Nil return on Scottish Mutual investment

If you invested 28,000 originally but would only get 22,000 if you encashed it now (which is what I think you are saying), you would need to get 5% return after any charges annually for the next 5 years to bring you back to 28,000. This is much more likely in a non-with profits product, but by no means guaranteed but I think the chance of the existing bond coming good in the foreseeable future is very low. Maybe you should look at various different funds and use an ISA/unit trust for some or all of your money. The charges may well be less.

Which funds you use depends on what risk you are prepared to take.

Rob Graham

If she withdraws the £22k and invests elsewhere at 5%pa for 5 years, then she will get to £28k right enough, but (unless the fund does even worse and shows negative returns) she will get the same result by leaving the investment alone and waiting until the MVR is lifted. I'm assuming, of course, that the MVR only applies on encashment before maturity.

That may be so, assuming by "coming good" you mean it will go back from Nil returns to positive returns. But will the chance be much less than that of any alternative investment outperforming it, given that the alternative has to exceed 5% in order to beat the existing investment returning only 0%?

For example, if the existing investment were to bounce back and average say 2.7%pa over the next 5 years, then it would become worth £32k because you're starting from £28k, but if by encashing now you'd lose £6k, to start from £22k, then to get to the same £32k you'd need returns of 7.8%pa, which ould be more difficult to achieve than 5%.

Well, that depends on when the MVR comes off. The OP indicated at least 6 years. The 5% calculation leaves a year in hand, and more if the MVA is still there after 6 years.

Yes

That is fair comment. However, often the first loss is the least loss. Also, by coming out of w/p she is getting away from the shackles of MVRs. Furthermore, she will have the availability of a massive range of funds - she will be free to choose from the marketplace - not just be beholden to w/p bonus rates.

It's impossible to predict which is the best course of action. You'll know in 6 years what you should have done.

Rob

In message , Robin Graham writes

There is no 'maturity' on a ScotMut W/P Bond. It is open ended.

I think there is a growing justification to sue the adviser for recommending ScotMut on the first place. Their w/profit funds has been in deep deep trouble for years hence its demutualisation and the 100's of millions that had to be shovelled into the fund by Abbey National.

They tried to get out of the problem by awarding artificially high early year guaranteed bonuses paid at the expense of existing fund members. Many IFAs went down this 'guaranteed high bonus' route which was against the better judgement of many others.

In message , Rosemary Denner writes

Then he didint know what he was talking about. In 2000 he should have known that the bonus rate was artificially high. Whilst all w/p funds have suffered from poor stockmarket returns the scotmut fund, in particular, was struggling before the market 'crash'.