Members Exit bonus

Answering your questions about the exit bonus

How will the LV= board decide what percentage uplift to give each year for the exit bonus?

The Board will consider several factors when deciding how much exit bonus will be applied to policies in any one year. This will include 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.

The exit bonus is a percentage increase in the final policy value, which can vary so it’s not guaranteed.  However, we won’t add an exit bonus to any eligible policies when guaranteed benefits, or the underpin on conventional pension benefits paid as lump sums, are payable.

Who will get the exit bonus?

We’ve decided to reward LV= with-profits policyholders who have been with us for many years, particularly during the period of time when we were growing the GI business, and in doing so were exposed to the most risks during that time. That’s about 250,000 people. In deciding who receives the bonus, the board took advice from the LV= With-Profits Committee and the LV= With-Profits Actuary.

However, we won’t add an exit bonus to any eligible policies when guaranteed benefits, or the underpin on conventional pension benefits paid as lump sums, are payable.

 
Where can I see my exit bonus in my policy documents?
Annual Statements will tell you the value of your policy and include any mutual bonus and exit bonus that has been applied. For the exit bonus we still have a bit of work to do to add these to any policies that are ending soon. If your policy finishes in the next few months we’ll make sure you receive the exit bonus as a separate amount.
When will I see the benefit of the exit bonus?

Any exit bonus will be added to your policy value when your policy ends, you start receiving an income from the policy. Alternatively we’ll use the exit bonus to reduce the number of units we cancel when you make a partial withdrawal on your unitised product.

However, we don’t add an exit bonus to any eligible policies when guaranteed benefits, or the underpin on conventional pension benefits paid as lump sums, are payable. For the exit bonus we still have a bit of work to do to add these to any policies that are ending soon. If your policy finishes in the next few months we’ll make sure you receive the exit bonus as a separate amount.

I have an LV= conventional with-profits pension policy that has a guaranteed yearly income benefit, and I’m already claiming an income from it. What will the exit bonus mean for me?
You won’t notice any difference to your income due to the exit bonus. This is because we don’t add an exit bonus to guaranteed benefits we are already paying, as the amount of money you’ll receive from your annuity is more than the value of the investments it’s paid from, and this is likely to continue.
I have an LV= conventional with-profits pension policy that has a guaranteed yearly income benefit, and I plan on claiming an income from it when I retire. What will the exit bonus mean for me?

You won’t notice any difference to the income due to the exit bonus. This is because we would begin paying guaranteed yearly income benefits, and we don’t add an exit bonus to these types of benefits.

We aren’t paying any more than your guaranteed benefits, as the amount of money you’ll receive from your annuity is more than the value of the investments it’s paid from, and this is likely to continue. 

 
I have an LV= conventional with-profits pension policy that has a guaranteed yearly income benefit, and I plan on taking the benefits as a lump sum or transferring it to another provider. What will the exit bonus mean for me?
It is likely that there will be no difference in value due to the exit bonus. While we would apply the exit bonus to the underlying value of your policy, you are likely to benefit (from age 50) from an ‘underpin’ which is paid if it is higher than the underlying value. The ‘underpin’ is based on the commuted value of your guaranteed yearly income, and we don’t add exit bonus to this.
I have a policy with a guaranteed benefit. Will I see the benefit of the exit bonus on my policy?

We don’t add an exit bonus to guaranteed benefits where they are a fixed amount. So if these are higher than the underlying value of your policy including the exit bonus, then you won’t benefit from the exit bonus. However you would be benefitting from the guaranteed benefit. 

Further information can be found in your guide to how we manage our with-profits business.

I have a Flexible Guarantee product - why am I not eligible to receive the exit bonus?
These policies are newer products, and therefore these policyholders’ investments didn’t contribute as much to the success of GI as our older legacy with-profits products. The board determined that only our older ‘legacy’ with-profits policyholders will receive the exit bonus.
I am an RNPFN policyholder. Why don’t I receive the exit bonus?
RNPFN with-profits policies don’t contribute to LV=’s trading businesses. They are in a separate, ring-fenced fund. Eligible policyholders in the RNPFN Fund may benefit from the distribution of the inherited estate of the RNPFN Fund in the form of a ‘terminal bonus enhancement’.
I am a Teachers Assurance with-profits policyholder. Why don’t I receive the exit bonus?
Teachers Assurance Fund with-profits policies don’t contribute to LV=’s trading businesses. They are in a separate, ring-fenced fund. 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’.
Are these bonuses guaranteed?
No. As a mutual, and a financial services provider, we need to continue to protect all of our members and the business for the long-term, so the board have full discretion as to whether a bonus is awarded, and at what level, and even to remove it all together.
What factors could impact whether the bonuses are paid or not?

In normal circumstances, these bonuses will be protected from most business risks. The actual rates we declare will be influenced by 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.

We must protect LV= and look out for the interests of all our members. Therefore, if in the unlikely event that our financial strength was to reduce to an unacceptable level the bonus rates could drop below the levels we are aiming for. We don’t think this is likely to happen, but we think it’s important to be upfront about this possibility. 

In these circumstances, we currently expect to reduce the exit bonus first and then we’d look at potentially reducing the mutual bonus.

Can I get the bonus now?

No, this isn’t possible. If you have an existing policy in place the exit bonus will only be added at the point that your policy matures, is cashed in, pays out a death claim, or you start to receive money from the policy – either through partial withdrawals on unitised policies (where the exit bonus reduces the units we cancel) or a regular income.

It is not possible to substitute this for a cash amount before the policy ends. We don’t add an exit bonus to any eligible policies when guaranteed benefits - or the underpin on conventional pension benefits paid as lump sums - are payable.

For the exit bonus we still have a bit of work to do to add these to any policies that are ending soon. If your policy finishes in the next few months we’ll make sure you receive the exit bonus as a separate amount.

 
How are you telling members about this exit bonus?

For those who are entitled to the exit bonus we included a message in their Annual General Meeting information which was sent out in August 2020. The value of your policy shown in relevant annual statement communications will include any mutual bonus and exit bonus that apply.

For the exit bonus we still have a bit of work to do to add these to any policies that are ending soon. If your policy finishes in the next few months we’ll make sure you receive the exit bonus as a separate amount.

If a member has taken a partial withdrawal from their policy since 28 November 2017, we’ll write to them over the course of the next 12 months to explain how the uplift for the withdrawn amounts will be applied to the remaining amount left on the policy. 

Over the next 12 months, we’ll also endeavour to trace any members who have left LV= since 28 November 2017, but are still entitled to receive the exit bonus. Once we’ve established contact with them, or any executor of their estate if they’ve passed away, we’ll make sure they receive the right amount from us with any appropriate interest.

I am taking partial withdrawals which are a fixed amount. How is the exit bonus included?
If you have a unitised product, you can take partial withdrawals by cancelling (or surrendering) some of the units you have purchased with your policy. The exit bonus will reduce the number of units we need to cancel for your partial withdrawal. You’ll benefit from this when your policy ends. You still receive a fixed withdrawal amount.