With profits policies - market value reduction
- All offices operate a market value reduction to protect the interests of investors remaining in the unitised with-profit funds.
- The MVR is applied at the life office’s discretion to reduce the amount payable on surrenders or switches and operates in times of adverse investment conditions. For example, a stock market crash.
- Usually, the MVR does not apply on death or maturity.
- The aim of the MVR is to prevent the value leaving the fund from exceeding the value of the underlying assets.
- Further study text reading: Pages 250