endowments
The Telegraph has a good article explaining how it is possible, if you are well briefed and prepared to take the risk, to make money on endowments by investing in Teps (Traded Endowment Policies).
There is also a novel bonus, if you get the right policy, of earning a nice little lump sum if the original owner of the policy dies.
Quite:
"Life insurance is sold as part of an endowment policy; when a Tep is sold on, that insurance still covers the person who initially held the policy. But any payment made as a result of that individual's death will be paid into the Tep, says Modray.
It is not necessarily a palatable way of making returns, but a "deed of assignment" when the policy is sold will ensure that the money is added to the fund if the original policyholder dies."
The lesson here is that there is always a way to make money; if you are brave, lucky and well advised.
The Telegraph has a good article explaining how it is possible, if you are well briefed and prepared to take the risk, to make money on endowments by investing in Teps (Traded Endowment Policies).
There is also a novel bonus, if you get the right policy, of earning a nice little lump sum if the original owner of the policy dies.
Quite:
"Life insurance is sold as part of an endowment policy; when a Tep is sold on, that insurance still covers the person who initially held the policy. But any payment made as a result of that individual's death will be paid into the Tep, says Modray.
It is not necessarily a palatable way of making returns, but a "deed of assignment" when the policy is sold will ensure that the money is added to the fund if the original policyholder dies."
The lesson here is that there is always a way to make money; if you are brave, lucky and well advised.
Monday, February 06, 2006
Standard Life Fails To Deliver
Standard Life Fails To Deliver
More bad news for people holding useless and underperforming endowment mortages.
Standard Life have warned their 2 million with-profits customers that policies maturing this month will pay out on average 5% less than before, on comparable policies; this is despite the fact that share prices are booming.
The annual bonus rates on conventional with-profits policies are unchanged, but terminal bonuses are down.
The maturity value of a Standard Life 50 a month, 25 year mortgage endowment policy is now £40,459 this month, that is a massive fall of 18% when compared to the same policy of £49,511 in February last year.
John Gill, Standard's UK life and pensions managing director finance, is quoted as saying:
"By smoothing returns, we have protected policyholders from the full drop in asset values between 2000 and 2002."
Others are not taken in by this pr hype.
Clive Scott-Hopkins, from independent financial advisers Towry Law, is quoted as saying:
"Standard Life is obviously losing its competitive edge with this very poor result. The Norwich Union typical endowment payout last month at £50,295 was 25% higher than these results."
Standard Life sold £7BN of equities in 2004 after guidance from the Financial Services Authority on "strengthening" its financial reserves.
The result being that it now unable to take advantage, or rather its hapless endowment policy holders are unable to take advantage, of the booming stock market.
Given the fact that other insurers have performed better than this (even if their endowment policy holders are also out of pocket), I would suggest that the holders of Standard Life policies should be considering asking some very hard questions indeed about the quality of management of their funds.
Indeed they may laso like to consider aksing some hard questions of the FSA, as to why it gave such absurd advice.
More bad news for people holding useless and underperforming endowment mortages.
Standard Life have warned their 2 million with-profits customers that policies maturing this month will pay out on average 5% less than before, on comparable policies; this is despite the fact that share prices are booming.
The annual bonus rates on conventional with-profits policies are unchanged, but terminal bonuses are down.
The maturity value of a Standard Life 50 a month, 25 year mortgage endowment policy is now £40,459 this month, that is a massive fall of 18% when compared to the same policy of £49,511 in February last year.
John Gill, Standard's UK life and pensions managing director finance, is quoted as saying:
"By smoothing returns, we have protected policyholders from the full drop in asset values between 2000 and 2002."
Others are not taken in by this pr hype.
Clive Scott-Hopkins, from independent financial advisers Towry Law, is quoted as saying:
"Standard Life is obviously losing its competitive edge with this very poor result. The Norwich Union typical endowment payout last month at £50,295 was 25% higher than these results."
