Release date: 2 March 2004

National Provident Life declares annual and final bonuses

In early 2003, National Provident Life policyholders were advised that the fund had reduced its equity holdings to zero, investing the proceeds of equity sales into fixed interest investments.

Policyholders were advised of the potential for future bonuses to be reduced, in many cases to zero. These actions were taken to help to ensure that statutory solvency margins continue to be met and to protect contractual benefits and bonuses already added to policies.

Annual bonus

As flagged in the customer communication, National Provident Life confirms that the annual bonus for 2003 will be zero on all policies except Series 1 Unitised With Profit (UWP) investments, which have a minimum guaranteed rate. It is expected that annual bonuses will continue to be zero for the foreseeable future.

Final bonuses

Final (terminal) bonuses are set at a level to ensure payouts reflect the policyholder’s underlying fair share of the With Profit fund. In many cases the value of the guaranteed benefits exceeds the underlying fair share of the fund, and as a result final bonuses are nil. However, policyholders continue to receive all guaranteed benefits. Market Value Reductions are in force against most Unitised With Profit investments, so that surrenders of these benefits are close to the underlying fair share level.

Notes to editors:

• The new rates took effect on 1 January 2004

• At 30 June 2003, the Equity Backing Ratio of National Provident Life was 12% – made up primarily of property with some private equity holdings. The remainder of the fund was invested in fixed interest investments.