UK: Aviva's with-profits continues to protect customers from market fluctuations

08 Feb 2013

  • With-profits products provide protection for customers who wish to invest in the markets but don’t want to be exposed to the full impact of volatile market conditions.
  • A £10,000 with-profits bond purchased 10 years ago is now worth £17,082, giving customers an impressive annual return of 5.5%. This has significantly outperformed a bank or building society average savings account return of 2% a year over the same period (all figures after tax and charges). 
  • A bond invested 10 years ago not only outperforms an average savings account, but also the average return from the ABI UK Mixed Investment 20%-60% Shares - Life Sector, as these annualised returns on a £10,000 investment show:
    • Aviva With-Profits Bond                        £17,082 or 5.5% p.a.
    • Average savings account*                        £12,228 or 2% p.a.
    • ABI UK Mixed Investment 20%-60% Shares – Life**       £15,926 or 4.8% p.a.
  • In 2012, 16,000 with-profits bond customers benefited from our valuable inflation protected guarantee. Payouts for a further 32,500 customers, whose policies reach their fifth anniversary during 2013, will be protected by the inflation protected guarantee.
  • In 2012, Aviva added £878 million in bonuses to customers’ with-profits policy values (£456 million in annual bonuses and £422 million in final bonuses).
  • Market value reductions (MVRs) have reduced by an average of 2%, where they were already applying.

2012 Overview

Investment markets remained volatile during 2012 with riskier asset classes performing strongly in the second half of the year mainly due to concerted efforts by governments to revive the global economy. The FTSE ended the year 5.8% higher.

Although global economic data has recently continued to strengthen, the consensus view is that low growth and interest rates will continue to be key economic factors over the medium-term.

This challenging economic backdrop has highlighted the value of the prudent approach we have taken to managing our With-Profits Funds, for the benefit of our customers.

What does this mean for our customers?
A with-profits bond with an initial investment of £10,000 and held for ten years:

  • Is worth £17,082, a return of 70.8% (5.5% per annum).
  • Has grown by £965 or 6.0% during 2012. (all figures net of tax & charges)

A 25-year, £50 per month mortgage endowment in the main Aviva With-Profits Fund, taken out on 1 January 1988:

  • Has a maturity value of £29,765, a return of 5.1% per annum
  • Has grown by £1,740 or 6.3% during 2012. (all figures net of tax and charges).
  • Has benefitted from valuable life cover during the 25 year period. 

Aviva’s Propositions & Pricing Director, Savings and Investments, Tim Orton commented: “Our with-profits funds continue to perform well for our customers. With bank and building society accounts yielding low returns and stock market volatility an on-going concern, the great strength of with-profits is its ability to invest in assets that provide income and growth whilst protecting from the full effects of volatile markets. Backed by our strong team of professionals, expert in managing investment risks, with-profits continues to provide value for customers in today’s economic conditions, as it has throughout its 200 year history”

Key bonus rate changes effective on 1 January 2013
Annual bonus rates

  • Annual bonus rates for new business remain at 2.5% for bonds, 3% for pensions and 2.75% for stakeholder pensions.
  • Annual bonus rates remain the same for most existing unitised Life & Pension business. The two exceptions are ex-CU bonds where rates have reduced from 2.5% to 2% and ex-NU bonds (without guaranteed bonus rates) which have reduced from 1% to 0.75%.

Final bonus rates

  • Final bonus rates have increased by an average of 2.5% for most unitised with-profits policies and by an average of 3% for most conventional policies.
  • Some conventional final bonus rates have fallen by an average of 1.7%, due to smoothing of historic investment returns.

With-Profit Income Fund

  • Reduction in total bonus rate of between 0.25% and 1.25% depending on the year of investment.

With-profits policy impact of 2012 rate changes

The table below shows typical changes in policy values over 2012 for our main with-profits products invested in our main With-Profit Fund. They do not necessarily reflect the changes to an individual policy. The bond and endowment figures are after charges and net of basic rate tax. The pension figures are after charges and gross of tax.

Investment details
(started on)
Total investment Payout value
1 Jan 2013 plus annual yield
Increase  in payout value over last year (excluding  premiums)
Average savings account payout plus annual yield
(5 year)
£10,000 single premium,
(1 Jan. 2008)
£10,000 £11,503
2.8% p.a.
1.4% p.a.
(10 year)
£10,000 single premium,
(1 Jan. 2003)
£10,000 £17,082 
5.5% p.a.
2.0% p.a.
(20 year)
£200/month starting on
(1 Jan. 1993)
£48,000 £81,643 
5.0% pa
2.9% p.a.
Endowment (25 years)
£50/month starting on
(1 Jan. 1988)
£15,000 £29,765  
5.1% pa
2.8% p.a.

About the fund, customer numbers and underlying assets
At the end of June 2012, the total value of Aviva’s with-profits funds was approximately £50 billion with 1.5 million customers.

  • The main Aviva With-Profit Fund, the Old and New With-Profits Sub Funds (ex-CGNU) has delivered an estimated investment return of 7.3% before tax in 2012.
  • The equity backing ratio (the amount of equities and property) of the main Aviva With-Profit Fund is 69.3% (as at 31st December 2012).

Pie Chart

- Ends -

*The average savings account used is the Moneyfacts Average up to 90 days’ notice, with a £10,000 minimum investment, invested from 1 January 2003 to 1 January 2013. Past performance is not a guide to the future.

**Source: Lipper for Investment Management for a £10,000 initial investment invested from 1 January 2003 to 1 January 2013. All values are net of charges and tax.

***The pension examples above are based on a male, investing £200 a month for 20 years from 1 January 1993 with a policy maturing at age 65, and a return of fund death benefit. The figures at 1 January 2013 assume retirement at selected retirement age and therefore benefit from the MVR-free guarantee. All figures are gross of tax and after charges.
The value of investment-linked funds can go down as well as up and is not guaranteed. It is possible that you may not get back the amount invested. Money in a savings account is accessible and safe, and interest, once earned, is guaranteed.

If you are a journalist and would like further information, please contact:
    Fiona Whytock: Aviva Press Office: 01904 452659; 07800 692299
    Louise Soulsby: Aviva Press Office: 01904 452617; 07800 699526
Notes to editors:

Aviva provides insurance, savings and investment products to 43 million customers worldwide.
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