Bonus Rate

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Bonus Rate

An interest rate that is added to the interest rate of an annuity in the first year of its existence. For example, an insurance company may sell a fixed annuity with a 5% rate but apply a bonus rate of 2% in the first year so that the principal increases by a total of 7%. In the second and subsequent years, the bonus rate reverts to 5%. The bonus rate is a sweetener to attract customers.
References in periodicals archive ?
Wesleyan has cut bonus rates and payouts on with-profits policies by up to 15 per cent.
While the final bonus rates for conventional with-profit individual self employed and personal pension policies have been cut from a range of up to 80pc to up to 60pc, resulting in a similar drop in the overall final payout.
In the other months of the bonus season there was less difference between the including and excluding bonus rates.
With bonus rates down across the board, and big name life companies such as Scottish Widows and Norwich Union announcing large cuts in their bonus rates, IFA Promotion is urging people to check the performance of their endowment policies.
The move is in response to the House of Lord's ruling on Equitable Life in 2000, when it said the troubled mutual must honour the final bonus rates it had previously agreed to pay its Gars.
Some regular bonus rates had been reduced in view of the level of guarantees already built up on policies, it said, but policy pay-outs continued to compare favourably to other investments.
While partners will receive lower bonus rates this year, John Lewis said money held in the bonus pool was virtually unchanged at pounds 57.3m.
It is in response to the House of Lords ruling on Equitable Life, when it said the troubled mutual must honour final bonus rates it had agreed to pay its GARs.
Bonus rates on conventional with-profits policies will remain unchanged at 0.25 per cent, while returns on previous bonuses will stay at 0.5 per cent, and returns on with-profits bonds will be held at two per cent.
In addition to the changes in final bonus rates, it is also reducing the payouts on withprofits policies that are surrendered early, by around 10pc.
In addition to the changes in final bonus rates, it is also reducing the payouts on with-profits policies that are surrendered early, by typically 10pc.
Final bonus rates have been increased, unchanged or reduced as necessary to achieve a closer alignment between actual payout and underlying investment values.