With profits

Bonus declaration at 1 April 2019

Click on the links below to find out more information about the sub fund you are invested in.

Bonus declaration at 1 April 2019

Prior to October 2013, we had two further sub funds, With Profits Sub Fund 3 which comprised the former Time Assurance Ordinary Benefit with profits fund, and With Profits Sub Fund 5, which comprised of the former University Life Assurance Society business. From 1 October 2013, both of these sub funds were merged with the non-profit fund. Policies were converted to non-profit contracts with guaranteed benefits and discretionary bonuses no longer apply.

With Profit Sub Fund 1 (WPSF1)

With Profits Sub Fund 1 contains policies originally issued by Reliance Mutual, Burslem Mutual and Nation Life policyholders.

Annual bonus

The following annual bonus rates were declared with effect from 31 December 2018 and are unchanged at 1 April 2019. They are percentages applied to the original sum assured, with the exception of Reliance ordinary branch insurances where the rate is a percentage of the original sum assured plus attaching bonuses.

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Policy type Annual Bonus Rate
Reliance ordinary branch whole of life and endowment insurances 2.00
Reliance industrial branch with profit policies 1.75
Reliance industrial branch mortuary bonus policies without regular cash bonuses 1.50
Reliance industrial branch mortuary bonus policies with regular cash bonuses 1.40

This table does not include contracts originally written by Burslem Mutual and Nation Life.

A final bonus (sometimes also called "terminal bonus") may be paid on all with profits policies when they become claims on death or at maturity. An allowance may also be made for final bonus within the calculation of surrender values. Where paid, the amount of bonus is expressed as a percentage of the basic sum assured and attaching annual bonuses on the date of the claim. Final bonus rates are not guaranteed and may be altered at any time.

Different rates apply to ordinary and industrial branch business and to whole life and endowment assurance policies.

For WPSF1, on 1 April 2019 we declared a special bonus of 25% of the guaranteed policy benefits for all types of policies in the fund. This special bonus is a one off declaration in addition to the annual bonus and it is not intended to be a future regular annual declaration.

Final bonus

The rates of final bonus depend on the year the policy commenced to share in profits, with longer duration policies receiving higher rates of bonus.

The final bonus rates only apply to death and maturity claims arising on or after 1st April 2019

Terminal Bonuses are expressed as a percentage of Sum Assured plus attaching Reversionary Bonus. Please click the link below to view the current rates:

Final bonus rates

With Profit Sub Fund 2 (WPSF2)

Policies issued by Criterion Life Assurance Limited

Annual Bonus

The following annual bonus rates were declared with effect from 31 December 2018 and are unchanged at 1 April 2019.

Life policies - for all premium paying policies, 55% of the sum of all premiums, other than those to cover special risks, paid since the last declaration of bonus in December 2017 are available as a cash benefit or may be converted to an annual bonus. For non-premium paying policies an equivalent premium is used.

Pension policies - for most premium paying group pension scheme policies, 55% of the sum of all premiums paid since December 2017 are converted to an annual bonus using a set mortality factor and interest rate. No bonus is paid on paid-up plans, although some contracts have a guaranteed increase in benefits each year.

Final Bonus

Only paid on life with profits policies. The following rates apply with effect from 1 April 2019.

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Start date on or after Start date before Final Bonus Rate
1 July 1963 1 July 1964 224.20
1 July 1964 1 July 1965 211.00
1 July 1965 1 July 1966 197.80
1 July 1966 1 July 1967 184.70
1 July 1967 1 July 1968 171.50
1 July 1968 1 July 1969 158.30
1 July 1969 1 July 1970 145.10
1 July 1970 1 July 1971 131.90
1 July 1971 1 July 1972 118.70
1 July 1972 1 July 1973 105.50
1 July 1973 1 July 1974 92.30
1 July 1974 1 July 1975 79.10
1 July 1975 65.90

With Profit Sub Fund 4 (WPSF4)

This fund contains former Family Assurance and Time Retirement Annuity with profits fund.

