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Moneybox Friday, 4 October, 2002, 17:40 GMT 18:40 UK
Money Box survey of with profits policies
Money Box survey
Money Box surveyed a selection of companies
Money Box asked a selection of the largest life insurance companies the following questions about their with profits policies:

Have you imposed or changed bonus payments, exit penalties or market value reductions / adjustments (often referred to as MVR's or MVA's) this calendar year?

How long does it take to provide written and verbal surrender value quotations?

How long are written and verbal surrender value quotations valid for?

Responses are listed below but please contact providers directly if you have individual queries.

This survey was compiled on 4 October 2002.

Bonus Payments

Annual bonus rate set at 4% for 2002. Reviewed and amended to 3.5% on 2 October 2002

Market Value Reductions

0 - 20% depending on the length of time in the fund.

Exit Penalties

None

Written surrender value quotation

On the day of receipt of letter.

Verbal surrender value quotation

Written response in 7 - 10 working days.

The level of MVR's applied will depend on the day the surrender is processed.

Bonus Payments / Market Value Reductions

The best way to express this is to look at the maturity values of example policies.

MVR's are calculated on a policy by policy basis.

Generally the payout reductions are greater for policies that have been in force for a short period as they have been most affected by the current market volatility.

25 year endowment, 50pm, male 30 next birthday at outset:

January 2002 - 78,912
October 2002 - 69,816

10 year unitised With Profit, 50pm, male 30 years next birthday at outset:

January 2002 - 8,541
October 2002 - 8,050

10 year unitised With Profit pension, 200pm, male 55 years at outset:

January 2002 - 39,356
October 2002 - 36,465

Exit Penalties

These are product specific and are not affected by bonus rate changes.

Written & verbal surrender value quotations

Our quotes team aim for a next day turnaround.

How long is the quotation valid for?

Pension policies: All transfer values are held good for 3 months.

Life policies

Unit Linked and Unitised With Profits: There is no 'hold good' period.

Conventional With Profits

quotes are held good for 1 month.

Bonus Payments: Changes to bonus payments are different for each fund. The bonus declaration for July 2002 follows:

All assessed on a case by case basis

Life Conventional
Regular bonus on sum assured: 2%
Regular bonus on attaching bonuses: 2.25%
Final reduced bonus? Yes.

Life Flexible
Regular bonus on sum assured: 2%
Regular bonus on attaching bonuses: 2.25%
Final reduced bonus? No.

Life Unitised (Series 1,2,3,4,6,10,11,14,21,22,23,26)
Regular bonus: 3.75%
Final reduced bonus? Yes.

Life Unitised (Series 7,12,27)
Regular bonus: 4.5%
Final reduced bonus? Yes.

Life Unitised (Series 5,8,25)
Regular bonus: 3.25%
Final reduced bonus? Yes.

Pension Conventional Series 1,2,4,9,10,21,22,24)
Regular bonus: 4.25%
Regular bonus on attaching bonuses: 2.75%
Final reduced bonus? Yes.

Pension Unitised (Series 1,2,4,9,10,21,22,24)
Regular bonus: 4.25%
Final reduced bonus? Yes.

Pension Unitised (Series 7,11,27)
Regular bonus: 4.2%
Final reduced bonus? Yes.

NGP
Regular bonus: 5.15%
Final reduced bonus? No.

OLAB
Regular bonus: 4.25%
Final reduced bonus? Yes.

Market Value Reductions

From 17 September 2001:
Rate: Up to 7%
Single premium: Yes
Regular premium: No
On policies effective from 1 January 1997 until 1 May 2001.

From 1 April 2002
Rate: Up to 7%
Single premium: Yes
Regular premium: No
On policies effective from 1 January 1999 until 1 May 2001.

From 8 July 2002
Rate 5-15%
Single premium: Yes
Regular premium: No

From 24 July 2002
Rate: Up to 19%
Single premium: Yes
Regular premium: Yes

3 October 2002
Rate: Up to 22%
Single premium: Yes
Regular premium: Yes

All assessed on a case by case basis.

Exit Penalties : No increases except for MVR.

Verbal surrender value quotations: Issued on the same day.

