Carrots and Woolly promises

Wednesday, 18th June 2008 15:00 - by Resident IFA

For this Blog I have recruited Howard Bullock, a Director of Clear Financial Advice, to share his interesting take on With-profits funds... "I am currently reviewing a Client’s pension holding with Prudential. Let us call him 'Bob'. Bob has his entire portfolio invested in their 'With-profits' fund and I am assessing the suitability of such a fund in line with his attitude to investment risk. Another point to consider in this assessment is Prudential’s possible re-attribution of its With-profits fund. In this, Prudential are proposing that they may make special payments to the holders of With-profits policies from the vast inherited estate that has built up over the years - this is the carrot. Of course there is no guarantee that this will take place. The basis, timing and size of any such payments is not yet known (if they happen at all) - this is the woolly promise. Perhaps the most important aspect to consider is whether or not my Client is in the 'right' With-profits fund to qualify for such a prize. There are many companies out there with more than one With-profits fund. I recently had a Client (Let us call him 'Lenny') with three separate plans, all with Norwich Union and all invested in With-profits funds. Not one of these policies will benefit from Norwich Union's current re-attribution policy because they are not in the 'right' With-profits fund. This is despite that fact that Norwich Union had written to Lenny informing him of their windfall plans. Thanks very much! Earlier today I made an enquiry to Prudential as to the exact type of fund that Bob is invested in and I will have to wait for a response (they are looking into it) before formulating any recommendations. So beware! These With-profits windfalls may not necessarily fall in your direction." Until next time...