Cheltenham, 20 December 2001. Eagle Star will be reducing bonus rates for unitised with-profits policies by 0.5% from 21 December. At the same time Market Value Reduction factors (MVRs) will be applied to a group of policies where they are not already in operation.
These moves have been made in response to the global economic slowdown of the past few years, which has been compounded by the world-wide stock market volatility of recent months. Even though markets have risen from the low point that followed the events of 11 September Eagle Star, like other insurers, is managing bonus rates to reflect future lower expected investment returns and to protect the longer term future of all the company's policyholders.
Eagle Star continues to believe that with-profits policies represent an excellent opportunity for customers who want some growth potential from a stock market investment, and also want some of the certainty normally associated with cash investments.
A with-profits policy still provides the investor with a valuable and reliable medium- to long-term savings vehicle, with smoothed returns from day to day - particularly valuable at times of stock market volatility.
Unitised with-profits policies:
Eagle Star will be reducing annual bonuses for all unitised with-profits policies by 0.5% from 21 December. For unitised with-profits policies sold since 1995, Eagle Star has had a fully active MVR policy, applying MVRs selectively on a case by case basis. From 21 December Eagle Star will, in addition, apply MVRs to most unitised with-profits policies sold between 1991 and 1994. At the same time those policies in this group that, until now, have had terminal bonuses will have these bonuses reduced to zero.
Conventional with-profits policies:
There is no change at this time to bonus rates on conventional with-profits policies.
ENDS
Media information:
Rosemary Callender, Eagle Star Press Office, Tel : 01793 503969.
Note to Editors:
Details of the new bonus rates and MVR rates follow.
Eagle Star unitised with-profits policies
New rates (old rates shown in brackets)
| Fund |
Annualised bonus unit growth rate |
| UWP1 Pensions |
2.5% (3.0%) |
| UWP2 Life |
3.5% (4.0%) |
| UWP2 Pensions |
5.0% (5.5%) |
| UWP3 Life |
3.5% (4.0%) |
| UWP3 Pensions |
5.0% (5.5%) |
| UWP4 Life |
4.0% (4.5%) |
| UWP4 Pensions |
5.0% (5.5%) |
| UWP5 Life |
4.75% (5.25%) |
| UWP5 Pensions |
6.0% (6.5%) |
| UWP6 Life |
4.75% (5.25%) |
| UWP6 Pensions |
5.0% (5.5%) |
| UWP7 Pensions |
5.0% (5.5%) |
Note that for UWP1 and UWP2, the annualised growth rate shown above includes the guaranteed minimum increases for these funds.
| Contract |
Terminal bonus rate |
| UWP1 Pensions |
Method unchanged. (Terminal bonus continues to be the excess of the bid price of units over the guaranteed price as at 1st January 2001). |
| UWP2 Trustee Investment Plans |
Nil (10.0%) |
| UWP2 With-Profits Bonds |
Nil (7.0%) |
| Large Money Purchase Pension Schemes |
Nil (8.0%) |
| Other UWP2, UWP3 |
Nil (nil) |
| UWP4, UWP5, UWP6 |
Method unchanged. Fully active Terminal Bonuses or MVRs continue to operate. |
| UWP7 Pensions |
Nil (8.0%) |
|
MVRs
MVRs are applied on policies cashed in early to ensure fairness between investments being continued in the With-Profits Fund and units cancelled from it.
For policies sold since 1995, Eagle Star operates a fully active MVR policy. This does not mean that an MVR will definitely be applied on all policies: the calculation that determines whether an MVR is applied is individual to each policy. When MVRs are applied these will be at a level consistent with retaining fairness between those who leave and those who stay in the fund.
Guaranteed non-MVR points are specified in the contract, but are typically death or critical illness claim, normal retirement date, regular withdrawals within limits and the 10 year point on with-profits bonds.
New MVR Rates |
| Contract |
MVR rate |
| UWP1 Pensions |
MVRs continue not to be applied. |
| UWP2 Trustee Investment Plans |
1.0% |
| UWP2 With-Profits Bonds |
3.7% |
| UWP2 Large Money Purchase Pension Schemes |
2.8% (for individuals who have a duration of greater than 3 years)10.0% (for others) |
| Other UWP2, UWP3 |
10.0% |
| UWP4, UWP5, UWP6 |
Method unchanged. Fully active Terminal Bonuses or MVRs continue to operate. |
| UWP7 Pensions |
2.8% |
