Abbey's shabby offer

By JAMES HOPEGOOD
Updated:

 

AN OFFER from Scottish Mutual to free its 97,000 bond holders from its poorly performing with-profits fund at 'no penalty' could still cost savers more than a quarter of their money.

For the past two years, with-profits bond holders at Scottish Mutual haven't received a penny on their savings after bonuses were axed. But they face a market value reduction (MVR) early surrender penalty of up to 27% if they move their money.

The company, owned by Abbey, has recently written to these savers, offering them the chance to switch into a range of funds run by itself and Abbey with 'no outstanding surrender penalty'.

But this refers only to the bonds' fixed early surrender penalties in the first five years. Scottish Mutual will still impose the MVR penalties if savers take up the offer.

Ian Lowes, managing director at independent financial adviser Lowes Financial Management, says this offer has been made only after a recent increase in MVRs.

He adds that savers prepared to bear an MVR to get out may well be better off leaving the Abbey group altogether.

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