- New report identifies problems and solutions -

In its latest report, “Unit Linked Bonds in the UK 2007″ (1), Defaqto examines the pressures that are undermining these saving instruments and how they will affect their appeal to investors.

The report examines the likely impact of the proposed introduction of the 18% flat rate of Capital Gains tax, the implications of the Retail Distribution Review, the growing importance of fund supermarkets and how life companies are likely to react to the growing influence of multi-manager propositions in the consumer investment field.

While all these influences are likely to cause serious challenges to the life companies, the report is far from pessimistic about unit linked bonds. For instance, as a result of CGT changes, IFAs are predicting a drop in business, (2) with 71% seeing a fall of up to 25%, but it is far from terminal. The press coverage proclaiming the death of unit linked bonds seems greatly exaggerated as only 11.5% expect a drop in business of more than 75%.

Source: Unit Linked Bonds in the UK - December 2007, Defaqto Ltd

Even unit linked with-profits bonds are viewed by many IFAs as products which could still have a future, with 50% of those who currently do not recommend them indicating that they would consider them again in the future. Overall, there is considerable optimism in the report that if the providers get the basics correct, then the future is anything but gloomy.

In this respect, the report carries very useful insights, gained from original research, into what IFAs want from providers and their financial products (3). While IFAs want both quality products competitively priced and administered smoothly, consumers want more certainty in performance and a known measure of security for their investments (4).

Commenting on the report, Fraser Donaldson, Principal Consultant - Investment said: “While unit linked bonds are going through a rough patch at the moment, the product still has attractions and, provided these are capitalised on and properly promoted by the insurers, unit linked bonds will have an enduring place in many investment portfolios.”

- Ends -

Notes to Editors:

(1) The report “Unit Linked Bonds in the UK 2007 - Stick, Twist or Bust” is on sale priced £1,200 excluding VAT for a PDF version and £595 (No VAT payable) for a single printed copy. For further information please contact Chris Johnston on 01844 295457, or the Sales Department on Freephone 0808 1000 804 or visit www.defaqto.com

(2) Defaqto Online Survey, October 2007

(3) Research carried out by W A Taylor and Associates - IFA Satisfaction Study for Investments, December 2006

(4) Research carried out by GfK NOP , 30 August to 4 September 2007

For further information contact:
Matt Ward, Chris Johnston or Luci Mylward
01844 295 454