Both the annual and final bonus rates are percentages applied to the annuity plus attaching bonuses for deferred annuities. The annual bonus has been declared in respect of the year 2018. The final bonus applies to policies commencing to pay a pension from 1 April 2019.

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Policy Type Annual Bonus Rate % Final Bonus Rate %
Regular premium deferred annuities (series 1) 1.00 83.0
Single premium deferred annuities (series 1) 1.25 103.80
Deferred annuities (series 2) 1.00 83.0

When deferred annuities commence being paid, the proportion of the annuity represented by the final bonus remains a non-guaranteed amount, and may be varied from year to year. For April 2019, no variation will be made in these amounts.

With Profit Sub Fund 6 (WPSF6)

This fund contains the former Hearts of Oak Friendly Society with profits fund.

With effect from 1 April 2019, 100% of the special bonus is being paid on claims under both life assurance and pension policies. From 1 April 2019, an extra final bonus (sometimes also called "terminal bonus") will be paid on all with profits policies in this sub fund when they become claims on death or at maturity.

An allowance will also be made for extra final bonus within the calculation of surrender values. The amount of extra final bonus is expressed as a percentage of the guaranteed benefits and attaching bonuses on the date of the claim. The rate of extra final bonus that will be added to claims from 1 April 2019 is 19.1% for pensions business and 18.2% for life business. Extra Final bonus rates are not guaranteed and may be altered at any time.

In addition 100% of the non-guaranteed bonus will be paid. Annuities in payment from WPSF6 will see a bonus of 0.5% of the basic annuity during 2019. This bonus is non-guaranteed.

For Unitised With profit policies the non-guaranteed bonus on policies with a 3% guaranteed bonus will remain at 0% and for policies with a 0% guaranteed bonus the non-guaranteed bonus will remain at 2% from 1 April 2019. Market Value Reductions will change from 1 April 2019 and apply for some entry years on Life policies and Pension policies. Terminal bonuses will apply for all policies where MVRs do not apply.

How we manage our with profits bonuses

All insurers managing with profits business are required to produce Principles and Practices of Financial Management (PPFM). This document sets out how we at Utmost Life and Pensions operate our with profits business, in each of the sub funds.

Reports on with profits management

Every year the directors of Utmost Life and Pensions report to with profits policyholders. In this report, the directors confirm that they have managed the business as required by the Principles and Practices of Financial Management (PPFM), and describe how they have done this. The report is reviewed by the With Profits Actuary who adds his comments to it.

This is the most recent report issued before our re-brand to Utmost Life and Pensions.

With profits sub funds

Our conventional with profits business is written in four sub funds. These each have separately identified assets, and are operated in slightly different ways.

With Profits Sub Fund 1(WPSF1) contains all the with profits business originally written by Reliance Mutual, Burslem Mutual and Nation Life.

With Profits Sub Fund 2 (WPSF2) comprises the former Criterion Life Assurance with profits fund.

With Profits Sub Fund 4 (WPSF4) comprises the former Time Assurance Retirement Annuity with profits fund.

With Profits Sub Fund 6 (WPSF6) comprises the former Hearts of Oak Friendly Society with profits policies.

Prior to October 2013, we had two further sub funds, With Profits Sub Fund 3 which comprised the former Time Assurance Ordinary Benefit with profits fund and With Profits Sub Fund 5 which comprised the former University Life Assurance Society business. When these sub funds were established they contained provisions whereby, when the sub funds became small, the policies could be converted to non-profit contracts with increased guaranteed benefits. The purpose of this change was to give policyholders added certainty as the funds declined. The conversion occurred on 1 October 2013 and at that time the assets and liabilities of the sub funds were merged with our Non Profit Sub Fund (NSF).

How Utmost Life and Pension's with profits business has built up

Reliance Life acquired Reliance Mutual on 1 April 2018 and in the process all the funds managed by Reliance Mutual transferred to Reliance Life. In March 2019, Reliance Life re-branded under Utmost Life and Pensions.

