Phoenix Group Annual With-Profits Bonus Rate Announcement
Monday 22 February 2016
Phoenix Group announces its with-profits bonus rates for
2015/2016




Estate distribution continues to uplift maturity values on most of our funds
Almost eight in ten (77% ) of our policies are now receiving an annual bonus (up
from less than 40% three years ago)
Over half of our policies (56% ) are seeing an increase in annual bonus rates
Current adverse market conditions impacting level of final bonuses and maturity
values
Commenting on the announcement, Andy Moss, Chief Executive of Phoenix Life, said: “We are pleased to be
able to increase annual bonus rates on many of our policies this year, despite difficult mark et conditions, and
continue to apply estate distribution to final payouts, a k ey differentiator between open and closed funds.”
Distribution of excess assets (estate distribution)
As a closed fund provider, many of our with-profits funds have excess assets (sometimes called the ‘estate’) in
addition to those needed to pay benefits to policyholders. For example, on the Pearl fund, now part of Phoenix
Life Assurance Ltd (PLAL), estate distribution is adding around 26% to the final pay -out on many policies.
Annual bonus rates
We have been able to increase annual bonuses in instances where funds have sufficient excess assets and
paying this additional bonus is not expected to constrain our investment flexibility. Once added, an annual bonus
cannot be taken away so it adds an additional level of guarantee for the policyholder. We have made increases to
annual bonus rates for some of our largest funds, most notably:





Traditional life policies in the Phoenix With-Profits Fund, which have increased from 2% to 2.5%
Traditional pension policies in the Phoenix With-Profits Fund, which have increased from 2.5% to 3%
Traditional UK life policies in the SPI With-Profits Fund, which have increased from 2.5% to 3%
Pre 1996 unitised with-profits pensions in the PLAL Pearl With-Profits Fund, which have increased from
2% to 3%
Unitised with-profits pensions in the Britannic With-Profits Fund, which have increased from 2.5% to 3.5%
As an example of what this means for policyholders, a typical 30 year old policyholder, paying in £64 per month
into a 25-year life endowment in the Phoenix with-profits fund, maturing in 2020 has already built up a guaranteed
minimum payout on maturity of £19,397, assuming that premiums continue to be paid. This year we have added
an annual bonus of 2.5% which would increase the guaranteed minimum benefit for this example by £485 to
£19,882. We currently expect to also add a final bonus to this policy when it reaches maturity, provided that
markets continue to perform in line with our expectations. Adding an annual bonus does not change the overall
amount we expect to pay when the policy matures. It does however increase the minimum amount of benefit that
is guaranteed, thereby giving the policyholder greater security should investment markets perform badly.
The annual bonus rates for some of our larger classes of policy are shown in Appendix 2.
also being paid on many of our smaller classes of policy.
Annual bonuses are
1
Phoenix Group Annual With-Profits Bonus Rate Announcement
Monday 22 February 2016
Final bonus rates
We will normally add a final bonus if the underlying value of the investments is greater than the benefits already
guaranteed. We continue to add final bonuses to policies in many of our funds, which may boost the final pay-out
significantly when the policy matures. For example, in the case of former Royal Life policies, now under Phoenix
Life Limited (PLL), 42% of the maturity pay-out on a 25 year life endowment policy will be through a final bonus
(unchanged from 42% last year).
Due to recent adverse market conditions, the level of final bonus on some funds has reduced which in turn is
impacting maturity values. There are also a significant number of policies where the benefits already guaranteed
are higher than the value of the underlying investments and for these policies we do not add a final bonus. These
guarantees can be very valuable; for example, a typical single-premium pension policy with PLL, originally sold by
Sun Alliance in 1991 to a 40-year old man for a 25-year term (maturing in 2016), provided a sum assured of
£17,302 in return for a premium of £3,390. This meant that the policy would produce a return to maturity of 6.7%
per annum after tax, even if no bonuses were added. In fact, annual bonuses were added to the policy during the
1990s when investment returns were good. More recently the annual bonuses have been very low but the overall
annual bonuses added of £4,303 mean that the value of the policy at maturity in 2016 is £21,605, even though no
final bonus is payable. This gives the policyholder an overall return after tax of 7.7% per annum.
Further examples of final bonus rates, and policy pay -outs, for some of our larger classes of policy are shown in
Appendix 1.
