- 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)
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).