1. Art and Diseño

Standard Life Assurance Limited
With-profits bonus declaration
29 January 2015
Standard Life announced a review of its UK with-profits bonus rates on 29 January 2015.
•
In 2014 the Standard Life Heritage With Profits Fund saw an overall return on assets of 8.6%
and plans have seen a real increase in value from last year. Customers will be able to see
how their plan has changed in their annual statements or they can go online to view their plan
values at www.standardlife.co.uk
•
Some regular bonus rates have remained unchanged; others have reduced from last year,
which means that guarantees will grow at a slower rate after 1 February 2015.
Sample with-profits payouts based on today's changes
These examples are purely for illustration. Each customer’s circumstances are different. There are
many variables that affect the value of their with-profits investment including how old they are, when
their investment started, and how much has been paid in.
Type of
plan
Term of
plan
Gender /
Age
Amount
invested
Plan
value at
29/01/14
Payout at
29/01/2015
Pensions
20 years:
started 29
January
1995
Male
Retirement
age 65
£48,000
(£200pm)
£70,878
£81,144
Savings
Endowment
25 years:
started 29
January
1990
Male
29 at start
£15,000
(£50pm)
£25,052
£26,891
With Profits
Bond
No fixed
term:
Started 29
January
2005
N/A
£10,000
£15,145
£16,603
The figures shown refer to the past. Past performance is not a reliable guide to future performance.
Standard Life Assurance Limited is registered in Scotland (SC286833) at Standard Life House, 30 Lothian Road, Edinburgh EH1 2DH.
Standard Life Assurance Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority
and the Prudential Regulation Authority.
www.standardlife.co.uk
© 2015 Standard Life, images reproduced under licence
With-profits bonus declaration: further information
1. Regular bonus rates and guarantees
Regular bonus rates increase the guarantees that underpin with-profits business.
Unitised plans
Guaranteed
benefits continue to
grow at a rate of
Unitised life plans that have a 3% pa unit price growth guarantee
3% pa
Unitised with-profits pensions that have a 4% pa unit price growth
guarantee
4% pa
From 1 February
2015
(until further notice)
guaranteed benefits
will grow at a rate of
With Profits Bond
2.5% pa
Other unitised life plans
0.5% pa
Other unitised pensions plans*
0.75% pa
* Excluding Stakeholder and plans invested in the Pension Inflation Plus Fund
Conventional plans
Life plans
Personal Pension and
Executive Pension plans
Group Pension plans
Bonus added to guaranteed benefits on 1 February
2015
0.25% on sum assured
0.35% on attaching
bonuses
0.25% on sum assured
0.25% on attaching
bonuses
For scheme year ending on or after 1 March 2015
0.00% on sum assured
0.00% on attaching
bonuses
Standard Life Assurance Limited is registered in Scotland (SC286833) at Standard Life House, 30 Lothian Road, Edinburgh EH1 2DH.
Standard Life Assurance Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority
and the Prudential Regulation Authority.
www.standardlife.co.uk
© 2015 Standard Life, images reproduced under licence
2. Standard Life’s with-profits asset mixes and investment returns
We have different types of with-profits plans with different asset mixes. The mix for each type of plan
reflects any guarantees and how they are applied. We publish separate information for the seven
different asset mixes for our main lines of business.
For more information please refer to the quarterly investment reports which can be found at
www.standardlife.co.uk/c1/funds/with-profits-important-information.page
At 31 December 2014 the asset mix and investment return details were:
Asset mix 31/12/14
Class of with-profits business
Estimated Gross
Return for 12
months to
31/12/14
Equities
Fixed
Interest
*
& Other
Property
1
Unitised life funds with a minimum unit
price growth rate of 3% a year and unitised
pension funds with a minimum unit price
growth rate of 4% a year
17.4%
77.3%
5.3%
9.9%
2
With Profits Bonds
54.5%
27.5%
18.0%
7.8%
3
Homeplan and other unitised life plans not
included in 1 above, and other unitised
pension business (excluding Stakeholder,
and plans invested in the Pension Inflation
Plus Fund)
49.7%
34.6%
15.7%
8.3%
4
With Profits Pension Annuities
46.0%
40.1%
13.9%
8.9%
5
Conventional life with-profits plans,
including mortgage endowments, and non
unitised pensions
32.8%
48.6%
18.6%
6.5%
6
Stakeholder with-profits pension plans
starting before 10 July 2006
64.7%
35.3%
0.0%
6.6%
7
Stakeholder with-profits pension plans
starting after 9 July 2006
64.3%
35.7%
0.0%
6.5%
*Fixed Interest and Other includes Corporate fixed interest, Government bonds including index linked
bonds, cash deposits and money market instruments.
