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LV= Announces with-profits performance

23 March 2015 | Press release

Insurance, investment and retirement group LV= today announces its annual with-profits pay-outs and performance details.

  1. The main LV= with-profits fund earned an investment return of 11.4% (gross of tax) in 2014.
  1. A 25-year policy covering a £50,000 mortgage is currently paying a surplus of £15,324 (for a customer aged 30 next birthday at entry, the maturity value for a 25-year low cost mortgage endowment maturing on 1 March 2015 is £65,324).
  1. A £50 a month 25-year savings endowment policy maturing on 1 March 2015 (for a male aged 30 next birthday at entry) will pay out £39,010, equivalent to an annual yield of 6.9%.

John Perks, Managing Director of LV= Retirement Solutions, said: “Against a backdrop of record low interest rates for six years the investment return of 11.4% for our main with-profits fund is great news for investors. This is higher than market benchmark, which coupled with the mutual bonus, means our members are receiving better returns than many investors in other traditional savings products.

“As well as our main fund, the funds invested in our flexible guarantee bond also beat market benchmarks. In 2014 we also made the bond available within our pension proposition, and since the Chancellor’s Budget announcement in March last year that annuities will no longer be compulsory, we have seen high levels of interest in these funds amongst savers using them as part of their retirement plans. For those who are seeking a potential uplift in their investments and/or their pension income but want a level of guarantee these products are an excellent solution, and sales over the last year are up 79% compared to 2013. We expect this upwards trend to continue as part of the new retirement landscape.”

Maturity value for mortgage-linked low cost endowment as at 1 March 2015

Policyholder: Male, aged 30 next birthday at entry

25-year endowment

Mortgage amount: £50,000

Guaranteed death benefit: £50,000

Maturity value: £65,324

Surplus £15,324

Equity backing ratio

As at 31 December 2014, the LV= with-profits fund had 46% invested in equities, 9% in property, and 4% in venture funds i.e. 59% of the total was invested in assets with greater potential for long-term growth.

The table below shows the LV= with-profits fund asset allocation, both at the end of 2014 and at the end of 2013.

Asset Class

Allocation

31 December 2014

31 December 2013

Equities

45.8%

46.9%

Venture Funds

3.7%

3.8%

Property

9.1%

8.5%

UK Gilts

29.0%

27.8%

Corporate Bonds

10.9%

10.9%

Cash/Other

1.5%

2.1%

Total

100.0%

100.0%

Notes to editors:

1. WITH-PROFITS FINAL BONUS RATES AND PAYOUTS 2015

Policy duration

Policy Description

Payout

Final Bonus Rate

Equivalent annual rate of return over the full term

25 years a

Ordinary Branch Endowment

£39,010

44.4%

6.9%

25 years b

Industrial Branch Endowment

£3,686

45.2%

6.0%

Notes

a: Regular premium of £50 per month for a male aged 30 next birthday at entry, maturing 01/03/2015.

b: Regular premium of £5 per four week period for a male aged 30 next birthday at entry, maturing 01/03/2015.

Unitised with-profits regular premium policies

Policy duration

Policy Description

Payout

Final Bonus Rate

Equivalent annual rate of return over the full term

10 years a

Endowment

£7,914

35.2%

5.4%

15 years a

Endowment

£14,087

47.0%

5.7%

10 years b

Pension Policy

£36,024

35.5%

7.9%

15 years b

Pension Policy

£59,158

41.3%

6.3%

Notes

a: Regular premium of £50 per month for a male aged 30 next birthday at entry, maturing 01/03/2015.

b: Regular premium of £200 per month for a male retiring at age 65 on 01/03/2015.

Final bonus is determined individually for unitised with-profits policies.

Unitised with-profits bonds

Policy duration

Policy Description

Surrender value as at 1 March 2015

Surrender value a year ago

Effective return over the year

5 years a

Flexible Guarantee Bond Cautious Series 2

£57,068

£53,277

7.1%

Flexible Guarantee Bond Balanced Series 2

£56,334

£52,525

7.3%

Flexible Guarantee Bond Managed Growth

£55,068

£51,660

6.6%

5 years b

Flexible Guarantee Bond Cautious Series 2

£58,508

£54,354

7.6%

Flexible Guarantee Bond Balanced Series 2

£59,777

£55,089

8.5%

Flexible Guarantee Bond Managed Growth

£61,385

£56,370

8.9%

New Cell

With Profits Growth Bond

£20,071

£18,389

9.1%

Notes

a: Single premium of £45,000, invested in the three fund options of the Flexible Guarantee Bond Series 2, for a male aged 30 exact at entry, with a 5 year guarantee, surrendering 01/03/2015.

b: As a, but without a guarantee.

c: Single premium of £10,000 for a male aged 30 exact at entry, surrendering 01/03/2015. Final bonus is determined individually for this product.

