Smooth as Ice

My Moneyfacts March 2009 magazine arrived this morning with fresh quarterly data on the performance of With Profits Bonds. To my knowledge Moneyfacts is the only magazine to provide performance data on With Profits Bonds that includes the Market Value Reduction (MVR) and actual surrender values. The surrender value after applying the MVR represents the policyholder's fair share of the fund, and allows you to assess how companies are smoothing returns.

I provided a fairly detailed analysis on my website last month explaining how a comparison between Distribution Bond performance and With Profits Bonds performance can give you a good insight into how returns are being smoothed. You can read more about that analysis here: http://www.withprofitshealthcheck.com/news

I've updated my figures for the same five insurance companies (Axa, Legal & General, Norwich Union, Prudential and Standard Life) and the results show that as at 1st February 2009 With Profits Bonds appear to still be smoothing returns. This is intimated by the fact that despite similar asset mixes in the funds, the With Profits Bonds are paying back more to clients who surrender today than for policyholders in the Distribution Bonds.



The point about smoothing is that it protects investors who are surrendering their investments after a sharp fall in the value of investments. It works by holding back some of the returns when times are good. So investors who surrender today could benefit.

Please note that past performance is not a reliable indicator of future returns and that this blog is for information only. Before taking any action you should consult an Independent Financial Adviser; if you don't have an IFA please get in touch and I'll be pleased to help.