Notes:
The figures shown refer to the past. Past performance is not a reliable guide to future performance.
The return on the asset mix is only one of the factors that affect with-profits plan values. Other factors
are the deductions we make, and any other discretionary adjustments that we may apply such as
smoothing. The deductions are for example for costs of guarantees and our expenses. We may also
top up plan values with a payment from the inherited estate.
Standard Life Assurance Limited is registered in Scotland (SC286833) at Standard Life House, 30 Lothian Road, Edinburgh EH1 2DH.
Standard Life Assurance Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority
and the Prudential Regulation Authority.
www.standardlife.co.uk
© 2015 Standard Life, images reproduced under licence
3. Final bonuses and Market Value Reductions (MVRs)
We describe how we calculate with-profits payout values in our Understanding With Profits booklets. A
plan’s with-profits payout value determines the amount of final bonus, if any, as follows:
For conventional plans, such as savings endowments, the final bonus at maturity is the difference
between the sum assured plus regular bonuses and the payout value. For unitised plans, the final
bonus is the difference between the unit value and the payout value. Sometimes there will be no final
bonus.
The payout value from a unitised plan can be higher or lower than its unit value. Any payment in
excess of the unit value is final bonus. If the payout value is less than the unit value the difference is
sometimes called an MVR. However, there will be no MVR if a guarantee applies. This is generally on
death or maturity, or when a pension fund is used to buy an annuity. The payout value then will be the
unit value plus any final bonus payable at the time+.
(+ For some older pension plans there may be a deduction for outstanding charges. There is also an
early exit penalty for some recent With Profits Bonds.)
The payout value for a plan is calculated on a daily basis. The final bonus or MVR differs from plan to
plan depending on such things as the payments made to the plan and when they were paid as well as
the growth in the unit price. Currently the majority of plans don’t have an MVR.
4. Frequently Asked Questions
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What has changed?
•
Why has the bonus growth rate reduced on my plan?
•
Why does the value of my plan change so much at each review?
•
Why is there an MVR (Market Value Reduction) on my pension plan?
•
Has the changes announced at the budget had any impact on how you apply MVRs?
•
Where can I find out more about with-profits?
What has changed?
•
•
•
We have reduced some regular bonus rates. Regular bonuses increase the guaranteed
benefits for with-profits plans and this change affects the rate at which the guaranteed amount
will grow after 1 February 2015.
We have reset the calculation factors we use to calculate payout values for many types of
with-profits plans. We regularly review payouts on our with-profits plans to ensure that withprofits customers continue to receive a fair return, taking account of the investment returns on
the assets of the with-profits fund.
Most plan values have increased over the year to 29 January 2015.
Standard Life Assurance Limited is registered in Scotland (SC286833) at Standard Life House, 30 Lothian Road, Edinburgh EH1 2DH.
Standard Life Assurance Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority
and the Prudential Regulation Authority.
www.standardlife.co.uk
© 2015 Standard Life, images reproduced under licence
Regular and Interim bonus rates
•
•
•
•
•
Reversionary and interim bonus rates for conventional with-profits plans are the same as last
year.
The bonus growth rates for some unitised with-profits plans are reduced from 1 February
2015.
The bonus growth rate for With Profits Bonds is unchanged.
Bonuses provide a gradual build-up of guaranteed benefits.
We currently expect these regular bonus rates to apply at least till February 2016.
