Those who have their money invested in with-profits funds are not likely too see higher returns in 2010 says the IFA. This is in spite of forecasts of strong performance on the stock market. Pension experts note that the adverse effects of the recession has meant that there have been cuts in with-profits bonuses. In fact these with profits funds are unlikely to grow in tandem with the stock market, which has seen gains in recent months. The lack of synchronicity will alarm those who have funds invested as well as those who are considering purchasing a with-profits annuity.
Miles Hendy, who is a with-profits annutiy specialist agreed with the prediction that 2010 will be a tough year for these types of annuities commenting that “increasing market volatility and declining new business means many with-profits funds are seriously underperforming compared to other vehicles.” Mr Hendy’s comments are backed up by figures from one of the major annuity providers in the UK, Aviva, which showed that it’s main with-profits fund made an after tax return of just 6% in 2009, compared to 10% from it’s “Cautious Managed NU Life fund”.
With-profits annuities have been perceived by many in the pension industry as being a fairly stable option but this new information will certainly make some think twice before they purchase one.
