UK pension mis-communications: Christmas, eh? Lovely cards and look, here are Seasons Greetings from Aviva, the UK life insurer which threw away the perfectly good name of Norwich Union.
It’s the annual statement of my personal pension plan. I’m told that I am continuing to benefit from the smoothed returns my with-profits plan offers over the longer term.
It is hard to see this benefit. Aviva has cut bonus rates, those little miracles of life-office obfuscation which determine the annual return on with-profits policies. A Market Value Reduction, which clips the fund of any customer who can’t stand this drivel and takes their money elsewhere, also applies.
Apparently I can now hope that my fund, worth 52,961.55 pounds on December 15, buys me a pension of 179 pounds a month. Yet in 11 pages, Aviva can find no room to remind me of the same calculation last year, projecting a monthly pension of 199 pounds.
Nor is there space to report that my fund value has shrunk from 57,976.94 pounds during the year, a negative return of about 10 per cent. To say this “smoothing” product provides protection from short-term market volatility is simply laughable.
The performance is quite impressively bad. The FTSE-100 index is up almost a quarter, excluding dividends, on the year. Aviva says my portfolio was 30 per cent in shares at the end of April. Meanwhile, UK government bonds —20 per cent of the fund have returned about 4.5 per cent. Corporate bonds — 26 per cent of the fund — have also performed well.
Aviva blames all this on “difficult market conditions” and claims the fund continues to perform well over the long term. But then the hurdle it sets, to outperform cash in a bank account, is hardly challenging.
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It’s bad enough watching my pension plan shrivel, without being fed this patronising rubbish. Aviva is by no means the worst UK life office — although it is the biggest — but as a demonstration of why you should never put your savings into one of their black box plans, this one’s a peach.
To paraphrase Woody Allen: a life office is a business which invests your money until it is all gone.