... that’s the ter­ri­fy­ing sum savers have stuck in ‘dead’ funds

Daily Mail - - Money Mail - By Sylvia Mor­ris

MIL­LIONS of in­vestors are be­ing bled dry in failed with-prof­its funds that have been forced to close their doors to new busi­ness.

A Money Mail in­ves­ti­ga­tion has laid bare the mis­ery fac­ing 11 mil­lion pol­i­cy­hold­ers who have al­most £190bil­lion fes­ter­ing in ‘zom­bie’ with­prof­its en­dow­ments, pen­sions and bonds.

They are so called be­cause, de­spite giv­ing ap­palling re­turns, they shuf­fle on and refuse to die.

The scan­dal has seen pol­i­cy­hold­ers shunted around as funds have been closed and sold to ‘vul­ture’ com­pa­nies that spe­cialise in feed­ing off the bones of these dy­ing in­vest­ments.

Huge num­bers of with-prof­its in­vest­ments were sold in the Eight­ies and Nineties. But when the high charges and poor per­for­mance of these funds were ex­posed, the in­surance com­pa­nies closed them to new in­vestors and left them to wither on the vine.

In­vestors led to be­lieve that years of thrift would earn them a com­fort­able re­tire­ment — or pay off their mort­gage — have been rocked by dis­mal in­vest­ment per­for­mance, sky high charges and ap­palling cus­tomer ser­vice. This scan­dal has left: HOME­OWN­ERS who took en­dow­ments un­able to re­pay their mort­gages;

SAVERS who used with­prof­its pen­sions un­able to re­tire;

PEN­SION­ERS sold with-prof­its bonds with lit­tle or no in­come;

SAVERS trapped in fail­ing funds by penalty charges; and

PEN­SION­ERS stripped of thou­sands of pounds in re­tire­ment in­come when t hey buy an an­nu­ity.

While with-prof­its funds in gen­eral have dis­ap­pointed, zom­bie funds have been the grave­yard of many in­vestors’ dreams.

Re­search by Money Mail re­veals that some with-profit bonds taken out ten years ago are worth less than the sum put in.

And en­dow­ment and pen­sion pay­outs on zom­bie funds are up to a third lower than on the bet­ter funds that are still open to new in­vestors.

There are some 70 closed life of­fices, in­clud­ing Cru­sader, Phoenix, Na­tional Prov­i­dent Life, Windsor Life, Abbey Life and Bri­tan­nia Life.

Cru­sader, a closed fund now un­der Phoenix’s man­age­ment, paid out just £23,653 to a 54-year-old who had saved £50 a month into an en­dow­ment for 25 years.

By com­par­i­son, Pru­den­tial, which runs one of the more solid funds still open to new in­vestors, paid £12,181 more on a sim­i­lar pol­icy.

Eq­ui­table Life and London Life have both lost money for in­vestors in their with-profit bonds over the past ten years, while Win­terthur Life has man­aged just £51 profit on £10,000 in­vested ten years ago — the equiv­a­lent of £5 a year.

Even Scot­tish Prov­i­dent’s £11,904 is only 1.7pc a year. Pru­den­tial turned in a more re­spectable £14,694.

Janet Wal­ford, edi­tor of fi­nan­cial mag­a­zine Money Man­age­ment, has stud­ied with-prof­its funds for more than 30 years. She says: ‘ These funds have a di­a­bol­i­cal in­vest­ment per­for­mance and have charges so high they are off the scale.

‘ When they were pay­ing bonuses of 15 pc, t hese fir ms pro­jected this would con­tinue for the next 25 years.’ Laith Kha­laf, of fi­nan­cial ad­vis­ers Har­g­reaves Lans­down, adds: ‘These zom­bie funds are bleed­ing mil­lions of in­vestors dry.’ And long suf­fer­ing savers are be­ing ripped off un­til they go to the grave.

Those who roll over into an an­nu­ity from these zom­bie funds when they re­tire will lose out on t hou­sands of pounds in pen­sions in­come.

Fi­nan­cial ad­viser An­nu­ity Di­rect re­cently helped a saver with a £23,186 pen­sion pot who was of­fered just £767.79 per year from zom­bie firm Windsor Life.

In­stead, they got him £1,504.24 with Canada Life.

Bob Bul­li­vant, from An­nu­ity Di­rect, says: ‘ These savers have en­dured shock­ing re­turns for years only to be of­fered the fi­nal in­sult — poor an­nu­ity rates, which can pay an in­come that’s less than half they would get else­where.’

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