Issued for Financial Advisers only. This information has not been approved for use with customers.
Mid-year Bonus Announcement: 2010
We are pleased to say that despite the continued volatility of investment markets there has been an overall improvement in the performance of investment assets. Our With-Profits funds continue to consistently outperform average savings accounts and compare favourably with the balanced managed sector.
- We have been able to maintain regular bonus rates for our with-profits customers.
- We have also been able to increase our final bonus rates in most instances.
- Importantly, the Equity Backing Ratio (EBR) in our main fund, the Old & New With-Profit Sub Funds has increased by over 9% to 66.6%.
The EBR increase reflects improvements in the financial strength of our With-Profit funds in the early part of the year. Improvements in investment conditions reduced the capital required to support policyholder guarantees allowing us to invest a higher proportion of the fund in riskier asset classes.
This is good news as the EBR increase gives our customers the potential to yield greater long term investment returns, although these cannot be guaranteed and returns could fall, particularly in the short term.
Fund performance
A customer who invested £10,000 five years ago in an investment bond would have seen a return of 25.9%, equivalent to 4.7% per annum net of basic rate tax, which compares favourably to an average savings account which would have returned 12.5%, or 2.4% per annum.
The chart shows the returns of an investment bond invested in the main Aviva With-Profit Fund. The 10-year figure doesn’t include market value reductions because Aviva’s No MVR Guarantee is in place. Without this guarantee, the % return would have been 24.5%. The No MVR Guarantee is no longer available to new customers and was replaced on the 16 January 2002 with a 10 year money back guarantee. Other data sourced from Lipper Hindsight based on investment return at 1 August 2010. The average savings account used is the Moneyfacts Average up to 90 days’ notice, with a £10,000 minimum investment. Please note that past performance is not a guide to future performance.
The main difference between with-profits and most other investments is that the value is smoothed over the long term. The graph below shows the impact of smoothing on the returns from the main Aviva With-Profit Fund compared with the returns from an average savings account and the ABI UK All Companies sector average:
Click on graph to enlarge
This chart shows a £10,000 investment from 1 August 1993 in the main Aviva With-Profit Fund through an investment bond, against an average savings account and the ABI UK All Companies sector. The values depicted each month for the bond are the surrender values and include any application of early exit charges or Market Value Reductions (MVRs). Figures to 1 August 2010. Other data sourced from Lipper Hindsight based on investment return at 1 August 2010. The average savings account used is the Moneyfacts Average up to 90 days’ notice with a £10,000 minimum investment. Please note that past performance is not a guide to future performance.
Regular bonus rates
- Regular bonus rates for unitised policies have been maintained. This means the new business rate for bonds is 2.75%, which compares favourably with current savings rates
- For new pensions the regular bonus rate remains at 3.25%
- For offshore bonds, rates have been held at 3.5% (Sterling) and 3.25% (Euro/Dollar)
- With-Profit Income regular bonus rates remain unchanged at 2.5%, With- Profit Income customers also benefit from an additional bonus rate which varies depending on the year of investment
Final bonus rates
- For unitised life and pension policies, final bonus rates have been increased in most instances.
- For conventional life and pensions, including endowments, final bonus rates have either remained the same or increased slightly.
You can view the impact of this latest change on your clients’ policy by visiting www.aviva-for-advisers.co.uk and using the online valuation service. Alternatively, you can call our Adviser Helpdesk on 0845 9000 810. A complete set of with-profit rate tables is available at www.aviva.co.uk/adviser/with-profits/.
With-Profits Customer Website
Significant changes have been made to the With-Profits customer website, www.aviva.co.uk/savings-and-investments/with-profits, which launched on the 9th June 2010.
Improvements include;
- easier navigation to find the information customers want, where complex terminology is clearly explained
- an extensive question and answer search facility to answer customers’ questions on with-profits
- improved functionality to help find the right information documents for customers’ policies.
Please take some time to have a look at the website and the range of information it holds on our With-Profits funds.
Facts and figures
Figures in tables below show the impact of today’s rate changes, and include special bonus payments where applicable. Tables have been created for Bonds, Endowment and Pension policies.
The tables compare Aviva’s returns to both 1st January 2010 and 1st August 2010 against average savings (cash), ABI Balanced Managed sector average and ABI UK All Companies sector average.
| 1. Onshore Investment bond | ||||
| 5 year | 10 year | |||
| Date of investment | 01/01/2005 | 01/08/2005 | 01/01/2000 | 01/08/2000 |
| Valuation Date | 01/01/2010 | 01/08/2010 | 01/01/2010 | 01/08/2010 |
| Bond Value | £12,385 (4.4% pa) | £12,588 (4.7% pa) (11.9% return above cash) |
£14,956 (4.1% pa) | £14,654 (3.9% pa) (15.1% return above cash) |
| Cash | £11,376 (2.6% pa) | £11,245 (2.4% pa) |
£12,905 (2.6% pa) | £12,730 (2.4% pa) |
| Balanced Managed | £12,506 (4.6% pa) | £11,667 (3.1% pa) |
£11,374 (1.3% pa) | £11,570 (1.5% pa) |
| UK All Companies | £12,172 (4.0% pa) | £11,398 (2.7% pa) |
£10,774 (0.8% pa) | £11,185 (1.1% pa) |
These figures are based on a £10,000 investment. The 10 year figures don’t include market value reductions because our No MVR Guarantee was in place. The No MVR Guarantee is no longer available to new customers and was replaced on the 16 January 2002 with a 10 year money back guarantee. Without the No MVR Guarantee, the return would have been £12,462 in August 2010. Figures are net of basic rate tax and charges.