Standard Life sold £7BN of equities in 2004 after guidance from the Financial Services Authority on "strengthening" its financial reserves.
The result being that it now unable to take advantage, or rather its hapless endowment policy holders are unable to take advantage, of the booming stock market.
Given the fact that other insurers have performed better than this (even if their endowment policy holders are also out of pocket), I would suggest that the holders of Standard Life policies should be considering asking some very hard questions indeed about the quality of management of their funds.
Indeed they may laso like to consider aksing some hard questions of the FSA, as to why it gave such absurd advice.
Monday, August 08, 2005
Standard Life Fails To Deliver
Standard Life Fails To Deliver
According to new figures, those people unfortunate enough to have an endowment policy maturing with Standard Life this year will not only miss out on any windfall but have had to endure a further decline in their investments over the past year.
It seems that Standard Life's useless endowment policies have produced a negative return of 2.7% this year.
Pathetic!
The figures were revealed as Standard Life unveiled its mid-year "bonus declaration", and made a useless attempt to focus attention on one-year returns of existing policies rather than the year-on-year change for maturing policies.
I think that it is time for the hapless holders of these useless, and underperforming, polices to act up.
According to new figures, those people unfortunate enough to have an endowment policy maturing with Standard Life this year will not only miss out on any windfall but have had to endure a further decline in their investments over the past year.
It seems that Standard Life's useless endowment policies have produced a negative return of 2.7% this year.
Pathetic!
The figures were revealed as Standard Life unveiled its mid-year "bonus declaration", and made a useless attempt to focus attention on one-year returns of existing policies rather than the year-on-year change for maturing policies.
I think that it is time for the hapless holders of these useless, and underperforming, polices to act up.
Wednesday, June 29, 2005
Norwich Union Raises Bonuses
Norwich Union Raises Bonuses
In a rare piece of good news, for some of those holding endowment policies, Norwich Union has announced that it will be raising bonuses on some of its with profits endowment policies.
This will be the first increase since 1991, that fact alone shows just how badly endowment policies have been performing.
As noted many times before; why were these polices, when they were obviously failing, still sold by the life assurance companies?
Norwich Union said that it had decided to raise the rates paid on certain with profits policies in the CGNU (which includes General Accident) and CULAC (Commercial Union) funds, on those with profits policies taken out before October 1998.
The bonus rates will be increased from 1% to 2% in the CGNU fund, and people in the CULAC fund will be paid 1.5% compared with 0.5% previously.
Norwich said all other bonus rates would remain unchanged, and that there would be no changes to the value of maturity payouts or the current levels of "market value reduction".
In a rare piece of good news, for some of those holding endowment policies, Norwich Union has announced that it will be raising bonuses on some of its with profits endowment policies.
This will be the first increase since 1991, that fact alone shows just how badly endowment policies have been performing.
As noted many times before; why were these polices, when they were obviously failing, still sold by the life assurance companies?
Norwich Union said that it had decided to raise the rates paid on certain with profits policies in the CGNU (which includes General Accident) and CULAC (Commercial Union) funds, on those with profits policies taken out before October 1998.
The bonus rates will be increased from 1% to 2% in the CGNU fund, and people in the CULAC fund will be paid 1.5% compared with 0.5% previously.
Norwich said all other bonus rates would remain unchanged, and that there would be no changes to the value of maturity payouts or the current levels of "market value reduction".
Wednesday, March 23, 2005
Abbey's Curate's Easter Egg
Abbey's Curate's Easter Egg
Abbey has presented its with profits policy holders with something of a curate's egg for Easter.
Despite benefiting from improved investment performance on with profits funds, Abbey will pay no annual bonuses on Scottish Provident, Abbey National Life and Scottish Mutual policies.
How nice of them!
However, they are going to reduce Market Value Reductions (MVR's), the penalties for early surrender, for some policyholders and reintroduce terminal bonuses on some long-term policies.
Abbey's Scottish Provident fund had a return of 10.5% last year, with Abbey National Life and Scottish Mutual showing 9.5% for the same period.
