Group Level Plan: Investment
The Level Plan has a low investment risk because benefits (including declared bonuses) are guaranteed in full.
The Level Plan policyholders' funds currently invest in long-term fixed interest bonds, equity funds and cash. Nordben aims to invest an appropriate percentage of its assets in fixed interest bonds so that it can broadly secure the guarantees underlying the Plan.
Having prioritised covering these guarantees, the remaining funds are then invested to seek the best return for policyholders within an acceptable level of risk. Nordben currently invests the funds in a mixture of equity funds and cash.
The bonus is determined having regard to the long term expected increase in the suplus of the fund. The surplus is influenced by the performance of the assets, the yields on the bonds matched to meet the guarantees to the policyholders and changes in life expectancy. There is an added aim to smooth out the bonuses from year to year in order to endeavour to generate a steady return. However, the declared bonus rates may not keep up with inflation. The bonus target may change over time.
We would like to draw your attention to the following risk factors.
Investment Strategy Risk Factors
Equity Fund Investment
The investment strategy for the currency funds includes investment in equity funds. The proportion invested in equity funds is determined having regard to the guarantees made to policyholders in the currency fund, the term of the liabilities and yields available on fixed interest securities in the currency.
The equity fund investments are expected to generate higher returns than more secure investments (e.g. fixed interest securities) over the policy term but such higher returns are not guaranteed.
Bonuses will be affected by future equity fund returns.
Yields available on Fixed Interest Securities
The currency funds investment strategy includes investment in fixed interest securities. These investments aim to broadly secure the guarantees within the currency funds.
The percentage invested in fixed interest securities depends on the available yields. A reduction in yields generally increases the percentage of assets allocated to fixed interest securities and therefore restricts the currency funds freedom to invest in equities.
Bonuses will be affected by changing yields on fixed interest securities.
Policyholders' Reserve Funds
The size of the policyholders' reserve funds varies from currency to currency. The reserve funds smooth out the effects of fluctuations in the capital markets in which the currency funds are invested.
Nordben aims to maintain policyholders' reserve funds at an appropriate level to reflect the currency funds liabilities and its investment strategy.
Bonuses will be affected by the size of the policyholders' reserve fund.
Please refer to the bonus section for details on bonus record and bonus regulations.