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Important note:
The information in this Media section is intended for use by journalists only and customers should not use it to make financial decisions. Please remember that information in past press releases may no longer be current.
The information in this Media section is intended for use by journalists only and customers should not use it to make financial decisions. Please remember that information in past press releases may no longer be current.
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News
29 January 2010
Friends Provident announces higher with profits final bonus rates
Friends Provident announced today a review of its with profits bonus rates. The key points are:
- A good year for with profits
- All final bonus rates either increased or unchanged
- With profits payouts generally higher
- Regular bonus rates maintained
- Gross investment return on the With Profits Fund of 9.3% in 2009
- Market Value Reductions removed from almost all lines of business
Friends Provident is committed to treating the holders of its 1.1 million with profits policies fairly and this bonus announcement ensures payouts from the With Profits Fund reflect the value of the underlying investments.
Andy Carr, Friends Provident chief actuary, said:
“Investment markets continued to be volatile in 2009, as they were for much of 2008, but staged a recovery in the second half of the year. Thanks to this, payouts for the majority of our policyholders have increased compared to last year. To illustrate this, the experience of most policyholders will be that the cashable value of their plans will have increased by around 10% in February 2010 compared to February 2009.
“The recovery in the second half of 2009 has also meant Market Value Reductions (MVRs), reintroduced in October 2008, have now been removed on virtually all products”.
Some examples of the returns achieved by particular Friends Provident (FP Main Series) policies over the last year are as follows: (for an explanation see ‘Description of the different series’ in Appendix 1)
| FP Main Series | Year of inception | Surrender Value in February 2009 £ | Surrender Value in February 2010 £ | Return over 2009 % |
|---|---|---|---|---|
| Unitised With Profits Bonds taken out in February 2005 with a Single Premium of £10,000 | 2005 | 11,140 | 12,541 | 12.6 |
| Unitised With Profits Bonds taken out in February 2000 with a Single Premium of £10,000 | 2000 | 10,873 | 11,746 | 8.0 |
| FP Main Series | Original Term in Years | Surrender Value in February 2009 £ | Maturity Value in February 2010 £ | Return over 2009 % |
|---|---|---|---|---|
| Conventional Individual Life policy taken out in February 1985 by a male aged 30yrs next birthday paying £50 per month | 25 | 25,526 | 29,966 | 14.9 |
| Unitised Personal Pension Plan taken out in February in 1990 by a male retiring at age 65 paying £200 per month gross and with the value of the fund returned on death before retirement | 20 | 66,903 | 77,314 | 11.7 |
The chart below shows the returns on an investment bond invested in the FP With Profits Fund relative to the averages of some alternative investments. The figures are based on an initial investment of £10,000 and show comparisons with investment in a Building Society (Halifax savings account with investments over £10,000) or unit linked savings vehicle as represented by the average return on policies from two investment sectors (Managed Funds and UK Equity Funds).
At 31 December 2009, the proportion of equities and property backing the asset shares in the FP With Profits Fund was approximately 26%. Financial markets recovered over the second half of 2009, although there is still some uncertainty about the pace and timing of a sustained recovery. To reflect this uncertainty we have been increasing our exposure to equities and property in a phased manner from the tactical low position of 16% at the end of 2008. We have also largely maintained our holdings of corporate bonds, which also recovered significantly during 2009.
-Ends-
View the full press release, including appendices (PDF 217K)
For further information, please contact:
| Contact name | Company | Contact number |
|---|---|---|
| Peter Timberlake | Friends Provident | 0845 641 7834 |
| Lorna Wiltshire | Friends Provident | 0845 641 7836 |
| Emma Wylie | Friends Provident | 0845 268 4909 |
| Keith Nolan | Friends Provident | 0845 641 7835 |
Ref: K004
Notes to Editors
With Profits Governance
The With Profits Committee has considered the outcome of this bonus review and has assessed it against the Principles and Practices of Financial Management published by Friends Provident. The Committee is satisfied that the decisions taken represent reasonable and appropriate use of the company’s discretion in this area.
Friends Provident remains committed to fair treatment of its customers and the published Principles and Practices of Financial Management underlying the funds.
How with profits policies work
- A with profits policy differs from a unit linked policy in that it adds an element of security which you do not get from an investment totally reliant on the current value of its underlying assets. Thus the investor is protected against sudden movements in the stock market immediately before his or her policy matures.
- A with profits policy provides this cushion against uncertainty in the form of the guaranteed benefits and additional regular bonuses, which are guaranteed even if the market subsequently falls.
- The guarantee is made possible by a process known as “smoothing”. That means that in good years for investment, some profit is held back in order to provide bonuses in years when stock market values have fallen. For example, even though the market fell sharply between 2000 and 2002, insurance companies such as Friends Provident were still able to provide guaranteed payments for those years and indeed continued to declare further regular bonus, albeit at reducing rates.
- Many with profits policies provide a further guarantee against risk by providing a sizeable element of life assurance cover.
- We have a range of bonus series to cater for different product structures and premium rates. These are designed to ensure fairness between policyholders.
Market Value Reductions
To maintain fairness between customers surrendering and those continuing to remain invested in the main With Profits Fund, in October 2008 Friends Provident introduced Market Value Reductions (MVRs). MVRs have been reviewed actively over 2009 to reflect changing investment conditions. We have now removed MVRs from all classes of business except Pension Series 1 where there is a guaranteed regular bonus of 4% per annum.
About Friends Provident:
Friends Provident was originally founded in 1832 to alleviate the hardship of Quaker families facing misfortune. Friends Provident's strategy today is to operate in markets where it can deploy its award-winning strengths in technology and service to gain competitive advantage. Since its demutualisation in 2001, Friends Provident has developed strong offerings in pensions and protection to complement its historic With Profits business, and now prioritises international growth. Friends Provident is fully committed to the principles of the FSA initiative ‘Treating Customers Fairly’.
Friends Provident distributes its products through intermediaries in the UK and around the world. Its key business lines in the UK are protection and corporate pensions. Friends Provident International develops competitive savings, investment and pensions products for a broad and diverse range of markets including Hong Kong, Singapore, the United Arab Emirates and Germany.
Friends Provident wholly owns the Luxembourg-based company Lombard, a leading pan-European life assurance company which specialises in the use of life assurance as a wealth management solution for high net-worth investors, and Sesame Bankhall Group, a leading UK supplier of intermediary support services to financial advisers providing services to over 7,500 financial advisers across the UK offering life assurance, mortgages and savings arrangements.
Since 5 November 2009 Friends Provident has been part of the Resolution group of companies.
For more information on Friends Provident including, photos, awards, fast facts, presentations, and media contacts please visit the media section at www.friendsprovident.com/media
Important
- This news service is for information purposes only and does not provide any form of advice, recommendation or financial promotion. Any opinions expressed by third parties are those of the third party concerned and not of Friends Provident. Friends Provident does not accept liability for any errors or omissions or for loss incurred because of reliance on information or opinions given.
- The content of the news items set out above are accurate only as of the date of issue and Friends Provident does not undertake any obligation to update them.