Investors should be wary of Aviva's offer to carry forward its no-MVR guarantee on with-profits bonds, warns Fraser Heath Financial Management.
The IFA firm says the offer could cause many investors to take no action, which could ultimately cost them thousands of pounds.
Announcing its latest with-profits bonus rates today, Aviva revealed 50,000 with-profits bond customers will be able to take advantage of a no market value reduction (MVR) guarantee on the 10th anniversary of their investment.
It also offered the option to carry forward the value of the guarantee, to protect from future MVRs.
However, Miles Hendy, chartered financial planner at Fraser Heath, says investors should seek financial advice on the issue.
"I'm very concerned about Aviva's carrying forward of the no MVR guarantee and how this is likely to encourage policyholders to take no action," he says.
"Unfortunately, taking no action on the 10th anniversary of a with profits bond with a no MVR guarantee is likely to cost the policyholder thousands of pounds of lost opportunity while allowing Aviva to continue to cream off their annual charges."
Aviva has touted its 49.6% 10-year return on its with profits bond, meaning £10,000 would now be worth £14,965, but Hendy stresses this value is a function of the product's features, and does not reflect the underlying value of the fund.
The true underlying value of £10,000 invested 10 years ago would actually be £12,158, meaning many investors could end up worse off if they remain invested and carry forward the no MVR guarantee.
Hendy says an investor who divests from the with-profits fund now, and receives similar returns over the next five years in a different investment vehicle, could end up thousands of pounds better off than those who carry forward the no MVR guarantee.
Aviva's Richard Kellsall says the offer has a number of benefits for consumers.
"This guarantee has a number of uses for consumer reaching their 10th anniversary," he says.
"Firstly, it will allow them to receive their reattribution payments and special bonus payments by extending the period they are invested without risking an MVR. You also often find people aren't in a position to withdraw from the fund on the 10th anniversary, and they will also benefit from this."
Kellsall says customers should always seek out independent advice on their with-profits investment.
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