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Zurich (ex Hambro) investment bond

yorkshirelad1
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Zurich (ex Hambro) investment bond

#388548

Postby yorkshirelad1 » February 21st, 2021, 9:35 pm

I have a couple of these (very: 1976) old policies, and have thought it might be useful to give them a bit of a check-up. I am really struggling with Zurich to get full information ("blood" and "stone" wouldn't be inaccurate). I thought I could deal with this (fairly simple) fact-find myself, but it's proving tricky, and I might have to pull in the expertise of my IFA, and possibly make a complaint to the FOS (a complaint is already in progress with Zurich, although their response is not quick, and I'm already onto my second "please wait another 4 weeks" letter). I have drafted a summary (that will probably be used for my wonderful IFA, and probably form the basis of any complaint to to the FOS) of what I think is happening, and I would appreciate any comments that anyone feels willing and able to make from the angle of any of the following:

  • ways to check if the underlying fund is OK or ways to make things better (either in fees or performance)
  • comments on the summary that might improve/amend/rectify it. And/or if it is to form the basis of a complaint to the FOS, on the basis that their costs and the way they communicate them are completely unusable (to say the least) and misleading (at worst)

TIA

yorkshirelad1's draft wrote:Zurich single-premium (Hambro) bonds on life assured: performance and fees

I have two Zurich bonds, whole life assured, started in 1976 as Hambro Life Assurance by my mother, single-premium (two policies: initial single premium £1000 + £500, total £1500), and I am the life assured. It was a “Hambro Investment Bond linked to Managed Investment fund”. My sister also has her own identical two policies. The current value of my two policies is about £60,000. The policies passed from Hambro to Allied Dunbar to (currently) Zurich. The underlying investment is currently “Zurich Managed Accumulation 3/4 AL” (SEDOL BYNM088) (ISIN: GB00BYNM0888) (Mex ID ADXYA; Citicode: MK8P) (NB: some of the identifiers may be confused because even Zurich is not consistent in its application between identifiers).

I have never done very much with these policies as they don’t need doing much to them, and there’s not a lot that can be done apart from waiting to collect on death of the life assured. There is a “cash withdrawal plan” option but I have no reason to utilitise that. I don’t need the funds at this point either. My mother looked after the admin & paperwork on these policies until about 10 years ago (she died 7 years ago).

Given that these policies have been in existence for 45 years, and will probably have another 25 years, I felt I ought to (at least occasionally) take a look at the performance of the underlying fund and the charges of that fund, to see if they are reasonable, also given the amounts involved (£120k).

With the appearance recently of “Value assessment reports” (see e.g. https://www.thetimes.co.uk/article/fca-crackdown-on-fund-managers-saves-investors-30m-qttznnm7m; paywalled), derived from the FCA’s “Assessment of value” (see e.g. https://www.handbook.fca.org.uk/handbook/COLL/6/?view=chapter), I thought this would be a useful yardstick to judge the fund. Sadly, as I was to find out, the FCA’s “Assessment of value” requirement only currently applies to collective funds, and the fund in question here (“Zurich Managed Accumulation 3/4 AL”) is a “Life Fund” so isn’t covered by the requirement to produce an annual “Value Assessment Report”.

As to the performance of the underlying fund, there are a couple of websites which have some comparative performance data (e.g. ft.com, trustnet.com) which suggest it’s respectable (some comparative figures from 2017 via https://www.yodelar.com/hubfs/Best%20Life%20Funds%20Report.pdf searching for ISIN GB00BYNM0888). I could possibly squeeze a little more performance out of it, but it remains to be seen whether I could, or even should, switch funds, or seek a close look-alike?

When it comes to fees and charges, this is simply a rabbit warren of opaque and confusing figures. The Policy Provisions in 1976 allow for an Annual Charge of 0.75% of the value of the investments. The same Policy provisions also mention “Income and Expenses” for the fund. Fast forward to today, and Zurich are describing the situation as 0.75% charge for the PLAN, and then a charge for the FUND, which can vary with the fund selected. The charge for the fund is given on the fund fact sheet. It is virtually impossible to get a consistent, clear answer out of Zurich whether (a) this is two charges and (b) what the rate of charge on the fund is. I have been told on different occasions by Zurich that the charge for the underlying fund is 0.21%, 0.75%, and 0.96%. It seems even Zurich cannot grasp the difference between the charge for the plan and the fund, nor be consistent for the figure for the charge for the fund. As a statement of fact, the Fund Factsheet quotes “Fund charges 0.96%”, and annual statement I get quotes “yearly charge” on “fund holdings” of 0.96%. This would seem to be in excess of the 0.75% on the plan in the Policy Provisions, and I haven’t had a clear answer whether the 0.96% is in addition to the 0.75% charge for the plan.

