2021 Bonus Rates for Former Equitable Life Customers

In 2020, our With-Profits Fund delivered a small positive return of 1.7% (gross) in what was a highly unusual year for global investment markets. The impact of the COVID-19 pandemic was severe in the early part of the year, although many investment markets, and the Fund, finished positively. Whilst the longer term performance of the Fund remains strong, there is still considerable ongoing uncertainty in relation to the future outlook for global economies and the investment markets which is reflected in this year’s bonuses.

In 2021 the team will continue to take decisions that allow them to manage the Fund prudently. We’ll aim to secure the highest total return for the Fund (after any tax and investment expenses) while maintaining an acceptable level of risk and protecting our planholders.

Your level of income at the start of your Plan depended on your Anticipated Bonus Rate (ABR) and whether your Plan had a Guaranteed Interest Rate (GIR). The higher your combined ABR and GIR, the higher your income in the early years. This combination also meant a higher chance of falls in income in the future. Your future level of income depends on the combination of:

  • The level of Regular Bonus, Overall Rate of Return (ORR) and Interim Rate of Return (IRR) we declare relative to your ABR
  • Any GIR

The combination of the Regular Bonus, ORR and IRR we declare represents your fair share of the investment return, after charges and smoothing, earned on the With-Profits Fund since the transfer of your Plan to Prudential on 31 December 2007.

In order to maintain investment flexibility and to protect the financial strength of our With-Profits Fund, we aim to keep the level of guaranteed benefits on all our With-Profits products at a sustainable level.

Customers who are receiving their Total Annuity will see their income rise if the combined effect of the declared Overall Rate of Return (ORR) and Interim Rate of Return (IRR), after offsetting the IRR declared at the preceding bonus declaration, exceeds the combined effect of the Anticipated Bonus Rate (ABR) and any Guaranteed Interest Rate (GIR). Where customers are in receipt of their Guaranteed Annuity, they will continue to see their income reduce by the level of their ABR.

So what are the 2021 Bonus Rates?

The 2020 bonus rates to be applied to your annuity on the plan anniversary following 1 April 2021 are:

  • Overall Rate of Return: 1.0%
  • Interim Rate of Return: 3.5%
  • Regular Bonus: 0.0%

The IRR can change or be removed at any time.

The change in your Total Annuity at your next Plan anniversary will reflect the level of ORR and IRR declared, after removing the IRR declared in the previous year. We also take the Anticipated Bonus Rate, and any Guaranteed Interest Rate for your Plan, into account when working out your new income.

How does this affect my income?

Former Equitable Life With-Profits Annuity customers, who are receiving their Total Annuity, will see average year-on-year changes in income of 1.0% before allowing for their Anticipated Bonus Rate (ABR) and any Guaranteed Interest Rate (GIR), as a result of the bonuses declared in the February 2021 Bonus Declaration. This means that for an annuity customer with a combined ABR and GIR of 6.5%, their income may decrease by up to 5.5% at their next Plan anniversary on or after 1 April 2021.

Where customers are in receipt of their Guaranteed Annuity they’ll see their income reduce by the level of their ABR.

Only plans issued before 1 July 1996 are subject to a Guaranteed Interest Rate. This is 3.50% for all of these plans.

If you've got any questions about this years Bonus Declaration, please read our frequently asked questions.

2018 was a difficult year for financial markets, which experienced lots of ups and downs. These impacted our With-Profits Fund because it invests globally in many different investments. This is reflected in our 2019 bonus declaration.

 

We’ll continue to manage the Fund prudently. We’ll aim to secure the highest total return for the Fund (after any tax and investment expenses) while maintaining an acceptable level of risk and protecting our planholders. We’ll also continue to smooth some of the extreme highs and lows of investment performance

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