Questions about Bonuses
Q. How much bonus will I receive?
A. The amount of bonus you receive is shown on your bonus statement, or your annual benefit statement if you have a unit pension with us.
Q. How does this bonus declaration differ from last year's?
A. 2003 annual bonus rates for conventional With-Profits life policies have been reduced from 2002 levels. For other policies 2003 annual bonus rates have generally been declared at the 2002 level. Interim bonus rates have generally been reduced or have remained at the 2003 level. These reductions reflect the need for guaranteed benefits to grow more slowly when interest rates and expectations for future investment returns are low. It is also due in part to the poor equity market performance of 2000 to 2002 - despite equity market rises during the year, the FTSE 100 index finished 2003 below its mid 2002 level and 35% below its peak at the end of 1999. Final bonus rates have been changed so that payouts more closely reflect the returns achieved on the underlying investments. Most final bonus rates have increased slightly or remained steady following the good investment returns of 2003. Future bonus rates are not guaranteed. In particular, interim bonus rates can be changed without notice. Annual bonus rates may be lower than interim rates.
Q. How did the fund perform in 2003?
A. The overall investment return was +14% (pensions) and +12% net of tax (life) with an increase in share values in the UK and overseas dominating. Lower returns on fixed interest securities, which resulted from a slight increase in long term interest rates, tempered these strong returns on equities.
Q. Bonus rates have been reducing for the last few years. What is the outlook for with-profits?
A. Investment returns in 2003 were in excess of our longer term expectations. However the returns over 2000 to 2002 were well below longer term expectations and smoothing means that this has not yet been fully reflected in bonus declarations. The economic outlook continues to be for interest rates and inflation to remain low. In this environment, despite the good returns of 2003, we anticipate a prolonged period of depressed bonus rates and application of Market Value Reductions for those whose investments have experienced the falls of 2002. To avoid this will require a significant further recovery in 2004 followed by a period of good and sustained investment returns.
Q. How strong is Legal & General?
A. In recent years market conditions, combined with natural and man-made disasters, have placed considerable demands on insurance funds worldwide. However the fund, which includes our with-profits business, has an extremely broad mix of investments. Legal & General Assurance Society Limited is one of the UK's top rated companies for financial strength. Three of the worlds leading independent rating agencies; Standard & Poor's, Moody's and A M Best, have recognised this. The ratings they have given us are the highest they currently award to any European life assurer.
This article was taken from Legal & General Website 1/6/2004
To contact Legal & General - Telephone - 08700 104080
