Norwich Union With Profits Announcement

I spent a little time this morning reviewing the news stories that appeared on Friday 16th January in connection with the Norwich Union annual With Profits announcement. Two things struck me.

The first was that journalist and adviser commentary seemed to reflect a sense of shock and disappointment that terminal bonus rates had been cut and annual bonus rates were coming down. I'm not so sure we should be up in arms about falling returns in With Profits funds. The funds invest in company shares, commercial property and corporate bonds, all of which took the biggest pounding for a generation in 2008. A With Profits fund cannot defy gravity.

The second point was that they all concentrated on the bad news story of lower returns rather than focus on the good news story tucked away in the middle of Norwich Union's press release. The good news is that With Profits funds have guarantees in certain situations, regardless of the value of the underlying invcestments in the fund, and that 33,000 With Profits Bond policyholders have a golden opportunity to take advantage of a 10 year guarantee during 2009. The guarantee in January is effectively a 16% one-off bonus, but only for those inestors who act on their 10th anniversary date. There's more information on this in the News section of our website www.withprofitshealthcheck.com.

If we assume that the average bond holder invested £10,000 10 years ago, each of these investors can claim an extra £2,171 if they act in time. 33,000 policies with a £2,171 windfall is a £71 million pound giveaway. But how many of these 33,000 bond holders will know about this feature or understand the implications when Norwich Union write to them about it? I think that's newsworthy.

One final point is that I raise my hat to Norwich Union for including this information in their press release. I'm sure they are relieved that so far the opportunity has not been spotted. It's a mark of the company's honesty and of their commitment to treat their customers fairly that they mentioned it.