Norwich Union launches 'Portfolio'

Article date: 16 June 2003

In a demonstration of its strong confidence in the investment market, Norwich Union will launch a new investment bond called "Portfolio" on 7 July 2003, which will offer access to explicitly charged with-profit and unit linked funds, as well as two new distribution funds.

From launch, Portfolio will be supported by a special offer ofan extra allocation of 1.5% to all investors (see Notes to editors).

The new bond - a lump sum investment bond with no fixed term - will replace the existing "Portfolio Bond" and "Bond 2000" products in Norwich Union’s range for new business.

The new bond:

  • Has clear and easy to understand charges - explicit charging provides investors with a clear picture of the charges applicable to their investment
  • Continues to support with-profits - offering the benefits of smoothed investments via two with-profit funds
  • Opens up new markets - the launch of two new distribution funds aims to meet the increasing demand from investors for a competitive level of income but with a broad spread of risk
  • Offers valuable guarantees - for investments into the With-Profit Fund, there is a 10th anniversary money-back guarantee. On the Guaranteed Fund (see "Guaranteed Fund" below),there is a money-back guarantee on the 5th anniversary
  • Is simpler and more flexible - offering a wide choice of internal and external funds and a choice of two charging structures within a single bond.

Commenting, Neil Davies, head of investment product development at Norwich Union, said: "As we see evidence of confidence beginning to return to the market, we think the time is right to take the initiative to reposition and modernise our investment bond proposition.

"With this launch, we’re demonstrating our confidence in the investment market, and at the same time meeting new expectations for simple, easy to understand products.

"It also signals our aim to support more transparent with-profits products and establish the Norwich Union brand firmly in the distribution fund market.

"We believe that the fund range we are offering, the choice of two explicit charging structures and our clear, jargon-free communications will provide an investment product that is attractive to all types of investors. As it has a flexible range of commission options, it is also a bond that all advisers can sell, including those who are fee-based."

In more detail, the key features of the new Portfolio bond include:

Wide choice of funds

Portfolio offers a range of funds with various risk profiles, and some which have capital guarantees, which should make it appealing to a wide range of potential investors.

Investors have the opportunity to select a diverse portfolio of funds from an enhanced offering of 31 internal funds (including distribution funds, with-profit funds and a Guaranteed Fund) aswell as 52 external funds managed by 12 industry-renowned fund managers.

The bond also offers the opportunity for investors to switch funds at any time, including four free switches each policy year.

The single bond structure simplifies the offering for IFAs and incorporates a range of options which are flexible enough to enable investors to tailor their investment to their lifestyle requirements and the level of risk that they are prepared to take.This flexibility covers most investors’ needs, and we believe it will have appeal to a wide range of customers.

With-profits with explicit charges

Norwich Union firmly believes that with-profits remains a key part of the investment mix for many customers.

While the fundamentals of with-profits remain the same, and still continue to deliver the benefits of investing in a managed fund with smoothing of returns, Portfolio improves the openness and transparency of with-profit funds by moving to explicit charging, with bonus rates shown as "gross" (ie 4.25%, which is the existing regular bonus rate of 3.25% plus the 1% management charge). This provides investors with a clear picture of the charges applicable to their investment.

New with-profits investors with Norwich Union can be assured that they will benefit from any future investment growth without feeling the effects of the poor equity returns seen over the last three years.

Distribution funds

Access to distribution funds within an investment bond wrapper, offering a choice of growth, income or a combination of both, is likely to be a very attractive option for a large proportion of IFAs’ clients.

The two Norwich Union distribution funds being launched - the Balanced Distribution Fund and the Managed High Income Fund - are aimed at meeting the growing demand amongst investors for a regular income which is higher than that which can typically be obtained from a bank/building society savings account.

Unlike other providers, Norwich Union is offering investors access to these two funds through Portfolio rather than through a stand- alone distribution bond. This means that clients can switch in and out of these funds and can also invest in other funds as well as investing in one or both of the distribution funds.

Norwich Union believes that distribution funds complement with-profits as they are an investment option for investors looking fora broad spread of risk, and build on Norwich Union’s expertise in managing fixed interest and property.

Guaranteed Fund

With the launch of Portfolio, Norwich Union is also offering an explicitly charged Guaranteed Fund, with unlimited growth potential and a built-in money back guarantee.

It has a broad mix of assets, including property and overseas equity as well as UK equities, fixed interest and cash.

This actively managed fund spreads the risk of the investment and can change to suit changing market conditions.

Dual charging structure within a single life bond

Portfolio offers, under a single bond structure, a choice of two explicit charging options (see Notes to editors).

The features, benefits and fund choice are exactly the same, whichever charging structure is chosen.

Visible charges

Management charges will be totally visible to investors, rather than being incorporated in the unit price or with-profits bonus rate.

All charges will be taken from the product rather than the fund, by cancelling units on a monthly basis. Unit statements will clearly show all the charges associated with the investment, enabling investors to see exactly what the charges are both at the point of sale and following sale.

This is not only a major step forward for with-profits; Norwich Union believes this is the first time that investors will be able to see the charges on their unit-linked funds separated out clearly.

Transparent terms and conditions

Literature has been designed to be clear and jargon-free, and to eliminate any small print.

-ends-

Press office contacts:

Ian Beggs - 08703 66 68 71 / 07790 487533 James Evans - 08703 6668 78 / 07790 487105 Louise Goffee - 08703 66 68 70 / 07810 057362Lorna Wiltshire - 08703 66 68 78 / 07788 471849

Notes to editors

  • Portfolio has a choice of the following two explicit charging structures:
    1. Step Down Option – this has a limited administration charge for the first five years and a management charge throughout the term, which depends on the funds chosen. Allocation rates of up to 101% will apply (up to 102.5% including the initial special offer terms). This is the same charging structure that applies on the current "Portfolio Bond".
    2. Level Option – this is a brand new charging structure that has management charge throughout the term, which depends onthe funds chosen and the amount invested. In effect, the more invested, the lower the charge, with the lowest charge applying to investments of £50,000 or more. The allocation rate is always 100% (101.5% including the initial special offer terms). This is similar to, but simpler than, the current "Bond 2000" charging structure.
  • Early exit charges apply in the first five years of the investment. The first year charge will be higher while the special offer is in force.
  • Terms and conditions apply to the guarantees under Portfolio. Details can be obtained from the Norwich Union Press Office.
  • On the Guaranteed Fund, withdrawals and switches from the fund, if any, will reduce the guarantee in proportion to the number of units cancelled.
  • The value of an investment can go down as well as up and is not guaranteed, apart from the fund-related guarantees mentioned above.
  • Norwich Union is the UK’s largest insurer. It is aleading 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 image sare available from Aviva plc's internet press centre at www.aviva.com/media.

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