The reduction in 10 year with-profit payouts between January and August reflects the difference of bonus rates over the period of the investment. For example, in 2000 regular bonus rates were 5.75%, in 2010 regular bonus rates are 1.75%. Consequently, the 10 year cash-in value in August had seven months less of 5.75% and seven months more of 1.75% than the January policy, which is illustrated in the figures.
| 2. Mortgage endowment – 25 years | ||
| Date of investment | 01/01/1985 | 01/08/1985 |
| Valuation Date | 01/01/2010 | 01/08/2010 |
| ex-CGNU | £35,979** (6.6% pa) (51.2% return above cash) |
£35,877 (6.4% pa) (50.1% return above cash) |
| ex-CULAC | £30,679** (5.3% pa) (25.4% return above cash) |
£29,402 (5.0% pa) (23.4% return above cash) |
| ex-NULAP | £27,884 (4.6% pa) (14.0% return above cash) |
£27,884 (4.6% pa) (17.1% return above cash) |
| PM*** | £28,950 (4.9%) (18.3% return above cash) |
£29,208 (5.0%) (22.6% return above cash) |
| Cash* | £23,462 (3.7% pa) |
£23,820 (3.5% pa) |
| Balanced Managed | £31,274 (5.4% pa) |
£30,252 (5.2% pa) |
| UK All Companies | £32,633 (5.7% pa) |
£31,726 (5.5% pa) |
The above endowment examples are based on a male, non-smoker, aged 29 investing £50 a month for 25 years with the policy starting on 1 January 1985 and 1 August 1985. Figures are net of basic rate tax and charges.
*The average savings account used is the Moneyfacts Average up to 90 days’ notice, with a £10,000 minimum investment. The average savings account return includes simulated past performance for the period 01/01/1985 to 31/10/1985 as actual figures are not available
**These figures exclude any 6% mortgage endowment promise amount
***Investments not switched to CGNU mid-2005.
| Pensions | Retirement date value 01/01/10 | Retirement date value 01/08/10 |
| ex-CGNU | £88,902 (5.9% pa) (23.7% return above cash) |
£91,696 (6.1% pa) (30.9% return above cash) |
| ex-CULAC | £88,154 (5.7% pa) (22.7% return above cash) |
£89,694 (5.9% pa) (28.0% return above cash) |
| ex-NUL&P | £76,372 (4.4% pa) (6.3% return above cash) |
£76,303 (4.4% pa) (8.9% return above cash) |
| Cash | £71,862 (3.8% pa) |
£70,058 (3.6% pa) |
| Balanced Managed | £91,163 (5.5% pa) |
£88,537 (5.7% pa) |
| UK All Companies | £90,518 (6.0% pa) |
£89,273 (5.8% pa) |
The above examples are based on a male, investing £200 a month for 20 years from 1 January 1990 and 1 August 1990 with the policy maturing at age 65, with a return of fund death benefit. The figures at 01/01/2010 and 01/08/10 assume retirement at selected retirement age and therefore benefit from the MVR-free guarantee. Pension figures are gross of basic rate tax and after charges.
Investment in the Aviva Life and Pensions UK Ltd With-Profit Sub Funds
In 2009 Aviva’s main With-Profit Fund, (formerly known as CGNU), recorded an increase of 8.0% compared to minus 13.7% in 2008. The Aviva Life and Pensions UK Ltd With-Profit Sub Fund, (formally known as NULAP), saw an increase of 7.5%, and the Provident Mutual fund recorded an increase of 8.7% (all figures are net of tax).
At the end of 2009 Aviva had approximately 2.1 million with-profits customers of which 0.7 million are endowments, 0.9 million are pensions and 0.5 million are investment bonds. The total value of Aviva’s with-profits funds was approximately £49 billion.
The proportion in shares and property held in the main With-Profit Fund was 66.6% as at 30 April 2010. This ratio has been actively managed up from 57.3% as at December 2009.
| Asset mix as at 30 April 2010 (figures in brackets are Dec 2009): | ||
| Equities (UK & International)* | 48.2% | (39.7%) |
| Property | 18.4% | (17.6%) |
| Corporate Bonds (UK & International) | 25.2% | (18.5%) |
| Gilts | 5.6% | (15.7%) |
| Cash and cash alternatives** | 2.6% | (8.5%) |
*Includes equity type assets not quoted on the stock exchange.
**Includes a range of short-term deposits (cash) - similar to a bank/building society account – and money market securities (cash alternatives), which are interest generating investments, issued by governments, major banks and other institutions.
About Aviva
Aviva, the international savings, investments and insurance group serves 53 million customers worldwide with funds under management worth £379 billion (for the year ended December 2009).
In the UK, Aviva is a leading provider of life, pensions, investment, general insurance and health products. Aviva also provides roadside assistance through RAC. Products are distributed through a number of channels including IFAs, brokers, corporate partners and direct to customers via the internet.
Aviva's life and pensions business in the UK has a market share of 9.8% with leading positions in its key markets of savings, protection, and annuities.
Aviva’s news releases and a selection of images are available from the internet press centre at www.aviva.com/media.
WM06010 08/2010