It was only a matter of time before the return of the dreaded Market Value Adjustment (sometimes known as Market Value Reductions, MVAs or MVRs) to with profit investments. Today. Norwich Union announced the re introduction of these temporary encashment and surrender penalties.

The MVRs will take effect from today and apply to policyholders who wish to makes a partial or total withdrawal from the CGNU, CULAC and NULAP funds.

They are a mechanism to ensure policyholders leaving a fund do not take more than their fair share of the fund at the expense of remaining shareholders.

NU has not imposed MVRs on its funds since July 1 last year when they were in place for policies taken out in 1999 and 2000.

Commenting on the decision, John Lister, chief actuary at NU, says: “Since the beginning of the year we have seen equity markets, commercial property and corporate bonds fall significantly in value.

“As a result we have reviewed the situation and have decided to introduce MVRs for policyholders who have unitised with-profits policies and who wish to make a partial or total withdrawal from the CULAC and NULAP funds. These are on average between 13% and 22% across different years of business.

“The decision has been made in consultation with the majority independent With-Profits Committee, ensuring that the interests of all policyholders are represented.”

Three special bonus payments announced in February for eligible customers in CGNU and CULAC funds will continue to be paid on top of today’s announcement.

The average MVR rate for the year units were purchased is:

2001 13%
2008 13%
2002 15%
1996-9, 2004-6 16%
1995 17%
1988,2007 18%
1990, 1994, 2003 19%
1989, 2000 20%
1991, 1993 21%
1992 22%