NU reintroduces Market Value Reduction
Norwich Union (NU) is reintroducing exit penalties for around 1.2 million customers who may need to cash in their savings before their policies mature.
The insurer says that volatile stock markets have led it to apply a Market Value Reduction (MVR) on some of its with-profits plans, which could reduce the value of investments by up to 22%.
The annual bonuses paid on with-profits investments are based on the performance of assets held in the fund and the move is designed to protect investors who are not taking their money out.
MVRs are usually applied if the value of the underlying assets is less than the value of the plan, including all bonuses.
While most insurers use MVRs, NU actually scrapped the charge last year. However, the financial turmoil surrounding the credit crisis has forced the company to reconsider its position.
According to NU’s chief actuary, John Lister, the reintroduction of the MVR will ensure that with-profit customers are treated fairly and protect the group’s funds in times of market turbulence.
With-profits pension policyholders and Life Bond holders in NU’s CGNU, NULAP and CULAC funds are affected.
Mortgage endowment policyholders are unaffected.
Category: Insurance News, Norwich Union Insurance News
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