Norwich Union has responded to new regulations on Principles and Practices of Financial Management by cutting projection rates on with profits funds and imposing a 75 basis points charge to provide policy guarantees.
The changes follow a review of the proportion of the funds held in equities in light of the new regulations and policy guarantees, and NU’s decision that imposing a charge would better suit policyholders’ interests than reducing exposure to equities.
Projection rates for the firm’s NU Life & Pensions and Provident Mutual with profits funds have been cut by an average of 1% and 1.5% respectively (see table below).
NU says the changes reflect “lower anticipated overall returns to policyholders”.
Those in the NU Life & Pension fund are additionally hit by the 0.75% charge, which is essentially being implemented in order to maintain exposure towards equities while staying within the bounds of acceptable risk proposed by the regulator.
NU says implementing these changes in response toe PPFM as part of new realistic reporting requirements “does not impact our ability or our inclination to sell with-profits policies”.
|Before mid rate||After mid rate|
|Life & Savings Products|
|CGNU/CULAC (including new business)||6%||6%(unaltered)|
|CGNU/CULAC (including new business)||7%||7% (unaltered)|
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