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.
Monday, January 19, 2009
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.
Saturday, November 29, 2008
FSA Taken To Task
FSA Taken To Task
Legal & General are taking the FSA to task over its annuity rate tables displayed on moneymadeclear.com. L&G want the FSA to display real-time annuity quotes, up-to-date rates and make a provision for postcode annuities.
However, the FSA have told the FT that the tables are up to date and are updated almost daily.
Legal & General are taking the FSA to task over its annuity rate tables displayed on moneymadeclear.com. L&G want the FSA to display real-time annuity quotes, up-to-date rates and make a provision for postcode annuities.
However, the FSA have told the FT that the tables are up to date and are updated almost daily.
Thursday, November 27, 2008
Equitable Life Sale Pulled
Equitable Life Sale Pulled
Equitable Life has pulled the sale of its £7BN with-profits fund having failed to find a buyer. The reason cited being the current market turmoil.
Equitable Life will put the fund into "run-off", ie the policies will run until they mature.
Equitable Life has pulled the sale of its £7BN with-profits fund having failed to find a buyer. The reason cited being the current market turmoil.
Equitable Life will put the fund into "run-off", ie the policies will run until they mature.
Sunday, November 16, 2008
Court Case
Court Case
Simon Shaw, the England International Rugby player, is scheduled to appear at the Royal Courts of Justice as a witness in a case between two financial advisers and Zurich.
Other rugby stars (eg Rob Henderson, Phil Greening and Damian Hopley) are also mentioned. It is alleged that some were mis-sold thousands of pounds worth of endowment policies by Zurich. The allegations are being made by the executives Zurich had hired to sell policies to the rugby stars, but who claim they uncovered massive mis-selling instead.
In 1998 Zurich became the official sponsor of the Rugby Premiership, and Allied Dunbar approached Philip Matania and his partner Terence Pullen to sell its products to the rugby community.
Under the deal, Allied Dunbar lent Matania and Pullen £429K to help them build up the business. Nine months later Matania made an appointment to see Simon Shaw.
He had already signed up to an Allied Dunbar endowment policy and its Maximum Investment Plan through Allied Dunbar salesman Mike Skeele.
According to court documents, Matania thought Shaw had been wrongly advised to take out both policies. Matania and Pullen claim that others, eg Wasps players Henderson and Greening, had also been wrongly advised.
Zurich is suing Matania and Pullen for recovery of the loans plus interest, and Matania and Pullen are counter-suing, claiming Zurich sabotaged their business in revenge for them pointing out the mis-selling.
Simon Shaw, the England International Rugby player, is scheduled to appear at the Royal Courts of Justice as a witness in a case between two financial advisers and Zurich.
Other rugby stars (eg Rob Henderson, Phil Greening and Damian Hopley) are also mentioned. It is alleged that some were mis-sold thousands of pounds worth of endowment policies by Zurich. The allegations are being made by the executives Zurich had hired to sell policies to the rugby stars, but who claim they uncovered massive mis-selling instead.
In 1998 Zurich became the official sponsor of the Rugby Premiership, and Allied Dunbar approached Philip Matania and his partner Terence Pullen to sell its products to the rugby community.
Under the deal, Allied Dunbar lent Matania and Pullen £429K to help them build up the business. Nine months later Matania made an appointment to see Simon Shaw.
He had already signed up to an Allied Dunbar endowment policy and its Maximum Investment Plan through Allied Dunbar salesman Mike Skeele.
According to court documents, Matania thought Shaw had been wrongly advised to take out both policies. Matania and Pullen claim that others, eg Wasps players Henderson and Greening, had also been wrongly advised.
Zurich is suing Matania and Pullen for recovery of the loans plus interest, and Matania and Pullen are counter-suing, claiming Zurich sabotaged their business in revenge for them pointing out the mis-selling.
Saturday, November 15, 2008
140 A Week
140 A Week
Caroline Mitchell, lead ombudsman for the Financial Ombudsman Service, told an audience at MBE London 2008 that the level of mortgage endowment complaints has fallen as a result of time barring.
However, complaints are still coming in at 140 a week.
Caroline Mitchell, lead ombudsman for the Financial Ombudsman Service, told an audience at MBE London 2008 that the level of mortgage endowment complaints has fallen as a result of time barring.
However, complaints are still coming in at 140 a week.
Tuesday, November 11, 2008
FSA Fights Lautro Ruling
FSA Fights Lautro Ruling
The Financial Services Authority (FSA) has appealed to the High Court over the Information Tribunals' decision to make them name and shame the Lautro 19.
The FSA argues that the information provided to it by the "Lautro 19" was confidential, and that it can't be disclosed.
The "Lautro 19" are endowment mortgage providers who misused Lautro projections to set unrealistically high maturity figures when selling their useless products to the unsuspecting public.
It is estimated that the number of policies affected by this number in the hundreds of thousands.
The FSA, by opposing the naming and shaming of the "Lautro 19", are failing in their duty to maintain an orderly and honest financial system; in other words the FSA is not fit for purpose.
The Financial Services Authority (FSA) has appealed to the High Court over the Information Tribunals' decision to make them name and shame the Lautro 19.
The FSA argues that the information provided to it by the "Lautro 19" was confidential, and that it can't be disclosed.
