With Profits Transfers

Hi all,

How you do you approach reviewing with profits funds with a view to gauging if a transfer is suitable?

Currently we get the PPFM, bonus history etc.

We have a client for example whereby her transfer value is another 30k on top of the current value due to a final bonus (No MVRS applying) of course this is not guaranteed and the provider can remove this at their discretion (although I'm not sure under what circumstances they would remove the whole 30k)

Just trying to formulate whether it would be appropriate to move it, of course there are many factors involved but the fund we are looking at has declared annual bonus' of around 2% per annum for the last 10 years and the client is balanced
investor.

We have requested historic current and transfer values for the last 5 years to ascertain some sort of total growth each year, i.e current value growth and proposed transfer value growth.

Any thoughts/someone to bounce ideas off would be great... we also charge a fixed fee for this service so whether a transfer occurs or not we are not trying to transfer just for the sake of it, genuinely would like to do the right thing for the client

thank you

Comments

  • are the annual bonuses guaranteed?

  • Have you assessed the rate of return they require to meet their goals? i.e. is it less than 2%?

  • PPWowPPWow Member

    Hi Yonkers,

    Some extra things to consider:

    • The client's views on 'smoothed' returns (in the context of their overall portfolio),
    • The client's views on the transparency of the investment,
    • The charge of the fund (and whether it is implicit or not), and the client's view on that.

    You should also consider other plan features of course, and consider a fund switch if the fund is the key driver in this case (i.e. rather than transfer-out the whole plan).

    It might be worth subscribing to AKG who provide ratings on WP funds (a score out of 5 for transparency, future performance and financial strength).

    Hope that helps!

  • As PPWow has stated, the issue with WP is that they are often giving very poor bonus rates unless they've been guaranteed at say 4% or higher.

    Are they happy with the return? What is the investment mix of the WP fund? Charges explicit or Implicit and if so what are they?

    If it's a very poor return and investment performance isn't correlating with this a move would potentially be in the clients best interest.

    On the other hand if it's a decent guarantee and the clients are lower risk investors then coming out of the fund wouldn't be that great unless they needed flexibility on it etc.

    AKG are usefull as mentioned above.

  • Thanks for all your replies guys, its much appreciated.

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