Members Mutual bonus

Answering your questions about our mutual bonus

What is a mutual bonus and why do we pay one?
The mutual bonus scheme is designed to reward eligible members for their membership of LV= and the risks taken in supporting the establishment and growth of our trading business i.e. its life insurance business and its holding in a general insurance business.
How does it work?

The mutual bonus will be used to increase the value of eligible policies. Currently only members with LV= with-profits policies have received a mutual bonus. 

For most policies it will form part of the amount payable when the policy matures, pays a death claim or is cashed in. 

For With Profits Pension Annuity and Pension Income Plus Annuity policies, the mutual bonus will increase the income payable to the policyholder alongside the normal annual bonus allocation.

However the scheme could evolve over time. Please see 'How do you see the scheme evolving' for more details.

 
How much is the 2018 mutual bonus worth?

Our 2018 mutual bonus declaration of £26 million was based on the financial performance of the LV= group for 2018. As a result, eligible members benefit from a further mutual bonus uplift within their with-profits payouts of: 

LV= policy group Uplift 
Conventional with-profits policies and with-profits annuities
1.0%
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% 

A mutual bonus has been declared for the first time for Flexible Guarantee Bonds Series 3 / Flexible Guarantee Funds Series 2. However these policies need to be in-force for at least 12 months before they are eligible for it. For the 2018 mutual bonus these policies would have to have been in-force on 31 March 2018 to receive it.

The different enhancements applied for 2018 reflects the contribution to the Society made by these different groups of policies.

It will typically add the following to LV= with-profits policies assuming they are currently worth £10,000:

LV= policy group Addition 
Conventional with-profits policies and with-profits annuities
£100
Accumulating and unitised with-profits policies except Flexible Guarantee policies
£100 
Flexible Guarantee Bonds Series 1 and 2 / Flexi Guarantee Plan / Flexible Guarantee Funds Series 1
£50 
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)
£20 

Mutual bonus will form part of the amount payable when the policy matures, pays a death claim or is cashed in, except for eligible annuitants which receive an increase in their income.  For most with-profits policies it is added by increasing any final bonus or top-up bonus (or reducing any Market Value Reduction) that otherwise would be paid.


What mutual bonus has been declared in the past?

Here is a summary of our mutual bonus declarations to date:

  Mutual bonus declaration  Uplift to LV= with-profits policy payouts 
2011 £17m  1.0%
2012 £21m 1.1% 
2013 £22m 1.0%
2014 £24m 1.0%
2015 £27m 1.0%
2016 £17m 0.5%
2017 £26m Conventional with-profits policies and with-profits annuities
1.0% 
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 Conventional with-profits policies and with-profits annuities
1.0%
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%
Total £182m  

The monetary figures shown in the above table are rounded.


How do you see the scheme evolving?

Each year the LV= Board considers whether to declare a mutual bonus and, if so, the level and form of the bonus and which policies should receive it. This will take into account:

  • the performance of the LV=’s trading business (its life insurance business and its holding in a general insurance business);
  • LV=’s capital position;
  • Smoothing profits and losses; and
  • the contribution to LV= made by various groups of policies (for example, the risks taken by them in supporting the establishment and growth of LV=’s trading business).

Future mutual bonuses will continue to be linked to our business performance and will be declared at the sole discretion of our Board.

We intend to declare a mutual bonus in years when both trading profits and financial strength allow. We also want to consider other ways that can reward our members more generally for their investment in LV=.

We can’t guarantee that we’ll be able to announce a mutual bonus every year, as it will depend on our future trading profits and financial strength.

 
Once you've declared a mutual bonus, can you ever take it away?
Yes, but we'd only take it away in exceptional circumstances, for example if it were required to protect our financial strength. It may be subsequently reinstated if the Board considers it appropriate.
I am a Flexible Guarantee Bond 3 /Flexi Guarantee Plan/Flexible Guarantee Funds 2 policyholder, am I eligible for mutual bonus?
Yes but only if your policy has been in-force for a year at the date we made the declaration i.e your policy was in-force on 31 March 2018.
I am an RNPFN policyholder. Why am I not eligible to receive the mutual bonus?
RNPFN Fund with-profits policies do not invest in LV= as they are part of a separate, ring-fenced fund and do not contribute to the growth of the group’s trading business. Eligible policyholders in the RNPFN Fund may benefit from the distribution of the inherited estate of the Fund in the form of ‘terminal bonus enhancement’.
I am a Teachers Assurance with-profits policyholder. Why am I not eligible to receive the mutual bonus?
Teachers Assurance Fund with-profits policies do not invest in LV= as they are part of a separate, ring-fenced fund and do not contribute to the growth of the group’s trading business. Policyholders in the Teachers Assurance Fund may benefit from the distribution of the inherited estate of the Fund in the form of ‘special bonus’.
What about future years? Will it always only be LV= with-profits members who receive mutual bonus?
The Board has the discretion to distribute surplus funds to all members i.e. to members who hold either with-profits or non-profit policies.  The LV= Board will consider each year whether, at what level and in what form LV= will declare any distribution of surplus, and which members are eligible to receive it.
Why aren't all customers eligible to receive the mutual bonus?
As we are a mutual company, we're owned by our members (who may hold either with-profits or non-profit policies) in much the same way as a plc is owned by its shareholders. A member is a person who holds life insurance, protection, investment or retirement policies with us. For more details see the members section. The mutual bonus is designed to reward our members for their ownership of LV=, and the risks taken supporting the establishment and growth of our trading business however, we will continue to assess the appropriate rewards for our members and this may change. Currently the mutual bonus is only paid to members with LV= with-profits policies (and members with LV= conventional Industrial Branch free-paid or conventional paid-up policies which are treated as with-profits) but the Board continue to consider this position and whether they wish to extend mutual bonus or reward members in other ways for their membership of LV=.
Why isn’t there a special bonus as a result of the 49% sale of our general insurance business?
The Board, after consulting the With-Profits Committee, considered if it was appropriate to make a special distribution following the partial sale of our general insurance business. The Board concluded that the sale proceeds should be used to help support mutual bonus in future years but also to be used to develop the business and therefore concluded it was not in members interests to make a one off special bonus.

Want to find out more?

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