Aviva bows to IFA pressure on with-profits literature

Aviva has been forced to improve its with-profits literature after an IFA criticised the information given to policyholders approaching their 10th anniversary.

The insurer is now using a new nine-year nine-month letter as of 25 January to remind its policyholders of the special no-MVR feature they can take advantage of on their 10th anniversary.

It follows heavy criticism from Fraser Heath on the wording of the previous notification letter, which the IFA said "actively encouraged policyholders to do nothing".

Miles Hendy, a chartered financial planner at Fraser Heath, says the new letter is "a bit better than its predecessor in the sense that it is a bit more non-committal on whether to stay or go rather than encouraging inactivity".

But he adds: "It still fails to state the key facts that would make a policyholder understand the value of the guarantee."

Aviva's head of marketing Kelsall says as the letter goes out three months prior to the 10th anniversary: "At this point we do not know what the MVR will be and it is therefore only a reminder of the benefit at this stage."

He adds: "It would be misleading to suggest to customers what action should be taken at this point."

However, Hendy questions why the letter cannot include the values as they stand, three months ahead of the guarantee date.

"For a policyholder to understand the value of this guarantee it needs to state the policyholder's asset share (or market value), the guaranteed value, and therefore the monetary value of the guarantee if the guarantee is exercised," he says.

"Just because it is three months away doesn't seem to justify a lack of this crucial information to me."

Hendy argues with an estimated £590m payout on the cards if all 90,000 policyholders surrender their policies, it is not in Aviva's best interest to properly explain the perks of the no-MVR offer. However, the insurer disputes this claim.

"The objective of our communications is to make sure customers are as clear as possible about their options when they reach the 10 year point," Kelsall says

Aviva also appears to be advocating a more proactive stance by urging policyholders with the no-MVR guarantee feature to switch out of the with-profits fund or cash in.

The company says once customers have taken advantage of its last Special Bonus and reattribution payment, it is "rational" to seize the full benefit of the guarantee.

Aviva head of marketing Richard Kelsall says: "Given how valuable the 10 year MVR guarantee is currently, we should fully expect customers to switch out of with-profits into another fund and crystalise the benefit of the guarantee."