Phoenix Group announces its with-profits bonus rates for 2015/2016 Estate distribution continues to uplift maturity values on most of our funds Almost eight in ten (77%) of our policies are now receiving an annual bonus (up from less than 40% three years ago) Over half of our policies (56%) are seeing an increase in annual bonus rates Current adverse market conditions impacting level of final bonuses and maturity values Commenting on the announcement, Andy Moss, Chief Executive of Phoenix Life, said: We are pleased to be able to increase annual bonus rates on many of our policies this year, despite difficult market conditions, and continue to apply estate distribution to final payouts, a key differentiator between open and closed funds. Distribution of excess assets (estate distribution) As a closed fund provider, many of our with-profits funds have excess assets (sometimes called the estate ) in addition to those needed to pay benefits to policyholders. For example, on the Pearl fund, now part of Phoenix Life Assurance Ltd (PLAL), estate distribution is adding around 26% to the final pay -out on many policies. Annual bonus rates We have been able to increase annual bonuses in instances where funds have sufficient excess assets and paying this additional bonus is not expected to constrain our investment flexibility. Once added, an annual bonus cannot be taken away so it adds an additional level of guarantee for the policyholder. We have made increases to annual bonus rates for some of our largest funds, most notably: Traditional life policies in the Phoenix With-Profits Fund, which have increased from 2% to 2.5% Traditional pension policies in the Phoenix With-Profits Fund, which have increased from 2.5% to 3% Traditional UK life policies in the SPI With-Profits Fund, which have increased from 2.5% to 3% Pre 1996 unitised with-profits pensions in the PLAL Pearl With-Profits Fund, which have increased from 2% to 3% Unitised with-profits pensions in the Britannic With-Profits Fund, which have increased from 2.5% to 3.5% As an example of what this means for policyholders, a typical 30 year old policyholder, paying in 64 per month into a 25-year life endowment in the Phoenix with-profits fund, maturing in 2020 has already built up a guaranteed minimum payout on maturity of 19,397, assuming that premiums continue to be paid. This year we have added an annual bonus of 2.5% which would increase the guaranteed minimum benefit for this example by 485 to 19,882. We currently expect to also add a final bonus to this policy when it reaches maturity, provided that markets continue to perform in line with our expectations. Adding an annual bonus does not change the overall amount we expect to pay when the policy matures. It does however increase the minimum amount of benefit that is guaranteed, thereby giving the policyholder greater security should investment markets perform badly. The annual bonus rates for some of our larger classes of policy are shown in Appendix 2. Annual bonuses are also being paid on many of our smaller classes of policy. 1
Final bonus rates We will normally add a final bonus if the underlying value of the investments is greater than the benefits already guaranteed. We continue to add final bonuses to policies in many of our funds, which may boost the final pay-out significantly when the policy matures. For example, in the case of former Royal Life policies, now under Phoenix Life Limited (PLL), 42% of the maturity pay-out on a 25 year life endowment policy will be through a final bonus (unchanged from 42% last year). Due to recent adverse market conditions, the level of final bonus on some funds has reduced which in turn is impacting maturity values. There are also a significant number of policies where the benefits already guaranteed are higher than the value of the underlying investments and for these policies we do not add a final bonus. These guarantees can be very valuable; for example, a typical single-premium pension policy with PLL, originally sold by Sun Alliance in 1991 to a 40-year old man for a 25-year