Over the years, Reliance Mutual acquired with profits business originally written by other companies. The main transactions were:

All the business of Burslem Mutual Assurance Society was acquired and transferred into Reliance Mutual in 1962.

Reliance Mutual acquired The British Life Office Limited in 1958. We used British Life as a separate company to underwrite various types of without profits policies until 2004, when all its business was transferred into Reliance Mutual.

The Industrial Branch business of Nation Life Insurance Company was acquired and transferred into Reliance Mutual in 1971.

All the business of Criterion Life Assurance Limited was acquired in 2003 and transferred into Reliance Mutual in 2004.

The business originally written by Time Assurance Society and Templeton Life Assurance Limited, which had been acquired by Family Assurance Friendly Society in 1994 was in turn transferred into Reliance Mutual in 2004.

We acquired all the business of Eurolife Assurance Company Limited during 2005, and transferred this directly into Reliance Mutual.

In September 2006 we acquired the share capital of SEB Trygg Life (UK) Assurance Company. Initially we maintained this as a separate subsidiary company, having changed its name to RM Life Assurance Limited. In July 2007 we transferred this business into Reliance Mutual.

In May 2007 we acquired the share capital of University Life Assurance Society from its then current owner Equitable Life Assurance Society. In July 2007 we transferred this business into Reliance Mutual.

Also in July 2007, we acquired all the business of Hearts of Oak Friendly Society, which we transferred directly into Reliance Mutual. Hearts of Oak was Reliance Mutual's largest acquisition, involving in excess of £300 million managed on behalf of more than 60,000 policyholders.

In July 2008 a further small block of business previously written by Time Assurance Society was transferred from Family Assurance Friendly Society into Reliance Mutual.

Frequently asked questions for with profits policies

Click on the links below for frequently asked questions.

What is a With Profits policy?

A with profits policy is designed to provide a benefit at some future time. This might be at the end of a fixed period - for example 25 years after the policy started. It might provide the benefit when you reach a certain age - perhaps 60 or 65. It might only provide the benefit when the life assured dies. There are two types of with-profits policies conventional with-profits policies and unitised with-profits policies.

Some policies provide a lump sum in cash when the policy benefit is due. If you would like to know exactly what benefit your policy provides, you can use one of the methods set out in the contact us page.

In order to pay for the benefit, you pay us premiums. Most policies have regular premiums paid every month, but some have other ways of paying premiums. Some policies originally had regular premiums, which have now ceased.

In exchange for paying the premiums a conventional with-profits policy promises a minimum guaranteed benefit - called the 'sum assured' or 'guaranteed benefit'. The unique feature of a 'with profits' policy is that bonuses can be added to this minimum guarantee as the policy progresses.

With a unitised with profits policy, your premiums purchase units in the fund at the unit price. Some policies guarantee that the unit price will increase at a minimum rate. Bonuses are added to unitised policies by increasing the unit price, and thus the value of your units.

When will the bonus updates be issued?

Bonus updates are usually sent out in June each year.

What are the aims that influence the management of a with profits fund?

  1. To meet contractual obligations to policyholders in all reasonably foreseeable circumstances;
  2. To treat policyholders fairly;
  3. To manage the business in a sound financial manner and, in particular, to meet the tests of solvency and capital adequacy required by regulatory bodies.

What is a bonus on a with profits policy?

They are additions to the benefits that are paid under the policy and are the way in which your policy shares in the profits of your Utmost Life and Pensions with profits sub fund.

They can either be annual (reversionary) bonuses or final (terminal) bonuses.
A reversionary bonus may be added to the policy annually. Once added it cannot be reduced or taken away. However future bonus rates are not guaranteed and can be changed or removed at any time.

The annual bonuses will be paid in full on the maturity or normal retirement date of your policy or on earlier death, provided you have paid all premiums due and have not altered your policy.

A final bonus is an additional bonus which may be paid on termination of the policy due to death or maturity. This bonus is not guaranteed and can be changed or removed at any time.

