For immediate release: 24 February 2015
Phoenix Group announces its with-profits bonus rates for 2014/2015
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Estate distribution continues to rise in most of our funds, increasing maturity values.
Over 75% of our policies are now receiving an annual bonus (up from less than 40% two
years ago).
Final bonus payments are rising in many funds
MVRs are now zero on majority of funds
Commenting on the announcement, Andy Moss, Chief Executive of Phoenix Life, said:
“The ability to distribute inherited estate is a key differentiator between open and closed
funds. We are pleased to have again increased the levels of estate distribution at the start of
2015 in most of our funds, which boosts the payouts we make to our policyholder. It is also
pleasing to see increased amounts of annual bonus being added to many of our policies.”
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. Due to
improved market conditions and management actions taken this year, we are again able to
further increase the amount of this estate we can pay 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
Phoenix’s view remains that, where we can, it is better to give priority to final bonuses rather
than paying an annual bonus. This allows us more flexibility in managing the funds, because
adding an annual bonus increases the guaranteed benefits. Some of our funds have high
levels of guaranteed benefits and therefore operate a conservative investment policy to
ensure that they will always have enough assets to meet these guarantees, even if
investment markets perform badly.
However, we have been able to increase annual bonuses in instances where funds have
performed well 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:
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Traditional life policies in the Phoenix With-Profits Fund, which have increased from 1
to 2%
Traditional pension policies in the Phoenix With-Profits Fund, which have increased
from 2% to 2.5%
Traditional UK life policies in the SPI With-Profits Fund, which have increased from
1.5% to 2.5%
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Pre 1996 unitised with-profits pensions in the PLAL With-Profits Fund, which have
increased from 0% to 2%
Unitised with-profits pensions in the Britannic With-Profits Fund, which have
increased from 2.5% to 3%
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 £19,016,
assuming that premiums continue to be paid. This year we have added an annual bonus of
2% which will increase the guaranteed minimum benefit by £381 to £19,397. 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.
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 in many of our funds,
which can 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 (up from
35% last year).
However, 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 1990 to a 40-year
old man for a 25-year term (maturing in 2015), initially provided a sum assured of £14,078 in
return for a premium of £2,772. This meant that the policy would produce a return to maturity
of 6.7% per annum, 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 in the past, of £4,226,
mean that the value of the policy at maturity in 2015 is £18,304, even though no final bonus
will be payable. This gives the policyholder an overall return 7.8% 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 have generally disappeared on almost all of our funds as a result of improved market
conditions. Where they remain, they are primarily on funds where the value of the guarantee
payable on maturity is high compared to the value of the underlying units in the fund.
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
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policies receive a guaranteed annual bonus of 4%, even if the underlying fund does not
produce this return.
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.
-EndsFor more information please contact:
Shellie Wells
Head of Media Relations
Phoenix Group
020 3735 0922/07872 414 137
[email protected]
Shirley Collyer
Lansons
020 7294 3615
[email protected]
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
Maturity
Value
Final Bonus
Within Maturity
Value
Return on
premiums
(p.a.)
No.
maturities
2015H1
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
22,082
36,419
4,483
10,962
3.0%
6.5%
256
402
30,930
32,142
33,648
23,275
31,231
12,947
13,680
10,601
5,508
10,285
5.4%
5.6%
6.0%
3.3%
5.4%
865
440
1,151
3,338
927
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Personal Pension – 20 Year Regular Premium (£200 per month)
With Profits Fund
Maturity
Value
77,146
Britannic
Terminal Bonus
Within Maturity
Value
18,746
Return on
premiums
(p.a.)
4.5%
No.
maturities
2015H1
100
Appendix 2: Annual bonus rates for larger policy classes+
Conventional with-profits life
With-profits fund
Products
PLL Alba With-Profits Fund
PLL Britannic With-Profits
Fund
PLL Phoenix With-Profits
Fund
PLL SPI With-Profits Fund
PLL SAL With-Profits Fund
Pearl Assurance Limited
90:10
All UK Life
On sum
assured
0.00%
On bonus
0.00%
Ex Britannic (1986 entry)
1.00%
0.00%
Main UK Life
2.00%
2.00%
UK Life
UK Life
Ordinary Branch
Compound
2.50%
0.10%
2.50%
0.10%
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)
With-Profits 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
On sum
assured
0.00%
On bonus
0.00%
UK Pensions
2.50%
2.50%
Main UK Pensions
0.00%
0.00%
Main UK Pensions
Pension Compound Pool
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Ordinary Branch
Compound
0.05%
0.05%
0.00%
0.00%
0.00%
0.00%
All
0.00%
0.00%
All
0.00%
0.00%
On basic units
On bonus
units
Post 1995 Life
0.75%
0.42%
Pre August 2000
Post July 2000
2.50%*
1.50%*
Unitised with-profits life***
With-profits fund
Pearl Assurance Limited
90:10
PLL Phoenix With-Profits
Fund
Products
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Unitised with-profits pensions***
On basic units
On bonus
units
3.00%
3.00%
2.00%
2.00%
Linked to Profit Plus Fund
0.10%
0.10%
Series 1 & 2 accumulation
Other series accumulation
Series 1
Series 2
Series 1 ordinary units
4.00%**
4.50%*
4.00%**
4.00%*
4.00%**
With-profits fund
Products
PLL Britannic With-Profits
Fund
Pearl Assurance Limited
90:10
PLL Phoenix With-Profits
Fund
PLL Scottish Mutual (SMA)
With-Profits Fund
Britannic OB UWP
Pensions
Personal Pensions v1 (pre
1996)
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
Pearl 90:10
Phoenix WP (ex Royal Life / RSA)
SPI WP (ex Scottish Provident)
Scottish Mutual With-Profits Fund
Product
Post 1995
Life
Pre August
2000
Post July
2000
UK UWP
Life
UWP
Series IV
10 year
15 year
20 year
0.00%
0.00%
0.00%
n/a
0.00%
n/a
0.00%
0.00%
0.00%
0.00%
n/a
n/a
10 year
0.00%
15 year
0.00%
20 year
0.00%
n/a
n/a
n/a
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
-27.3%
-41.5%
-30.3%
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
+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.
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Important additional information:
1. 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 http://www.thephoenixgroup.com/site-services/whoservices-your-policy.aspx.
2. 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.
3. 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 contact 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 expertise 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 in excess of £57billion of assets under management.
As at 31 December 2013 there were just over 5.3 million policies in force across the Group.
This figure includes:
 Over 2.4 million whole-of-life and endowment policies
 Nearly 2 million pensions
 Over 430,000 annuities in payment
 Nearly 350,000 pure protection policies (term assurances, critical illness and income
protection)
 Nearly 140,000 investment bonds
Split across:
 Nearly 2.3 million Non-Profits policies. (This includes policies which were originally
With-Profits but which have been paid-up and no longer receive bonuses)
 Over 1.1 million Traditional With-Profits policies
 Over 1 million Unit Linked and Index Linked policies
 Nearly 900,000 Unitised With Profits policies
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