Stay or quit: The experts view

By THIS IS MONEY
Updated:

 

THE question that most Standard Life policyholders ask is whether they should cash in their policies now, before bonus cuts bite and before it follows rivals and applies exit penalties.

• ADRIAN Johnston, founder of Johnston Financial Services in Edinburgh, says the choice should be seriously considered only by those very close to maturity of their policies. Those with years to run, or recent investors in with-profit bonds, should sit tight and weather the current poor markets.

'In the short term, there is a very serious danger that stock markets will fall further and bonuses be cut,' he says. 'I would not like to make the decision on behalf of my clients, but I would point out to those near maturity that if they don't cash in now, not only might they get a reduced total payout, but they may not see any benefit from continuing to pay premiums into that policy.'

On the other hand, he warns that early encashment will mean savers forfeiting some annual bonus. They may also be acting 'selfishly' against their fellow policyholders' interests by taking more than their fair share of assets.

• SIMON Farrant of adviser Towry Law in Bracknell, Berkshire, says: 'There is a moral issue of obligation to other investors in the fund. But on a purely personal level, there may be a strong argument for cutting and running.'

• PATRICK Connolly, with-profits expert at Chartwell investment Management in Bath, agrees: 'It goes against our usual advice, but there may be some cases where early encashment would be a suitable course.' He stresses that this should apply only to investors with long-running policies (15 years or more) near the end of their term.

• DAVID Scott of Alan Steel Asset Management of Linlithgow, West Lothian, doesn't support this course. 'We believe markets are undervalued and will pick up,' he says. 'We would always recommend that investors hold policies to maturity, where possible.'

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