Three million with-profits policyholders with Norwich Union have today found out they will split £1bn in annual bonuses between them as the main CGNU fund made an investment return of 11.5% through last year.
The second year of positive returns in a row unfortunately has not been enough to offset the losses suffered in the bear market. Despite the FTSE ending 2004 at 4,814 points, it remains 2,100 points below its late 1999 peak, NU says.
Low interest rates and low inflation mean the long-term outlook for investment returns are lower than in the 1980s and 1990s, but NU still feels its CGNU/CULAC with-profits funds can achieve an average 7% return before tax.
Last year’s return on the NULAP with-profits fund was 10.2% pre-tax, with the Provident Mutual fund returning 7.6% pre-tax.
The CGNU with-profits fund increased its exposure to UK equities, property and cash, while reducing its exposure to international shares, UK fixed interest and international bonds, compared with the end of 2003. The equity backing ratio, EBR, increased from 65.2% to 66.9% by the year’s end.
Market value reductions, MVRs, have been reduced as a reflection of the improved investment performance, but they still remain at a range of ratios depending on when money was invested.
|Year money invested||MVR rate|
Payout examples for 2005 published by the provider are as follows:
|Unitised with profits policies|
|Investment bond 10 years|
|Company||Cash-in value 01/01/04||Cash-in value 01/01/05||Including final bonus of||Increase in value during 2004|
|Conventional with-profit policies|
|Pension 20 years|
|Company||Maturity value 01/01/05||Including a final bonus of||Return before deducting inflation of 3.15%|
|CGNU (incl GA)||£113,392||£1,353||7.9%|
|Mortgage endowment policy 25 years|
|Company||Original target value of policy||Maturing policy value 01/01/05||Including a final bonus of||Excess amount over target||Return before deducting inflation of 3.55%|
|CGNU (incl GA)||£28,779||£52,576||£16,065||£23,797||8.9%|
|Mortgage endowment policy 15 years|
|Company||Original target value of policy||Maturing policy value||Including a final bonus of||Shortfall to target||Return before deducting inflation of 2.7%|
|CGNU (incl GA)||£14,909||£13,033||£0||£1,876||4.8%|
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Follows active fee cuts in June