Strong market performance and general improvements in the stock markets have caused Norwich Union to remove Market Value Reductions (MVRs) from existing with-profits policies.
MVRs, a charge levied on those wishing to leave a with-profits fund, vary depending on the performance of the stock market. If the market is performing badly then many people will wish to reclaim their assets, which can disadvantage other members of the fund, and the cost of the MVR increases.
The measures were first introduced in 2001 due to the severe stock market falls seen when the dot.com bubble burst. However, the use of MVRs has received criticism as it prevents many people from seeking alternative forms of investment that may be more suitable.
As a result of improving market performance, Norwich Union has removed the MVR from its with-profits policies and has also increased or maintained its bonus rates.
A new With-Profits Committee, which is intended to improve transparency and governance of the with-profits fund, took the decision to remove MVRs. The committee is made up of several independent members who will ensure that the interests of policyholders are represented.
Commenting on the developments, Mark Hodges, chief executive of Norwich Union Life, says: “Today’s announcement of MVRs being removed, unitised final bonus rates being increased and the new With-Profits Committee, is good news for our with-profits policyholders and firmly underlines our commitment to the with-profits market.”
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Annuity market worth £4bn in 2017
For ‘distress’ caused
Oversees £30bn of advised and D2C assets
Less than a third of top paid employees are women
£1bn business since inception