As has been the practice for a number of years, we did not add a regular bonus to conventional with-profits policies at the declaration in April 2018. By not adding a regular bonus, and so not increasing the level of guarantees under conventional with-profits policies, we can be more flexible with our investment policy. We believe that this will improve the returns we are likely to earn for the policyholders concerned. Any benefit will be seen in final bonuses rather than regular bonuses.
A final bonus is added when you cash-in your policy in order to increase your payout when the regular bonuses previously added would give you less than a fair return.
For eligible with-profits policies (broadly, those taken out before 10 July 2001), final bonus rates include an enhancement designed to distribute the ‘inherited estate’ within the with-profits fund. The inherited estate is the amount of money built up in the with-profits fund that is in excess of the amount needed to pay policy benefits.
We did not declare final bonus rates for many single premium pension policies. The benefits under these policies already exceed the amount that can be justified by the investment returns earned on them. This reflects the high level of the guaranteed benefits these policies enjoy.
Market Value Reduction (One ISA only)
When you cash-in your RNPFN One ISA policy or take withdrawals, if our regular bonus rates have been higher than your fair share of the investment returns added to your ISA policy, we may apply a market value reduction. This will either reduce the amount we pay out or increase the number of units we cancel. We’d do this to make sure we’ve enough money to ensure the remaining investors in the with-profits fund receive their fair share. We’ll not apply a market value reduction on a death claim or on any units purchased 10 years or more before the date of encashment.