Aviva has reduced market value reductions on with-profits policies. The changes apply to all Aviva unitised with-profit funds – formerly known as CGNU, CULAC, and NULAP funds – and come into effect on 19 October 2009.
The average MVR rates applying to policies are:
|
Year units bought |
Average MVR rate as at 01/07/09 |
Average MVR rate as at 19/10/09 |
|
1988 |
5% |
2% |
|
1989 |
14% |
12% |
|
1990 |
6% |
4% |
|
1991 |
0% |
0% |
|
1992 |
1% |
1% |
|
1993 |
1% |
1% |
|
1994 |
2% |
1% |
|
1995 |
1% |
1% |
|
1996 |
3% |
2% |
|
1997 |
8% |
5% |
|
1998 |
15% |
12% |
|
1999 |
16% |
14% |
|
2000 |
20% |
18% |
|
2001 |
11% |
10% |
|
2002 |
2% |
1% |
|
2003 |
1% |
0% |
|
2004 |
2% |
1% |
|
2005 |
9% |
6% |
|
2006 |
16% |
13% |
|
2007 |
18% |
16% |
|
2008 |
9% |
8% |
Aviva follows a robust and comprehensive MVR review strategy and makes adjustments only when there is a sustained improvement in the overall value of the with-profit funds. The move to reduce MVRs follows improvements in the stock market experienced over the past six months. However, the stock market is still well below the last peak of October 2007*. This decision has been taken in line with Aviva’s commitment to prudent fund management and treating customers fairly.
Some 86% of Aviva with-profits bond policyholders benefit from valuable guarantees. This year 50% of bond policies are eligible for a guarantee and 33,000 will be able to take advantage of their 10 year anniversary No Market Value Reduction Guarantee.
David Barral, marketing director at Aviva, said: “We have been monitoring MVR levels on a weekly basis and the sustained improvement in the overall value of the with-profit funds means we are pleased to reduce market value reduction (MVR) rates from 19 October 2009. Aviva’s with-profit funds continue to provide investors with attractive returns while protecting them from the extremes of volatile equity markets.”
How an MVR works
Suppose there are three investors in a with-profits fund, who each pay in £10,000, so the total with-profits fund is worth £30,000. Stock markets fall by 10% so that the total with-profits fund drops to £27,000. If one investor then withdraws his original £10,000, without introducing an MVR, this would leave only £17,000 in the fund to be shared between the remaining two investors. The investor who encashed his policy early would take more than his fair share of the fund.
*Despite recent improvements, the stock market still remains below its peak in autumn 2007.
| Date | FTSE 100 | Notes |
| 12/10/07 | 6,731 | Previous peak (FTSE 100 peak 6,930 on 31/12/1999) |
| 15/09/08 | 5,204 | Lehman Brothers collapses |
| 21/10/08 | 4,230 | Aviva announces MVRs for unitised funds |
| 03/03/09 | 3,512 | FTSE 100 low point, 48% fall from 12 October 2007peak |
| 12/10/09 | 5,210 | Improving market but 23% lower than 12 October 2007 |
Aviva’s with-profit funds are invested in a wide range of asset types and so movements in the FTSE 100 are not necessarily representative of combined movements in the asset values within the fund.
