information

We use cookies to make sure your experience is as good as it can be. If you’re happy with that, just continue using the site. Learn more about cookies.

skip to main content

The mutual difference

We’re a mutual, with 1.3 million members.

As a mutual, when we do well we’re able to give eligible members something extra. The mutual bonus is our way of rewarding eligible members for their support of the development and growth of our trading businesses.

Currently, we do this by increasing the asset share of certain LV= with-profits policies by a percentage. In recent years, this has been between 0.2% and 1.0% (depending on the type of policy the member holds). The mutual bonus isn’t guaranteed to be paid every year and the level can vary. In the event of exceptional circumstances the board also reserve the right to take back any bonuses that have been previously awarded.

Since we introduced the mutual bonus in 2011 we’ve awarded a total of £210 million to eligible members.

In 2019 we sold one of our trading businesses. We plan to use some of the sale proceeds to maintain the mutual bonus, for most of our eligible members, for years to come. You can find out more about how the mutual bonus scheme is changing in the questions below.

The mutual bonus is always at the sole discretion of our board of directors and at the moment is only available to certain with-profits members.

Common questions on our mutual bonus

Each year the LV= Board decides whether to declare a mutual bonus and, if so, the level that will be awarded. For members who have recently received mutual bonuses of 1.0% or 0.5%, we want to use some of the proceeds from the sale of the GI business to keep mutual bonuses at similar levels going forward. This means that from this year onwards (2020) whether or not a mutual bonus is given will be based on things such as:

  • what funds are still available
  • how investment markets perform
  • the number of active members who are eligible to receive it
  • our current and projected financial strength

This isn’t the case for our newer members, specifically those who hold Flexible Guarantee Bonds Series 3 or Flexible Guarantee Funds Series 2 policies, which since 2018 have received a mutual bonus of 0.2%. The decision to declare a mutual bonus for this group will still be based on factors like the performance of our trading businesses, smoothing profits and losses and our current and projected financial strength and the contribution made by various groups of members (for example risks they take in supporting the development and growth of LV=’s trading business). We won’t use the GI sale proceeds towards maintaining these bonuses.

If the LV= Board decide that it’s right to give a mutual bonus, after consulting with the With-Profits Committee and With-Profits Actuary, a percentage uplift will be applied to the value of eligible with-profit policies. The decision to give a mutual bonus is at the sole discretion of the board and is not guaranteed.

Members, or their beneficiaries, will be able to see the benefit of mutual bonuses when either their policy matures, is surrendered or pays out a death claim. So the longer a policy is in place the bigger the benefit could be. If a member has an annuity with us they will instead see the benefit of the mutual bonus through an increase in their regular income. However policyholders won’t see the benefit of a mutual bonus for policies where guaranteed benefits - or the underpin on conventional pension benefits paid as lump sums - are payable.

Since 2011, the mutual bonus has been partially funded from the success of our trading businesses. As we have sold one of our largest trading businesses – LV= General Insurance - there are fewer sources from which to pay future mutual bonuses. Therefore, for the majority of eligible members, we will aim to use some of the proceeds of the sale to help maintain this bonus at similar levels to those that members have come to expect in the past. We are using this approach except for members with newer policies, specifically those who hold Flexible Guarantee Bonds Series 3 or Flexible Guarantee Funds Series 2 policies, which since 2018 have received a mutual bonus of 0.2%. For more information about this please read through the FAQs below.

Eligibility for the mutual bonus depends on what type of policy your client has with us, and is only awarded once a policy has been held for at least 12 months.

Policy group

Member type

Is this type of member eligible for mutual bonus?

LV= conventional with-profits policies and with-profits annuities

LV= with-profits

Yes, our aim is to use the sale proceeds of the GI business to maintain the mutual bonus for this policy group, so it will be protected from most business risks. The actual rates we declare will be based on what funds are still available, how investment markets perform, the number of active members who are eligible to receive it and our current and projected financial strength.

LV= conventional Industrial Brand free-paid or conventional paid-up policies

Treated as LV= with-profits

Yes, our aim is to use the sale proceeds of the GI business to maintain the mutual bonus for this policy group, so it will be protected from most business risks. The actual rates we declare will be based on what funds are still available, how investment markets perform, the number of active members who are eligible to receive it and our current and projected financial strength.

LV= accumulating and unitised with-profits policies except Flexible Guarantee policies

LV= with-profits

Yes, our aim is to use the sale proceeds of the GI business to maintain the mutual bonus for this policy group, so it will be protected from most business risks. The actual rates we declare will be based on what funds are still available, how investment markets perform, the number of active members who are eligible to receive it and our current and projected financial strength.

Flexible Guarantee Bonds / Flexi Guarantee Plan / Flexible Guarantee Funds

LV= with-profits

Yes, but if your client has a Flexible Guarantee Bond 3 / Flexi Guarantee Plan / Flexible Guarantee Funds 2 then any mutual bonuses awarded will rely on the performance of our trading business and we won’t use the proceeds from the sale of the general insurance business towards them.

With-profits policies in the RNPFN Fund

RNPFN with-profits

No, these members are not eligible for the mutual bonus. Their policies are in a separate ring-fenced fund, and eligible policies benefit from the distribution of the inherited estate of this fund in the form of a ‘terminal bonus enhancement’.

With-profits policies in Teachers Assurance Fund

Teachers with-profits

No, these members are not eligible for the mutual bonus. Their policies are in a separate ring-fenced fund, and benefit from the distribution of the inherited estate of this fund as Special Bonus.

