When eligible policies end, they’ll currently receive an exit bonus of 5.0%
The exit bonus rate is reviewed annually by the LVFS Board in January of each year, but it can be reviewed at other times if there is a need to. They consider several factors, when deciding what rate to apply.
Once the new rate has been agreed, it will then be used to uplift pay-outs and income for eligible policies, typically from the following 1st March. We’ll publish this rate on our website on or shortly after this date. We reserve the right to review the rate at other times in the event of an unexpected change in the factors we consider.
The Board declared an initial exit bonus rate of 5.75% in 2020 and this was maintained at the review in January 2021.
Following particularly strong investment returns in late 2020 and early 2021 in the fund eligible policies are invested in, a further review has been performed and a rate of 5.0% has been declared, to take effect from 1 June 2021. Strong investment returns increase the policy values over which the funds for exit bonus have to be spread and therefore tend to reduce the percentage of exit bonus payable.
This rate will continue to be used to uplift payouts and income for eligible policies until the next rate is declared, which would be on 1st March 2022 unless there is a need to review it earlier.
Where pension income is being uplifted, the rate of exit bonus will be the current rate on the anniversary of when the policy started. The level of the income will then not change for a year.
We don’t add the exit bonus if we are already paying guaranteed benefits, or when the underpin on conventional pension lump sum benefits is paid.