Zombie firm sees signs of life in with-profits fund

The chief executive said the ability to distribute any inherited estate within these closed funds has helped to boost overall returns.

He said: “The ability to distribute inherited estate is a key differentiator between open and closed funds and we are pleased to have increased levels of estate distribution again at the start of 2014.

“This action, coupled with the good performance of assets, has led to an increase in maturity values in many of our stronger with-profits funds, and a reduction in market value reductions.”

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Funds where bonuses have risen include traditional life policies in the Phoenix With-Profits fund, which has increased from 0.25 per cent to 1 per cent.

Also, during the past year, the company changed the assets mix for policyholders in the National Provident Life Ltd fund to provide greater growth potential for those policies that did not have any attractive guarantees available.

For those policyholders without guarantees, Phoenix Life 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.

Mr Merrick added: “Where we can, it is better to give priority to final bonuses rather than paying an annual bonus, and in most cases annual bonus rates remain low or nil.

“This allows us more flexibility in managing the funds, because adding an annual bonus increases the guaranteed benefits. However, we have been able to increase annual bonuses in a few instances where funds have performed well and paying this additional bonus is not expected to constrain our investment flexibility.”

Key figures:

On the Pearl fund, estate distribution has added 24.2 per cent to the final payout on many policies, compared to 15.5 per cent in 2013.

On former Royal Life policies, 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.