A proportion of the annual and final bonus is also paid on the early termination of any life or pension policy when taking the proceeds or, for pension policies, when transferring them to another provider. The amount is determined when the event occurs.

Final bonus is also allocated to unitised with profits policies by an increase in the unit price. As final bonuses are not guaranteed to remain unchanged, this means that part of the unit price is not guaranteed, and thus the unit price may be reduced in future.

At the time the business was transferred from Hearts of Oak to Reliance Mutual, with profits benefits under conventional policies in WPSF 6 were re-structured. A portion of the guaranteed benefits was replaced by a special final bonus. This special final bonus is not guaranteed. The purpose of the benefit restructure was to improve the security and financial prospects of the fund, for the benefit of all policyholders.

Is there any difference between bonuses on with profit life and pensions policies?

Annual and final bonuses attaching to pensions policies are paid in the same manner as the basic benefit; that is as an addition to the basic guaranteed pension, open market option, cash payment or transfer value.

Life assurance policies receive the guaranteed sum assured together with any annual and final bonuses in cash when a claim arises or on the policy maturity date (if any).

How much bonus will I receive on my with profits policy?

The amount declared depends on the progress of the underlying fund in which premiums are invested. This depends mainly on the returns earned from the assets in which the fund is invested. Profits from all the business written in the fund are available to be distributed as bonuses.

In setting bonus rates, returns are smoothed so that part of the short-term fluctuations in investment values are not reflected in payments. The aim is that policy benefits will be broadly similar year on year. Smoothing reduces the risk of you receiving a low payout if investment markets are low when your benefit is due to be paid. In exchange you won't receive the full benefit if investment markets are high.

The amount of total annual bonuses accumulated so far is shown on your Bonus Update. Bonus Updates are usually issued in May each year for most policies.

How does this year's bonus compare with last years?

For all sub funds annual bonus rates are the same as last year.

For WPSF1, on 1 April 2019 we declared a special bonus of 25% of the guaranteed policy benefits for all types of policies in the fund. This special bonus is a one off declaration in addition to the annual bonus and it is not intended to be a future regular annual declaration.

Annual bonuses had been set to zero for with profit policies in WPSF6 before these policies were acquired by Reliance Mutual. Unless there are significant changes in the investment returns available from fixed interest securities, it is unlikely that the annual bonus will change in future years except for annuities in payment.

Final bonuses are used to determine the overall level of policy payouts. Final bonus rates changed on 1 April 2019. The following figures compare the payouts from 1 April 2019 with those payable on 1 October 2019.

In WPSF1, payouts have increased by between 4.0% and 15% depending on the entry year and type of policy.

In WPSF2, payouts have decreased by between 1.4% and 2.3%.

In WPSF4, payouts have decreased by between 8.3% and 9.4%.

In WPSF6, the proportion of special bonus payable on life policies and pension policies has remained at 100%.

The proportion of non-guaranteed bonus remains at 100%.

From 1 April 2019, an extra final bonus (sometimes also called "terminal bonus") will be paid on all with profits policies in WPSF6 when they become claims on death or at maturity. An allowance will also be made for extra final bonus within the calculation of surrender values. The amount of extra final bonus is expressed as a percentage of the guaranteed benefits and attaching bonuses on the date of the claim. The rate of extra final bonuses that will be added to claims from 1 April 2019 is 19.1% for pensions business and 18.2% for life business. Extra Final bonus rates are not guaranteed and may be altered at any time. This change will result in an average reduction in payout for life policies of 4.2% and for pension policies of 4.3%.

Annuities in payment in WPSF6 will see a bonus of 0.5% of the basic annuity during 2019. This bonus is non-guaranteed.

For Unitised With Profits policies, all Market Value Reductions on Life and Pension policies have increased and terminal bonuses have decreased.

For all sub funds, future annual bonuses and all final bonuses are not guaranteed and the rates may be changed without notice.

Annual bonus rates do not change often. When there is a need to change rates we introduce changes gradually, so that the change from year to year is small.

