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Friends Provident bonus declaration - Friends Provident, the FTSE 100 insurance and investment group, has announced today details of its mid-year review of with profits final bonus rates. The key points are:
- Estimated annualised gross investment return on the With Profits Fund of 5.5% p.a. for the year to date
- As a result, most bonus rates are unchanged
- Some final bonus rates increased on unitised with profits
Friends Provident is committed to treating the holders of its 1.4 million with profits policies fairly. Therefore it continues to maintain alignment of policy payouts with their underlying investment values.
Brian Harrison, Friends Provident chief actuary, said: - "We have undertaken this review of final bonus rates as part of our ongoing commitment to treating our policyholders fairly. Following steady overall returns in the year to date, most bonus rates are unchanged. Some final bonus rates have been increased to maintain alignment between policy payouts and underlying investment values.
"With Profits policies contain valuable guarantees. Policyholders can continue to have confidence that the with profits concept both protects those guarantees and allows smoothed exposure to potentially higher yielding investments."
How with profits policies work
A with profits policy differs from a unit linked policy in that it adds an element of security which you do not get from an investment totally reliant on the current value of its underlying assets. Thus the investor is protected against sudden movements in the stock market immediately before his or her policy matures.
The with profits policy provides this cushion against uncertainty in the form of the guaranteed benefits and additional regular bonuses which are guaranteed even if the market subsequently falls.
The guarantee is made possible by a process known as "smoothing". That means that in good years for investment some profit is held back in order to provide bonuses in years when stock market values have fallen. For example, even though the market fell sharply between 2000 and 2002, insurance companies such as Friends Provident were still able to provide guaranteed payments for those years and indeed continued to declare further regular bonus albeit at reducing rates.
With profits policies provide a further guarantee against risk by providing a sizeable element of life assurance cover.
We have a range of bonus series to cater for different product structures and premium rates. These are designed to ensure fairness between policyholders.
This article was taken from Friends Provident Website 7/4/2008
To contact Friends Provident - Telephone - 0870-607-1352
