How will these changes affect Clients’ in-force policies?
Most Clients will receive increased dividends in 2023/2024 due to the increase in the dividend scale interest rate. Some male smoker Clients could receive decreased dividends due to mortality. The change in dividends may affect how much a Client needs to pay, and their policy's cash value and death benefit growth.
Why add a special dividend for products issued before 2004?
Declaring a special dividend for Sun Par policies issued before 2004 allows for the fair and timely pass through of past exceptional investment experience to Clients. It also allows the Sun Par dividend scale interest rate to remain stable and aligned with the investment outlook of the Par account.
All Sun Par policies continue to share the same dividend scale interest rate and participate proportionately in the Sun Life Par Account investment earnings. Sun Par policies issued before 2004 require the special dividend to effectively pass through past exceptional investment experience, partly due to its dividend mechanics and the maturity of the block. Policies issued more recently will also retain benefits from positive experience.
What can cause the special dividend to change?
We’ll use this new special dividend to manage exceptional experience. We designed this special dividend as an annual dividend. We’ll review it annually. Future positive or negative exceptional experience can cause a change to this special dividend.
Is this special dividend replacing the current Special Maturity Dividend (SMD)?
No, this special dividend is independent from the Special Maturity Dividend (SMD) currently available on some pre-1996 policies. SMD rates are not changing with this dividend recommendation.
Why does Sun Par Accumulator II have a larger average dividend increase than Sun Par Protector II?
Other experience, mostly policy loans, is more favourable for Sun Par Accumulator II than for Sun Par Protector II. On average, Sun Par Accumulator II dividends are increasing by 8% and Sun Par Protector II dividends are increasing by 3%.
Why is the Plus premium maximum changing?
Due to the increase in the dividend scale interest rate, future projected dividends are increasing. The increase to dividends reduces the available tax-exempt room. Plus premium payments are used to purchase paid up additional insurance, which also uses tax exempt room.
Are enhancement maximums changing?
No, the enhancement maximums are not changing.
How material are the changes to the other factors of the dividend scale e.g., mortality, policy surrenders, expenses and taxes?
For most Clients, the dividend changes from mortality, policy surrender, expense and tax experience are immaterial. For some male smoker policies, the negative impact from mortality is more material and could decrease dividends.
When can I request an in-force illustration?
In-force illustrations reflecting the new dividend scale interest rate will be available starting April 1, 2023.
- For policies sold before 2010, you’ll be able to run your own illustration. It’s easy to run. Learn how in this step-by-step guide.
- For policies sold in 2010 or later, you’ll be able to request an in-force illustration through Request centre.
How does the current economic volatility impact the future outlook for Sun Par?
We manage investment volatility by smoothing investment returns for Sun Par. We manage the Par block so it continues to provide excellent value for Clients.
How does the dividend scale interest rate compare to other historical returns?
The performance of the Sun Life Par Account affects the non-guaranteed values in participating life insurance policies. Sun Life’s long-term strategy and the accounting rules that govern participating policies contribute to providing a stable par account return. See Sun Life Participating Account (810-3599) for details.
What is Sun Life's philosophy on managing the asset mix of the Participating account?
Sun Life takes a long-term view to managing the participating account. The ultimate goal is to provide stable returns for our policyholders.
We have a high quality and well diversified asset portfolio that adheres to a research-based process. More than 200 experienced professionals and support staff conduct this research. We make sure to diversify our investments in various industries, companies, asset classes and financial instruments.
We employ a consistent and disciplined approach to identify, measure, monitor and manage risk.
We’re able to invest in a wide variety of holdings including bonds, mortgages and equities. This is because the participating account has a long-term investment philosophy and a focus on stable cash flows. The portfolio's longer-term investments, such as its private fixed income and real estate components are a good match for the Sun Life Participating Account's long-term objectives.
What dividend scale should I be illustrating for Clients?
Managing Client expectations with respect to policy performance is important. They must understand what we guarantee and what we don’t guarantee. In addition, Clients need to understand how changes to the dividend scale impact the non-guaranteed elements. The “Statement of Variability” of the basic illustration provides Clients with an overview of how a change in dividend scale may impact the policy in the future. We encourage you to review this with all Clients so they understand the impact a change in the dividend scale interest rate can have on their policy.
Give Clients a current dividend scale illustration and a full alternate dividend scale illustration. This can help them see the impact a change in dividend scale will have on their policy values. The Sun Life illustration software automatically illustrates the current dividend scale and the current -1% dividend scale. It also provides the option to show Clients a current -2% dividend scale scenario.
Is the growth rate within a participating policy the same as the dividend scale interest rate?
No. The dividend scale interest rate isn’t the return that a Client can expect from their policy. The dividend scale interest rate is just one component we use to determine policyholder dividends and an individual policy’s performance. The rate reflects the investment experience of the par account and is only part of a Client’s dividend. Many things can affect dividends, including the:
- design of the participating life insurance product,
- pattern of guaranteed cash values,
- number of premiums paid to the policy and
- insured person’s age and risk characteristics.
Other factors that may impact dividends include mortality, expenses, taxes and policy surrenders.