Friends says it has reviewed its MVR rates after continued improvement in investment markets during August. MVRs are now only applied on single-premium and regular-premium pension business with a guaranteed minimum bonus of 4 per cent, other pension single premiums paid in 1999 and 2000 and on overseas life insurance business single premiums paid in 2000.

The maximum MVR rate has been reduced from 13 per cent to 10 per cent and the average reduction on a surrender claim has halved from 4 per cent to 2 per cent.

Where a policy guarantees that an MVR will not apply on a particular date, on death or on regular withdrawals, the MVR will not be reduced.

The firm says MVRs are necessary to maintain fairness between customers' surrendering and those continuing to remain invested in the with-profits fund.

Informed Choice joint managing director Martin Bamford says: "Investors are keeping their eyes open for an opportunity to exit with-profits so reductions or removals of MVRs will clearly be a good signal to consider that.

"Most companies should be considering this as we have seen such strong investment performance since March but they are always quick to impose market value reductions and very slow to remove them."


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