MVR's have been reduced by 6%. As noted, there are no annual bonuses declared for 2004, except where the policies carry guaranteed bonuses.
Scottish Mutual's traditional 25 year maturing endowments now pay a terminal bonus of 30%, an increase of 5%. The 15 year policies now receive a 5% terminal bonus, no change on the previous period.
Abbey National Life 10 year pension plans receive a 5% terminal bonus, introduced for single premium policies, and 1% for regular premiums. Scottish Provident?s 20 year endowment terminal bonus goes up from 0% to 7%.
These "improvements" are on the backs of large cuts in the past. So don't bother getting the champagne out!
At this rate, if MVR's continue to decline, investors will at least be able to take their money out and put it somewhere more useful instead.
At the end of the day endowment policy holders are being screwed left, right and centre!
Abbey has presented its with profits policy holders with something of a curate's egg for Easter.
Despite benefiting from improved investment performance on with profits funds, Abbey will pay no annual bonuses on Scottish Provident, Abbey National Life and Scottish Mutual policies.
How nice of them!
However, they are going to reduce Market Value Reductions (MVR's), the penalties for early surrender, for some policyholders and reintroduce terminal bonuses on some long-term policies.
Abbey's Scottish Provident fund had a return of 10.5% last year, with Abbey National Life and Scottish Mutual showing 9.5% for the same period.
MVR's have been reduced by 6%. As noted, there are no annual bonuses declared for 2004, except where the policies carry guaranteed bonuses.
Scottish Mutual's traditional 25 year maturing endowments now pay a terminal bonus of 30%, an increase of 5%. The 15 year policies now receive a 5% terminal bonus, no change on the previous period.
Abbey National Life 10 year pension plans receive a 5% terminal bonus, introduced for single premium policies, and 1% for regular premiums. Scottish Provident?s 20 year endowment terminal bonus goes up from 0% to 7%.
These "improvements" are on the backs of large cuts in the past. So don't bother getting the champagne out!
At this rate, if MVR's continue to decline, investors will at least be able to take their money out and put it somewhere more useful instead.
At the end of the day endowment policy holders are being screwed left, right and centre!
Wednesday, February 23, 2005
Prudential's Little Ray of Sunshine
Prudential's Little Ray of Sunshine
Those of your with underperforming and useless endowment polices, will no doubt be dreading this year's round of letters from your life assurance companies; as they tell you, yet again, that they are cutting their bonuses on their pitifully pathetic products.
However, there is one small piece of good news for those of you with a Prudential with profits policy.
It is reported that bonuses paid to with-profits policy-holders will be the same or bigger than last year's.
Around 5.5M people hold a Prudential with-profits fund. Prudential said the fund had seen an "exceptionally strong" return of 13.4% gross over the past year, compared with the FTSE 100 index's total return of 11.25%. Over the past five years, the fund has seen a pre-tax return of 20.7%, while the FTSE 100 has seen a negative total return of 19.5%.
Prudential said that buoyant performance meant it would add £2.2bn to the value of its policies.
This means that Prudential will at least maintain the same level of bonus it paid last year across all with-profits policies. Additionally, its with-profits annuities total bonus was to be increased to 7.12% this year, up from 6.35% last year.
David Belsham, actuarial director at Prudential Assurance, said that the fund's good performance was down to "long-term prudence" quote:
"We are now seeing the benefit of long-term prudence. We took early action to protect policyholders' funds by switching out of equities ahead of the prolonged bear market and policyholders are now benefiting from the strong returns earned on Prudential's with-profits fund...This year's bonus declaration shows that with-profits continues to be an attractive investment for policyholders when provided by a financially strong and well managed fund, such as Prudential."
I have but two simple questions:
1 If the Pru can do this, why can't the other life assurance companies?
2 The implication of the Pru's prudence (forgive the pun), is that other life assurance companies have not been prudent. This surely means that they (the other life assurance companies that have cut bonuses) can be sued for mismanagement, doesn't it?
