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Eye on AVC returns

The returns achieved on additional voluntary contributions paid by pension scheme members varied enormously in 1994,according to the 1995 AVC survey from Bacon & Woodrow . An estimated 1 million people made AVCs last year, the actuaries said.

The Co-operative Insurance Society had the best- performing with-profits contract, producing returns averaging 17 per cent per annum over the past 10 years. London Life managed only 11 per cent. The range of returns on unit-linked contracts also varied widely, with Fidelity achieving 13.5 per cent per annum over the past five years, three times higher than the worst performer, Guardian.

Bacon & Woodrow also warn that occupational scheme members wanting to top up their contributions are being wrongly sold expensive free-standing AVCs, which could cost the equivalent of one year's contributions in charges.

Bacon & Woodrow 1995 AVC Survey.0372 733700.

Unit trust switch

Sales of unit trusts fell more than 5 per cent last month as investors switched to insurance-based guaranteed income bonds. This was in spite of the seasonal increase in personal equity plans. Net retail sales declined from £92m in January to £87m in February, one sixth of last February's £536m. Net PEP sales rose £23m to £167m.

Philip Warland, director general of the Association of Unit Trusts and Investment Funds said: "People with low levels of equity holdings are continuing to buy PEPs."

Policies warning

Standard Life has accused rivals of artificially inflating payouts on with-profits polices. The company warns that this will mislead investors about the likely returns they will receive from their pensions, further damaging the reputation of the life insurance industry.

The life insurance sector is experiencing fierce competitive pressure.

Standard Life warned in its annual report and accounts this week that the end of its agreement to supply all pension and investment products sold through Halifax would adversely affect future levels of business in Britain.

Revenue changes

The Inland Revenue is proposing to reduce the minimum amount for income withdrawals from personal pensions from 70 per cent to 35 per cent of the maximum annuity permissable.

The change will allow investors greater flexibility in making withdrawals from their pension funds in retirement rather than being locked into what has sometimes been a poor fixed income through the traditional annuity. The deferral facility means that investors can vary the amount they withdraw each year according to their personal circumstances.