Dedicated Information

Our future plans and what it means for With-profits policyholders

10 September 2021

What’s the difference between a With-profits member and a non-profit member?

With-profits members hold a long-term investment product where the premiums are pooled together in a fund and invested. These policyholders receive bonuses that reflect the performance of the investments plus additional bonuses at the discretion of the Board. The policies are primarily made up of longer-term financial products including endowments and whole-of life policies that are no longer actively marketed.

Non-profit members have an insurance policy where the sum insured and benefits are fixed from the start of the policy and the policy doesn’t attract bonuses e.g. Income Protection or Critical Illness Cover.

What you should know if you have a RNPFN or Teachers With-profits policy

RNPFN policyholders
One-off member payment

Provided that your policy is still in place as at the date of the Special General Meeting you’ll be eligible for the one-off member payment if the transaction goes ahead. 

Enhanced payout

LV= acquired the Royal National Pension Fund for Nurses in 2001. These policies sit in a closed ring-fenced fund so are not eligible to receive the enhanced payout. This is because the RNPFN Estate within the fund is and will continue to be being distributed solely to RNPFN With-profits policyholders in the form of an enhancement to final bonus rates. 
 

Our FAQs below will be able to provide you with more details on the transaction.

Teachers policyholders
One-off member payment

Provided that your policy is still in place as at the date of the Special General Meeting you will be eligible for the one-off member payment if the transaction goes ahead. 

These policies were sold by the Teachers Provident Society Limited which we took over in 2016. They sit in a closed ring-fenced fund so are not eligible to receive the enhanced payout. This is because the Teachers Estate within the fund is and will continue to be distributed solely to Teachers With-profits policyholders in the form of an enhancement to final bonus rates. 
 

Our FAQs below will be able to provide you with more details on the transaction.

Some of our most frequently asked questions specific to you

Strategic review

Why can’t LV= just stay as it is now?
LV= requires significant investment to ensure future success. As a mutual this investment would need to come from internal capital which would otherwise be used for returns to LV= With-profits policyholders, many of whom would not be expected to see the returns within the lifetime of their policies. The Board did not believe this was in the best interests of LV= With-profits policyholders and so explored other sources of external investment, which would protect their returns whilst also providing the investment to secure a sustainable future for LV=.
What were the alternatives that the Board considered for the future of LV=? Was this option accepted unanimously? What other options were considered?
Mutuality has served us well for many years but we simply can’t make it work any longer for our business model given the scale of additional investment that would be required and time required to deliver growth. It has taken nearly 12 years for members to see a full return on their investment in the general insurance business and the vast majority of today’s With-profits policies will mature within the next eight or nine years.
 
The Board carefully considered a wide range of strategic options and proposals supported by independent financial and legal advice and in consultation with the independent With-Profits Committee.
 
During the strategic processes confidential information is shared between the parties, which is why everyone concerned signs confidentiality agreements. This means it would not be right or proper for us to disclose details on any of the other parties that took part in our process or what their plans were for LV=.
 
It is the Board’s duty to take action in the best interests of all members. At the end of the process the Board was unanimous in its decision that the transaction with Bain Capital presents an excellent financial outcome for our LV= With-profits members as well as offering an unrivalled commitment to LV=’s future prospects, business and our people.
 
There was also no transaction being offered which would have allowed members to retain similar membership rights to those that they have today and no transaction under which LV=With-profits members would have been likely to benefit from stronger governance arrangements, more access to distributions or a better cost structure.
What criteria did the Board use to evaluate if these proposals were in the best interests of members at each stage of the transaction process?
The primary criteria used was to secure the best financial outcome for all members and specifically LV= With-profits members, who by the nature of their policies provide capital to fund investments and new business in LV=. 
 
Once that was achieved the Board looked at what other benefits could be achieved for our other stakeholders as is required by their statutory duties as directors.
 
Bain Capital put forward a proposal that provides an excellent financial outcome for members. This is not only in the purchase price but also through fixed administration and asset management agreements that our With-profits members will benefit from even as the With-profits book decreases in size.
 
Bain Capital was also singular in being able to offer not only this financial outcome but also the strongest commitment to the future of LV= and our people.
 
This provides our people with the opportunity to participate in an exciting future, supports the communities which we serve and provides ongoing competition and choice in the UK market. The news has been well received by our people who recognise the transaction as an opportunity for the business to grow.

Bain Capital

What are Bain Capital’s plans for LV= in outline?

Bain Capital will support the LV= Board and Management’s strategic plan, which includes (i) leveraging LV=’s strong brand to expand its presence in its existing markets, (ii) innovating and refreshing the customer experience, (iii) providing significant value and on-going stability and financial strength to With-profits policyholders and (iv) continuing to strengthen LV=’s value proposition to its financial advisers.

What guarantee is there that the long-term interests of members will be protected?

There are number of policyholder protections in place. The With-Profits Fund will be ring-fenced from new business risk and the risks in other parts in the business for example increased deaths on terms assurance business. Other policyholder benefits such as the level of annuity someone receives are not changing and cannot be changed by Bain Capital as these are protected by the terms and conditions of the policy.

Voting process

Will members get a vote on the transaction?

