Norwich Union has reviewed the investment strategy of the Provident Mutual with-profit fund and has reduced the fund's holdings in shares and property from 24% to 10%.
Innovative offer for policyholders to earn CGNU with-profit fund returns
Norwich Union has reviewed the investment strategy of the Provident Mutual with-profit fund and has reduced the fund's holdings in shares and property from 24% to 10%. This change is necessary to ensure that the substantial underlying guarantees on the fund are better matched against certainty of investment returns. As a result of this move, Norwich Union has changed the mid-range projection rate for Provident Mutual mortgage endowment policies from 6% to 4%.
Norwich Union is offering Provident Mutual mortgage endowment policyholders the innovative option to take advantage of future investment returns from the stronger CGNU with-profit fund. This fund has a considerably higher equity backing ratio of 67% and therefore offers the potential of higher investment returns in the longer term. In 2003 the CGNU fund earned 12.1% (before tax) and, in 2004, 11.5% (before tax). The mid-range projection rate for the CGNU fund for mortgage endowments is 6%.
Provident Mutual policyholders who select the special option will retain the benefits and any guarantees which they have on their individual policies.
Provident Mutual mortgage endowment policyholders should take no action until they receive their mailing during March 2005. Policyholders must respond to the mailing by 30 June 2005 in order to take up this option. Norwich Union is urging policyholders to seek financial advice prior to making any decision.
Mike Urmston, chief actuary of Norwich Union, said: "We have reduced the fund's holdings in shares and property to ensure that the substantial underlying guarantees on the fund are better matched against certainty of investment returns.
"We have also found an innovative way to offer Provident Mutual mortgage endowment policyholders the opportunity to potentially improve their longer-term returns and benefit from the investment return of the stronger CGNU with-profit fund. This option firmly underlines our commitment to treat customers fairly and look for new ways to help our policyholders. We are urging customers to take advice and consider the switch as one of the ways to look at the opportunity to mitigate any endowment shortfall."
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Notes to editors
- Norwich Union has 40,000 Provident Mutual with-profit mortgage endowment policyholders. The letters to policyholders will, for the first time, include time bar details in relation to mortgage endowment complaints. The return on the PM fund in 2004 was 7.6% before tax and in 2003 it was 7.1% before tax.
- 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's internet press centre at www.aviva.com/media.