Written surrender value quotations: Issued between 2 and 9 days of receipt.

How long are quotes valid for?: Conventional: 30 days Unitised: not guaranteed policy is re-valued at the date of receipt.

Bonus Payments: Annual bonus declaration for the year ended 31 December 2001 was made on 28 February 2002. No bonus declaration has been made since.

Market Value Reductions (MVR): Current range of reduction factors is: Life regular premiums 0 to -19%
Bonds 0 to -24%
Pensions o to -27%

Exit Penalties: No changes have been made during 2002.

Written Surrender Value Quotations: 2 - 5 days. Validity varies by product.

Verbal Surrender Value Quotations: For regular premium policies all quotations are provided in writing. For Bonds verbal quotations are provided immediately Verbal quotations carry no guarantee period.

Bonus payments: Final bonus rates were changed at 1 January 2002 and 1 August 2002.

The declaration on 1 August 2002 led to a reduction in maturity payouts of up to 5%.

Conventional regular bonus rates were changed on 1 January 2002.

Unitised regular bonus rates were changed on 1 January 2002 and 1 August 2002.

Regular bonus rates were cut by 0.5% on 1 August 2002.

Market Value Reductions: The current average rate is 13%.

Exit Penalties: Specified within the policy conditions. Have not been altered this year

Written surrender value quotation: Published service standard is 5 days.

Verbal surrender value quotation: Immediately, except when policy is particularly complicated (eg if it has been altered) when written quotation will be provided.

The actual surrender value for written and verbal quotations is determined on the date that we receive all our requirements from the policyholder (ie policy document etc) using the surrender rates that apply on that date.

Bonus Payments: Interim bonus rate change announced on 5 September 2002.

The average reduction is between 5-10%. No changes to annual bonus rates.

Market Value Reductions: Not on surrenders up to 25,000. Average of 3% MVA on surrenders over 25,000.

Exit Penalties: No change

Written surrender value quotation: Service standard is 5 days. Valid for 1 day.

Verbal surrender value quotation: Immediately on the phone. Valid for 1 day.

Bonus Payments:

1 January 2002: General slight improvement in terminal bonus rates.

1 May 2002: Average 5% cut in maturity payouts.

1 September 2002: Up to 10% cut in maturity payouts.

Market Value Reductions: Average MVR on unitised with profits bond is currently 14%.

For unitised with profits pensions the average is currently 10%.

Exit Penalties: No changes to exit penalties have been imposed this year.

Written surrender value quotation: On average around 5 days to provide.

Verbal surrender value quotation: Available immediately

How long are quotations valid for?

Traditional with profits policies, such as endowments - up to 30 days.

Unitised policies, such as the majority of our with profits bonds, is only a guide and not guaranteed, as the unit price will change daily.

Bonus Payments: Annual bonus rates for unitised with profits classes WP2 and WPB took effect from 1 April 2002. That is, the classes of WP that are open to new business at that time.

Both reversionary bonus (RB) and terminal bonus (TB) scales remain in force today at those levels.

For non-unitised business, the annual declaration was made as at 31 December 2001 and RB rates remain in force.

However, TB rates for "old" With Profits business classes which came into force from 1 April 2002, and replaced our October 2001 rates, were revised from 9 September 2002.

The typical reduction in payout as a result was of the order of 5%).

Market Value Reductions: have been applied to our UWP classes WPB and WP2 at most durations throughout 2002.

We do not apply a blanket MVR. It depends on indiviudal circumstances of claim, allowing for an element of smoothing over the duration of the investment.

Written surrender value quotation: Up to 5 working days

Verbal surrender value quotation: Around 90% are immediate. No guarantees on quotations.

We calculate actual claim value upon receipt from customer of formal confirmation of desire to disinvest

Bonus Payments

Annual Bonus rate set at 4.00% for life policies in 2002.

Amended to 3.5% on 2 October 2002.

Annual Bonus rate set at 4.5% in 2002 for pension policies and reviewed and amended to 4% on 2 October 2002.

Terminal Bonus rates. On unitised contracts a terminal bonus of 2% is now currently payable after 7 years on bonds.

