Important Information for
Phoenix Life Limited
Britannic With-Profits Fund Customers
FORMER BRITANNIC ASSURANCE
PERSONAL PENSION PLAN
(CHANNEL ISLANDS)
1 January 2016
Your investment with Phoenix Life
Your former Britannic Assurance Personal Pension Plan is invested in the Phoenix Life Limited Britannic With-Profits Fund ('the with-profits fund').
Questions you might ask us about the with-profits fund
How do you manage the with-profits fund?
Our guide, ‘How we manage the Phoenix Life Limited Britannic With-Profits Fund’ (‘the guide’) is available on here.
What is the annual bonus rate for Personal Pension Plans?
The annual bonus rate for 2015 has been increased to 3.5% compared to the 2014 rate of 3.0%. The actual number of bonus units we have added to your plan is shown in the additional information section of your statement.
Has the annual bonus rate changed?
Yes, we have increased the annual bonus rate. When we compare the investment returns over recent years with the level of guaranteed benefits already provided, it means that we are able to increase the annual bonus for 2015 for Personal Pension Plans. The underlying value of policies is high compared to the benefits already guaranteed to be paid and we are confident that the underlying value of policies will be enough to enable us to pay these bonuses when they become due, even if future investment returns or other factors become unfavourable. The addition of any future annual bonuses will depend on the future investment performance and experience of the with-profits fund.
The guaranteed benefits are the with-profits units and bonus units we have added to date. We guarantee to pay these on retirement at the selected retirement date or in the event of a death claim.
Are you adding a final bonus now?
We are currently (as at 1 January 2016) adding a final bonus for personal pension plans where with-profits units were purchased before 2015 and we have generally been able to increase final bonus rates compared to 1 January 2015. We do not guarantee final bonuses. We normally review final bonus rates towards the end of June and December each year. However we may change final bonus rates at any time.
Examples of final bonus rates as a percentage of basic units, for Personal Pension Plans reaching their selected retirement date in January 2016, are given below.
Year units purchased Final bonus
2016 0.0% 2011 29.0% 2006 41.0% 2001 51.0% 1996 95.0% 1991 235.0%
If you transfer your plan or retire at any time which is not the selected retirement date, we may apply a market value reduction (MVR). On 1 January 2016, we were applying MVRs on some personal pension plans. However where we were applying MVRs they were generally similar to those on 1 January 2015. We review MVRs frequently and they may change on a daily basis.
What about with-profits guarantees?
The with-profits guarantee is that we will value with-profits and bonus units at 100.00p on retirement at your selected retirement date or on earlier death, and we will not apply a market value reduction (MVR). If you transfer your plan or retire at any other time, we do not guarantee the with-profits unit price will be 100.00p and we may apply a MVR. You can find further details in your plan documents.
What is a market value reduction (MVR)?
If you transfer, retire at any time which is not the selected retirement date or switch funds, we may apply a market value reduction (MVR). A MVR is the amount by which the transfer (retirement or switch) value is less than the value of the with-profits and bonus units (based on a unit price of 100.00p).
We use a MVR to make sure that any amounts paid to those planholders who
transfer their plans or retire at a date other than their selected retirement date, reflect how the with-profits fund has performed up to that point. If we use a MVR,
planholders who transfer their plans may receive less than any transfer value previously quoted. We apply MVRs to ensure the fair treatment of all planholders whenever they transfer their plan or retire at a date other than their selected retirement date.
It is important to remember that we only apply MVRs to your Personal Pension Plan in certain circumstances. Please note that we will not apply a MVR:
on death; or
on retirement at your selected retirement date. You can find further details in your plan documents.
How are bonus rates calculated?
When deciding whether we should add an annual bonus to your policy, we look at the current financial position of the with-profits fund and estimate how we expect this to change in the future. We also compare the guaranteed benefits with the underlying value of policies. We will add an annual bonus only if we are confident that the underlying value of policies will be enough to enable us to pay the bonus when it becomes due, even if future investment returns or other factors become
unfavourable.
