Norwich Union breaks records yet again with a projected £1.4 billion payout to some 70,000 customers in 2000.
Norwich Union breaks records yet again with a projected Ł1.4 billion payout to some 70,000 customers in 2000.
Group chief executive, Richard Harvey commented, "Customers whose policies mature in 2000 are enjoying excellent returns well above the rate of inflation. For example a 25 year endowment has a return of 12.3% compared to inflation of 5.1%"
"By smoothing out the volatility of market fluctuations and investment returns through bonus declarations, with-profit policies continue to give policyholders good returns while reducing the risk. They are an ideal stepping stone between deposits and equity based investments."
Payouts in 2000
Payouts on unitised policies remain strong with increases in the additional bonus scales for all years money has been invested.
For a man aged under 75 investing Ł25,000 in a Norwich Union with-profits bond five years ago, the payout would be Ł40,648. This represents a yield of 10.2% . For the same investment ten years ago, the payout would be Ł59,104, representing a yield of 9%. Inflation over the period was 2.8% and 3.5% respectively.
For a man investing Ł200 per month into a ten year unitised personal pension plan the payout at age 65 will be Ł40,693, representing a yield of 10.2% (1999:10.1%).
Annual bonus rates
Annual bonus rates have been reduced for 2000 as part of an ongoing programme of managing bonus rates to reflect future lower investment returns.
The rates for the current series of unitised policies until further notice will be:
| Savings | 5.0% | (1999: 5.5%) |
| Pensions | 5.5% | (1999: 6.0%) |
The rates for conventional with-profits policies at 31/12/99 are:
| Savings | 1.5% on guaranteed benefit plus 2.75% on attaching bonuses (1999: 2.0% and 3.25%) |
| Pensions | 1.0% on guaranteed benefits plus 1.75% on attaching bonuses (1999: 1.5% and 2.5%) |
Richard Harvey concluded: "Against a wider background in recent years of lower interest rates and low inflation, our view of the longer-term investment outlook has led us to further adjust annual bonus levels. We believe annual bonuses need to be managed at a realistic level, which allows us the investment freedom to maximise the overall investment returns which can be passed on to policyholders through the payment of additional bonuses.
-ends-
Notes to Editors
BONUS TERMS EXPLAINED
There are two types of with-profits policies: Unitised and Conventional.
Unitised:
Contributions buy units in the With-Profits Fund. The unit price increases as the annual bonus is added on a daily basis.
The payout for a unitised with profits policy is made up of two elements: The value of units and additional bonus.
Value of units: This is the value of the units held.
Additional Bonus: At the date of claim the value of the units is compared with the total earnings of the policy. Any balance is made up by the declaration of an additional bonus. Scales are expressed as percentage of the unit value and vary according to the year the money was invested. Different additional bonus rates will apply to the units bought with the different years' contributions.
Conventional:
Contributions secure a guaranteed benefit. Bonuses are added to the guaranteed benefit annually and at the end of the policy term as detailed below.
The payout under a conventional with-profits policy is made up of three elements: the guaranteed benefit, annual bonus and additional bonus.
Guaranteed benefit (also known as sum insured): This is the amount payable at the date of the claim (e.g. maturity or earlier death). Bonuses are added to this amount over the term of the policy to make up the final payout.
Annual Bonus (also known as reversionary bonus): This is the amount added to a with-profits policy each year. It is a payment on account towards the full share of policy earnings which will be payable at the date of claim. For most policies it is expressed as one percentage applying to the guaranteed benefit and a further percentage applying to the bonus already added in previous years.
Additional bonus (also known as terminal bonus): At the date of claim the total of the guaranteed benefit and annual bonuses to date is compared with the total earnings of the policy. Any balance is made up through the declaration of an additional bonus. Additional bonus rates are expressed as a percentage of the guaranteed benefit and will form a scale of rates that will vary according to the year the policy was taken out.
Please note: The above is designed as an introduction to bonus terms. For details relating to specific policies, you should refer to the policy terms and conditions.