The "Lautro 19" are endowment mortgage providers who misused Lautro projections to set unrealistically high maturity figures when selling their useless products to the unsuspecting public.
It is estimated that the number of policies affected by this number in the hundreds of thousands.
The FSA, by opposing the naming and shaming of the "Lautro 19", are failing in their duty to maintain an orderly and honest financial system; in other words the FSA is not fit for purpose.
Wednesday, October 29, 2008
Norwich Union Imposes Penalties
Norwich Union Imposes Penalties
Norwich Union has imposed hefty exit penalties on customers' holding with-profits policies.
The market value reductions (MVRs) of between 13%-22% are a heavy blow to the already beleaguered with-profits (hardly an apt name given the ongoing diminution in value of these useless products) policy holders.
The MVRs will apply to about 1.2 million of Norwich Union's 2.4 million holders of with-profits pensions, bonds and endowments.
John Lister, Norwich Union's chief actuary, is quoted in the Times:
"Since the beginning of the year we have seen equity markets, commercial property and corporate bonds fall significantly in value.
MVRs are a mechanism to ensure that those policyholders leaving or wishing to take money out of the fund do not take more than their fair share of the fund at the expense of those policyholders who remain."
All very well but I wonder, if the with-profits funds had been better managed and profits/losses smoothed, whether such a drastic step would have been really necessary.
Norwich Union has imposed hefty exit penalties on customers' holding with-profits policies.
The market value reductions (MVRs) of between 13%-22% are a heavy blow to the already beleaguered with-profits (hardly an apt name given the ongoing diminution in value of these useless products) policy holders.
The MVRs will apply to about 1.2 million of Norwich Union's 2.4 million holders of with-profits pensions, bonds and endowments.
John Lister, Norwich Union's chief actuary, is quoted in the Times:
"Since the beginning of the year we have seen equity markets, commercial property and corporate bonds fall significantly in value.
MVRs are a mechanism to ensure that those policyholders leaving or wishing to take money out of the fund do not take more than their fair share of the fund at the expense of those policyholders who remain."
All very well but I wonder, if the with-profits funds had been better managed and profits/losses smoothed, whether such a drastic step would have been really necessary.
Monday, October 27, 2008
What Happened To Smoothing?
What Happened To Smoothing?
The Times reports that:
"Legal & General has become the latest insurer to cut terminal bonus rates on with profits funds. The FTSE 100 company is cutting rates by between 5 and 9 per cent in the wake of falling and turbulent stock markets.
The move means that a 25-year £50 a month mortgage endowment maturing will pay £38,565 compared to £41,293 before the reduction. A 20-year £200 a month pension maturing after this change will pay £90,999 compared to £98,511 before the change.
Mark Gregory, managing director of with profits at L&G, said the decision would affect 10,000 of the company's 800,000 policyholders. He added: “We have made the decision to reduce final bonus rates to take account of some of the negative movements in the investment markets.
'In making these changes, we are ensuring fairness between all of our customers, whether they are leaving or remaining in our with profits fund.'"
Am I alone in believing that the concept of a "with profits" (a somewhat ironic name under the circumstances) fund is that the "profits/losses" are smoothed over the period of the policy in order to minimise wild fluctuations in returns?
Surely, if these policies had been well managed by L&G, such a large reduction in one year would be unnecessary?
The Times reports that:
"Legal & General has become the latest insurer to cut terminal bonus rates on with profits funds. The FTSE 100 company is cutting rates by between 5 and 9 per cent in the wake of falling and turbulent stock markets.
The move means that a 25-year £50 a month mortgage endowment maturing will pay £38,565 compared to £41,293 before the reduction. A 20-year £200 a month pension maturing after this change will pay £90,999 compared to £98,511 before the change.
Mark Gregory, managing director of with profits at L&G, said the decision would affect 10,000 of the company's 800,000 policyholders. He added: “We have made the decision to reduce final bonus rates to take account of some of the negative movements in the investment markets.
'In making these changes, we are ensuring fairness between all of our customers, whether they are leaving or remaining in our with profits fund.'"
Am I alone in believing that the concept of a "with profits" (a somewhat ironic name under the circumstances) fund is that the "profits/losses" are smoothed over the period of the policy in order to minimise wild fluctuations in returns?
Surely, if these policies had been well managed by L&G, such a large reduction in one year would be unnecessary?
Thursday, October 16, 2008
Market Falls
Market Falls
It should come as no surprise to anyone with an endowment policy that the ongoing falls in the stock market will negatively impact the returns on the already poorly performing endowment policies.
However, another issue that may also affect returns is the level of involvement by the life assurance companies in complex financial instruments (eg credit default swaps).
Exactly how exposed are the life assurance companies to these instruments, and what effect will that exposure have on the stability of the endowment policies managed by these companies?
It should come as no surprise to anyone with an endowment policy that the ongoing falls in the stock market will negatively impact the returns on the already poorly performing endowment policies.
However, another issue that may also affect returns is the level of involvement by the life assurance companies in complex financial instruments (eg credit default swaps).
Exactly how exposed are the life assurance companies to these instruments, and what effect will that exposure have on the stability of the endowment policies managed by these companies?
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