Financial benefit

Details of the expected payout enhancement

Eligible LV= With-profits policyholders only

The table below shows examples of the payout enhancement that could be paid

The exact percentage uplift will depend on how long the eligible policy has been held with LV=, determined in complete calendar years since 1996 up to when the policy ends or an income is received.

Number of years* 5 10 15 20 25 30 35 40 50 60
Percentage uplift 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 5.0% 6.0%
Final policy value                    
£1,000 £5 £10  £15  £20  £25  £30  £35  £40  £50  £60 
£3,000 £15 £30  £45  £60  £75  £90  £105  £120  £150  £180 
£5,000 £25 £50  £75  £100  £125  £150  £175  £200  £250  £300 
£10,000 £50 £100  £150  £200  £250  £300  £350  £400  £500  £600 
£25,000 £125 £250  £375  £500  £625  £750  £875  £1,000  £1,250  £1,500 
£50,000 £250 £500  £750  £1,000  £1,250  £1,500  £1,750  £2,000  £2,500  £3,000 
£75,000 £375 £750  £1,125  £1,500  £1,875  £2,250  £2,625  £3,000  £3,750  £4,500 
£100,000 £500 £1,000  £1,500  £2,000  £2,500  £3,000  £3,500  £4,000  £5,000  £6,000 
Number of years* 5 10 15 20 25 30 35 40 50 60
Percentage uplift 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 5.0% 6.0%
Final policy value                    
£1,000 £5 £10  £15  £20  £25  £30  £35  £40  £50  £60 
£3,000 £15 £30  £45  £60  £75  £90  £105  £120  £150  £180 
£5,000 £25 £50  £75  £100  £125  £150  £175  £200  £250  £300 
£10,000 £50 £100  £150  £200  £250  £300  £350  £400  £500  £600 
£25,000 £125 £250  £375  £500  £625  £750  £875  £1,000  £1,250  £1,500 
£50,000 £250 £500  £750  £1,000  £1,250  £1,500  £1,750  £2,000  £2,500  £3,000 
£75,000 £375 £750  £1,125  £1,500  £1,875  £2,250  £2,625  £3,000  £3,750  £4,500 
£100,000 £500 £1,000  £1,500  £2,000  £2,500  £3,000  £3,500  £4,000  £5,000  £6,000 

*Number of complete calendar years a policy is held from start to finish

Examples of the future LV= With-profits policy payout enhancements

Example 1: Around three-quarters of all With- profits policies are Industrial Branch Whole of Life policies. These have an average value of around £2,000 and have been held on average for 26 years since 1996. The resulting payout enhancement is expected to be 2.6% or £52.

Example 2: Another popular product are our older unitised with-profits bonds (for example With Profits Growth Bond or With Profits Investment Bond). The average bond has a value of £30,000 and has been held on average for 21 years. In this situation, the payout enhancement is expected to be 2.1% or £630.

Example 3: With-profits members with Flexible Guaranteed Bonds (Series 1 and 2) and Flexible Guarantee Funds (Series 1) have on average £80,000 invested and have held their policies for an average of 6 years. Here, the payout enhancement is expected to be 0.6% or £480. 

For illustration purposes all figures are based on policy values at 31 December 2020 and claim is assumed to occur at 1 January 2022.

The payout enhancement will be reviewed periodically, and may go up as well as down and is not guaranteed. For example if the financial strength of the LV= Fund varies due to factors such as variation in policy longevity, annuity take-up rates, or higher contributions associated with the two staff defined benefit pension schemes, the payout enhancement may vary from the levels set out, possibly reducing to zero.

When required due to the financial position of the LV= Fund, we would expect to reduce the payout enhancement first, before potentially reducing any exit or mutual bonus.

 

Implications for LV= With-profits policies where guaranteed benefits exceed the underlying value

Many LV= With-profits policies come with a guaranteed lump sum benefit on death or maturity, or a guaranteed income benefit.

For some of these policies the value of the guaranteed benefit will be higher than the underlying value of the policy (including any payout enhancement). These policies would not benefit from the payout enhancement because they would already benefit from the higher amount of the guaranteed benefit.

The policies where this is most likely to occur are:

  • Ordinary branch conventional pensions sold before 1997, once they begin paying an income.
  • Maturity and death benefits on LV= conventional With-profits low cost endowments and LV= mortgage savings plans.
  • Death benefits on flexible whole of life policies.

We expect this to be the case now and in the future.

 

Guaranteed benefits - your questions answered

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 payout enhancement mean for me?
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 payout enhancement mean for me?
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 payout enhancement mean for me?
I have a policy with a guaranteed benefit. Will I see the benefit of the payout enhancement on my policy?

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Non-profit members - Press option 1 
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LV=, Proposals for change, County Gates, Bournemouth, Dorset, BH1 2NF.