Mutual bonus

Our members hold a variety of products with us including investments, life insurance, income protection and retirement income solutions. 

Members will either be with-profits or non-profit members depending on what product they hold with us. Learn more about the differences between these two product types and view our full list of products.

LV= with-profits policies directly invest in, and support, the development and growth of our business. These policies are eligible for the mutual bonus: 

• Flexible Guarantee Bonds 
• Flexi Guarantee Plan
• Flexible Guarantee Funds (Flexible Guarantee Trustee Investment Plan) 
• Smoothed Managed Funds (Bond, Pension, ISA, Trustee Investment Plan) – on and off platform variants
• LV= ISA
• LV= unitised with-profits policies (other than above)
• LV= conventional and accumulating with-profits policies
• With-profits lifetime annuities (With Profits Pension Annuity, Pension Income Plus Annuity)
• With-Profits Fixed Term Annuity policies

Other bonuses, for example regular and final bonuses, are paid to eligible members based on their individual policy terms and conditions. For information on the bonuses you are eligible to receive, please take a look at your annual statements.

RNPFN with-profits policies are in a separate, ring-fenced fund within LV=. Eligible policyholders in the RNPFN Fund may benefit from the distribution of the inherited estate of the RNPFN Fund through an enhancement to the payout when policies end or are cashed in. 

Teachers Assurance Fund with-profits policies are in a separate, ring-fenced fund within LV=. Eligible policyholders in the Teachers Assurance Fund may benefit from the distribution of the inherited estate of the Teachers Fund in the form of a ‘special bonus’.

Our aim is to distribute our profits - via the mutual bonus - in a broadly stable and sustainable way, by maintaining our profitability and capital position. The LV= Board has full discretion and freedom when deciding to award a mutual bonus.

The decision to award a mutual bonus is guided by the Board’s overriding responsibility to balance the need to deliver for members both today and in the future, against LV’s investment needs and projected financial strength. The Board could make adjustments or significant changes to the rates if circumstances require it. For example, if the current performance or capital position of the business differs materially from the business plan. Any past mutual bonuses could be reduced or removed, though could be reinstated at a later date.

The Board will always consult with the With-Profits Committee, With-Profits Actuary and Chief Actuary, taking into account how the business has performed against the business plan and what profits are available to distribute that year.  

The mutual bonus rates will be communicated alongside our financial results each year.

The rates differ between different groups of eligible with-profits policies. The reason for this is because the level of investment, and associated exposure to risk, in supporting the development and growth of our business over the years, depends on the type and nature of the with-profits policy. For example, if a mutual bonus is declared, our older policies (group three) who have contributed most will get the highest mutual bonus rate.

Group one (which include LVFS’ with-profits policies open to new business)

• All Smoothed Managed Funds unitised with-profits policies 
• Flexible Guarantee Bond Series 3
• Flexible Guarantee Funds Series 2
• With-Profits Fixed Term Annuity policies

Group two

• Flexible Guarantee Bond Series 1 and 2
• Flexible Guarantee Funds Series 1
• Flexi Guarantee Plan

Group three 

• All other with-profits policies in the LVFS Fund.

The mutual bonus rates are currently as follows:

• The mutual bonus rate for group two is three times the rate for group one.
• The mutual bonus rate for group three is six times the rate for group one. 

The ratios between the mutual bonus rates for different policy groups would be expected to remain stable over time, but the Board retains discretion to change the ratios after taking advice from the With-Profits Committee, With-Profits Actuary and Chief Actuary.

If the Board declares a mutual bonus, we'll apply it to eligible with-profits policies that have been in place for 12 months. For most policies, the amount will be a set percentage of the policy's value on the date the mutual bonus is applied.

The mutual bonus will be paid to eligible members either when their policy matures, is cashed in or pays out on a death claim. However, for eligible lifetime annuity members, they'll receive an increase in their regular income, unless we're paying guaranteed benefits. A mutual bonus does not increase guaranteed benefits or the ‘underpin’ when conventional pension benefits are paid.

The mutual bonus is not guaranteed to be paid each year and the amount can vary.