Article date: 3 September 2008
As a result of poor investment conditions since the beginning of 2008, Norwich Union has today announced that it is reducing payouts on its with profits investments through a reduction in final bonus rates. The changes came into effect on 1 September 2008. No changes are being made to regular bonus rates and Market Value Reductions (MVRs) are not being introduced.
John Lister, chief actuary at Norwich Union, said: "We have reduced final bonus rates because equity markets, commercial property and corporate bonds have fallen significantly in value since the beginning of the year.
"We are taking responsible action to reflect the market movements over the past nine months. We need to ensure that those policyholders who leave the fund do not take more than their fair share at the expense of those customers who remain in the fund.
"Despite market conditions, Norwich Union's With-Profit Fund* has performed well against average savings accounts and the FTSE All-Share over the short, medium and long term. This demonstrates that smoothing protects customers from the extremes of stock market volatility and that well managed with-profits investments have good prospects for long-term growth.
"In addition to this performance, many customers in the CGNU and CULAC funds will be eligible for a reattribution payment in the near future.
"We remain committed to with-profits and see it as a good investment choice for many customers."
Figures at a glance:
- The CGNU fund achieved an overall return of -7.3% before tax as at 30 June 2008.
- A £10,000 investment in Norwich Union's Portfolio investment bond has returned 44% over five years. This is an annualised return of 7.56%, compared to average savings account returns of 2.87%
- Policy value changes
- Cash-in value for a £10,000 single contribution 10-year bond is £15,077 compared to £14,522 they would have received had they surrendered 1 September 2007
- A 25-year £50 a month mortgage endowment maturing 1 September 2008 will pay £42,885, compared to £39,214 they would have received had they surrended 1 September 2007
- A 15-year £200 a month pension maturing 1 September 2008 will pay £56,038, compared to £52,385 they would have received had they surrendered 1 September 2007.
Figures for investment and policy returns relate to the CGNU with-profit fund only. Returns quoted assume the policies mature on 1 September 2008. Endowment example is for a 29 year old male at the outset of the policy. 2008 payouts include the first special bonus payment announced earlier this year.
* a fund consisting of equities, property and bonds
Press office contacts:
Louise Soulsby 01904 452617
David Gwyer 07800 693187
Notes to editors:
About Norwich Union
Norwich Union is the UK's largest insurer. It is a leading provider of life, pensions and investment products and one of the largest financial adviser (FA) providers. FAs provide over 70% of the company's long-term savings business in the UK. Norwich Union's news releases and a selection of images are available from Aviva's internet press centre at www.aviva.com/media.
In the summer of 2009 Norwich Union will change its name to Aviva. Aviva is the world's fifth largest insurance group and operates in 27 countries. Aviva is to become the customer brand worldwide, thus enabling the company to compete even more effectively on a global scale for the benefit of customers, staff, business partners and shareholders.