For the first time Clerical Medical has decided to apply a general market value adjuster (MVA) ...
For the first time Clerical Medical has decided to apply a general market value adjuster (MVA) to its With-Profits fund in response to the sustained decline in global equity markets.
The group explained that so far this year, stock market values have been depressed and its trigger point for an MVA review was breached some time ago. The group noted however, that high encashment volumes from the Clerical Medical With-Profits Fund had not been experienced to date. This said, Clerical expects encashments to increase against a background of MVAs already being applied by other providers, the continued weakness in the stock market and the increasing volume of bad news on the UK economy.
Clerical Medical argued it acted now to protect the With-Profits fund and the policyholders who remain invested in it. Clerical reasoned that if an MVA was not applied, there was a danger the extra amount paid to those withdrawing money would have to come from investors who remain in the fund. The decision will be kept under continuous review and the MVA will be lifted if there is a sustained stock market rally or a reduced likelihood of withdrawals.
John Edwards, managing director, said, "The decision to apply a general MVA has not been taken lightly, especially since Clerical Medical has never before applied one. In deciding to do so the company has acted in accordance with its stated policy in order to protect the With-Profits Fund."
The (MVA) is being applied to encashments of over £50,000 from Clerical's With-Profits Fund. It will apply with immediate effect until further notice to with-profits investments started before 1 March 2001. The MVA will only apply to Flexible Bond, With-Profits Bond (including those marketed as Classic and Sovereign), Premier Bond, Hong Kong Investment Account, Trustee Investment Account, Corporate Investment Account, Executive Pension Plan and Corporate Pension Account.
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