UK: Norwich Union offers monthly fixed income plan

From 21 July 2003, Norwich Union will offer the "Monthly Fixed Income Plan", a new tranche based, lump sum investment plan offering an attractive level of fixed monthly income.

The key features of the Plan are:

• An attractive fixed monthly income rate of 0.47% (or 5.75% annually through a new investment in an Isa), which compares favourably against high street bank and building society savings rates (albeit with greater risk)
• Ability to tax-shelter part, or all, of the investment in an Isa (see "Tax Sheltering Options" below)
• No maximum investment limit (minimum investment of Ł3,000)
• A fixed, five year investment term, which has a commencement date (strike date) of 19 September 2003, and an offer period that runs from 21 July through to 15 September
• The return of capital at the end of the five year term is not guaranteed and is subject to certain conditions being met (see "Managing The Risk To Capital" below)
• .

Monthly Fixed Income Plan should appeal to investors who:

• Are looking for an attractive rate of income, against the current backdrop of low interest rates
• Are willing to take some risk with their investment but are concerned about managing the level of risk to capital
• Have other investments, and are looking to re-invest
• Are keen to tax-shelter some, or all, of their investment in an Isa or Pep.

Commenting, Neil Davies, head of investment product development at Norwich Union said: "Monthly Fixed Income Plan endeavours to provide investors with an attractive rate of income in the prevailing economic conditions.

"We believe the time is right for a big named brand such as Norwich Union to offer this type of plan, which meets the obvious and increasing demand for an attractive level of fixed income."

Competitive Income

Gross monthly income is fixed at 0.47% per month.

For new Isa investments only (not transfers or direct investments), there is an Annual Option – where income of 5.75% is paid annually. For new Isa investments, and Isa/Pep transfers in, there is a roll up option - the Single Option - which will pay a single payment equivalent to 31.28% of the original amount invested at the end of the full five year term.

Outside of an Isa, income is paid net of 20% tax. Higher rate tax payers will have an additional tax liability that they should declare on their tax return. Non tax payers, and lower rate tax payers, may be able to reclaim all or some of the tax paid on their investment.

Tax-Sheltering Options

Investors can choose to shelter some, or all, of their investment in a mini or maxi stocks and shares Isa, subject to the Government’s prescribed limits.

Existing Isas and Pep investments can be transferred into the Plan, although these transfers must be for the full value in any tax year - no partial transfers are allowed. Investors must have completed transfer applications by no later than 15 August 2003.

Over and above the Government’s Isa/Pep limits, there is no maximum investment limit into the Monthly Fixed Income Plan.

Managing The Risk To Capital

Capital will be returned in full unless both:

• The FTSE 100 Index falls below 70% of its starting level at some point during the five year term, and
• The FTSE 100 Index is below its starting level at the end of the five year term.

Return of capital is based on 100% of the amount originally invested and will be returned at the end of the five year period provided that both of the above conditions have not been breached.

In other words, if the FTSE 100 Index is at 4,000 on 19 September 2003 (the commencement date), it would need to fall to 2,800 or less during the five year period, and also fail to recover its starting position by the end of year five, for a breach to occur.

Where a breach does occur, investors will lose 1% of their investment for every 1% that the FTSE 100 Index is below its starting level at the end of the five year term.

Example Scenarios:

1. Partial Capital Repaid:
   FTSE 100 level at strike date - 4000
   FTSE 100 level lowest point during term - 2000 (70% barrier breached)
   FTSE 100 level at maturity - 3000 75% of original capital repaid
2. Capital Fully Repaid:
   FTSE 100 level at 19 September 2003 - 4000
   FTSE 100 level lowest point during term - 2000 (70% barrier breached)
   FTSE 100 level at maturity - 5000
   FTSE 100 fell below 70% but finishes above starting level
3. Capital Fully Repaid:
   FTSE 100 level at 19 September 2003 - 4000
   FTSE 100 level lowest point during term - 3000 (70% barrier not breached)
   FTSE 100 level at maturity - 3500
   FTSE 100 finishes below starting level but lowest point 75%

(The underlying assets are provided by an A+ rated company. An A+ rating from Standard and Poor’s means the borrower is likely to repay their debt at the end of the five years, but this is not guaranteed. If they do not repay the debt, Norwich Union will not guarantee either to pay the income or to return the investor's capital.)

Charges

There is an implicit initial charge of 6% which the product terms take full account of. There are no further charges.

-ends-

Press office contacts:

Ian Beggs - 08703 66 68 71/07790 487533
James Evans - 08703 66 68 78/07790 487105
Louise Goffee - 08703 66 68 70/07810 057362
Lorna Wiltshire - 08703 66 68 78/07788 471849

Notes to editors

• The minimum age for investors is 18.
• The underlying assets are provided by a financial institution which has an A+ credit rating from Standard & Poor’s. Norwich Union is not guaranteeing this plan.
• The Monthly Fixed Income Plan is not suitable for investors who may require access to their investment before the end of the five year term. However, investors can gain access to their money at any time within the first five years; there will be no early exit penalty - investors will receive the market value of their investment. This may be considerably less than the amount invested. If the investor dies before the end of the term, their beneficiaries will receive the value of the underlying assets, which may be considerably less than the original investment.
• Norwich Union is the UK’s largest insurer. It is a leading provider of life, pensions and investment products and one of the leading IFA providers. IFAs provide around 70% of the company’s long- term savings business.
• 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 plc's internet press centre at www.aviva.com/media.