Prospects for With Profit Bonds

WP

Certainly cash holdings in WP funds are at record levels. Long term, and people seem to forget these are long term investments, the average equity content can be expected to be in the range of 50% to 70%.

Too much emphasis is on this 3 year negative return period we are going through. If you are invested for 15 to 20 years this is a blip, agreed a serious blip but a blip all the same. Long term returns is the target. The benchmark will be Managed Fund returns which WP funds have consistently outperformed in the past. Eddie Hobbs may be the best to confirm this from his last Irish Times survey. For this reason the historical information available to him would indicate that his premise that WP are low risk low return is questionable.

Irrespective, it was nice to see a measured and reasoned debate on this subject. It has been all to lacking in the past.

Very Curious

Hi Curious,

What your basis for expecting with-profit funds to outperform managed funds in the future, given that (a) they invest in (essentially) the same set of assets, and (b) with-profit funds charge more to pay for their smoothing and guarantees ?

WP

Dogbert
I'm simply using historical data from recent Irish Times Personal Pension surveys compiled by Eddie Hobbs.

Quinn Life Mail Shot

<!--EZCODE QUOTE START--><blockquote>Quote:<hr> British media attention on With Profit funds is beginning to spill into Irish
newspapers, and with billions at play, the debate aroused is no harm. But
it’s important to separate important points from commercial agenda’s,
especially when firms that lack the financial strength to compete in the
sector, take a hand. <hr></blockquote><!--EZCODE QUOTE END-->

The following is one of the questions that Gary Mahood recommends that the self-employed ask their financial advisor before making a cotribution towards their pension this year

<!--EZCODE QUOTE START--><blockquote>Quote:<hr> Are you investing your pension funds in the "black hole" that is now reportedly emerging in the with-profits business as discussed recently in the financial press? If you are, what does your Financial Advisor suggest that you now do?<hr></blockquote><!--EZCODE QUOTE END-->

The other questions relate to commissions, charges, performance and attitude to risk and I think these have been debated at length on AAM.

<!--EZCODE BOLD START--> THE TWIST<!--EZCODE BOLD END-->

<!--EZCODE QUOTE START--><blockquote>Quote:<hr> Your adviser may be reluctant to suggest that you invest with Quinn Life because we do not use your money to pay any commissions or fees.<!--EZCODE BOLD START--> However, you could agree a fixed fee with your adviser to review the Quinn Life pension options<!--EZCODE BOLD END--> <hr></blockquote><!--EZCODE QUOTE END-->

Standard Life

It would seem, according to the Irish Times that if the above are forced to apply an mva it will have been as a result of media coverage of the with profit debate over recent times and punters jumping ship as a result.
The Standard Life must have taken on some of the spin doctors that our politicans are so good at using to get bad news into the public domain.
The application of an mva will have nothing to do with current markets or the fact that they are heavily invested in equities.
Any comment/view from our Broker contributors, who have in the main been very quiet on this topic

MVR's

Hiya Beddie,

MVR's will be applied by SL if the Bear gets bigger and longer, but will be applied sooner if media rumour whipped up by competitive forces with lower FAR, and journo's stuck for a story gathers. But if we pull out of the bear within six month's I guess it may have ridden it out.

But if an MVR goes on, so what - its part of the deal. It won't affect long term investors, and those withdrawing 'income' regularly pitched at the bonus rate will be fine too. I don't understand the 'calamity' if the fund goes MVR like most everybody else. Why aren't SL beibf praised for not doing so, so far. Guess that wouldn't sell a story to an editor.

MVA

I've no problems with MVAs at all. I don't see them in a negative aspect. You cant really say you have financial clout and be first on the market to impose one.

S

Standard Life

Standard Life lashes out at Cazalet claims
John Stones

Standard Life has launched a scathing attack on influential
analyst Ned Cazalet, saying that he has refused to accept
invitations to go through its books and that his analysis is
wrong.
Cazalet angrily rejects the claims, saying he has had repeated
meetings with senior Standard figures this year, including group
finance director John Hylands and group actuary Bob King and
that the company, by its own admission, lost £9bn in reserves
last year.
Standard claims other analysts are more credible than Cazalet
and that he is trying to promote his business by attacking the
country's biggest mutual.
The row follows well-publicised comments by Cazalet
questioning Standard Life's strategy, its policy on bonuses and
market value adjusters and claims that its reserves have fallen
to below £2bn.
Standard Life has reasserted its financial strength, saying it
can withstand the FTSE falling to 3,000 before having to
switch assets. But it refuses to disclose the current valuation
of its reserves or its with-profits policyholders bonus policy,
repeating that bonuses and MVA policy are under daily review.
Director of corporate affairs Gordon Arthur says: "We are one
of the five strongest life companies in the world and have an
AAA rating from Standard & Poor's and Moody's. They do not
just sit behind a desk looking at published FSA returns but look
at our books, our management process and our long-term
strategy.
"Cazalet has refused to come and meet Standard Life because
he is too busy. We struggled to get a date out of him and then
he cancelled. The FTSE can go down to 3,000 before we have
to switch assets."
Cazalet says he will take the fight to Standard Life. He says:
"It is completely untrue that I have refused to meet Standard
Life. I have had a face-to-face meeting recently with senior
figures in Standard Life."

Source : MoneyMarketing