Release date: 24 August 2006

Information for IFA's

We advised our customers earlier this year that we had found it necessary to withdraw projections for our With-Profits Self Employed Retirement Plan (SERP) due to a problem with our systems. During August and September we will mail all SERP customers with an updated projection.

We have also taken the opportunity to refine our calculation approach and as a result we have made three changes:

1. Projected Fund Values
The changes will mean that many (but not all) projected fund values will have increased. In most cases the difference between the projected fund values at the lower and higher growth rates will have narrowed. This is because the projections are now more realistic - the figures more closely reflect the amount of pension that we will pay at retirement and reflect the guarantees in the policy. Therefore, policyholders will have a better understanding of what to expect their policy to pay.

Please remember that projected values are not guaranteed, and we may change the values and the basis of calculation on any future date without notice.

2. Transfer Values
We have revised the calculation of transfer values for policyholders who are currently aged below 60. In the past, we would quote the amount payable if the policyholder were able to retire at the transfer date, less a deduction. However, in the future, the transfer value will be determined so that the amount payable is consistent with the asset share for a sample policy of similar size, entry date and age attained as the actual policy assuming all expected premiums are paid. Where premiums have been altered, transfer values will be calculated using the resulting amended policy benefits.

This is intended to ensure that we pay the ‘fair share’ of the underlying fund for each policy. The previous basis was aimed at paying broadly the ‘fair share’ of the total fund across all transfers, whereas the new basis targets this on a more individual basis. For policyholders aged 60 and over, they will receive a transfer value equal to the value of immediate pension benefits payable at the time of claim.

3. Retirement Values
Changing final bonus rates so that they take the policyholder’s age at retirement into consideration is also designed to ensure we pay the policyholder's ‘fair share’ of the fund on a more individual basis. In most cases the payouts do not change significantly because they are dependent on the guaranteed pension, but this is not the case for everyone.

Please note that if the policyholder is under the age of 60 years, we no longer provide a ‘fund value’ for this policy as it only has relevance in a very few specific circumstances (i.e. early retirement due to ill health or a special occupation). However, we will continue to provide the current death value which is a true reflection of the amount we would pay out to the policyholder's estate, or to their trustees (if the policy is subject to a trust), upon their death. We will also continue to provide the current transfer value, which is the best indicator of the value of the policy before the age of 60.

The strength of the NPI With-Profits fund has had no bearing on the actions we have taken. We have taken the opportunity to better align values with asset share to improve the accuracy of the projected benefits we supply, and to target payouts more closely on the policy’s underlying fair share of the fund where the guaranteed benefits do not apply. We are not anticipating any overall reduction in payouts as a result of these changes although some policies will be affected.

Our customer Questions and Answers page may provide you with answers to any questions you may have.