Annuity Plan: Investment

This investment section only applies to the Annuity Plan with discretionary bonus increases.

The Annuity Plan has a limited investment risk to the extent benefits (including declared bonuses) are guaranteed in full. However, the level of future discretionary bonus increases will depend on investment performance.

The Annuity 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 consumer price inflation for the period September to September in the relevant currency. This is a target and not a guarantee, the bonus could be higher or lower than the target. The bonus target may change over time.

The annuity is increased by a bonus on 1 January each year. The bonus is declared by the Board of Directors having regard to the advice of the Actuary. The bonus is not expected, necessarily, to remain at constant levels from year to year, as bonuses are determined having regard to consumer price inflation for the period September to September in the currency of the annuity. This is not a guarantee but rather a long-term target and the target should not be regarded as the upper or lower limit of future increases. The year-on-year bonus may be higher or lower than the consumer price increase in that year and can be 0%.

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 funds.

Please refer to the bonus section for details on the bonus record and bonus regulations.