MVR explained
MVR, or Market Value Reduction, is the process which insurance and investment companies sometimes use to ensure that investors withdrawing from their funds do not receive more than their fair share to the detriment of fellow investors.
If you are cashing in an investment in certain types of with-profit fund, and investment returns have been low, the company may apply a market value reduction to ensure you do not leave the fund with more than your fair share of its assets. This is to protect those policyholders who remain in the fund, but it may mean that you receive less than you expect.
MVRs are not applicable to our traditional with-profit policies. But when market conditions and investment returns dictate, it is possible that we may apply MVRs to our Platinum Plus and Platinum Bond Plus with-profit investments.
When you cash-in your Platinum investment, we ask the question: ‘What is a reasonable proportion of the fund for you to receive, which enables other policyholders also to retain their fair share of the fund?’
We may apply a final bonus which will increase your payment when you cash-in. However, to ensure that those policyholders who leave the fund do not take more than their fair share at the expense of those customers who remain in the fund, we may apply a market value reduction which will reduce your cash-in value.
Are MVRs fair?
MVRs will only apply in certain circumstances such as after deep or prolonged periods of market falls. When this happens, annual bonuses paid out could be much higher than the actual returns earned by the fund. MVRs help to bring the payout amount back in line with the actual returns earned by the fund.
If we didn’t do this, we would be paying out more than the proportion of the fund attributable to individual policies – that is, more than the policy is worth at that time. This would unfairly reduce the amount available for other customers when they leave the fund in the future.
MVRs ensure that policyholders who withdraw from the fund still receive a fair value, but not to the detriment of those remaining. MVR rates applied to individual policies depend on the bonuses paid and the fund’s performance during the life of the policy. This is why the rate of any MVR varies depending on the actual date of investment.
When do MVRs not apply?
Importantly, MVRs only apply if you cash-in your investment.
The Co-operative Investments do not apply MVRs:
- From the 10th anniversary of Platinum Bond Plus investments made before 1st April 2000
- On Platinum Bond Plus regular income payments
- If you don’t cash-in
- To payments on death.
Due to recent investment returns, with effect from 1 October 2008 it has been necessary for us to apply or increase MVRs on Platinum Bond Plus and Platinum Plus policies.
The current MVR rates are outlined in our Platinum Plus (PDF – 0.1MB) and Platinum Bond Plus (PDF – 0.1MB) overview leaflets.
The possibility of MVR was highlighted in the Key Features document you received when you made your investment and can also be found in your Terms and Conditions document.
You can also find out more in our With-profits guide (PDF – 0.4MB)
Our regulator, the Financial Services Authority, provides information about with-profit policies, including MVR, on its website
If you have any questions, please contact your Co-operative Financial Adviser or phone our Customer Contact Centre on 08457 46 46 46. We are open from 8am – 8pm Monday to Friday, and 8am to 5pm on Saturday.
Any advice from a Co-operative Financial Adviser will relate only to a range of the products and services availble from the members of the CFS marketing group, and a limited number of other companies.