For information from https://www.trustnet.com/factsheets/n/mk8p/zurich-managed-accumulation-34-al:


In addition, when researching this matter, I stumbled across a notification of charges increases in 2016 at: https://www.zurichintermediary.co.uk/en-gb/have-you-talked-about/articles/2016/12/investment-fund-charges: “For the majority of customers who hold affected funds, the impact is modest - in most cases less than a £10 annual increase in fund charges, depending upon the plan value. We have therefore not written to all customers who are invested in affected funds.”. The 2016 fee increase seems to be on average about 0.8% although the fund list is unclear whether I’m included because of ambiguous, incomplete, and shortened fund names (with no identifier such as SEDOL to clarify) and since they didn’t deem it necessary to write to all policy holders, I have no way of knowing. Either way, if I’d have been affected, it would have been to the tune of around £80, not £10, so I’d liked to have known, and if I’d had the letter, I might have started looking round (or perhaps Zurich didn’t want to precipitate that).

mc2fool
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Re: Zurich (ex Hambro) investment bond

#388567

Postby mc2fool » February 21st, 2021, 10:51 pm

yorkshirelad1 wrote:...and possibly make a complaint to the FOS (a complaint is already in progress with Zurich, although their response is not quick, and I'm already onto my second "please wait another 4 weeks" letter).

Apologies if you know/have done this already...

The FOS won't take up a complaint until and unless you have already made a formal complaint to the company and either received a full and final response (obviously that you aren't happy with) or 8 weeks have passed without receiving such a response. The full and final response should come with an FOS Want to take your complaint further? leaflet.

Different companies have different policies as to how they categorise unspecified complaints, some will treat them as formal complaints while others won't, as formal complaints are counted in FCA statistics.

Now, you may have a clue in their responses so far which way they are treating it, but if not then you can try turning your existing complaint into a formal one by contacting them again and telling them that they should consider it a formal complaint, and you hope that they will provide their full and final response before the eight week limit specified by the FOS, and state that you are counting the 8 weeks from your original complaint.

If they don't accept starting the clock from your original complaint, then put in a new one. Put FORMAL COMPLAINT (bolded!) at the top, detail your compaint(s) and your expected remedy, and finish off with a similar phrase to above about expecting a full and final response before the eight week FOS limit.

yorkshirelad1
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Re: Zurich (ex Hambro) investment bond

#388576

Postby yorkshirelad1 » February 21st, 2021, 11:37 pm

mc2fool wrote:
yorkshirelad1 wrote:...and possibly make a complaint to the FOS (a complaint is already in progress with Zurich, although their response is not quick, and I'm already onto my second "please wait another 4 weeks" letter).

Apologies if you know/have done this already...

The FOS won't take up a complaint until and unless you have already made a formal complaint to the company and either received a full and final response (obviously that you aren't happy with) or 8 weeks have passed without receiving such a response. The full and final response should come with an FOS Want to take your complaint further? leaflet.

Different companies have different policies as to how they categorise unspecified complaints, some will treat them as formal complaints while others won't, as formal complaints are counted in FCA statistics.

Now, you may have a clue in their responses so far which way they are treating it, but if not then you can try turning your existing complaint into a formal one by contacting them again and telling them that they should consider it a formal complaint, and you hope that they will provide their full and final response before the eight week limit specified by the FOS, and state that you are counting the 8 weeks from your original complaint.

If they don't accept starting the clock from your original complaint, then put in a new one. Put FORMAL COMPLAINT (bolded!) at the top, detail your compaint(s) and your expected remedy, and finish off with a similar phrase to above about expecting a full and final response before the eight week FOS limit.


Many thanks for the useful info; I knew the bit about having to make a complaint to the company before the FOS entertain the complaint direct but did't know the rest. Happily, I've already had a letter from Zurich about taking it forward to the FOS (which I haven't done, cos I'd like to give them the chance to respond first).

Zurich wrote:Financial Ombudsman Service Rights: I'd appreciate more time to deal with your complaint. However, if you are dissatisfied with the progress of our investigation, you can refer your complaint to the Financial Ombudsman Service, free of charge – but you must do so within six months of the date of this letter. The FOS website address is https://www.financial-ombudsman.org.uk/ and full details of how to complain can be found in their booklet, the link to which is http://www.financial-ombudsman.org.uk/publications/consumer-leaflet.htm

Dod101
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Re: Zurich (ex Hambro) investment bond

#388585

Postby Dod101 » February 22nd, 2021, 12:26 am

Quite apart from your commendable letter to Zurich (which I do not quite follow) your fundamental problem is that the underlying contracts were no good. They are based on Hambro Life, then Allied Dunbar and now Zurich. When Zurich bought Allied Dunbar it was a bit like Berkshire Hathaway buying into Tesco except that BH could sell Tesco again quite easily.

I doubt that Zurich are very interested in the contracts although that is no reason why they should ignore you.

As to the complaint to the FOS, well what actually is your complaint? If I were you I would take the money and run. Write it off as a bad investment, which is what it was.