Policy duration

Policy Description

Total annual income as at 1 February 2015

Total annual income a year ago

Effective return over the year

5 years a

With Profits Pension Annuity

£4,106

£3,901

5.3%

10 years b

With Profits Pension Annuity

£4,556

£4,284

6.4%

Notes

a: With Profits Pension Annuity (Series 4) taken out on 01/02/2010 with an initial income of £3,000 and an Assumed Bonus Rate of 3%.

b: With Profits Pension Annuity (Series 1) taken out on 01/02/2005 with an initial income of £3,000 and an Assumed Bonus Rate of 3%.

Total annual income includes any top-up bonus.

2. ANNUAL BONUS RATES

Product

Bonus rate 2014 **

Bonus rate 2013

With Profits Pension Annuity – Series 1 & 2

1.40%

1.90%

With Profits Pension Annuity – Series 3 & 4

(entry years 2007-2011)

1.40%

1.90%

Pension Income Plus Annuity *

4.00%

2.75%

Tax Free Savings Plan

1.75%

1.75%

With Profits Growth Bond, With Profits Investment Bond, Bank of Ireland Group / Liverpool Victoria With Profits Bond, MAX

1.00%

1.00%

With Profits Retirement Plan, Top Up Company Pension Plan, Flexible Personal Pension Plan

1.50%

1.50%

With Profits Life ISA

0.50%

0.50%

Flexible Savings Plan – Series 2 *, Flexible Savings Plan – Series 1, Regular Savings Plan, Mutual Investment Bond, Flexible Investment Bond, Family & Legacy Fund, Mortgage Savings Plan

1.50%

1.50%

With Profits Income Bond

3.00%

3.00%

Flexible Whole Life Plan

6.17%

6.17%

Appropriate Personal Pension policies

1.81%

1.81%

Industrial Branch Life policies

1.00%

1.00%

Ordinary Branch Life policies

2.00%

2.00%

Ordinary Branch Pension policies

0.00%

0.00%

* Products open to new business.

** The 2014 annual bonus rates are effective from 01/03/2015, except for With Profits Pension Annuity policies where the rates are effective from 01/02/2015. The rates for Pension Income Plus Annuity are the Declared Investment Returns for policies taken out between 01/02/2013 and 30/04/2013 at their policy anniversaries in 2015 and 2014. Quarterly declarations are made for this product and rates also differ by entry-year. A full record of all the declared rates is available on request.

Further details of how LV= manages its with-profits business can be found in its Principles and Practices of Financial Management. The current version is on our website at http://www.lv.com/wp-info.

It is important to remember that past performance is not a guarantee of future returns as these depend on bonuses yet to be declared.

Mutual Bonus

LV=’s mutual bonus was launched in 2011 and rewards eligible members for their ownership of the Society. The LV= Board considers the financial performance of LV=’s trading businesses each year along with its current and projected financial strength to determine whether, at what level, and in what form, any mutual bonus should be declared, and which members should be eligible to receive it. Most eligible members will receive the mutual bonus when their with-profits policy matures or is cashed in. LV='s mutual bonus is not a guaranteed benefit and is at the discretion of the LV= Board.

About LV=

LV= employs over 6,000 people and serves over 5.7 million customers with a range of financial products. We are the UK’s largest friendly society and a leading financial mutual.

When we started in 1843 our goal was to give financial security to more than just a privileged few and for many decades we were most commonly associated with providing a method of saving to people of modest means. Today we follow a similar purpose, helping people to protect and provide for the things they love, although on a much larger scale and through a wide range of financial services including insurance, investment and retirement products.

We offer our services direct to consumers, as well as through IFAs and brokers, and through strategic partnerships with organisations such as ASDA, Nationwide Building Society and trade unions.

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