Saving keep it simple – MoneyWeek

Theresbadnewstooforanyonewhohasinvestmentswithaninsurerintheformofawith-profitspolicy。

Youresupposedtobeabletocashintheseequity-basedsavingsschemesatanytime。

Butrightnowitisntconvenientfortheinsurersforyoutodoso(theyneedthemoney)。

Sotheyveintroducedwhattheycallmarketvaluereductions(MVRs)。

Theseareeffectivelywhoppinggreatexitpenalties,inthattheyimmediatelyreducethevalueofyourinvestmentbywhateverpercentagetheinsurerdecidessuitsthem,andforaslongastheythinkitmightsuitthem(itwasaroundfouryearslasttimeround)。

Solastweek,thevalueofsomeNorwichUnionpolicieswasinstantlycutby22%,andtheaverageofalltheMVRsimposedwasaround15%。

AccordingtoGeoffPenriceofBatesInvestmentServices,thismakessense。

Why?

Becausewith-profitsfundsuseasmoothingprocesstomakesuretheirpayoutsarefair:Ingood-performingyearstheyholdbacksomegrowth,andinpooryearstheyusetheirreservestocontinuepayingbonuses。

Doesthatmakesensetoyou,giventhisyearpresumablycountsasapooryear?

No。

Norme。

IfeellikeIhavebeenpunishedforbeingprudent,onemiserablesavertoldTheDailyTelegraph。

Butheswrong。

Heisactuallybeingpunishedforbuyinganover-complicatedanduntransparentproduct。

Financialadvisersandfinancial-productproducerslovetheseforthereasonthattheycanleechchargesoutoftheirholdersateveryturn(notethatallwith-profitsinvestmentsallowfortheimpositionofMVRsintheirsmallprint)。

Therestofusshouldlearnfromthelastfewweeksthatwhenitcomestomoney,thesimplertheproductthebetter。

Andhopethatwedontloseourjobsand,whatwithhavingnoinsurance,findourselvesforcedtocashinpolicieswhiletheMVRsremaininforce。

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