Questions and Answers

NPI’s Self Employed Retirement Plan (SERP) is a conventional with-profits Retirement Annuity Contract. The plan provides pension benefits on retirement or a lump sum in the event of earlier death. The premiums invested in a policy purchase amounts of basic pension based on the amount of premium paid and the investment term completed. Throughout the policy term the amount of basic pension payable may be increased by the addition of reversionary bonuses.

Why have you made these changes?
We made changes to our systems to improve the accuracy of the projections provided to policyholders. As part of those changes we have changed the basis used for calculating transfer values and retirement values so they are closer to each policy’s underlying fair share of the fund. Overall, we are not expecting the amounts payable to change in total but there has been a reduction for some individual policies.

Is the fund crashing/are NPI financially unstable?
The strength of the NPI With-Profits fund has no bearing on the actions we have taken. We have taken the opportunity to better align values with asset share. This will improve the accuracy of the projected benefits we supply, and will ensure that payouts more closely reflect 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.

How have you calculated my projection?
To calculate an illustrative value at the chosen pension date we take the current transfer value, take into account any regular premiums payable, less expenses etc, and project forward to the selected pension date. As we have changed the basis that we use to calculate the transfer value, these projected figures now give a better indication of what you would receive if there were no guaranteed benefits.

We then compare the pension likely to be provided by this projected fund, with the pension that would actually be payable, as a minimum, under your policy. Where the amount required to provide the minimum pension is higher than the projected fund we will increase the fund value so that it is enough to buy the minimum pension. This revised amount of fund is then used to provide a pension in the format you want.

Why has my Projected Fund changed?
The projected fund value will have changed because we have changed the transfer value on which it is based - and because we have also changed the way we take into account the minimum pension payable when you take your benefits. These changes are meant to give you a better estimate of the pension benefits you will actually get at that time, and what level of fund would be required to provide that pension.

Does this change affect retirement/pension benefits?
Your policy guarantees to pay certain amounts at specified times. These will be set out in your policy document. We may increase the amount guaranteed by adding bonuses allocated from the with-profits fund. The guaranteed pensions are only payable at the ages and in the format set out in your policy. If you retire at an age other than one for which the policy specifies the amount of guaranteed benefit, or take your pension in a different format, then we will recalculate the amount payable to reflect that different date or different pension format.

If there is an amount of final bonus payable on your policy at the date you retire, then this will increase the pension you receive. The rates of final bonus payable are now dependent on the age at which you retire as well as when your policy started.

Does this change affect death benefits?
If you have selected to have either a Return of Premiums or a Return of Premiums plus 4%pa - This change will have no impact on your death benefits.
If you have selected to have a Return of Fund - We have made changes to the final bonus rates so that they take the policyholder’s age at retirement into consideration; this is also designed to bring payouts closer to each policy’s underlying fair share of the fund. In most cases the payouts do not change significantly because they are dependent on the guaranteed pension.

If your fund has reduced this will be because the revised basis confirms that the fair share of the fund for your policy is now less than the amounts shown previously as likely to be payable on your death.

Why is there a transfer adjustment/How are the transfer adjustments calculated?
If you terminate your policy early either by transferring it to another provider or transferring it to an NPI PPP for early retirement (excluding ill health or special occupation) we calculate your entitlement with the aim of being fair to all policyholders. 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.

Does this policy have a Market Value Reduction (MVR)?
No, an MVR is only relevant to Unitised With-Profits and Capital Account policies.

What is ‘asset share’?
We calculate the asset share by looking at premiums paid, making deductions to cover our expenses, tax and the costs of providing benefits, and adding investment returns.