Terminal bonus meaning

An additional, discretionary amount that an insurer may add to the payout of a with-profits life assurance policy at maturity or on the death of the life assured, reflecting the fund’s overall performance not already captured by annual (reversionary) bonuses. Often called a final bonus, it varies over time and can be a substantial addition; it may be reduced to nil in adverse conditions. The term is not defined in legislation or case law; it is a descriptive industry expression used in policy terms and regulatory materials. In England & Wales, Scotland and Northern Ireland, the insurer’s discretion is exercised in line with the policy conditions and its published Principles and Practices of Financial Management (PPFM), under PRA/FCA oversight (including smoothing practices and Treating Customers Fairly). In Ireland, usage is broadly consistent, with discretion governed by the policy and Central Bank of Ireland requirements. Key features: - Not guaranteed; amount depends on investment returns, expenses, guarantees, smoothing and solvency. - Typically payable only on maturity or death; on early surrender, it may not apply and a market value reduction may instead be used. - Calculation and eligibility are set by the contract and the insurer’s with-profits governance.