Frequently asked questions relating to the 2020 Bonus Declaration
These FAQs have been designed for former Equitable Life Annuity Customers who'd like more information on the 2020 Bonus Declaration.
No, your plan conditions do not allow you to change your Anticipated Bonus Rate.
No, your plan conditions do not allow us to switch your annuity to a Guaranteed Pension Annuity.
No you are unable to transfer to another company or cash in your annuity.
Once a Regular Bonus is added to your Plan, it can't be removed, and it increases your Guaranteed Annuity. To maintain investment flexibility and to protect the financial strength of our With-Profits Fund, we aim to keep the level of guaranteed benefits at a sustainable level.
No Regular Bonus was being paid at the time this business transferred from the Equitable Life Assurance Society to The Prudential Assurance Company Limited. We don't expect to add any Regular Bonus to your Plan in the foreseeable future because of the high cost of guaranteed benefits provided.
To increase the Regular Bonus the cost of the guarantees on all former Equitable Life With-Profits Annuities needs to reduce substantially. For this to happen, our With-Profits Fund would need a sustained period of substantial growth. We also need to be confident that the higher Regular Bonus could be supported by the investment returns we expect to achieve from our With-Profits Fund in the future without impacting the flexibility of our investment policy.
Overall Rate of Return (ORR)
The ORR is applied on your Plan anniversary falling on or after 1 April 2020. It's designed to give credit for the investment return earned by the With-Profits Fund during 2019, allowing for smoothing and charges. The same ORR applies to all Plans.
Interim Rate of Return (IRR)
The IRR is applied on your Plan anniversary and is intended to give credit for the expected future investment return on the With-Profits Fund from 1 January 2020 until your Plan anniversary falling before 31 March 2021, allowing for smoothing and charges.
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.
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.
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 2020 until your plan anniversary falling before 31 March 2021. The IRR can change or be 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 2020 until your plan anniversary falling before 31 March 2021, 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 2020 and your plan anniversary. For example if your next plan anniversary is 1 July 2020 then there are 181 days from 1 January 2020 to your plan anniversary - you would therefore receive 181/365ths (roughly half) of the Interim Rate of Return.
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.
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.
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.