Market value reductions (‘MVRs’)
MVRs are in place to ensure that all policyholders receive a fair share of the fund and those that remain in the
fund are not disadvantaged. For example, within the NPLL fund certain policies receive a guaranteed annual
bonus of 4%, even if the underlying fund does not produce this return.
As with final bonus rates, adverse market conditions are impacting MVRs, with small MVRs being levied on some
policies surrendered before the selected retirement date. However, MVR-free guarantee dates, which provide
protection for policyholders against MVRs, exist for many of our policyholders. For example some with-profits
bonds, such as those originally sold by Britannic Assurance OB Fund, now part of PLL, still have future MVR -free
dates.
We ensure that any such date is communicated to policyholders in their annual statements and also via a specific
letter as they approach the date. We also allow policyholders a reasonable period to utilise these ‘windows’, often
longer than stated in their original policy wordings to ensure they don’t miss out.
Examples of the MVRs on some of our larger types of policies are set out in Appendix 3.
-EndsEnquiries
Shellie Wells
Head of Media Relations
Phoenix Group
020 3735 0922/07872 414 137
[email protected]
Shirley Collyer
Lansons
020 7294 3615
[email protected]
[email protected]
[email protected]
2
Phoenix Group Annual With-Profits Bonus Rate Announcement
Monday 22 February 2016
Appendix 1: Final bonus and policyholder returns for larger policy types+
25 Year Life Endowment (£50 per month, male aged 30 next at entry)
With Profits
Alba (Britannia Life)
Britannic
Phoenix WP (ex Royal Life / RSA)
SMA (ex Scottish Mutual)
SPI (ex Scottish Provident)
SAL (ex Sun Alliance)
Pearl 90:10
Maturity
Value
Final Bonus
Within Maturity
Value
Return on
premiums
(p.a.)
No.
maturities
2016H1
21,422
29,249
4,541
9,310
2.7%
5.0%
434
292
25,542
10,778
4.0%
1,018
30,667
29,544
12,740
8,591
5.3%
5.0%
127
932
20,225
4,632
2.3%
1,508
32,531
11,888
5.7%
1,116
Personal Pension – 20 Year Regular Premium (£200 per month)
With Profits Fund
Britannic
Maturity
Value
Final Bonus
Within Maturity
Value
Return on
premiums
(p.a.)
78,552
19,559
4.7%
No.
maturities
2016H1
100
Appendix 2: Annual bonus rates for larger policy classes+
Conventional with-profits life
On sum
assured
0.00%
With-profits fund
Products
On bonus
PLL Alba With-Profits Fund
All UK Life
PLL Britannic With-Profits Fund
Ex Britannic (1986 entry)
1.05%
0.00%
PLL Phoenix With-Profits Fund
Main UK Life
2.50%
2.50%
PLL SPI With-Profits Fund
UK Life
3.00%
3.00%
PLL SAL With-Profits Fund
UK Life
0.10%
0.10%
Pearl Assurance Limited 90:10
Ordinary Branch Compound
0.00%
0.00%
0.00%
Conventional with-profits pensions
With-profits fund
Products
PLL Alba With-Profits Fund
PLL Phoenix With-Profits Fund
PLL Scottish Mutual (SMA) WithProfits Fund
PLL SAL With-Profits Fund
London Life Limited With Profit
Pearl Assurance Limited 90:10
Pearl Assurance Limited 100:0
SERP
National Provident Life Limited
All UK Pension
UK Pensions
On sum
assured
0.00%
3.00%
On bonus
0.00%
3.00%
Main UK Pensions
0.00%
0.00%
Main UK Pensions
Pension Compound Pool 4
Ordinary Branch Compound
0.05%
0.00%
0.00%
0.05%
0.00%
0.00%
All
0.00%
0.00%
All
0.00%
0.00%
3
Phoenix Group Annual With-Profits Bonus Rate Announcement
Monday 22 February 2016
Unitised with-profits life***
On basic units
On bonus
units
Post 1995 Life
0.75%
0.42%
Pre August 2000
4.00%*
Post July 2000
3.50%*
With-profits fund
Products
Pearl Assurance Limited 90:10
PLL Phoenix With-Profits Fund
Unitised with-profits pensions***
On basic units
On bonus
units
Britannic OB UWP Pensions
3.50%
3.50%
Pearl Assurance Limited 90:10
Personal Pensions v1 (pre
1996)
3.00%
3.00%
PLL Phoenix With-Profits Fund
Linked to Profit Plus Fund
0.10%
0.10%
PLL Scottish Mutual (SMA) WithProfits Fund
Series 1 & 2 accumulation
4.00%**
Other series accumulation
4.50%*
Series 1
4.00%**