If you want more information on our regular bonus rates please click on the relevant link below;Life contracts
www.standardlife.co.uk/1/content/resources/uk_internet/PDFs/Retail/wp1.pdf
Pension contracts
www.standardlife.co.uk/1/content/resources/uk_internet/PDFs/Retail/wp3.pdf
Payout values
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For most types of with-profits plan we use payout calculation factors to calculate payout
values. These factors are set to ensure that each customer receives a fair payout plus any
Inherited Estate enhancement. Last year we reset these factors in January and July.
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For most plans the payout value based on the payout calculation factors set at 29 January
2015 are higher than when the factors were last reset and higher than at 29 January 2014.
Why has the bonus growth rate reduced on my plan?
As guarantees build up we have to ensure the with-profits fund remains strong and is able to meet all
the guarantees. We expect asset classes such as equities and property to offer better prospects for
with-profits payouts in the long run but the higher the guaranteed benefits the more we may need to
invest in lower-risk assets such as fixed interest and cash. We are therefore reducing some bonus
growth rates from 1 February 2015 and so the guaranteed amount for your plan will grow at a slower
rate from that date.
Why does the value of my plan change so much at each review?
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The value of the assets that we hold to back with-profits plans can go up and down. Because
of this the value of your plan can rise and fall.
•
Smoothing aims to even out some of the effects of short-term ups and downs in investment
returns. However, there may be times when payout values do not move smoothly even when
we are applying smoothing. For example, where we use calculation factors to calculate
payouts. We don't set these every day. When we change them, we have to take account of
investment returns, adjusted for any smoothing, since we last set them. This can result in a
sharp overnight change, up or down, in payout values.
Standard Life Assurance Limited is registered in Scotland (SC286833) at Standard Life House, 30 Lothian Road, Edinburgh EH1 2DH.
Standard Life Assurance Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority
and the Prudential Regulation Authority.
www.standardlife.co.uk
© 2015 Standard Life, images reproduced under licence
Why is there an MVR (Market Value Reduction) on my pension plan?
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Your plan’s transfer value is a fair payout that takes account of how the fund has performed
while your plan has been invested in with-profits. In particular it takes account of the
investment returns on the assets in the with-profits fund, and any smoothing.
•
Your plan’s unit value includes the regular bonuses that have been added to the guaranteed
amount over the same period. But regular bonuses are not directly linked to the performance
of the with-profits fund. This means that the unit value can be higher than the transfer value,
giving valuable protection for claims where guarantees apply. (The unit value is the number of
units multiplied by the unreduced unit price.)
•
There’s no guaranteed amount payable on transfer and so the transfer value can be lower
than the unit value. This happens when your fair payout hasn’t grown by as much as the unit
value since your plan started.
•
In other circumstances, when the transfer value is higher than the unit value, we pay a final
bonus to make up the difference.
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Your plan’s retirement value will also reflect how the with-profits fund has performed while your
plan has been invested in with-profits, and any smoothing, Currently, when we calculate
retirement values we apply a minimum of unit value to each year’s units and so the retirement
value can be higher than the transfer value and, for claims where guarantees apply, the
retirement value will be at least the total unit value+.
(+ For some older pension plans there may be a deduction for outstanding charges.)
Has the changes announced at the budget had any impact on how you apply MVRs?
•
We have not made any changes at this time. If we were to do so in future we would, of course,
have to ensure that we maintain fairness between those customers who choose to leave with
profits and those who remain invested.
Where can I find out more about with-profits?
You can find out more about with-profits on our website:
www.standardlife.co.uk/withprofits
For information on unit values, guaranteed amounts, calculation factors, smoothing and how we
set fair payouts, please also see our ‘Understanding With Profits’ booklets at
www.standardlife.co.uk/c1/funds/with-profits-important-information.page
Standard Life Assurance Limited is registered in Scotland (SC286833) at Standard Life House, 30 Lothian Road, Edinburgh EH1 2DH.
Standard Life Assurance Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority
and the Prudential Regulation Authority.
www.standardlife.co.uk
© 2015 Standard Life, images reproduced under licence