Norwich Union, the UK’s largest insurer, is to introduce a new carry forward guarantee on its existing with-profit bonds where an MVR (market value reduction) free anniversary exists.
- Policyholders to be notified three months prior to any MVR free anniversary
Norwich Union, the UK's largest insurer, is to introduce a new carry forward guarantee on its existing with-profit bonds where an MVR (market value reduction) free anniversary exists. This means that policyholders who decide not to cash-in their policy on an MVR free anniversary can still take advantage of this guarantee at a later date (please see worked example below).
In addition, Norwich Union intends to start writing to with-profit bond policyholders three months prior to any MVR free anniversary, if an MVR applies to a policy. Out of Norwich Union’s 500,000 with-profit bonds, approximately 50% have an MVR free anniversary – usually after ten years.
At present MVRs only apply on monies invested between 1998 to 2001. Therefore, any with-profit bond that has an MVR free anniversary in 2005, 2006 and 2007, currently does not have an MVR.
Worked example: An investor has a with-profit bond worth Ł50,000, an MVR free date after ten years and a current MVR of Ł1,500. On the MVR free date they can take out the Ł50,000 without an MVR. However, with the new carry forward guarantee the Ł1,500 MVR free allowance will still apply even if they do not cash in the policy on the MVR anniversary. If they cash in the policy, for example a year later, then the Ł1,500 will be offset against any MVR that might apply at that time.
So if the MVR at the time they cash in, has reduced to Ł1000 they can cash in MVR free. If the MVR has increased to Ł2000 when they cash in, the MVR will be reduced to Ł500 (Ł2000 less the carry forward guarantee of Ł1500).
(Example is not based on an actual policy)
Commenting on the new guarantee, Mike Kirsch, operations director, said: "We wanted to look at how we could introduce more flexibility for our customers after they had reached their MVR free date and we believe this is a good way of doing it. While some policyholders may want to cash in their with-profit bonds at the MVR free date, others may not. We did not feel it was right that these people should then be penalised for not taking the benefit and therefore we have introduced the carry forward guarantee.
"We believe that the combination of this guarantee and giving people timely notification if they have an MVR free benefit is the best way forward and underlines our commitment to treating customers fairly."
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Notes to editors
- Norwich Union is the UK's largest insurer. It is the UK's largest provider of life, pensions and investment products and one of the leading IFA providers. IFAs provide around 75% of the company's long-term savings business in the UK.
- Norwich Union has strategic alliances with building societies and other leading UK brand names including Tesco Personal Finance and The Royal Bank of Scotland Group. Norwich Union’s news releases and a selection of images are available from Aviva's internet press centre at www.aviva.com/media