Frequently Asked Questions Relating To The 2012 Bonus Declaration
Please explain what each bonus means?
I don't understand why you proportion the Interim Rate of Return (IRR) - can you explain this?
Please explain how each of the bonuses impact my income?
What will it take for my income to increase?
How does this bonus declaration affect the guarantee I have on my plan?
Can I transfer my annuity to another company or cash in my annuity?
Can I change my Anticipated Bonus Rate?
Can I switch my With-Profits Pension Annuity to a Guaranteed Pension Annuity?
Since I transferred from Equitable Life, have you changed the method of calculating my new annual income?
Please explain what each bonus means?
Regular Bonus (or Declared Reversionary) - is added to your Guaranteed Annuity. Once added it cannot be removed. Inline with previous Equitable Life practice we do not expect to add any Regular Bonuses to your Plan in the foreseeable future. The rate of Regular Bonus therefore remains 0.00%.
Overall Rate of Return - is applicable on your plan anniversary falling on or after 1 April 2012. It is designed to give credit for the investment return earned by the With-Profits Fund during 2011 but also reflects some of the smoothing from the past 4 years investment returns.
Interim Rate of Return (IRR) - is applicable on your plan anniversary and is intended to give credit for the expected investment return earned by the With-Profits Fund from 1 January 2012 until your plan anniversary falling before 31 March 2013. The IRR can be increased, reduced or removed at any time and it is the value of the IRR on your plan anniversary that will determine your income.
The Overall Rate of Return and Interim Rate of Return are used each year to determine the new amount of your Total Annuity.
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I don't understand why you proportion the Interim Rate of Return (IRR) - can you explain this?
The Interim Rate of Return applicable on your plan anniversary is intended to give credit for the expected investment return earned by the With-Profits Fund from 1 January 2012 until your plan anniversary falling before 31 March 2013. The IRR can be increased, reduced or removed at anytime and it is the value of the IRR on your plan anniversary that will determine your income.
The Interim Rate of Return is an annual rate of return. As we apply the Interim Rate of Return to give credit for the expected investment return earned by the With-Profits Fund from 1 January 2012 until your plan anniversary falling before 31 March 2013, then we should only credit your Total Annuity with a proportion of this annual rate. The proportion is based on the number of days between the 1 January 2012 and your plan anniversary. For example if your next plan anniversary is 1 July 2012 then there are 182 days from 1 January 2012 to your plan anniversary - you would therefore receive 182/366ths (roughly half) of the Interim Rate of Return.
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Please explain how each of the bonuses impact my income?
The income you receive is the greater of your Guaranteed Annuity and Total Annuity.
Guaranteed Annuity - is increased at your plan anniversary by any Regular Bonus declared and decreased by your Anticipated Bonus Rate. However, in line with previous Equitable Life practice, we do not expect to add any Regular Bonuses in the foreseeable future.
Total Annuity - is increased or decreased at your plan anniversary by the Overall Rate of Return, decreased by your Anticipated Bonus Rate and decreased by any Guaranteed Interest Rate. It can be further increased or decreased by any differences in the Interim Rate of Return applicable at this plan anniversary and at your last plan anniversary.
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What will it take for my income to increase?
The income you receive is the greater of your Guaranteed Annuity and Total Annuity.
The Total Annuity will only increase if on an Annual Review, the combination of the Overall Rate of Return applicable and current proportion of Interim Rate of Return is greater than the combination of your Anticipated Bonus Rate, Guaranteed Interest Rate (if applicable) and the previous proportion of Interim Rate of Return.
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How does this bonus declaration affect the guarantee I have on my plan?
Your Guaranteed Annuity remains unaffected by this bonus declaration. At your next plan anniversary your Guaranteed Annuity will fall by your Anticipated Bonus Rate. As we do not expect to declare any Regular Bonus for the foreseeable future, your Guaranteed Annuity will be reduced by your Anticipated Bonus Rate each year.
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Can I transfer my annuity to another company or cash in my annuity?
No you are unable to transfer to another company or cash in your annuity.
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Can I change my Anticipated Bonus Rate?
No, your policy conditions do not allow you to change your Anticipated Bonus Rate.
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Can I switch my With-Profits Annuity to a Guaranteed Pension Annuity?
No your policy conditions do not allow us to switch your annuity to a Guaranteed Pension Annuity.
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Since I transferred from Equitable Life, have you changed the method of calculating my new annual income?
No - the method of calculating your new income has not changed. This remains exactly the same as before. A breakdown of this calculation is shown on your yearly statement.
For more information and a worked example of your yearly statement, please click here.