Those of your with underperforming and useless endowment polices, will no doubt be dreading this year's round of letters from your life assurance companies; as they tell you, yet again, that they are cutting their bonuses on their pitifully pathetic products.
However, there is one small piece of good news for those of you with a Prudential with profits policy.
It is reported that bonuses paid to with-profits policy-holders will be the same or bigger than last year's.
Around 5.5M people hold a Prudential with-profits fund. Prudential said the fund had seen an "exceptionally strong" return of 13.4% gross over the past year, compared with the FTSE 100 index's total return of 11.25%. Over the past five years, the fund has seen a pre-tax return of 20.7%, while the FTSE 100 has seen a negative total return of 19.5%.
Prudential said that buoyant performance meant it would add £2.2bn to the value of its policies.
This means that Prudential will at least maintain the same level of bonus it paid last year across all with-profits policies. Additionally, its with-profits annuities total bonus was to be increased to 7.12% this year, up from 6.35% last year.
David Belsham, actuarial director at Prudential Assurance, said that the fund's good performance was down to "long-term prudence" quote:
"We are now seeing the benefit of long-term prudence. We took early action to protect policyholders' funds by switching out of equities ahead of the prolonged bear market and policyholders are now benefiting from the strong returns earned on Prudential's with-profits fund...This year's bonus declaration shows that with-profits continues to be an attractive investment for policyholders when provided by a financially strong and well managed fund, such as Prudential."
I have but two simple questions:
1 If the Pru can do this, why can't the other life assurance companies?
2 The implication of the Pru's prudence (forgive the pun), is that other life assurance companies have not been prudent. This surely means that they (the other life assurance companies that have cut bonuses) can be sued for mismanagement, doesn't it?
Wednesday, February 09, 2005
Terminal Decline
Terminal Decline
The Scotsman writes that endowment policies are in "terminal decline". They cite the recent cuts in bonuses, announced by the larger life assurance companies; quote:
"..Standard Life and Clerical Medical were this week the latest in a string of assurors to serve up unpalatable news to policyholders: the former slashed bonuses almost across the board, despite a 10.4 per cent pre-tax return on its with-profits fund, while the latter's investors fared little better, although its fund was up 9.9 per cent.
That followed grim tidings from Scottish Widows, a subsidiary of Lloyds TSB, and Aviva - owned Norwich Union. Like Standard Life, Widows cut final payouts for the sixth time in three years, following a 10.5 per cent lift in its fund.
Earlier, Norwich Union, the UK's largest insurer, became the first this year to deliver a stinging blow, slashing payouts by up to 11.5 per cent when its four funds overall enjoyed the same rise.
Prudential's bonus declaration is over a fortnight away, while Abbey National is not due to make its announcement until March. The Pru has claimed it will increase or maintain total bonus rates on all unitised with-profits and offer good year-on-year increases in value..".
The bottom line to this is that we, the holders of these lousy underperforming polices, are screwed.
The Scotsman writes that endowment policies are in "terminal decline". They cite the recent cuts in bonuses, announced by the larger life assurance companies; quote:
"..Standard Life and Clerical Medical were this week the latest in a string of assurors to serve up unpalatable news to policyholders: the former slashed bonuses almost across the board, despite a 10.4 per cent pre-tax return on its with-profits fund, while the latter's investors fared little better, although its fund was up 9.9 per cent.
That followed grim tidings from Scottish Widows, a subsidiary of Lloyds TSB, and Aviva - owned Norwich Union. Like Standard Life, Widows cut final payouts for the sixth time in three years, following a 10.5 per cent lift in its fund.
Earlier, Norwich Union, the UK's largest insurer, became the first this year to deliver a stinging blow, slashing payouts by up to 11.5 per cent when its four funds overall enjoyed the same rise.
Prudential's bonus declaration is over a fortnight away, while Abbey National is not due to make its announcement until March. The Pru has claimed it will increase or maintain total bonus rates on all unitised with-profits and offer good year-on-year increases in value..".
