Key features of the Distribution Bond

Transcription

1 Key features of the Distribution Bond The Distribution Bond is open for additional investments into existing policies only, and is not open to new business. The Financial Conduct Authority is a financial services regulator. It requires us, Clerical Medical, to give you this important information to help you decide whether making an additional investment into our Distribution Bond is right for you. You should read this document carefully so that you understand what you are investing in and then keep it safe for future reference. These key features should be read with the enclosed illustration. Its aims To provide growth over the medium to long term (at least five to ten years) from a mix of assets including stockmarket investments. To provide a regular income if you choose. To allow you to withdraw part or all of your investment when you want. Your commitment A high regular income withdrawal rate could reduce the capital value of your bond below the total amount you have invested. In exceptional circumstances, if money is withdrawn from your bond, we may defer payment for up to one month. As some of our charges are taken by cashing in units, there is a risk that your capital may be reduced if these charges exceed the amount of growth in your chosen fund(s). Tax rules may change in the future. You agree to invest an additional lump sum into an existing Distribution Bond. The minimum additional investment you can make is currently 1,000. You accept that your additional lump sum is a medium to long-term investment, held for at least five to ten years. Risks The value of an investment and any income from it can go up and down as a result of market and currency movements. You may get back less than you invested. Investment growth could be lower than the growth shown in your personal illustration. Our charges could increase. You have a right to cancel your additional investment within 30 days of receiving your documents. If you do cancel and the value of the investment has fallen, you may not get back the full amount of the additional investment. 1

2 Questions and answers What is the Distribution Bond? Clerical Medical s Distribution Bond is a unit-linked, single premium, whole of life assurance plan issued as 100 identical policies. The minimum initial investment was 5,000 and you can top up your investment with a minimum of 1,000 at any time. You can pay by cheque. Cheques should be made payable to Scottish Widows Limited. To help prevent fraud, you must also add the plan holder name and the plan number. If you don t do this, we may have to return the cheque. For example: Scottish Widows Limited A N Other, policy no You should also draw a line through any unused space on the cheque so that unauthorised people cannot add extra numbers or names. Two options are available under the Distribution Bond: the initial charge option and the bond fee option. What are the bond options? Two options are available under the Distribution Bond the initial charge option and the bond fee option. Initial charge option Once units have been allocated to your investment an initial charge will be deducted. Units are bought and sold at the bid price, so there is no bid/offer spread. Bond fee option Units are bought and sold at the bid price, so there is no bid/offer spread, and no initial charge is taken. Once units are allocated there is a monthly bond fee taken as a percentage of the value of the bond. This will be deducted by cancelling units on the start date and monthly thereafter for the period of the fee. Exact details of all the charges that apply to your bond are shown in your personal illustration. What funds are available? There are two funds available. Each fund invests in different assets, for example stocks and shares, bonds and property. Each fund is made up of units. We use your investment to buy units in the fund you choose. The Distribution Fund you need to invest in this fund if you wish to take the income earned within the fund as half-yearly payments in February and August. The Distribution Accumulation Series 2 Fund the income earned within this fund is reinvested to enhance capital growth. This fund also allows you to take regular income withdrawals by encashing units. You can switch between these two funds at any time, currently free of charge. It is not possible to invest in both of these funds at the same time within one bond. So you must put all additional investments into the same fund as your original investment, or switch your original investment. What might I get back? With this key features document you will find a personal illustration for your additional investment into your Distribution Bond. This will give you details of the options chosen and the charges for your bond. Your personal illustration will give you an idea of what you might get back, but this isn t guaranteed. The effect of inflation will reduce the future buying power of what you get back. Can I encash part of my investment? We no longer apply early withdrawal charges. You can arrange to take one-off withdrawals and/or regular withdrawals at any time. The maximum amount you can take is 7.5% per year of the cash investment amount of each individual policy. Please remember the 7.5% limit includes regular withdrawals and any one-off withdrawals you may make. We recommend that you speak to your financial adviser before opting to take any withdrawals (especially those over 7.5%) to consider the tax consequences of any such withdrawal. Please see Personal tax on page 4 for more details. Any unused allowance can be carried forward to subsequent years. For example, if no income withdrawals or encashments are taken in the first year, up to 15% of the total cash investment amount can be taken in the second year. The minimum encashment is 240. The minimum amount that must remain in your bond is 1,000. Can I take the income earned by the fund? Yes, you need to invest in the Distribution Fund. Any income earned within the fund will be paid out as halfyearly payments in February and August. 2

