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Expat Investor : January February 2008
January/February 2008 EXPAT INVESTOR 11 INVESTMENT NEWS Further trouble for with-profits bonds? Fast Facts 22008 Fast Facts 22190 Research conducted by Fidelity FundsNetwork reveals that while a large number of financial advisers put the improvement in performance of the with-profits market down to changing market conditions, few attribute it to the life companies' intervention to improve the funds. So where, asks FundsNetwork, does this leave with-profits investors? The research drew on responses from some 170 advisers across the UK, and found that the majority (87%) of advisers felt that the performance of the with-profits bond market in general has not deteriorated over the last 12 months. In fact, nearly half (45%) believe that there has been an improvement. While this is clearly a positive outcome for investors, of those advisers who noticed a change, more than two-thirds (68%) put it down to changing market conditions. Just over a quarter (26%) of advisers felt that the change is down to a shift in the management approach of the life companies who run the funds. Rob Fisher, Head of Sales & Marketing, Fidelity FundsNetwork, tells Expat Investor, "While markets over the last few years have helped to deliver good returns on a range of investments, more recent volatile conditions are likely to have had an altogether more negative effect. "While it's easy to see the impact of the ups and downs in the markets on a mutual fund, not to mention the latest asset allocation position, it's clearly not quite so straightforward when it comes to with-profits bonds. If advisers need to get to the bottom of how a client's with-profits investment is doing, online tools such as our new With Profits Analyser now offer perhaps the best option available." Fidelity FundsNetwork has recently launched its With Profits Analyser, the only independent, free-of-charge with- profits review service on the market, developed with the active design involvement of Cazalet Consulting. Fidelity claims this new service can help advisers establish the extent to which market conditions may be having an impact on their clients' with-profits bonds. Tread carefully over cash back deals for life cover COMPARATIVE COSTS FOR LEVEL TERM LIFE ASSURANCE Based on a 30-year-old non-smoker taking out single life cover of £250,000 for 25 years. Company Female age 30 Total cost of premiums Male age 30 Total cost of premiums monthly premium including any monthly premium including any cash back deals cash back deals AA Insurance Services £10.33 £3,099 £13.09 £3,927 Egg £11.23 £3,369 £13.20 £3,960 Legal & General (e) £11.25 £3,375 £14.75 £4,425 Lutine Assurance £11.37 £3,411 £14.02 £4,206 Post Office £11.75 £3,425 £14.50 £4,250 Sainsbury's Bank £11.64 £3,492 £14.49 £4,347 Marks & Spencer Money £12.40 £3,720 £15.15 £4,545 Virgin Money £12.50 £3,750 £15.75 £4,725 Standard Life £12.78 £3,834 £14.72 £4,416 HSBC Life £13.95 £4,185 £16.45 £4,935 Notes: e = Rates available directly from Legal & General or via an IFA if applied for electronically. Consumers looking for life assurance to protect their loved ones are being urged to assess the full cost of cover over the term of the policy when selecting the best deal. The warning, from Moneyfacts.co.uk,follows the launch of a new life product from the UK's Post Office, which offers a £100 cash back bonus to anyone taking out either a level or decreasing term assurance policy. Whilst on the face of it £100 looks to be a generous incentive, says Moneyfacts, consumers may be able to obtain cheaper cover elsewhere that would outweigh the financial benefits of the cash back deal over the longer term. "Although the premiums on offer from the Post Office are more competitive than many of the other direct providers, a better deal can still be found elsewhere for consumers willing to shop around. For instance, a female non-smoker aged 30 looking for £250,000 of level term assurance over 25 years would pay total premiums of £3,425 with the Post Office once the £100 cash back has been taken. However, by opting for the most competitive premium currently on offer from AA Insurance Services, the same customer would pay just £3,099, a longer term saving of £326. "In this particular scenario Egg, Legal & General, and Lutine Assurance could also provide a greater saving, despite not offering the attraction of a cash back deal. The table above shows how the Post Office deal stacks up with other providers over the longer term." Richard Eagling, from Moneyfacts.co.uk, tells Expat Investor, "Consumers need to look at the bigger picture and calculate the overall cost of their cover over the full term. "Cash back deals may seem attractive for some products such as mobile phones, but for longer term deals such as life assurance, where the consumer may be paying the same premium for 25 or 30 years, care needs to be taken. "Consumers also need to ensure that the actual product matches their requirements, as the consequences of opting for the wrong life cover can be far more serious than simply opting for the wrong mobile phone contract."