The bottom line to this is that we, the holders of these lousy underperforming polices, are screwed.
Thursday, February 03, 2005
Standard Life Cuts Bonus
Standard Life Cuts Bonus
In more bad news for holders of failing endowment policies, Standard Life has yet again cut bonuses; for good measure it also warned that lower payouts will continue, irrespective of the recovery in equity markets.
Standard Life has around 2.6m with profits endowment policy holders.
The cuts are the 6th in 3 years; you will recall that Standard Life "welched" on its mortgage endowment promise a few months ago, I assume its 2.6m policy holders must be feeling pretty sick by now.
The effect of this latest round of cuts can be seen in this example:
A £50 per month mortgage endowment over 25 years was worth £55K, until the latest cut; now it is worth just £49K.
I wonder of the directors of Standard Life have had their bonuses cut for good measure?
In more bad news for holders of failing endowment policies, Standard Life has yet again cut bonuses; for good measure it also warned that lower payouts will continue, irrespective of the recovery in equity markets.
Standard Life has around 2.6m with profits endowment policy holders.
The cuts are the 6th in 3 years; you will recall that Standard Life "welched" on its mortgage endowment promise a few months ago, I assume its 2.6m policy holders must be feeling pretty sick by now.
The effect of this latest round of cuts can be seen in this example:
A £50 per month mortgage endowment over 25 years was worth £55K, until the latest cut; now it is worth just £49K.
I wonder of the directors of Standard Life have had their bonuses cut for good measure?
Monday, January 10, 2005
Bonuses Cut
Bonuses Cut
More bad news for the hapless holders of underperforming, and useless, endowment policies.
Axa Equity & Law has announced that it will be halving the annual bonus payments on its with-profits policies from a pathetic 2%, to a derisory 1%.
That is less than inflation, and certainly less than you would get for leaving your money in a savings account.
Legal & General (L&G) has cut interim bonuses on some of its with-profits bonds from 3.5% to 2.75%.
Prudential is maintaining its annual bonus payouts on its Prudence Bond, at 3.25%.
The Actuarial Profession are reported to have said that, despite rising equity markets, bonus payouts "are continuing to fall and are set to do so for a number of years yet".
More bad news for the hapless holders of underperforming, and useless, endowment policies.
Axa Equity & Law has announced that it will be halving the annual bonus payments on its with-profits policies from a pathetic 2%, to a derisory 1%.
That is less than inflation, and certainly less than you would get for leaving your money in a savings account.
Legal & General (L&G) has cut interim bonuses on some of its with-profits bonds from 3.5% to 2.75%.
Prudential is maintaining its annual bonus payouts on its Prudence Bond, at 3.25%.
The Actuarial Profession are reported to have said that, despite rising equity markets, bonus payouts "are continuing to fall and are set to do so for a number of years yet".
Tuesday, October 19, 2004
Secret Commission Payments
I received this email today, from someone who has made a very interesting discovery about the commission payments being made "secretly" from his endowment policy.
It seems that, despite the fact the policy was sold to him back in the 80's, commissions of 2.5% are still being deducted annually from his policy; and paid to the IFA that sold him the policy.
Even more startling, is the fact that he could have cancelled these payments at anytime; had the life assurance company that runs his endowment policy bothered to tell him of their existence.
However, as his life assurance company puts it:
"..The representative said that whilst he conceded that
it would be in the interest of policy holders it would not be in the
interest of ** (edited) since the company required the firms of advisors,
brokers etc to provide it with a continual stream of new business.."
The 2.5% could well make a very significant difference to the maturity value of the policy.
In my view this is a very serious issue. The action of the life assurance company; in not telling him of these commission payments, and his right to cancel them, is scandalous to say the least.
I would be interested to hear from anyone else who has encountered this issue.
The text of the email is reproduced in full below, the name of the life assurance company has been withheld for the time being.
