MVA on Friends First Monthly Savings Plan

B

Bedlam

Registered User
Messages
277
A policy with the above taken out 20 years ago is having an MVA OF 20% applied if surrendered now.

Policy is done a Whole of Life basis with a maturity date of Age 100 which is 41 years away.

The fund is currently invested 91% Govt. Gilts and balance in Property and Equity.

With this type of split it is unlikely that the MVA will ever be removed

Has anybody any experience of this type of plan and the fact that I will have to be dead before I am allowed to collect without penalty.

Is there any point in going to the Ombudsman?

Any help appreciated

Bedlam
 
Are you sure the MVA applies to the total fund and not ust the property portion?
 
Hi

No the MVA is being applied to the full fund and is costing almost €11,000.00

Thanks

Bedlam
 
Hi - the MVA is the difference between the nominal value (nv) and the surrender value. FF would calculate the surrender value (sv) based on the current value of the assets backing your policy with some allowance for smoothing (which could be zero). The MVA could increase or decrease depending on how the sv moves relative to the nv. The nv may be static or it may increase (it depends on the policy terms and how bonuses are declared). Lets assume the nv is static, the MVA will reduce if the Gilts, property and equities backing your policy increase in value (for simplicity we'll ignore FF charges + smoothing adjustments).

The question you might want to consider is could you get a better future return elsewhere by investing the current sv in an alternate investment vehicle. The nv does have a value ..... on death - so you would be giving that up by surrendering.

In summary - the MVA will disappear if the assets backing your policy grow to such an extent that the FF calculated SV exceeds your NV. No way of predicting that with certainty I'm afraid.
 
... meant to add ...... that it might be worth having a re-read of the policy conditions to see if there is any time period during which you can surrender the policy with no MVA applying.
 
Hi

Thanks for your reply.

The policy was taken out in 1992 which is before the concept of the MVA was introduced.

The only date that the MVA does not apply is on reaching Age 100 or as you mentioned on death.

Bedlam
 
Bedlam,

What was the original purpose of the policy?
Is this an "investment" where you expected to be able to access the funds say at retirement, or was this originally expected to pay out on death say to cover Capital Acquisitions Tax liabilities?
 
Marc

Original purpose was for Savings with a 20 year time frame.

However original application was completed stating Whole of Life as opposed to stating a specific term of between 10 and 30 years.

As mentioned earlier Whole of Life is.. according to Friends First to Age 100.

Thanks

Bedlam
 
Exactly as Liam says.

It seems to me like you took out a policy at about age 40 with the intention of taking benefits at age 60. So a 20 year term would be suitable.

Leaving aside any questions for the moment about suitability or otherwise of with profits endowments or poor investment performance which created the MVA as these could not have been reasonably foreseen by the Insurance Company and MVAs are a contractual provision of the policy which you signed up to.

The issue is that there would be no MVA on the 20th anniversary if the policy had been written over a 20 year term.

The onus should therefore be on the person who sold the policy to demonstrate that the sale was suitable and that the extra commission that would have been payable on a whole of life contract rather than a fixed term contract was not a factor in the sale.

All you would need to demonstrate is that you had a reasonable expectation of being able to access your funds after 20 years rather than 100 years. A normal retirement age of 60 rather than 100 may help in this matter.

So to be clear you should not be complaining about the performance or the MVA you are trying to establish that the policy that was arranged was unsuitable for your needs. It would then be up to the company that sold the policy to demonstrate that their sale was sound.

This should not be relied upon as a legal interpretation of the case as I do not have the full facts from both sides. You would need to pursue this to final offer from the company that sold the policy not necessarily the insurance company before you could go to the ombudsman.
 
Hi Marc / Liam

Policy was taken out at Age 30.

MVA's are not specifically mentioned in the Policy Conditions (as mentioned previously I dont think the term was even invented when the policy was taken out)

I will post the policy wording on Friday which Friends First are relying on and would appreciate your comments

Thanks

Bedlam
 
At the risk of sounding like half of a Marc/Liam duet, I'd agree with Marc that you're probably better off concentrating on why a whole-life policy was sold to you rather than a 20 year one.

I'm aware that as it was 20 years ago, you may not still have too much documentation surrounding the sale.
 
You must log in or register to reply here.
Back
Top