There is a paragraph from chapter 6 which reads, "Companies might also retain the right to apply an MVR to switches out of an accumulating with-profits fund into a unit-linked fund." Could someone please explain what happens when AWP contracts switch to unit-linked funds. Does this mean that the contract is now changed to a unit linked product?
Hello Yes A company is most likely to offer this option to switch between different unit-linked funds and an AWP fund if the AWP is unitised (ie UWP) and operates an explicit charging structure (as described in Ch6, page 17) rather than taking the charges implicitly through the bonus rate. An MVR might be needed to prevent selective switches (eg customers choosing to switch from UWP to UL when markets have fallen). Lynn