"..I have an endowment policy with ** (edited) that I acquired in March
1988. I recently had cause to telephone that organisation to ask why I
had not received any annual bonus statements for a couple of years. The
representative that fielded my call told me that statements had been
issued. I inquired as to where they had been sent and was given an address
that was a complete mystery to me, having never resided anywhere remotely
close to that location.
The representative explained that this must be the address of a firm who
were acting as my financial advisor. I said that I didn't have a financial
advisor and what on earth was he talking about? He explained to me that
normally a copy of the annual bonus statement is sent to the policy
holder's financial advisor at the same time as the original is sent to the
policy holder. He added that in my case, for some strange reason, my
address details had been overwritten with those of my "financial advisor"
and that consequently the original had been sent to them whilst I had
received nothing.
I repeated my statement that I did not have a financial advisor and asked
who exactly were this firm. After a little searching through my file the
representative explained that this was a firm that had taken over another
firm who were at the time also acting as my "advisor". That second firm's
name I did recall, just about. It was the company that had originally sold
me my endowment policy all those years ago.
I told the representative that at no time during the last 16 years had I
any contact with either of those firms, except during the time of the
policy sale back in March 1988. I then asked what possible reason could
there be for sending copies of my bonus statements to parties with whom I
had no ongoing relationship. I was told that whilst I may not have any
direct relationship, ** (edited) was paying out a commission each month
to the firm currently acting as my "advisor". I asked how much was the
commission and was told 2.5%. I was then told not to worry as this was not
coming out of my monthly premium. I then explained to the representative
that I was ultimately bearing the cost as the effect of the commission was
to reduce the available funds from which ** (edited) could declare a
bonus to policy holders. The representative agreed.
I said that I was aware that when an endowment policy is sold the firm
brokering the deal receives a lump sum commission payment. However, I said
that I was not aware that an ongoing commission is payable on each and
every premium until maturity. Nor was I aware that the entitlement to that
commission could be purchased by another firm. I asked whether the firms
were contractually entitled to this ongoing commission and was told that
they were not! I then asked what needed to happen for the commission not
to be paid. I was informed that all that needed to happen was for me to
tell ** (edited), in writing, that I wanted the payments to stop. I said
I would be writing immediately.
I then said to the representative that I was willing to wager that a
sizeable majority of policy holders were similarly unaware that such
ongoing commission charges were being paid. I also commented that the sum
total of these charges would amount to a significant sum ....a sum that
could surely have a material impact on the size of the bonus declared. I
put it to the representative that it would surely be in the best interests
of all policy holders for ** (edited) to immediately stop all ongoing
commission payments. The representative said that whilst he conceded that
it would be in the interest of policy holders it would not be in the
interest of ** (edited) since the company required the firms of advisors,
brokers etc to provide it with a continual stream of new business.
I shall be writing to ** (edited) instructing that all ongoing commission
payments in respect of my policy cease immediately. I shall further be
stating that:
1. I was unaware that such payments were being made;
2. ** (edited) had not made me aware that I had the right to terminate
such payments;
3. The corollary of the fact that only I can terminate these payments is
that only I should be able to authorise the payments in the first place.
Needless to say, I did not give my consent to the payments;
4. Notwithstanding 3. above, if ongoing commission was not a contractual
entitlement then it should not have been paid out in the first place.
As a consequence of 1 to 4 above, I shall be demanding that the value of
the commission paid (plus compound growth thereon) be added to the
cumulative total of my reversionary bonuses.
I should be very interested to learn whether other policy holders are
similarly unaware of the existence of the ongoing commission payments and
that they have the right to terminate them...."
I received this email today, from someone who has made a very interesting discovery about the commission payments being made "secretly" from his endowment policy.
It seems that, despite the fact the policy was sold to him back in the 80's, commissions of 2.5% are still being deducted annually from his policy; and paid to the IFA that sold him the policy.
Even more startling, is the fact that he could have cancelled these payments at anytime; had the life assurance company that runs his endowment policy bothered to tell him of their existence.
