£120 billion trapped in 'shocking' with-profit funds

By DAILY MAIL REPORTER
Updated:

More than a third of the £300billion invested in with-profits endowments, pensions and bonds plans is in doomed funds.

An investigation by the group Exit With-Profits describes the funds as 'shocking'.

Information provided by insurance companies to their policyholders makes it difficult to distinguish between the good and the bad, it says.

The nine-month study, based on interviews with hundreds of with-profit policyholders, concludes that only £120billion - or 40 per cent of with-profits money - is invested in funds that are effective. 

Up in smoke: Many investors could lose their money in 'doomed' with profit funds

Up in smoke: Many investors could lose their money in 'doomed' with profit funds

A further £ 120billion is stuck in poor funds 'in terminal decline' while the remaining £60billion falls somewhere in between.

Matthew Morris, director of Exit With-Profits says: 'Over our nine-month investigation, we were shocked by the intransigence of product providers in supplying even basic product information. 

When they did, it was often presented in an incredibly complex way. The confusion suits them as it keeps the money in these funds, which are profitable for them.'

Exit With-Profits, which is run by financial planning analysts DMP, looked at five aspects of funds - financial strength, transparency, features of the plan, past performance and future performance - to generate a league table for investors.

At the bottom of the table for 'getting it completely wrong', are Canada Life, Equitable Life, MGM, Pearl Group, Sun Life of Canada and Zurich Life. Only four of the 75 companies are 'getting it right': Aviva (formerly Norwich Union), Prudential, LV and Wesleyan.

Huge insurers such as Co-operative Insurance, Legal & General, Standard Life, Royal Liver and Royal London have room for improvement. Those 'in need of serious attention' include Axa, Clerical Medical, Friends Provident, Scottish Widows and Children's Mutual.

But there is no golden rule for one company. For example, if your policy with a poor-performing company matures in a couple of years, it might be best to hang on to it because of a valuable guarantee.

Exitwith-profits (www.exitwith-profits.co.uk or 0800 088 4570) will arrange for your policy or bond to be analysed by independent financial advisers.

Hargreaves Lansdown (www.h-l.co.uk or 0117 317 1690) analyse with-profits bonds and pensions, and Skipton Financial Services (0800 137 832 or www. skiptonfs.co.uk) look at bonds.

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