Annual Benefit Statement FAQs

You should be receiving your annual 2009 Benefit Statement letting you know the bonuses which have been added to your plans and the premiums you pay.

We are sending the statement before the end of March. Please let us know if you have not received your statement by then. This page and the documents in the Additional Information box attempt to answer some of the frequently asked questions which we receive at this time of year.

Can my metfriendly long term endowment bonus rate be compared directly with interest rates offered by Banks/Building Societies?

metfriendly With Profit Savings Plans are not the same as Bank and Building Society savings accounts. The rates are difficult to compare directly. We will explain some of the major differences.

The most important thing to note is that our bonuses get calculated from (and added to) your Sum Assured, not just to the amount of money you pay in. Under a "conventional" policy your Sum Assured is higher than the total premiums you have paid in until you near the end of your policy term. (The "accumulating" policies - ISA, Bonds and Flexible Savings Plans - are more similiar to bank accounts - see below.)

To take an example if you were pay £10 per month into a metfriendly 10 Year Tax Exempt Endowment we would give you a Sum Assured of £1120. Therefore in year 1 your 1.8% bonus equates to a guaranteed increase in benefit (at maturity or death) of £20. (The annual bonuses are compounded, i.e. in year 2 you will get a bonus calculated from £1120+£20.)

In contrast to this a year of paying £10 per month into a 3% High Street Bank savings account would result in annual interest of under £2 in the first year, £5 in the second year etc - before tax.

But there is more... most of our policies have tax advantages. A higher rate tax payer would be subject to full 40% tax on the interest from the High Street Bank savings account but with a qualifying metfriendly policy, there is no tax for you to pay if your plan pays out at its maturity date.

However this may still not be the complete picture. The bonus rate quoted on your bonus statement reflects a conservative view of the long-term growth of the metfriendly funds. At the time of encashment you may also be entitled to a final bonus which reflects additional investment profits which are not already distributed by way of an annual bonus. A final bonus is applied to the Sum Assured + all annual bonuses. We are currenty paying final bonuses on all of our plans including "accumulating" policies, subject to a minimum term of investment. (See Current Bonus Rates for more details.)

But in fairness a Bank savings account has certain advantages. It is likely to be an instant access account whereas metfriendly plans should be treated as medium to long term investments. The full benefits from the metfriendly plans can only be realised at maturity (or death) but the tax benefits still apply for some early surrenders.

Why do you do things differently?

The "Conventional" With-Profits policy is an Endowment Savings Plan, which means that as well as a payout at maturity there is also life assurance 'built in' - this gives you a better tax position.

The death benefit is the Sum Assured figure, plus bonuses - so your estate wouldn't just get back what you had paid in.

We publish a CFPPFM - (Consumer Friendly Principles and Practices of Financial Management) which describes, in a 'Customer Friendly' way, how we calculate our bonus rates. The Association of British Insurers also publishes useful information. We are happy to discuss anything about our plans with you; please get in touch.

Can my ISA bonus rate be compared directly with Cash ISA interest rates being advertised by the High Street Banks/Building Societies?

The 2.4% bonus is an annual bonus applied to your ISA investment. This annual bonus is a reflection of the growth of the Society's investments over recent years. At the time of encashment you may also be entitled to a final bonus which reflects additional investment profits which are not already distributed by way of an annual bonus. We are currently paying final bonuses on ISAs which have been invested for 3 or more whole tax years. These final bonuses depend on current market conditions. So far this year we have been paying a final bonus rate of 14% on an ISA invested 5 years ago or 25% on an ISA invested 10 years ago [Correct as at 1/3/2010].

Taking the final bonus into account an ISA invested 5 years ago will have grown at a rate equivalent to an average of 6.2% per annum. In general the longer you leave the policy running the higher the final bonus.

What about my With Profit Bond or Flexible Savings Plan, are these subject to a final bonus like the ISA?

Yes. The annual bonus is a reflection of the growth of the Society's investments over the year. At the time of cashing-in, you may also be entitled to a final bonus which reflects additional investment profits which are not already distributed by way of an annual bonus. We are currently paying final bonuses on cashing-in investment plans which have been running for 3 or more years. These final bonuses depend on current market conditions. So far this year we have been paying a final bonus rate of 14% on a Bond invested 5 years ago [Correct as at 1/3/2010].

In general the longer you leave the investment plan running the higher the final bonus on cashing-in. (On 1/3/2010 we were paying a final bonus of 25% & 55% on Bonds taken out 10 & 15 years ago respectively.)

Why are there different bonus rates for different tables?

For some tables, such as the With-Profit Bond and the ISA, the Benefit or Sum Assured is based on what you have already paid us. For most tables, however, the Sum Assured is based on what you will pay us over the term of the plan. Therefore, the profits we earn on each type of table are different. Also, on these tables where we reclaim some of the tax which we otherwise pay on the underlying investments, we pass on this saving to you by way of a higher bonus rate.

How do you calculate bonuses?

The bonus we add each year is a consistent way of distributing a projected pre-tax investment return of, currently, about 3.5% per annum. On average, we earn more than this - and the excess is distributed as a final bonus at maturity or on cashing-in. We also reflect any return of our capital to members in the final bonus.

When do you pay a final bonus?

If you pay us a lump sum, including all ISA contributions, then your policy would currently qualify for a final bonus on or after the third anniversary. Regular contribution contracts attract a final bonus if they pay out from the fifth anniversary onwards. Final bonuses are not only included in maturity and death claims - they are also included in our calculation of surrender values.

Can the final bonus be negative?

We need to reflect our investment return, even in bad times, so we reserve our rights to adjust surrender values - not maturity values or death claims. In particular, lump sum investments held for less than 10 years could be adjusted downwards by a 'market value reduction' - effectively a negative final bonus. Currently (1/3/2010) metfriendly does not apply a Market Value Reduction to any of its products.

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