Unitised life regular premium contracts qualify for a small terminal bonus after 12 years.

On unitised pensions plans terminal bonus is payable after 7 years for single premium plans and after 11 years for regular premium plans.

Rates rise after 15 years to 25% for singles and 10% for regulars.

On conventional contracts there has also been a reduction in terminal bonus rates by around 5%.

Market Value Reductions : From 0 - 25% on Single premiums and from 0 - 20% on Regular premiums

Exit Penalties: 0 - 20%

Written surrender value quotation: Normally on the day of receipt of letter.

Verbal surrender value quotation: Normally a written response in 4 working days.

The level of MVR applied will depend in the day the surrender is processed. MVRs can change.

Bonus Payments: Rate announcement - February 2002 (2001 values in brackets).

Conventional policies:
1% (1.25%) of the basic guaranteed benefit and 2% (2.5%) of existing bonuses for life assurance policies.

1% (1%) of the basic guaranteed benefit and 1% (1%) of existing bonuses for CWP pensions benefits effected before 15 February 1999.

2% (3%) of the basic guaranteed benefit and 3% (3%) of existing bonuses for new CWP pensions benefits effected on or after 15 February 1999.

Unitised policies: From 1 January 2002, the rates of increase in unit prices are as follows (with the rates in force in the second half of 2001 in brackets):

Flexible Investment Bond
Rate per annum - 4.0% (4.5%)

International Investment Bond
4.5% (5.0%)
Jersey Bond3.5% (5.0%)
Other life-fund policies3.0% (4.5%)
Pension-fund policies4.0% (5.0%)

Market Value Reductions:

April 2002 - unitised w-p pensions 6%-12%
Unitised w-p life 0%-10%

1 July 2002 - unitised w-p pensions 4%-15%
Unitised w-p life 2%-15%

29 July 2002 - unitised w-p pensions 0%-22%
Unitised w-p life 0%-20%

1 October 2002 - unitised w-p pensions 0%-26%
Unitised w-p life 0%-24%

Exit Penalties: same as MVR

Written surrender value quotation: Same day quotation for vast majority (longer if more complex manual calculation required). Valid for 14 days.

Verbal surrender value quotation: Instant quotation. Not guaranteed.

Bonus Payments

February 2002. In total 1.7 billion in bonuses were added to existing and maturing policies.

Payouts were on average 8% lower than last year.

Endowment and Whole of Life Plans

Interim bonus rates have been reduced (yearly rates of 2% on the sum assured and 3.25% on attaching bonuses).

The total growth rate for unitised plans has been reduced from 4.5% to 4.0% a year.

Individual Pension Plans: The interim bonus rate has been reduced (yearly rate of 2.75% on the sum assured and attaching bonuses).

The total growth rate for unitised policies has been reduced from 5.5% to 5.0% a year.

30 September 2002: Terminal bonus reduced by an average of 10%.

The reduction on payouts before maturity was typically a further 10%.

Written surrender value quotation

Life products

Within 3 days for the majority. Guaranteed for 4 weeks for conventional with profits policies.

Figures for unitised with profits policies are not guaranteed.

Pension productsWithin 3 days for the majority. For illustration only /not guaranteed.

Verbal surrender value quotation: Life & Pension products: Instantly (normally). For illustration only /not guaranteed.

On currently sold policies.

Bonus Payments

Reversionary bonus rates were reduced earlier this year.

Terminal bonuses depend on the investment performance between the days of entry and exit from the fund.

Market value reductions

Are calculated on similar principles and vary accordingly.

Early Exit Charges (for people who leave early) - Some of Eagle Star products have early exit charges in the product terms.

For others, the costs of setting the policy up are taken in a different way.

For example the Eagle Star Investment Bond - Standard Option has early exit charges of 5% in year 1, reducing by 1% pa until they reach 0%.

Written surrender value quotation

Within three days and provide written confirmation of the current value of the policy on the day our letter is issued.

Verbal surrender value quotation

On the phone, followed up with written confirmation of the value of the policy at the time of the call.

The actual surrender value is calculated on the day we receive formal instructions to cash in the policy.

Please note - A valuation is indicative, not a guaranteed quotation.

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