In Reply to: FRIENDS PROVIDENT INCREASES EARLY EXIT FEES (MVR) AGAIN posted by CPLANNER on 11 October 2002 at 10:34:47:
: In case you missed it, IBM quietly put a notice on the UK Pension Intranet site that effective 3rd Oct, Friend Provident increased their MVR's for AVC's yet again for withdrawals before normal retirement age.
: The usual reason - continued decline in stock markets.
: The biggest hit is to to IBMers who started contributing very early between 6 July and 30th Nov 2000 when IBM "promoted" this plan as a switch-over alternative to Equitable when their problems came to light.
: The MVR for this highest hit group was originally 0%, then 10%, then rose to 15%, now 18%.
: Place your bets now for 20% !
: NB This MVR also applies to EARLY RETIREMENT.
: Check out the IBM UK Intranet Pension site for details.
Note that Friends Provident
a) calculate the MVR according to the date of your FIRST payment
b) then apply the MVR to your entire fund, including future contributions
This means that your future contributions will also have the MVR applied to them.
I do not know how FP can justify this - the MVR is used to compensate for the market having fallen in the past - new contributions should not be penalised at all! Also, if a newcomer starts an FP AVC today, then his contributions do not suffer the MVR.
A much fairer scheme would be to apply a appropriate MVR to each contribution - older contributions (made when the market was higher) would have a higher MVR than more recent contributions (made when the market was lower).
If you believe that you are likely to retire while this MVR is in place, you may wish to consider stopping paying into FP and paying instead into the L&G Cash Fund. WHile it (historically) has a smaller return than FP, you do not get the -18% hit on your contribution.