term (maturing in 2016), provided a sum assured of 17,302 in return for a premium of 3,390. This meant that the policy would produce a return to maturity of 6.7% per annum after tax, even if no bonuses were added. In fact, annual bonuses were added to the policy during the 1990s when investment returns were good. More recently the annual bonuses have been very low but the overall annual bonuses added of 4,303 mean that the value of the policy at maturity in 2016 is 21,605, even though no final bonus is payable. This gives the policyholder an overall return after tax of 7.7% per annum. Further examples of final bonus rates, and policy pay-outs, for some of our larger classes of policy are shown in Appendix 1. Market value reductions ( MVRs ) MVRs are in place to ensure that all policyholders receive a fair share of the fund and those that remain in the fund are not disadvantaged. For example, within the NPLL fund certain policies receive a guaranteed annual bonus of 4%, even if the underlying fund does not produce this return. As with final bonus rates, adverse market conditions are impacting MVRs, with small MVRs being levied on some policies surrendered before the selected retirement date. However, MVR-free guarantee dates, which provide protection for policyholders against MVRs, exist for many of our policyholders. For example some with-profits bonds, such as those originally sold by Britannic Assurance OB Fund, now part of PLL, still have future MVR-free dates. We ensure that any such date is communicated to policyholders in their annual statements and also via a specific letter as they approach the date. We also allow policyholders a reasonable period to utilise these windows, often longer than stated in their original policy wordings to ensure they don t miss out. Examples of the MVRs on some of our larger types of policies are set out in Appendix 3. Enquiries -Ends- Shellie Wells Shirley Collyer Head of Media Relations Phoenix Group Lansons 020 3735 0922/07872 414 137 020 7294 3615 shellie.wells@thephoenixgroup.com shirleyc@lansons.com shellie.wells@thephoenixgroup.com ph@lansons.com 2
Appendix 1: Final bonus and policyholder returns for larger policy types+ 25 Year Life Endowment ( 50 per month, male aged 30 next at entry) With Profits Maturity Final Bonus Within Maturity Return on premiums (p.a.) No. maturities 2016H1 Alba (Britannia Life) 21,422 4,541 2.7% 434 Britannic 29,249 9,310 5.0% 292 Phoenix WP (ex Royal Life / RSA) 25,542 10,778 4.0% 1,018 SMA (ex Scottish Mutual) 30,667 12,740 5.3% 127 SPI (ex Scottish Provident) 29,544 8,591 5.0% 932 SAL (ex Sun Alliance) 20,225 4,632 2.3% 1,508 Pearl 90:10 32,531 11,888 5.7% 1,116 Personal Pension 20 Year Regular Premium ( 200 per month) With Profits Fund Final Bonus Return on No. Maturity Within Maturity premiums (p.a.) maturities 2016H1 Britannic 78,552 19,559 4.7% 100 Appendix 2: Annual bonus rates for larger policy classes+ Conventional with-profits life With-profits fund Products On sum assured PLL Alba With-Profits Fund All UK Life 0.00% 0.00% PLL Britannic With-Profits Fund Ex Britannic (1986 entry) 1.05% 0.00% PLL Phoenix With-Profits Fund Main UK Life 2.50% 2.50% PLL SPI With-Profits Fund UK Life 3.00% 3.00% PLL SAL With-Profits Fund UK Life 0.10% 0.10% Pearl Assurance Limited 90:10 Ordinary Branch Compound 0.00% 0.00% Conventional with-profits pensions With-profits fund Products On sum assured PLL Alba With-Profits Fund All UK Pension 0.00% 0.00% PLL Phoenix With-Profits Fund UK Pensions 3.00% 3.00% PLL Scottish Mutual (SMA) With- Profits Fund Main UK Pensions 0.00% 0.00% PLL SAL With-Profits Fund Main UK Pensions 0.05% 0.05% London Life Limited With Profit Pension Compound Pool 4 0.00% 0.00% Pearl Assurance Limited 90:10 Ordinary Branch Compound 0.00% 0.00% Pearl Assurance Limited 100:0 SERP All 0.00% 0.00% National Provident Life Limited All 0.00% 0.00% 3