Unit-linked policies, annuities and other non-profit policies in the RNPFN Fund

RNPFN non-profit

No, These members are not eligible for the mutual bonus as their policy is not exposed to the risks and growth of our trading businesses.

All other policy groups such as Income Protection, Life Insurance, unit-linked policies, annuities, LV= ISA etc. These include ex-Teachers Assurance policies that are not with-profits.

LV= Non-profit

No, currently mutual bonus is only paid to our with-profits members.

Equity release products (for example Lifetime mortgage and Flexible Lifetime mortgage) underwritten by LV= Equity Release Limited.

Not a member of LV=

No, these policyholders are not members of LV=, because their policies are underwritten by a subsidiary company, LV= Equity Release. Therefore they don’t qualify for the mutual bonus.

Where we have lost contact with members, and our attempts to re-connect with them fail, membership is removed. In these circumstances the policies will no longer receive a mutual bonus, until such time as membership is re-instated. At this point we would add any mutual bonuses that would have been awarded had the policyholder been a continuous member.

Since we introduced the mutual bonus in 2011 we’ve added a total of £210 million to the policies of eligible members.

In recent years, the mutual bonus declared has been an uplift to policy value of between 0.2% and 1.0% (depending on the policy type). The level of mutual bonus could go up or down, or the board may decide not to award one at all.

Here is a summary of our mutual bonus declarations since it was introduced.

Year

Mutual bonus declaration

Uplift to LV= with-profits policy pay-outs

2011

£19m

1.0%

2012

£21m

1.1%

2013

£22m

1.0%

2014

£24m

1.0%

2015

£27m

1.0%

2016

£18m

0.5%

2017

£26m

LV= Conventional with-profits policies and with-profits annuities

1.0%

LV= Accumulating and unitised with-profits policies except Flexible Guarantee policies

1.0%

Flexible Guarantee Bonds Series 1 and 2 / Flexi Guarantee Plan / Flexible Guarantee Funds Series 1

0.5%

Flexible Guarantee Bonds Series 3 / Flexible Guarantee Funds Series 2

0.0%

2018

£26m

LV= conventional with-profits policies and with-profits annuities

1.0%

LV= accumulating and unitised with-profits policies except Flexible Guarantee policies

1.0%

Flexible Guarantee Bonds Series 1 and 2 / Flexi Guarantee Plan / Flexible Guarantee Funds Series 1

0.5%

Flexible Guarantee Bonds Series 3 / Flexible Guarantee Funds Series 2 policies that have been in force for at least 12 months (i.e. that were in-force on 31 March 2018)

0.2%

2019

£27m

LV= conventional with-profits policies and with-profits annuities

1.0%

LV= accumulating and unitised with-profits policies except Flexible Guarantee policies

1.0%

Flexible Guarantee Bonds Series 1 and 2 / Flexi Guarantee Plan / Flexible Guarantee Funds Series 1

0.5%

Flexible Guarantee Bonds Series 3 / Flexible Guarantee Funds Series 2 policies that have been in force for at least 12 months (i.e. that were in-force on 31 March 2019)

0.2%

Total

£210m

The monetary figures shown in the above table are rounded. The declarations from 2020 onwards will use some of the proceeds from the sale of the GI business for all the above policyholders, except for those with either a Flexible Guarantee Bond Series 3 or Flexible Guarantee Funds Series 2.

If the LV= Board decides to award a mutual bonus, we’ll usually apply the bonus to the value of eligible policies on 1 March of that year. Exceptions to this are outlined below by policy type:

  • 1 February for With Profits Pension Annuity policies
  • 1 April for Flexible Guarantee Bond, Flexible Guarantee Fund, Flexi Guarantee Plan, All-in-1 Investment Bond and Guaranteed Capital Bond policies
  • 1 May for Pension Income Plus Annuity (PIPA) policies

The mutual bonus will be part of the amount payable when the policy either:

  • matures
  • pays out in the event of a death claim
  • is cashed in

This doesn't apply to eligible annuitants who will get their mutual bonus as an increase in their income, or for partial withdrawals on unitised policies (where the mutual bonus reduces the units we cancel).

However policyholders won’t see the benefit of a mutual bonus for policies where guaranteed benefits - or the underpin on conventional pension benefits paid as lump sums - are payable.

No, the decision to give a mutual bonus is at the sole discretion of the LV= Board, and is currently only offered to certain eligible with-profits members.

The LV= Board regularly reviews member benefits and who is entitled to take advantage of these, including the mutual bonus.

Our goal is to protect the mutual bonus from most business risks. In extreme situations, such as if the solvency of the company is reduced to an unacceptable level, the future bonus rates could drop below the levels we are aiming for or be stopped. Any past mutual bonuses could be reduced or removed, although we think that’s unlikely to happen.

The percentage of mutual bonus varies by policy type because of the different levels of investment and support certain policyholders make to our trading businesses.

Full details and mechanics of the mutual bonus can be found in the LV= Principles and Practices of Financial Management (PPFM).

null

Member benefits

Purchasing a product entitles your client to member benefits such as discounts on other products.

More about our member benefits

null

Doctor services

LV= Doctor Services gives your client access to five expert medical services in one app.

More on doctor services

null

Supporting your client's retirement

Our retirement plans provide flexibility for your clients' needs now and in the future.

Visit our retirement products

null

Smoothed investments

View our Smoothed Investments proposition, with a range of fund choices accessible as a pension, bond and ISA.

Smoothed Investments explained

FOR UK FINANCIAL ADVISERS ONLY
Liverpool Victoria Financial Services Limited, registered in England with registration number 12383237. County Gates, Bournemouth, BH1 2NF, UK