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Aviva reduces Market Value Reductions in light of improving market conditions
We’re pleased to announce that Aviva is making further reductions to Market Value Reduction (MVR) rates from 19 October 2009. The improving market conditions we’ve seen recently together with our ongoing weekly monitoring of Market Value Reduction rates have been key to this decision.
Impact of the reductions
The following table shows the average MVR rate by year in which the policy was taken out (or units purchased):
| Year units purchased | Average MVR rate as at 19/10/09 |
|---|---|
| 1988 | 2% |
| 1989 | 12% |
| 1990 | 4% |
| 1991 | 0% |
| 1992 | 1% |
| 1993 | 1% |
| 1994 | 1% |
| 1995 | 1% |
| 1996 | 2% |
| 1997 | 5% |
| 1998 | 12% |
| 1999 | 14% |
| 2000 | 18% |
| 2001 | 10% |
| 2002 | 1% |
| 2003 | 0% |
| 2004 | 1% |
| 2005 | 6% |
| 2006 | 13% |
| 2007 | 16% |
| 2008 | 8% |
| 2009 | 0% |
The rate reduction applies to Aviva’s unitised with-profits policies. MVRs do not apply to conventional with-profits policies.
Additional Context
• Aviva follows a robust and comprehensive MVR review strategy and only makes adjustments when there is a sustained improvement in the overall value of the With-Profit Fund.
• Despite recent improvements, the stock market still remains below its peak in autumn 2007.
| Date | FTSE100 | Notes |
|---|---|---|
| 12/10/07 | 6,730 | Previous peak (FTSE100 highest peak 6,930 on 31/12/1999) |
| 15/09/08 | 5,204 | Lehman Brothers collapses |
| 21/10/08 | 4,229 | Aviva announces the introduction of MVRs on unitised WP funds |
| 03/03/09 | 3,512 | FTSE100 low point, 52% fall from 12 October peak |
| 25/09/09 | 5,082 | Improving market conditions but still 25% lower than 12 October |
• Market Value Reductions ONLY apply where customers are withdrawing all or part of their investment. They don’t apply on death, endowment maturity, the original selected retirement date or on MVR-free policy dates for bonds.
• 86% of Aviva with-profits bond policyholders benefit from valuable guarantees. This year 50,000 bond policies are eligible for a guarantee and 33,000 will be able to take advantage of their 10 year anniversary No Market Value Reduction Guarantee. This guarantee is not available to new customers however.
• Eligible customers will continue to benefit from the reattribution (agreed last month) and the fund’s final special bonus payment, taking place in 2010.
Financial Strength and Fund Performance
Aviva’s With-Profits Funds are acknowledged as being financially strong. We are rated 5 star (‘excellent’) by AKG and AA- (‘very strong’) by Standard & Poor’s. This strength means our policyholders benefit from our ability to deliver ‘smoothed’, consistent returns over the longer term.
Aviva reviews its MVR rates weekly in line with the process set out in the Principles and Practices of Financial Management (PPFM). This process is in place to ensure fairness to all customers. In order to reduce or remove MVRs in the future we have to be confident that customers withdrawing money from the fund do not benefit at the expense of those who remain invested in the fund. Markets will be monitored with a view to reducing or removing MVRs at the appropriate point.
Further Information
For more details about our Market Value Reductions please see the following items:
WA03155 10/2009
