# WP Bonds 'could miss out in market recovery'



## Karen Mc (18 Oct 2002)

By : Chris Duncan

IFA Bestinvest is warning investors to steer clear of most wiith-profits bonds under current conditions as they are unlikely to benefit from the full effects of a stockmarket recovery. 
In its latest guide, Bestinvest says only life offices with good financial strength are worth considering as many need to replenish weakened reserves and cannot offer satisfactory 
reversionary bonuses. 

As some life offices are also abolishing the guaranteed periods when market value adjusters cannot be applied, Bestinvest says investors should consider distribution bonds instead. 

Although conceding that distribution bonds do not have a smoothing effect, Bestinvest says they are superior because they have an identical tax treatment to with-profits, similar asset mixes but no MVA penalties or reserving requirements. The guide also pours scorn on the use of free-asset ratios as a
measure of financial strength. It says it no longer takes FARs into account because there is too much discretion allowed in their calculation and says it prefers to measure companies by their real assets. 
But the guide welcomes the gradual introduction of a declared annualised rate of return as a replacement for the annual and terminal bonus mechanism.  By simply combining the annual and terminal bonus to give an annualised rate, Bestinvest says the benefits of longer-term performance relative to alternative investments will be highlighted and end the focus on short-term patterns. 
Head of financial planning John Turton says: "Some life offices, such as Liverpool Victoria and Britannic, do have decent reserves and are still worth considering. However, under current circumstances, investors should consider distribution bonds as an alternative."

Source : MoneyMarketing


----------



## ClubMan (18 Oct 2002)

What is a distribution bond? What products are available to Irish investors. What are the main features of such products (charges, term, guarantees, min investment etc.)?

Thanks.


----------



## Karen Mc (18 Oct 2002)

*Distribution Bond*


----------