Yes – eligible members will get a vote on the transaction, as long as they have been a member for a continuous period of 12 months.

Financial benefits

Can you tell me the details of the enhanced payout on LV= With-profits policies?

Members who hold an eligible LV= With-profits policy are expected to receive an additional amount by way of an enhanced payout when their policy comes to an end or they start to receive money from the policy.

Details on the value of these payments will be included in the voting pack that will be sent out ahead of the Special General Meeting.

The amount of money that eligible members receive will vary by type of product that the member holds, the size of their investment, and the length of time until their policy ends.

Can you tell me the details of the one-off member payment?

The amount of these payments will be determined by the Board after consultation with the With-Profits Committee. The Board’s decision will also be reviewed by an Independent Expert to ensure that the Board has achieved its primary aim of being fair to all members. Details on the value of these payments will be included in the voting pack sent ahead of the vote on the transaction. 

Member eligibility criteria

Are there any With-profits members who will not benefit from an enhanced payout?
Yes, there are three types of With-profits members who will not qualify for the enhanced payout at policy exit:
Those who have a conventional pension where these policyholders already benefit from a guaranteed yearly income. 
RNPFN With-profits policies which are already in their own ring-fenced fund. These policyholders may benefit from distributions made from their fund’s inherited estate in the form of either a terminal bonus enhancement or special bonus. 
Teachers With-profits policies which are already in their own ring-fenced fund. These policyholders may benefit from distributions made from their fund’s inherited estate in the form of either a terminal bonus enhancement or special bonus. 
 
What are the eligibility details for the one-off member payment?

This one-off member payment will be made to all existing LV= With-profits members with an active policy at the date of the Special General Meeting. We expect payments will be made in 2022 once the member, regulatory and legal processes have fully completed.

Please note that the payment will be per member, and not for each member qualifying policy held.
If I purchased a new policy from the 1 March 2021 and I was not already a member of LV=, am I entitled to any member payment as a result of the proposed transaction?
LV= With-profits policies taken out from the 1 March 2021 are still entitled to the enhanced payout when their policy ends or they start to receive an income from it, providing the policy is still active at the date of the Special General Meeting and the overall vote is in favour of the transaction.
My policy is due to mature soon, will I still be eligible for the member payment?
If your policy is due to mature before the date of our Special General Meeting, then you’ll no longer be classed as a member of LV=. Even if you decide to leave your money with us, you won’t have an active policy and you would no longer be classed as a member – meaning you would not be eligible for any member payment. If you have other policies with us which are still active at the date of our SGM, then you would still be eligible. We will announce the date of the SGM on LV.com/future in due course.
What happens if my policy lapses or terminates before the date of the Special General Meeting (SGM)?
If you do not hold an active member qualifying policy at the point of the SGM, you will no longer be a member and therefore you will not qualify for the member payment.
If you do not hold an active LV= With-profits policy on the date of the SGM, you would not qualify for the enhanced payout.
What are the eligibility details for the enhanced payout on LV= With-profits policies?

Members holding eligible LV= With-profits policies are expected to receive an enhanced payout when their policy comes to an end or when they start to receive an income from it - if they hold a With-profits policy at the date of the Special General Meeting - and the overall vote is in favour of the transaction. This will remain the case even if after this date your policy lapses or you leave.

The amount of money that eligible members receive will vary by type of product that the member holds, the size of their investment, and the length of time until their policy ends.

Details on the value of these payments will be included in the voting pack that will be sent out ahead of the Special General Meeting

These eligibility criteria were discussed and agreed at Board and considered alongside advice from the With-Profits Committee who agreed the proposals were fair to With-profits members.

You and your policy

Is my pension investment, currently under management with LV=, safe?
Yes. Your investment will be protected by the same safeguards as it is today. We will still be regulated by the independent Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA), who both look to ensure an appropriate level of protection for all consumers. Your investment will also continue to be covered by the Financial Services Compensation Scheme.
What changes will members see if the transaction goes ahead?

First and foremost, all eligible members will benefit financially from the transaction.

LV= With-profits members will benefit from a With-Profits Fund that is ring-fenced from new business and existing non-profit business and the associated risks.

With-profits members will continue to benefit from independent oversight from the existing With-Profits Committee as they do today.

There are no immediate changes to the overall business strategy or the management team. While Bain Capital will be the ultimate owners of LV=, the leadership team will be responsible for the day to day running of the business under the direction of the Board.

Who will look after my policy in the future?

Although Bain Capital would own and invest in the LV= business, it is the LV= leadership team who would be managing the business on a day-to-day basis. Bain Capital will provide their expertise in helping to deliver the strategy and growth plans. Our people will continue to look after your needs in exactly the same way as they do today from any of our UK offices in Bournemouth, Exeter and Hitchin.

Will the Fund charges remain the same and will the asset mix change as the closed With-Profits Fund is wound down?
There will be no changes to the Fund charges as a result of this transaction. Under the terms of the transaction there will be a fixed cost schedule of administration and investment management charges.
There are no planned changes to the asset mix. As happens now we regularly review the asset allocations and ensure that it is still appropriate for the current market conditions, outlook, and the profile of our With-Profits business. The With-Profits Committee and the Investment Committee will continue to provide independent oversight.
 

Questions

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