Series 2
5.50%*
Series 1 ordinary units
4.00%**
With-profits fund
Products
PLL Britannic With-Profits Fund
PLL SPI With-Profits Fund
National Provident Life Limited
Appendix 3: Current MVRs (February 2015) for larger policy classes+
Unitised With Profits Life (Single Premium)
With Profits Fund
Product
10 year
15 year
20 year
Pearl 90:10
Post 1995
Life
0.00%
0.00%
0.00%
n/a
0.00%
n/a
Phoenix WP (ex Royal Life / RSA)
SPI WP (ex Scottish Provident)
Scottish Mutual With-Profits Fund
Pre August
2000
Post July
2000
UK UWP
Life
UWP
Series IV
-2.00%
-3.40%
†
†
-2.00%
-3.40%
†
†
-2.00%
†
n/a
4
Phoenix Group Annual With-Profits Bonus Rate Announcement
Monday 22 February 2016
Unitised With Profits Pensions (Single Premium)
With Profits Fund
Britannic With Profits
Phoenix WP (ex Royal Life / RSA)
SPI WP (ex Scottish Provident)
Scottish Mutual With-Profits Fund
National Provident Life
Product
Ex Britannic
Pensions
Solutions
UK UWP
Pensions
UWP
Series I&II
Series 1
ordinary
units
10 year
-5.05%†
15 year
-6.95%†
20 year
-3.79%†
n/a
n/a
n/a
-2.50%†
-2.50%†
-1.00%†
-1.30%†
-1.30%†
-1.40%†
-29.7%
-37.8%
-37.2%
+Other rates may apply for other policy classes
*No bonus units, bonus is applied as an increase in unit price.
**Guaranteed minimum rate. No bonus units, bonus is applied as an increase in unit price.
***Bonus rates on most unitised with-profits policies may be changed at any time.
† These MVRs only reduce the final bonus, but some final bonus is still being paid
Important additional information:
1.
2.
3.
Phoenix Life has more than 100 legacy brands within the life company so customers may be in a fund with a
different name to the product they originally took out. For a full list of legacy brands – please visit our website
h//www.thephoenixgroup.com/site-services/who-services -your-policy.aspx.
The value of investments can go down as well as up and is not guaranteed, past performance is not a guide
to the future. It is possible that you may not get back the amount you put in.
This press release is intended for use by the media only. If you are a policyholder and would like to find out
information about your specific policy then please c ontact the customer number listed on your annual
statement or visit our website for the details at www.phoenixlife.co.uk
Background to the closed fund industry:
Phoenix operates 13 with-profits funds in the UK which are all closed to new business. The funds were all closed
to new business by their previous owners, in many cases after experiencing difficulties. By bringing together a
number of closed funds under one umbrella, Phoenix aims to apply its experti se to provide a fair outcome for its
with-profits policyholders, whilst balancing this against the need to maintain adequate security for policyholder
benefits, and recognising the challenging history that many of the funds experienced under their previous
ownership.
The Phoenix Group:
The Phoenix Group is the UK’s largest specialist consolidator of closed life funds with over 5 million policyholders
and £51 billion of assets held by the Group’s life companies. The Group employs around 750 people split across
Phoenix Life and Group.
As at 31 December 2014 there were just over 5 million policies in force across the Group.
5
Phoenix Group Annual With-Profits Bonus Rate Announcement
Monday 22 February 2016
This figure includes:
•
•
•
•
•
Over 2.2 million whole-of-life and endowment policies,
2 million pensions
Nearly 416,000 annuities in payment
Over 270,000 pure protection policies (term assurances, critical illness and income protection)
Over 151,000 investment bonds
Split across:
•
•
•
•
•
Nearly 2.1 million Non-Profits policies. (This includes policies which were originally With-Profits
but which have been paid-up and no longer receive bonuses)
Over 1 million Traditional With-Profits policies,
Over 980,000 Unit Linked and Index Linked policies
Over 900,000 Unitised With Profits policies
6