Investment bond enhancements

Article date: 12 June 2000

From 26 June, investors will benefit from enhancements toNorwich Union’s range of investment bonds - the BicentenaryBond, Norwich FlexiBond and the Norwich Bond 2000.

The enhancements include:

  • Improved terms for investments of £15,000 up to £25,000 forthe Bicentenary Bond and Norwich FlexiBond.cc
  • The opportunity to take out additional bonds, with enhancedguaranteed extra bonuses linked to the size of the originalinvestment in the Bicentenary Bond and the Norwich Bond 2000.
  • Increased investment choice for Bicentenary Bond and NorwichFlexiBond customers with the addition of four new funds; theHigher Income Bond, Ethical UK Equity, UK Equity Income and UKGrowth funds.
  • The extension of the age limits under the Bicentenary Bond andNorwich FlexiBond. Now available from birth to age 90.
  • Reduced early cash in charge under the Norwich Bond 2000 foryears 3,4 and 5.

Julie Chong, Norwich Union’s marketing manager (investmentbonds), commented, "This package of enhancements will make ourbonds even better value for investors.

"The improved terms for investments of £15,000 up to £25,000 forthe Bicentenary Bond and Norwich FlexiBond make these products evenmore appealing to investors.

"The ability to make additional investments to the NorwichFlexiBond has proved very popular, so we’ve extended this toour other bonds. Bicentenary Bond and Norwich Bond 2000 investorscan now buy additional bonds and will benefit from an enhancedguaranteed extra bonus rate. The rate will be based on the originalinvestment, rather than just on the additional lump sum."

Chong explained, "For example, if a Bicentenary Bond customer,who originally invested £50,000, buys an additional bond for£5,000, they will benefit from a guaranteed bonus rate of 4.2 percent on the additional amount, rather than 0.5 per cent which wouldapply to a single £5,000 investment."

All existing Bond 2000 investors and holders of BicentenaryBonds bought from September 1999 onwards, can take advantage ofthis additional bond feature.

The investment choice under the Norwich FlexiBond andBicentenary Bond has been extended with the addition of four newfunds, bringing the total number to 22. Investors can now opt forNorwich Union’s UK Equity Income Fund which has returnedfirst quartile performance in the first three months this year andthe UK Growth Fund which has consistently achieved leadingperformance with top decile returns over 3 and 6 months, and 1, 3and 5 years.*

The Higher Income Bond Fund is a high yielding corporate bondfund which is invested in a portfolio of high yielding bonds bothin the UK and internationally. And the increasing demand forethical investment philosophy and good performance has been metwith the addition of the Ethical UK Equity Fund.

For more information on Norwich Union’s investment bondsreaders should speak to their independent financial adviser or callNorwich Union on 0345 606 606.

-ends-

Press contact: Liz Nicholson 01603 688 263.

*Source: Hindsight Basis: bid to bid net income reinvested -performance figures related to the underlying OEICs.

The Norwich Bond 2000 – product summary

The Norwich Bond 2000 is a lump sum investment bond whichinvests in the With-Profits Fund. The bond is automatically writtenas a series of up to 250 identical policies with a minimuminvestment in each of £1,000.

Minimum investment: £5,000 (£10,000 for regular withdrawals)

Guaranteed Extra Bonus#:

Investment bandRate(%)
£100,000 and over3.0
£50,000 - 99,999.992.5
£20,000 - 49,999.991.6
£15,000 - 19,999.991.0
£5,000 - 14,999.990.0

Headline rate: This consists of the current 5.0% annual bonusrate (which can change at any time), plus a guaranteed extra bonusrate. There are no charges deducted from these headline rates. Thisapplies to a life aged under 80 at outset. Potentially subject toan early cash-in charge in the first 5 years and/or a marketadjustment factor.

Investment bandRate(%)
£100,000 and over8.0
£50,000 - 99,999.997.5
£20,000 - 49,999.96.6
£15,000 - 19,999.996.0
£5,000 - 14,999.995.0

Current annual bonus rate: 5.0%

Additional (terminal) bonus:** 1.25% for monies invested in theWith-Profits Fund during 2000, until further notice.

Additional investments:+ Additional investments can be made intoa separate bond. Each additional bond may receive a guaranteedextra bonus rate determined by the amount invested in the originalbond (this applies to all existing bondholders).

Minimum/Maximum ages: 12-90 attained. No minimum age if plan iswritten on a life of another basis and in trust for the benefit ofa child. Maximum age applied to the youngest life on a joint lifepolicy.

Loyality bonuses: 3.25% loyalty bonus rate will be appliedagainst the number of units remaining in the bond on the businessday prior to the tenth anniversary and on the business day prior toevery subsequent fifth anniversary. The bonus will be paid by theaddition of units.

Death benefit: 101% of the sum of the value of units plus anyadditional bonus. No early cash-in charge or market adjustmentfactor will apply. Joint life bonds will be written on a seconddeath basis.