However, as his life assurance company puts it:
"..The representative said that whilst he conceded that
it would be in the interest of policy holders it would not be in the
interest of ** (edited) since the company required the firms of advisors,
brokers etc to provide it with a continual stream of new business.."
The 2.5% could well make a very significant difference to the maturity value of the policy.
In my view this is a very serious issue. The action of the life assurance company; in not telling him of these commission payments, and his right to cancel them, is scandalous to say the least.
I would be interested to hear from anyone else who has encountered this issue.
The text of the email is reproduced in full below, the name of the life assurance company has been withheld for the time being.
"..I have an endowment policy with ** (edited) that I acquired in March
1988. I recently had cause to telephone that organisation to ask why I
had not received any annual bonus statements for a couple of years. The
representative that fielded my call told me that statements had been
issued. I inquired as to where they had been sent and was given an address
that was a complete mystery to me, having never resided anywhere remotely
close to that location.
The representative explained that this must be the address of a firm who
were acting as my financial advisor. I said that I didn't have a financial
advisor and what on earth was he talking about? He explained to me that
normally a copy of the annual bonus statement is sent to the policy
holder's financial advisor at the same time as the original is sent to the
policy holder. He added that in my case, for some strange reason, my
address details had been overwritten with those of my "financial advisor"
and that consequently the original had been sent to them whilst I had
received nothing.
I repeated my statement that I did not have a financial advisor and asked
who exactly were this firm. After a little searching through my file the
representative explained that this was a firm that had taken over another
firm who were at the time also acting as my "advisor". That second firm's
name I did recall, just about. It was the company that had originally sold
me my endowment policy all those years ago.
I told the representative that at no time during the last 16 years had I
any contact with either of those firms, except during the time of the
policy sale back in March 1988. I then asked what possible reason could
there be for sending copies of my bonus statements to parties with whom I
had no ongoing relationship. I was told that whilst I may not have any
direct relationship, ** (edited) was paying out a commission each month
to the firm currently acting as my "advisor". I asked how much was the
commission and was told 2.5%. I was then told not to worry as this was not
coming out of my monthly premium. I then explained to the representative
that I was ultimately bearing the cost as the effect of the commission was
to reduce the available funds from which ** (edited) could declare a
bonus to policy holders. The representative agreed.
I said that I was aware that when an endowment policy is sold the firm
brokering the deal receives a lump sum commission payment. However, I said
that I was not aware that an ongoing commission is payable on each and
every premium until maturity. Nor was I aware that the entitlement to that
commission could be purchased by another firm. I asked whether the firms
were contractually entitled to this ongoing commission and was told that
they were not! I then asked what needed to happen for the commission not
to be paid. I was informed that all that needed to happen was for me to
tell ** (edited), in writing, that I wanted the payments to stop. I said
I would be writing immediately.
I then said to the representative that I was willing to wager that a
sizeable majority of policy holders were similarly unaware that such
ongoing commission charges were being paid. I also commented that the sum
total of these charges would amount to a significant sum ....a sum that
could surely have a material impact on the size of the bonus declared. I
put it to the representative that it would surely be in the best interests
of all policy holders for ** (edited) to immediately stop all ongoing
commission payments. The representative said that whilst he conceded that
it would be in the interest of policy holders it would not be in the
interest of ** (edited) since the company required the firms of advisors,
brokers etc to provide it with a continual stream of new business.
I shall be writing to ** (edited) instructing that all ongoing commission
payments in respect of my policy cease immediately. I shall further be
stating that:
1. I was unaware that such payments were being made;
2. ** (edited) had not made me aware that I had the right to terminate
such payments;
3. The corollary of the fact that only I can terminate these payments is
that only I should be able to authorise the payments in the first place.
Needless to say, I did not give my consent to the payments;
4. Notwithstanding 3. above, if ongoing commission was not a contractual
entitlement then it should not have been paid out in the first place.
As a consequence of 1 to 4 above, I shall be demanding that the value of
the commission paid (plus compound growth thereon) be added to the
cumulative total of my reversionary bonuses.