The underlying value of your policy reflects the premiums you have paid and the investment performance of the with-profits fund over the lifetime of your policy, after allowing for factors, such as expenses and charges. This is explained in more detail in the guide.
When deciding whether we should add a final bonus when we pay out on your policy, we will look at the underlying value of policies we use to calculate final bonus rates and compare this to the value of their guaranteed benefits. If the underlying value of the policies is more than the value of their guaranteed benefits, we will add a final bonus. However, if the value of the guaranteed benefits is more than the underlying value of the policies, we will not add a final bonus.
We aim to avoid very large differences in with-profits maturity payments (payments at selected retirement date) over relatively short periods of time. Maturity payments are the total of the with-profits units, bonus units and final bonus. We consider the maturity payments that we have made for similar policies in the recent past and limit, where possible, changes to final bonuses to avoid very big differences in maturity payments as a result of any change in final bonus rates. This practice is known as ‘smoothing’. As a result of smoothing we may pay more or less than the underlying value of your policy. However, we do not smooth changes in final bonuses that are due to excess assets being used to increase final bonuses (see the ‘what are the excess assets?’ section below).
What are the excess assets?
The with-profits fund your policy is invested in currently has some excess assets. These excess assets provide a buffer to protect the fund so that it can expect to meet its commitments to policyholders even if adverse events occur. It has been decided that some of these excess assets can be used to increase the final bonuses by including an additional amount which we call an ’uplift’. From January 2016 this uplift has increased policy values by up to 8.4%. This means that for policies currently maturing or surrendering where we are able to add a final bonus, these final bonuses are higher than they would otherwise have been. For policies where the increased underlying policy value remains below the level of the guaranteed benefits,
policyholder benefits will not change.
The amount of excess assets in the fund goes up and down depending on a range of factors including the performance of investment markets, the level of policy claims due to death and surrender, the expected lifespan of policyholders whose policies provide a retirement income and other operational profits and losses. Because of this, the amount of uplift will be regularly reviewed and may increase or decrease as a result. Should the fund’s circumstances require, the uplift could even be removed entirely.
What about the future?
We guarantee annual bonuses once they are added to your plan. We will only add new annual bonuses if we are confident that the underlying value of policies will be enough to enable us to pay the bonus when it becomes due, even if future
investment returns or other factors become unfavourable.
If investments perform well, we will pay higher final bonuses. Poor future market conditions will lead to lower final bonuses.
How is my plan invested?
The with-profits fund consists of a wide range of assets with the aim of providing good growth potential over the medium to long term. On 31 December 2015 the split of assets for with-profits Personal Pension Plans was:
Company shares (equities) 36%
Property 8%
Other growth assets (including hedge funds) 4%
Total growth assets 48%
Fixed interest stocks - issued by the UK government (gilts) 18% Fixed interest stocks - other (including corporate bonds) 31%
Cash 3%
Total fixed interest and cash assets 52%
Total assets 100%
How much we hold in each type of investment will change over time. We aim to make sure that the with-profits fund can always meet the guarantees it has given to planholders. Subject to this, we aim to get a good investment return while balancing this with the degree of risk being taken. We currently hold some higher risk
investments (referred to as growth assets) which we expect to provide a higher return in the longer term, such as company shares (equities) and property. The rest are lower risk investments such as fixed interest stocks (bonds or loans usually issued by governments or companies) and cash.
The return on the investments in the with-profits fund for 2015 was 1.5%. This return is before tax, expenses and charges. The return benefited from increases in the value of company shares (equities) and property.
We do not expect to make any significant changes to the investment strategy for the with-profits fund during 2016.
Other questions and answers
What charges do you make on my plan?
We take into account an annual management charge of approximately 1% of the value of policies when we set bonus rates. If you’re making payments into your plan, we also make a charge of up to 5% of each payment. In addition we may deduct a plan fee from each premium, which varies according to the amount and frequency of payment. The current maximum is £18 each year.
If you have any questions or would like more information about your statement or your plan, our contact details are available here.
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Phoenix Life Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Phoenix Life Limited is registered in England No. 1016269 and have their registered office at: 1