Regular withdrawals: Maximum: 6.5% a year of either:

  1. the original investment specified at outset, or
  2. the value of units plus any allowance for additional bonus atthe time we receive the request.

Minimum withdrawal is £50 for each payment taken monthly,quarterly, termly, half-yearly or yearly. Withdrawals can only betaken on the 1st or 15th of each month and are free from theapplication of the early cash-in charge and any market adjustmentfactor.

Fund Management Charge: Currently 1.5% each year taken daily isallowed for when annual and additional bonus rates are declared forthe With-Profits Fund. No units are encashed to pay for thischarge.

Allocation rates:

Age attained% ofinvestment used
to buy units
Up to age79100
Ages 80-9098

If written on joint life basis, the allocation rate isdetermined by the youngest life.

Early cash-incharge:Year ofencashment %
19.0
28.0
36.0
43.0
51.0
6 onwardsnil

Buying/selling spread: Nil

The Norwich FlexiBond – product summary

The Norwich FlexiBond is a lump sum investment bond which allowsinvestment in up to 12 funds from a choice of the With-ProfitsFund, three managed funds and 18 investment linked funds. The bondis automatically written as a series of up to 250 identicalpolicies with a minimum investment in each of £1,000.

Minimum investment: £5,000 (£10,000 for regular withdrawals)

Minimum/Maximum ages: 12-90 attained. No minimum age if plan iswritten on a life of another basis and in trust for the benefit ofa child. Maximum age applied to the youngest life on a joint lifepolicy.

Current annual bonus rate for the With-Profits Fund: 5.0%

Additional (terminal) bonus** 2.0% for monies invested in theWith-Profits Fund during 2000, until further notice.

Allocation rates:

Investment% ofinvestment used to buy units++
£50,000 and over103.00
£25,000 - 49,999.99102.75
£15,000 - 24,999.99102.25
£5,000 - 14,999.99100.00

Add-ons: Additional investments can be made to the originalbond, the allocation rate of which will be determined by the amountof the initial investment and the age attained at the time theadditional investment is made (this will be the youngest life jointlife cases).

Initial investment% ofadditional investment
used to buy units++
£50,000 and over102.75
£25,000 - 49,999.99102.75
£15,000 - 24,999.99102.25
£5,000 - 14,999.99100.00

Death benefit: 101% of the sum of the value of units at theirselling price, plus any additional bonus. No early cash-in chargeor market adjustment factor will apply. Joint life bonds will bewritten on a second death basis.

Regular withdrawals: Maximum: 7.5% a year of either:

  1. the original investment, or
  2. the value of units at their selling price plus any allowancefor additional bonus at the time we receive the request.

Minimum withdrawal is £50 for each payment taken monthly,quarterly, termly, half-yearly or yearly. Withdrawals can only betaken on the 1st or 15th of each month and are free from theapplication of the early cash-in charge and any market adjustmentfactor.

Buying/selling spread: 5%

Fund Management Charge: Currently 0.75% each year taken daily onall funds with the exception of the With-Profits Fund and threemanaged funds. Managed funds do not have a management charge assuch, but each of the funds in which they invest is subject to the0.75% charge each year. A similar charge is allowed for when bonusrates for the With-Profits Fund are declared.

Fund switching: In each plan year: two free switches betweenfunds. The next 10 switches are charged at £20 each. Any furtherswitches will be charged at 0.5% of the switch value subject to aminimum of £20.

Early cash-incharge:Year ofencashment %
15.0
24.0
33.0
42.0
51.0
6 onwardsnil

The early cash-in charge is calculated from the start date ofthe bond.
It will not apply separately to additional investments.

The Bicentenary Bond – product summary
The Bicentenary Bond is a lump sum investment bond which allowsinvestment in up to 12 funds from a choice of the With-ProfitsFund, three managed funds and 18 investment linked funds. The bondis automatically written as a series of up to 250 identicalpolicies with a minimum investment in each of £1,000.

Minimum investment: £5,000 (£10,000 for regular withdrawals)

Minimum/Maximum ages: 12-90 attained. No minimum age if plan iswritten on a life of another basis and in trust for the benefit ofa child. Maximum age applied to the youngest life on a joint lifepolicy.

Current annual bonus rate for the With-Profits Fund: 5.0%

Additional (terminal) bonus** 2.0% for monies invested in theWith-Profits Fund during 2000, until further notice.

Guaranteed extra bonus rate :# This applies to both theWith-Profits Fund and the investment linked funds. The extra bonuswill be applied on the business day before the first policyanniversary and is paid by adding extra units.

