Minor amendments to the Scheme

We need to make some small technical amendments to the Scheme document. This note explains those amendments, and it is likely to be of interest to any Scheme Policyholders who are interested in the details of the way Uplifts would be calculated for Conventional With-Profits Policies.

The amendments:

  • will not change figures shown on Personal Illustrations sent out with the Decision Packs (including the amount of any Uplift) for any Scheme Policyholders;
  • update the description of the calculation of Uplifts for Conventional With-Profits Policies (including “whole of life” policies) in line with what was always intended and in line with Personal Illustrations; and
  • will only apply to Conventional With-Profits Policies

The impact of this on holders of other Policies (e.g. Personal Pension Plans and other types of Recurrent Single Premium Policy) is so small that it doesn’t make a material difference to any of them.

Paragraphs 20.30 and 20.43 of Part B of the Explanatory Booklet explains that the calculation of the Uplift is based on Policy Values derived from premiums which were paid or switches which were made on or before 31 December 2017. This avoids a situation where some Scheme Policyholders can benefit by making payments into the With-Profits Fund specifically to take advantage of the Scheme. The Scheme Document as initially drafted applied this approach to all Scheme Policies, including Conventional-With-Profits Policies.

However, that doesn’t quite work for Conventional With-Profits Policies whose treatment is described in paragraph 20.34 of Part B of the Explanatory Booklet. That is because, while Conventional With-Profits Policies’ ‘surrender value’ is similar to the ‘policy value’ that Recurrent Single Premium Policies have, the current surrender value at any particular time is based on all premiums paid, not on premiums paid up to a date in the past. Also, the risk of Scheme Policyholders making payments into the With-Profits Fund specifically to take advantage of the Scheme doesn’t apply to Conventional With-Profits Policies because their premiums are fixed and so policyholders cannot choose to pay in more to receive a larger Uplift.

The Equitable always intended to calculate Primary Uplifts for Conventional With-Profits Policies based on their surrender values as at the Implementation Date, but the Scheme document did not reflect that exactly. We have made some minor amendments to the Scheme document so that it does reflect that. The amendments mean that:

  • for Recurrent Single Premium Policies, the Uplift will be based on Policy Values as at the Implementation Date but limited to the value which comes from premiums which were paid or switches which were made on or before 31 December 2017; and
  • for any other policies (Conventional With-Profits Policies), the Uplift will be based on Policy Values (which for these purposes is the same as their surrender values) as at the Implementation Date.

You can find a copy of the Scheme document showing these amendments as changed text here

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