Friday, October 24, 2008

Celebration Bond

If you are the holder of one of these With-Profit Bonds through Norwich Union/Hibernian, it may be a good idea to put a note in your diary regarding the 10th anniversary of your investment.

The products that were sold during the period 1999 to 2002 have an underlying guarantee on the 10th Anniversary of the start date - and every subsequent 5th anniversary - that the company cannot impose a 'Market Value Adjustment' (MVA) on these dates. Unfortunately, the company are under no obligation to notify you that these important dates are coming up.

Under the terms of the contract, the price of the units held in this with-profit fund are guaranteed not to drop. This means that you are guaranteed your original investment plus attaching bonuses on the 10th/15th/20th etc. anniversary.

The current 'nominal' value of your investment could potentially be much higher than the 'surrender' value, as MVAs are applied outside of the guaranteed dates. If you are thinking about cashing in this bond at present, it may be prudent to wait until the 10th anniversary. It will put the policy holder 'in the driving seat' as the company cannot reduce the price of the units in the with-profit fund on the guaranteed dates.

Should market conditions continue in the same direction in the short to medium term, then this 'guarantee', on these significant dates, may become very valuable indeed. This may have prompted the company to place 80% of the fund in Fixed Interest Assets in recent days and the product is now closed to new business.

If your Celebration Bond had a commencement date outside of the 1999-2002 dates, then your guarantee applies to your capital only on 10th/15th/20th etc anniversary.

You should definitely review this investment, especially if you may need access to your capital between the 10th and 15th anniversary dates. Do remember that the 'window' that you can apply the guaranteed periods to, is limited to 14 days either side of these important dates.

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