Pensioners lose on unit-linked plans

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The Independent Online
A SURVEY of unit-linked personal pensions over the past four years shows that more than half the companies monitored have lost ground for investors.

Of 40 companies 24 could not even return the premiums paid into the policy.

The best performance, by quite a margin, came from Rothschild, which turned pounds 50 a month, amounting to a total of pounds 2,400, into pounds 2,896 - the only one to beat tucking it into a building society. If the money had been saved in a Halifax 90-day account, it would have turned into pounds 2,755 net of tax.

The companies that managed to show a profit include Prosperity, Allied Dunbar, National Mutual Standard Life, NPI and Equitable Life. Those with poor results include Sun Alliance, Save & Prosper, London Life, MGM and Prolific. Some companies, such as Laurentian, Skandia and NM Financial Management, did not take part in the survey.

The charges associated with monthly premiums show up when the pounds 50-a-month plans are compared with ones taking in pounds 600 a year, although the money will have been invested for longer. Rothschild, for instance, boosts performance from pounds 2,868 to pounds 3,050.

Unit-linked plans, where performance varies directly according to the peformance of the shares and other assets held in the fund, have fared much worse recently than with-profits plans, where the investment performance is smoothed by the use of annual bonuses.

For personal pensions with a pounds 50-a-month premium, the average with-profits policy produced pounds 2,485 at March, while the average managed unit-linked policy was worth pounds 2,179.

John Jenkins of Clay & Partners, the actuaries who helped Money Marketing to compile the survey, said the figures were a warning that current bonus rates being paid on with-profit policies could not be sustained. He said that investment performance could not justify such large payouts and would have to be trimmed back.

But he still believed that with-profits policies were right for the majority of people who did not want to monitor their pensions and investments.

'A number of high street institutions are selling unit-linked policies to people unless they say specifically that they would rather not have them. But if many of them had the policies explained to them I'm sure they would opt for the greater security of with-profits.'

------------------------------------------------------------------- PERSONAL PENSIONS ------------------------------------------------------------------- Pounds ------------------------------------------------------------------- 1 Rothschild 2,868 2 Liberty 2,568 3 LAS 2,530 4 Norwich Union 2,530 37 Target Life 2,166 38 Irish life 2,051 39 Cannon Lincoln 1,957 39 Providence Capitol 1,957 ------------------------------------------------------------------- Based on a man aged 61 in July 1988 paying pounds 50 a month. Total premiums paid pounds 2,400 to July 1992. -------------------------------------------------------------------

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