If the Overall Rate of Return is designed to give credit for investment returns in 2009 why is it 0.5% p.a. for plans issued after 20 July 2000?
We saw smoothing working in 2009 when the full fall in investment return over 2008 was not reflected in the Overall Rate of Return declared. That, coupled with the addition of an Interim Rate of Return ensured customers did not feel the full force of the market downturn. The improved investment return this year means that the Overall Rate of Return has increased this year to 0.5% p.a. for plans issued after 20 July 2000. The increase seen in the rate declared is not in line with the investment performance, just as the reductions last year were not in line with investment performance. Our intention is that smoothing should balance out over time, so that in the long run policyholders should neither gain nor lose as a result of smoothing. The Overall Rate of Return (ORR) is intended to give credit for the investment return earned by the With-Profits Fund during 2009 but also reflects some of the smoothing of the 2008 return at the 2009 declaration.
