Changes made to PPFM at 30 June 2005
Principles
There were no changes to the Principles.
Practices
There were a number of changes to the text of the Practices on 30 June 2005. There has been a small increase in the rate of distribution of the 'Retained Account' described on page 20 and a new bonus series has been introduced as described below. Otherwise none of the amendments reflect a change in our actual practices.
New bonus series have been introduced for the With-Profits Income Units and the With-Profits Growth Units allocated to policies issued on or after 23 March 2005. Changes have been made to sections 4.4 and 4.5 accordingly.
Several of the changes in text were made to comply with new requirements of the FSA that came into force on 30 June 2005. These changes relate to extra information in describing our smoothing processes and to describing any shareholder support for the With Profits Fund. At the same time we made some other changes to make some minor corrections, and to make the wording clearer.
Sections 4.2.3, 4.3 and 4.4.2 have been updated, principally to include more detail about:
- the circumstances in which we consider changing rates of terminal bonus outside the usual six-monthly cycle
- the circumstances in which we consider changing rates of Market Value Reductions (MVR) or other factors that give the amount we pay out when guarantees do not apply
- the factors that might limit the extent of smoothing.
Section 4.5.2 has been updated to improve clarity and to correct the description of how we set 'Overall Yield'.
In section 5.2 we have added some further detail in connection with Transferred With Profits Policies.
Most of the changes to section 7 reflect the new FSA requirement to include a description of shareholder support to the With-Profits Fund. This is mainly in section 7.3, together with the addition to Annex 2 of some relevant extracts from the Scheme of Transfer.
There is also a technical correction in section 7.1 to simplify a statement on business risk. (This was necessary because some of the investments of the With Profits Fund are held through investment holding companies that are technically subsidiaries.)
Section 7.2 now states explicitly that profits and losses from certain payments made under post-3 March 2000 With-Profits Policies are among those separately accumulated within the With-Profits Fund. This was previously covered by the statement later on in the section that the Board may limit the impact of profits and losses.
