What affects the benefits payable under your S&P with profits policy?
Many factors affect the benefits payable under your policy. The following are the main ones:
The most important factor that will affect the amount of benefit is the amount of gains or losses made on the investments of the fund. This depends on many things including how much we invest in different types of investments. To achieve potentially higher returns the fund invests some money in higher-risk investments, such as company shares and property. The remainder is invested in lower-risk investments, such as fixed-interest bonds issued by the Government and by companies, and cash deposits.
The performance of different types of investment can vary considerably over time. We regularly monitor this and change the proportion we invest in each type with the aim of improving the total long-term performance. The primary aim is to ensure that we always meet at least the guarantees.
The ups and downs of the stock market
To avoid significant short-term fluctuations in the value of benefits payable caused by movements in the value of the fund's investments we use a process known as smoothing.
We use a formula to determine the smoothed value of assets attributable to policyholders in the fund. We blend together the actual movement in asset values each week and the expected movement over the long-term. This produces a weekly movement in the smoothed value that is closer to the longer-term trend than short-term fluctuations.
We can change the smoothing formula at any time if we think it is necessary to be fair to all policyholders.
Charges and expenses
We make charges in the form of deductions from your premiums and an annual management charge on the value of the fund.
Countrywide Assured plc (the Company) is owned by shareholders. The Company keeps the charges made on the polices but the Company then pays all the expenses for looking after the policies and meets the cost of any additional life assurance or other benefits payable under the policies, except for the costs of the management of direct property investments which are reflected in the investment performance of the fund. The Company keeps or suffers any difference between charges and expenses.
Cost of guarantees
In addition to the charges we currently deduct 1.25% per year of the value of the pooled policyholder assets in the Pension With-Profits Fund to meet the future cost of guarantees of all policies. Currently there is no such deduction being applied to the Insurance With-Profits Fund. This money is set aside and used to make up any shortfall between the share of assets in the fund attributable to a policy and the cost of the minimum guaranteed benefits payable under that policy. We can change the level of this deduction if required, but 1.5% per annum is the maximum level for this deduction. No excess is kept by shareholders. All the money set aside is attributed to the remaining policyholders in the Fund and will be returned to them if we decide it is no longer needed to pay for the future cost of guarantees. We review the position once every year.
How do we manage risk?
The fund is exposed to a number of risks. The biggest risks come from the need to pay all the guarantees when due and the possibility of big falls in shares and property values.
We manage risks to the fund and our business by regularly reviewing and changing our investment strategy as necessary.
The fund is not exposed to any significant new risks as it is closed to new business, other than currently existing clients may increase their premiums if this is allowed by their policy.
Can I move out of with- profits?
If you have a pension policy, before your selected retirement date you may choose to:
- take early retirement subject to the conditions/rules of your policy/scheme;
- transfer the benefits to our unit-linked policy;
- transfer the benefits to another provider.
If you do this, we do not guarantee the minimum that you receive. The amount you get will be calculated by our actuaries having regard to factors like the market conditions at the time and the number of years before your selected retirement date.