I should be very interested to learn whether other policy holders are
similarly unaware of the existence of the ongoing commission payments and
that they have the right to terminate them...."
Tuesday, September 21, 2004
About Time!
It is reported that the Financial Services Authority (FSA) has been asked to investigate the reward schemes of financial advisers; apparently there are concerns that the commissions and bonuses could affect the advice given, and encourage the mis-selling of financial products.
Now it seems to me that the hapless holders of the splendidly underperforming, and useless, endowment products sold some 10 or more years ago could have told them that.
The Consumers Association has asked the FSA to investigate how products are sold, and the level of commissions paid.
It has also requested that senior directors of financial firms be held accountable for the actions of their employees, and lose their own annual bonus if the firm is fined by the FSA for malpractice.
Now that is a good idea!
In other news, it is reported that a few hundred advisers at Bradford & Bingley are about to quit; as a protest against their new commission policy, which requires them to sell a set number of policies every year.
If they don't hit the target, they don't get a commission.
Bradford & Bingley (B&B) claim that B&B would never encourage staff to give misleading information.
It is certainly long overdue, that the FSA investigates the commission structure of the life assurance companies.
It is reported that the Financial Services Authority (FSA) has been asked to investigate the reward schemes of financial advisers; apparently there are concerns that the commissions and bonuses could affect the advice given, and encourage the mis-selling of financial products.
Now it seems to me that the hapless holders of the splendidly underperforming, and useless, endowment products sold some 10 or more years ago could have told them that.
The Consumers Association has asked the FSA to investigate how products are sold, and the level of commissions paid.
It has also requested that senior directors of financial firms be held accountable for the actions of their employees, and lose their own annual bonus if the firm is fined by the FSA for malpractice.
Now that is a good idea!
In other news, it is reported that a few hundred advisers at Bradford & Bingley are about to quit; as a protest against their new commission policy, which requires them to sell a set number of policies every year.
If they don't hit the target, they don't get a commission.
Bradford & Bingley (B&B) claim that B&B would never encourage staff to give misleading information.
It is certainly long overdue, that the FSA investigates the commission structure of the life assurance companies.
Tuesday, August 24, 2004
The Death of a Thousand Cuts
Yet more cuts in bonus rates have been foisted on endowment policy holders.
This time, it is Friends Provident who give policy holders a kick in the guts; they have reduced their payouts on maturing policies by 3%. This reduction is expected to affect around 1 million endowment policy holders, and is their fourth cut in 18 months.
Reports indicate that, for example, the payout on a £50 per month 25 year endowment will fall from £51K to £48K (in 2003 the same policy was worth £62K).
To my humble view, using a technical term here, these people are simply "taking the piss" out of endowment policy holders.
Friends Provident claim that the reductions will ensure: "that there will be a closer alignment of policy payouts with their underlying investment values."
In other words, the policies are worth "F**k All"; and they, Friends Provident and other life assurance companies, are simply softening up the hapless holders for this bombshell by the death of a thousand cuts.
If you haven't signed my petition yet, then don't you think it is time that you did?
Yet more cuts in bonus rates have been foisted on endowment policy holders.
This time, it is Friends Provident who give policy holders a kick in the guts; they have reduced their payouts on maturing policies by 3%. This reduction is expected to affect around 1 million endowment policy holders, and is their fourth cut in 18 months.
Reports indicate that, for example, the payout on a £50 per month 25 year endowment will fall from £51K to £48K (in 2003 the same policy was worth £62K).
To my humble view, using a technical term here, these people are simply "taking the piss" out of endowment policy holders.
Friends Provident claim that the reductions will ensure: "that there will be a closer alignment of policy payouts with their underlying investment values."
In other words, the policies are worth "F**k All"; and they, Friends Provident and other life assurance companies, are simply softening up the hapless holders for this bombshell by the death of a thousand cuts.
If you haven't signed my petition yet, then don't you think it is time that you did?
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