Scottish Widows has announced a cut in its Market Value Reduction (MVR) for unitised with profits policyholders. The 6% cut in penalties from 9% to 3% means that unitised with profits policyholders will be better off by around 13% when cashing in their policies.
Our view
With stock market returns increasing, Scottish Widows (and many other providers) have taken the opportunity to increase their equity holdings and reduced their fixed interest holdings. This has allowed them to take advantage of the profits to be made and they have passed the profits to policyholders by reducing penalties for cashing in. If steady returns can be sustained over the next few years, we hope Market Value Reductions again become a thing of the past.