What changes have there been to the former Engage and UKCSBS with profit contacts?
Since the fund closed to new business in 2016, the number of investors in the fund has been reducing. When the fund was established there was a clause set that describes what happens when the number of members or value of the fund reach a certain level – this is called “the sunset clause”.
The sunset clause for this fund requires that all contracts be converted to “guaranteed Bonus business”. We have consulted with specialist external actuaries who have calculated what this means for each class of With Profit policy holder. A communication as to how that impacts each policy holder has been prepared and sent (mid - May '23). This allowed time for reflection before the changes were implemented in June 2023.
The sunset clause itself can be found on page 18 of the “Principles and Practices of Financial Management (EM)” document. To save you digging, this is what it says:
Once the Fund has been closed, the run-off of the business will be managed in a sound and prudent manner until the size of the Fund falls below a minimum threshold criterion. This minimum threshold criterion is reached when the total assets within the Fund fall below £25 million (as at 31 December 2003) increased each year in line with the change in Average Earnings Index, or if the number of contracts falls below 12,000, whichever occurs first.
At the point that the business falls below this threshold, or as soon as the Board deems to be appropriate thereafter, the policies then remaining will be converted to guaranteed bonus business on a fair and equitable basis.
In managing the With Profits business up to the point of such conversion, in determining bonus policy and in determining the terms of the conversion to guaranteed bonus business, the Board will take into account the reasonable interests of the various policyholders in the Fund, and any external capital support that may have been provided to the Fund.