MVR

The Financial Services Authority has unveiled a series of reporting measures which effectively make it possible to compare the performance and payouts of with-profits policies.

With-profits funds have suffered extremely bad press since the stockmarket fell in March 2001 and consumers woke up to the fact the all-important ‘bonuses' they thought were guaranteed were actually just "on loan" while the good times rolled.

IFAs have reacted angrily to a move placing a market value reduction (MVR) on regular client income withdrawals by Scottish Mutual International's with-profits funds.

About two-thirds of AXA Sun Life's 1.6 million with profits policyholders have been told their bonus rates will be maintained at last year's rates, while the remainder will see cuts of between 0.25% to 0.75%.

Scottish Widows says an improvement in the performance of its with-profits funds means the life insurer has cut MVRs and will continue to pay bonus rates of 1% and 1.5% on its unitised flexible investment bond and pension policies.

Prudential has unveiled an updated version of the with-profits fund which carries many of the transparent ‘smoothing' characteristics but is still said to offer 5% pa net return.

Clerical Medical has improved the market value reduction (MVR) on its with-profits funds but may have to cut bonus rates again if the stock market does not produce a sustained recovery.