We change final bonus rates at least once a year. The method used generally leads to stable rates unless there are large movements in investment markets, so reviews at other times should not normally be necessary. We may also review final bonus rates if there are significant changes in investment markets during the year.

Past performance is not necessarily a guide to the future.

Where is my money invested for my with profits policy?

Your premiums are combined with those from all the other policyholders in your sub fund and are invested in a wide range of securities including:

  • UK shares
  • Overseas shares
  • Fixed interest securities
  • Property
  • Cash deposits

What are the expenses charged for administering the business in my with profits fund?

The expenses charged to your with profits fund are on a basis that was established at the time the fund was transferred to the Company (or to Reliance Mutual) and are subject to inflationary increases.

Can I cash in my with profits policy?

If you are unable or do not wish to continue paying premiums to your policy, it is normally possible for a cash value to be paid on a life assurance policy. Under a pension contract, it is not normally possible, under current tax rules, for a cash value to be paid if you are aged under 55, although you can transfer the value of your policy to another pension provider. If you are aged 55 or above then it is possible to access your pension fund benefits.

When we calculate early termination values, we try to treat policyholders terminating on a basis that is consistent with and fair to those policyholders who remain in the fund.

For unitised with profits policies the early termination value is the value of units allocated to the policy. This value may be reduced by a market value reduction factor ("MVR"). MVRs are designed to ensure that policyholders leaving the with profits fund receive a fair share of the fund, and neither advantage nor disadvantage the remaining policyholders. At times it is not necessary to apply an MVR.

Why have I never received an annual notification of bonuses for my with profits policy?

  • Industrial Branch policyholders do not generally receive annual bonus updates. The main contact was traditionally between the agent who called at the door to collect premiums, and thus was able to answer questions face to face. The nature of this operation has changed, and we are giving consideration to sending bonus information by post at some time in the future.
  • Annual notifications of bonus are also not normally sent in respect of annuities in payment, unless the amount due to be paid changes.
  • Only with profits policies receive bonuses. You may have a non-profit or unit linked policy.
  • If you used to receive bonus updates, it may be that we no longer hold your current address. You can get in touch with us to update your address by calling us on 01892 510033 or by writing to us at Customer Services, Utmost Life and Pensions Limited, Utmost House, 6 Vale Avenue, Tunbridge Wells, Kent TN1 1RG. Calls may be recorded for training and monitoring purposes.

What happens if a with profits fund goes below a certain size?

  • Utmost Life and Pensions may close a with profit fund if the total assets in the fund goes below a threshold. The threshold is £25m for WPSF 1, WPSF 4 and WPSF 6, and £10m for WPSF 2. If Utmost decides to close a with profits fund, which will only be done if the Board is satisfied that this course of action is in the best interests of the policyholders in the fund, all the policyholder benefits will become guaranteed and would be transferred into Utmost's main Non Profit Fund (NPF). The decision to close a with profit fund is taken by the Board on the advice of the With Profits Actuary and With Profits Committee of the Company.

What has happened to WPSF3 and WPSF5?

When WPSF3 and WPSF5 were established in 2004 and 2007 respectively, the High Court agreed to arrangements that enabled the sub funds to be wound up once they had declined to less than a certain size. We decided to wind up WPSF3 and WPSF5 with effect from 1 October 2013, as the trigger points for wind up had been passed. We felt that the risk of a small fund having significant and frequent revisions to bonus rates was high and that it would be advantageous to policyholders to have certainty as to the amount their policies would pay out.

We therefore replaced the non-guaranteed and uncertain future bonuses on the with profits policies in these sub-funds with a guaranteed policy value. Having done this there is no need to keep a separate fund of assets and liabilities as all policy payouts are guaranteed by Utmost Life and Pensions as a whole. WPSF3 and WPSF5 were therefore merged with our main non-profit sub fund, the Ordinary Sub Fund (OSF).

With profits policyholders in WPSF3 and WPSF5 have been advised of the guaranteed benefits now attaching to their policies.