Unitised with-profits life*** With-profits fund Products On basic units units Pearl Assurance Limited 90:10 Post 1995 Life 0.75% 0.42% PLL Phoenix With-Profits Fund Unitised with-profits pensions*** Pre August 2000 4.00%* Post July 2000 3.50%* With-profits fund Products On basic units units PLL Britannic With-Profits Fund Britannic OB UWP Pensions 3.50% 3.50% Pearl Assurance Limited 90:10 Personal Pensions v1 (pre 1996) 3.00% 3.00% PLL Phoenix With-Profits Fund Linked to Profit Plus Fund 0.10% 0.10% PLL Scottish Mutual (SMA) With- Profits Fund PLL SPI With-Profits Fund Series 1 & 2 accumulation 4.00%** Other series accumulation 4.50%* Series 1 4.00%** Series 2 5.50%* National Provident Life Limited Series 1 ordinary units 4.00%** Appendix 3: Current MVRs (February 2015) for larger policy classes+ Unitised With Profits Life (Single Premium) With Profits Fund Product 10 year 15 year 20 year Pearl 90:10 Phoenix WP (ex Royal Life / RSA) SPI WP (ex Scottish Provident) Scottish Mutual With-Profits Fund Post 1995 Life 0.00% 0.00% 0.00% Pre August 2000 Post July 2000 n/a 0.00% n/a UK UWP Life -2.00% -2.00% -2.00% UWP Series IV -3.40% -3.40% n/a 4
Unitised With Profits Pensions (Single Premium) With Profits Fund Product 10 year 15 year 20 year Britannic With Profits Ex Britannic -5.05% -6.95% -3.79% Phoenix WP (ex Royal Life / RSA) SPI WP (ex Scottish Provident) Scottish Mutual With-Profits Fund National Provident Life Pensions Solutions n/a n/a n/a UK UWP Pensions -2.50% -2.50% -1.00% UWP Series I&II -1.30% -1.30% -1.40% Series 1 ordinary units -29.7% -37.8% -37.2% +Other rates may apply for other policy classes *No bonus units, bonus is applied as an increase in unit price. **Guaranteed minimum rate. No bonus units, bonus is applied as an increase in unit price. ***Bonus rates on most unitised with-profits policies may be changed at any time. These MVRs only reduce the final bonus, but some final bonus is still being paid Important additional information: 1. Phoenix Life has more than 100 legacy brands within the life company so customers may be in a fund with a different name to the product they originally took out. For a full list of legacy brands please visit our website h//www.thephoenixgroup.com/site-services/who-services -your-policy.aspx. 2. The value of investments can go down as well as up and is not guaranteed, past performance is not a guide to the future. It is possible that you may not get back the amount you put in. 3. This press release is intended for use by the media only. If you are a policyholder and would like to find out information about your specific policy then please contact the customer number listed on your annual statement or visit our website for the details at www.phoenixlife.co.uk Background to the closed fund industry: Phoenix operates 13 with-profits funds in the UK which are all closed to new business. The funds were all closed to new business by their previous owners, in many cases after experiencing difficulties. By bringing together a number of closed funds under one umbrella, Phoenix aims to apply its expertise to provide a fair outcome for its with-profits policyholders, whilst balancing this against the need to maintain adequate security for policyholder benefits, and recognising the challenging history that many of the funds experienced under their previous ownership. The Phoenix Group: The Phoenix Group is the UK s largest specialist consolidator of closed life funds with over 5 million policyholders and 51 billion of assets held by the Group s life companies. The Group employs around 750 people split across Phoenix Life and Group. As at 31 December 2014 there were just over 5 million policies in force across the Group. 5
This figure includes: Over 2.2 million whole-of-life and endowment policies, 2 million pensions Nearly 416,000 annuities in payment Over 270,000 pure protection policies (term assurances, critical illness and income protection) Over 151,000 investment bonds Split across: Nearly 2.1 million Non-Profits policies. (This includes policies which were originally With-Profits but which have been paid-up and no longer receive bonuses) Over 1 million Traditional With-Profits policies, Over 980,000 Unit Linked and Index Linked policies Over 900,000 Unitised With Profits policies 6