UNITISED BONUSES
Additional bonus rates have been improved as follows:
| Savings business | 1.1.00 | 1.1.99 |
| 1989 money | 10% | 6% |
| 1990 money | 20% | 14% |
| 1991 money | 27% | 23% |
| 1992 money | 34% | 32% |
| 1993 money | 27% | 23% |
| 1994 money | 23% | 19% |
| 1995 money | 25% | 19% |
| 1996 money | 18% | 15% |
| 1997 money | 11% | 9% |
| 1998 money | 3.5% | 2.5%(#) |
| 1999 money | 2.5%(#) |
| Pensions business | 1.1.00 | 1.1.99 |
| 1987 money | 20% | 15% |
| 1988 money | 19% | 15% |
| 1989 money | 12% | 10% |
| 1990 money | 21% | 15% |
| 1991 money | 32% | 27% |
| 1992 money | 41% | 34% |
| 1993 money | 31% | 26% |
| 1994 money | 27% | 22% |
| 1995 money | 30% | 21% |
| 1996 money | 20% | 16% |
| 1997 money | 12% | 10% |
| 1998 money | 5% | 3%(#) |
| 1999 money | 1%(#) |
N.B The additional bonus rate is a percentage increase to the unit value and varies according to the year the money was invested. (#: provided units have been held for at least a year).
UNITISED BONUS - PAYOUT TABLES
With-profits Bond
| Maturing 1.1.00 | Maturing 1.1.99 | Average rate of Inflation to December 1999 | |
| Effected 5 years ago: | Not then available | ||
| Unit value | Ł32,518 | ||
| Additional bonus | Ł8,130 | ||
| Total payout | Ł40,648 | ||
| Yield | 10.2% | 2.8% | |
| Effected 10 years ago: | Not then available | ||
| Unit value | Ł49,253 | ||
| Additional bonus | Ł9,851 | ||
| Total payout | Ł59,104 | ||
| Yield | 9.0% | 3.5% |
10 Year Self-Employed Pension
| Maturing 1.1.00 | Maturing 1.1.99 | Average rate of Inflation to December 1999 | |
| Unit value | Ł32,832 | Ł33,985 | |
| Additional bonus | Ł7,861 | Ł6,468 | |
| Total Payout | Ł40,693 | Ł40,453 | |
| Yield | 10.2% | 10.1% | 2.7% |
The bond examples above are based on a Ł25,000 single contribution made by a man under age 75 at outset. The pension example is as issued to a male for a monthly premium of Ł200, maturing at age 65, with a return of fund death benefit.
CONVENTIONAL BONUSES - PAYOUT TABLES
10 year endowment
| Maturing 1.1.00 | Maturing 1.1.99 | Average rate of Inflation to December 1999 | |
| Guaranteed benefit | Ł5,533 | Ł5,533 | |
| Annual bonus | Ł2,010 | Ł2,293 | |
| Additional bonus | Ł1,936 | Ł2,103 | |
| Total payout | Ł9,479 | Ł9,929 | |
| Yield | 8.8% | 9.7% | 2.7% |
25 year endowment
| Maturing 1.1.00 | Maturing 1.1.99 | Average rate of Inflation to December 1999 | |
| Guaranteed benefit | Ł14,260 | Ł14,260 | |
| Annual bonus | Ł36,756 | Ł38,145 | |
| Additional bonus | Ł38,502 | Ł45,632 | |
| Total payout | Ł89,518 | Ł98,037 | |
| Yield | 12.3% | 12.9% | 5.1% |
The endowment policy examples above are based on a male aged 30 next birthday, when the policy was started, for a monthly premium of Ł50.
Note: Ł30 a month endowment figures available on request.
Important notes:
Future bonus rates are not guaranteed and may vary, as they depend on profits yet to be earned. Past performance is not necessarily a guide to the future.
The value of investment linked funds can go down as well as up. The illustrative maturity amounts include periods of high inflation and high investment returns.
We may apply a market adjustment factor on encashments (except on maturity or death) which will reduce what you get back from the unitised with-profits fund.
Full written terms and conditions of Norwich Union products are available on request. Norwich Union Life & Pensions Limited is regulated by the Personal Investment Authority and only advises on its own products.