InvestmentbandRate(%)
£100,000 and over4.4
£50,000 - 99,999.994.2
£25,000 - 49,999.993.4
£15,000 - 24,999.992.75
£5,000 - 14,999.990.5

Headline rate (With-Profits Fund only) This consists of thecurrent 5.0% annual bonus rate (which can change at any time) plusa guaranteed extra bonus rate. The headline rate will be reduced bythe monthly limited administration charge and/or a marketadjustment factor.

InvestmentbandRate(%)
£100,000 and over9.4
£50,000 - 99,999.999.2
£25,000 - 49,999.998.4
£15,000 - 24,999.997.75
£5,000 - 14,999.995.5

Additional investments+: Additional investments can be made to aseparate bond. Each additional bond may receive a guaranteed extrabonus rate determined by the amount invested in the original bond.Any Bicentenary Bond bought after September 1999 will beeligible.

Death benefit: 101% of the sum of the value of units at theirselling price, plus any additional bonus. No early cash-in chargeor market adjustment factor will apply. Joint life bonds will bewritten on a second death basis.

Regular withdrawals: Maximum: 6.5% a year of either:

  1. the original investment, specified at outset or
  2. the value of units plus any allowance for additional bonus atthe time we receive the request.

Minimum withdrawal is £50 for each payment taken monthly,quarterly, termly, half-yearly or yearly. Withdrawals can only betaken on the 1st or 15th of each month and are free from theapplication of the early cash-in charge and any market adjustmentfactor.

Limited administration charge: A monthly limited administrationcharge of 0.105% of the value of units, including any additionalbonus, will be deducted over the first five years. It is paid forby cancelling units from the start date.

Fund Management Charge: Currently 0.75% each year taken daily onall funds with the exception of the With-Profits Fund and threemanaged funds. Managed funds do not have a management charge assuch, but each of the funds in which they invest is subject to the0.75% charge each year. A similar charge is allowed for when bonusrates for the With-Profits Fund are declared.

Allocation rates:

Age attained% ofinvestment used
to buy units
Up to age74100
75 - 7999
80 –9098

If written in a joint life basis the allocation rate isdetermined by the youngest life.

Fund switching: In each plan year: two free switches betweenfunds. The next 10 switches are charged at £20 each. Any furtherswitches will be charged at 0.5% of the switch value subject to aminimum of £20.

Early cash-incharge:Year ofencashment %
18.0
27.5
36.0
44.0
52.0
6 onwardsnil

Important Notes:

**Additional (terminal) bonus is not guaranteed and can bechanged or removed at any time. The bonus will be applied on apro-rata basis, calculated daily, for units invested for less thanone year. It will be added to the units cancelled from theWith-Profits Fund for regular withdrawals, partial/full encashmentsand on death.

+Additional investments cannot be made to the Bicentenary Bondor Norwich Bond 2000. However, if an additional bond of the sametype is taken out and it is advantageous, the guaranteed extrabonus rate will be based on the amount invested into the existingbond rather than into the new one. This would be where the amountinvested in the additional bond is not more that that invested inthe existing bond.

If there is more than one existing bond of the same type thenthe additional bond is only related to the investment in one ofthem, not the total.

These are the current terms for additional bonds which can bechanged or withdrawn at any time. A period of one month must elapsebetween the issue of the cancellation notice for the original bondand taking out the additional bond. The original policy must be inforce. The terms and conditions for each additional bond will bethose applying at the time of the additional bond, not when theexisting bond was taken out. The additional bond feature does notapply to existing Bicentenary Bonds started before 1 September1999.

++Allocation rates for ages 75-79: 1% less on all tiers.
Allocation rates for ages 80- 90: 2% less on all tiers.
If written on a joint life basis, the allocation rate is determinedby the youngest life.

#The rate of extra bonus will depend on the investment made tothe whole bond and it will be paid by the addition of extra units.For each individual in-force policy in the bond the rate shown willbe multiplied by the investment amount, less all withdrawals up tothe end of the previous business day. For the Bicentenary Bond theresult will be used to buy units split between funds in proportionto the value of funds held.

Investment bonds are designed as a medium to long terminvestment and should not be viewed as a short-term commitment.

To protect remaining with-profits single investment bondpolicyholders we may apply a market adjustment factor, which willreduce what you get back from the With-Profits Fund. We may do thisif policyholders cash in all or part of the bond, except forregular withdrawals. It will depend on investment factors at thattime.

Future bonus rates for the With-Profits Fund are not guaranteedand may vary.

If cash is taken from the bond within the first 5 years, we willapply an early cash-in charge, except for regular withdrawals andon death. The early cash-in charge is calculated as a percentage ofthe cancelled units, after any allowance for additional bonus andmarket adjustment factor. The percentage applied depends on theyear of cashing in.

The value of investment linked funds and any income from themcan go down as well as up.

Past performance is not necessarily a guide to the future.

Full written terms and conditions of Norwich Union’s bondare available on request.

Norwich Union Life & Pensions Ltd is regulated by thePersonal Investment Authority.

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