Dod

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Re: Zurich (ex Hambro) investment bond

#388589

Postby mc2fool » February 22nd, 2021, 1:05 am

Dod101 wrote:Quite apart from your commendable letter to Zurich (which I do not quite follow) your fundamental problem is that the underlying contracts were no good. They are based on Hambro Life, then Allied Dunbar and now Zurich. When Zurich bought Allied Dunbar it was a bit like Berkshire Hathaway buying into Tesco except that BH could sell Tesco again quite easily.

I doubt that Zurich are very interested in the contracts although that is no reason why they should ignore you.

As to the complaint to the FOS, well what actually is your complaint? If I were you I would take the money and run. Write it off as a bad investment, which is what it was.

Ummm ... £1,500 invested in 1976, worth £60,000 now, makes an annualised 8.54%pa growth for the last 45 years. That's not what I'd call "a bad investment".

I take it, yorkshirelad1, that you are aware that if you do take the money, the gain will be treated as income and taxed at your marginal rate of income tax?

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Re: Zurich (ex Hambro) investment bond

#388590

Postby mc2fool » February 22nd, 2021, 1:22 am

mc2fool wrote:I take it, yorkshirelad1, that you are aware that if you do take the money, the gain will be treated as income and taxed at your marginal rate of income tax?

Ummm ... maybe ... I've just remembered that some pay basic rate tax within the fund, in which case you only have to worry if you are/get into higher rate tax on withdrawal, and others are tax free within the fund, in which case the withdrawal is fully taxed as income ... checking needed!

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Re: Zurich (ex Hambro) investment bond

#388591

Postby Dod101 » February 22nd, 2021, 1:29 am

I have not looked a the numbers but if mc2fool is correct the that is not a bad investment. So what is the OP complaining about?

The underlying companies were poor investments so if mc2fool's numbers are right you owe Zurich a big one.

Dod

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Re: Zurich (ex Hambro) investment bond

#388660

Postby yorkshirelad1 » February 22nd, 2021, 11:06 am

Many thanks Dod101 mc2fool for the thoughts & input, which are all useful, and helpful and look at things from a different viewpoint.

It could be possible to take the money now, but I think it would be taxable now as mcfool points out. In addition, my 2 policies are still under the trust they were started with (so probably double trouble for unravelling not to mention tax), so the proceeds will fall outside my estate for IHT, which is not to be sniffed at. Cashing out now would pull the proceeds back into my estate for IHT purposes.

The performance of the plan (at around 8% compound p.a. as mcfool points out) is not shabby at all. However, the plan has been in operation for 45 years, and there may be better funds available (if the incumbent fund has been consigned to e.g. 'legacy' / 'not actively managed' status). Also, given the fund was started in 1971, its fees may be on an "old" scale, not a more modern advice/commission-free / post-RDR scale etc.

The exercise is more about what will probably be a once-in-a-lifetime "check under the bonnet" to make sure performance and fees/costs are respectable, see if anything can be improved/fine-tuned/spring-cleaned and probably "let sleeping dogs lie".

The complaint (if it comes to that) is the inability of the provider to provide a clear, straight, consistent answer about the cost of the underlying fund. At present, I've been given 3 different figures by different Zurich sources. To me, it's like asking three different "Sainsbrose" employees the cost of a pint of milk and getting three different answers: shouldn't really happen.

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Re: Zurich (ex Hambro) investment bond

#388672

Postby mc2fool » February 22nd, 2021, 11:26 am

Dod101 wrote:The underlying companies were poor investments so if mc2fool's numbers are right you owe Zurich a big one.

Methinks you don't understand the investment being discussed. It was not in Hambro/Allied Dunbar/Zurich themselves; those were/are just the fund managers of the investment, which is a "managed accumulation" fund. If you follow the OP's Trustnet link you'll see that the underlying investments of the fund are familiar big caps: Glaxo, BATS, Unilever, Microsoft, Apple, etc, etc......

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Re: Zurich (ex Hambro) investment bond

#389011

Postby Dod101 » February 23rd, 2021, 7:33 am

mc2fool wrote:
Dod101 wrote:The underlying companies were poor investments so if mc2fool's numbers are right you owe Zurich a big one.

Methinks you don't understand the investment being discussed. It was not in Hambro/Allied Dunbar/Zurich themselves; those were/are just the fund managers of the investment, which is a "managed accumulation" fund. If you follow the OP's Trustnet link you'll see that the underlying investments of the fund are familiar big caps: Glaxo, BATS, Unilever, Microsoft, Apple, etc, etc......


Yes I understand that perfectly well. It is now many years since Hambro/Allied Dunbar was swallowed by Zurich Insurance (which I happen to have known quite well in a previous life) If Zurich has reorganised the contents of the bond that is good news because in their heyday as a standalone company, Allied Dunbar was an expensive and poorly run investment manager.

Dod


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