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Phoenix Life splits with-profits fund in bid to boost returns

Phoenix Life has split the National Provident Life Ltd with-profits fund so that policyholders without guaranteed pensions are exposed to more investment risk.

The closed life insurer’s with-profits bonus announcement, published this week, confirmed that annual bonuses will remain at “low to nil” this year as the firm prioritises paying out final bonuses.

The level of final bonus varies depending on the policy taken out. For old Royal Life policies, for example, 35 per cent of the maturity payout on a 25-year life endowment policy will be through a final bonus – up from 31 per cent last year.

However, other policies have guarantees more valuable than the investments underpinning them. In these cases, the customer will receive no final bonus payment.

Phoenix has also overhauled the NPLL fund so that policyholders who do not have guarantees are exposed to greater risk.

Phoenix says: “The investment strategy has, in the past, been limited because some of the policyholders in the fund have attractive guarantees.  To ensure these can be honoured, the investment managers have been unable to take any risks with the fund. 

“On 1 January we split the fund. For those policyholders without guarantees, we increased the proportion of growth assets supporting their policies from 5 per cent to approximately 50 per cent, providing them with increased potential for future growth through exposure to more assets with a higher-risk profile.”

Chase de Vere head of communications Patrick Connolly says: “Over the long term this should be good news for with-profits policyholders without guarantees who were penalised under the old structure.”

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