3 Can I take regular income withdrawals from my bond? Yes, you need to invest in the Distribution Accumulation Series 2 Fund to take regular income withdrawals. You may take up to a maximum of 7.5% per year of your total cash investment amount currently invested. The income will be paid directly into your bank account. The minimum amount you can withdraw is 240 per year, and this can be divided into regular payments either: monthly quarterly every four months every six months once a year. We can make the payments on any day of the month from the 1st to the 28th. Please note that it may take up to seven working days, from the date you choose, for the payment to reach your account. You can choose whether the amount you withdraw increases each year or is fixed. The options you can choose from are: a fixed amount each year the amount paid will not change unless you give us new instructions a fixed amount increasing each year with inflation as measured by the Retail Prices Index (RPI). We will calculate the annual increase on each anniversary of your first regular income withdrawal and the new level of payments will start from this date. The RPI increase will be based on the difference in the RPI figures published two and fourteen months before the withdrawal anniversary a percentage each year of your total cash investment amount the amount paid will not change unless you make an additional investment or give us new instructions. Regular income withdrawals are made by encashing units. Income withdrawals are treated as a withdrawal of capital for tax purposes. You should be aware of the tax implications. Your financial adviser can give you further details. Is there any life cover? In the event of a death claim the amount payable will be 101% of the value of the units allocated (or 100% if you (the life assured) are 80 or over when the bond is taken out). On a joint life first death basis, the reference age applies to the oldest life assured, and on a joint life last death basis, to the youngest life. All bonds with more than one life assured will be set up on a joint life last death basis unless instructions that joint life first death is required are given at the time the application is submitted. How much will the advice I receive cost? If you ve received advice your adviser will tell you this cost. If you didn t receive advice before investing, the above bullet does not apply. Since 1 January 2013 we no longer pay commission to your financial adviser for additional investments/premiums. As the cost of commission is included in the charges we take, we ve increased the allocation rate for your additional investment/ premium. This is shown on your personal illustration. Any commission arrangements for existing investments/premiums aren t affected. How will I know how my bond is doing? We will send you a statement every year to show how your bond is doing. You can check the unit prices of your funds on our website: Or you can contact our customer service desk on Lines are open Monday to Friday 8.30am to 6pm. Can I change the funds linked to my bond? Yes, you can switch the whole of your investment from the Distribution Fund to the Distribution Accumulation Series 2 Fund, or vice versa, at any time currently free of charge. It is not possible to switch to any other Clerical Medical fund in this bond. 3

4 Further information Cancellation rights You can change your mind within 30 days from when you get your plan documents for your additional investment. If you do decide to change your mind about making your additional investment, you will need to sign and return the cancellation notice that we will send to you. If you have invested a lump sum, we will give you your additional investment back less any fall in the investment by the time we receive your instructions. If you don t want to cancel your additional investment, you need take no action and it will continue. See How can I contact Clerical Medical? for more information. Personal tax The proceeds of your bond are payable free of any personal liability to income tax at basic rate, or to capital gains tax. However, there may be an income tax charge at the difference between the basic rate and higher or additional rate of income tax if you re a higher or additional rate tax payer when the gain arises or if the gain results in you becoming a higher or additional rate tax payer. There is no liability to the UK basic rate of tax because growth on the underlying investments is taxed via Corporation Tax, at a rate deemed equivalent to the UK basic rate of income tax. It is not possible to claim back any of the UK basic rate tax treated as paid on a gain. If you cash in the whole of your bond or individual policies and there has been an overall profit on those policies (taking into account previous amounts taken from the bond and chargeable event gains), then you may have to pay income tax on that profit. Encashing complete policies may mean a lower tax liability than making a withdrawal equally across all policies, however, the amount of early withdrawal charge which might apply at encashment could be higher. Any one-off withdrawals from the bond made by cancelling units across policies are treated as a return of capital and special tax rules apply. A tax charge may arise where the amounts withdrawn exceed your 5% tax deferred withdrawal allowance. Your 5% tax deferred withdrawal allowance is 5% per policy year of the amount that you have invested in each individual policy. This 5% withdrawal allowance is cumulative. Any unused allowance can be carried forward to future years, subject to the total cumulative 5% allowance amount not exceeding 100% of the amount you have paid into your bond. Large withdrawals from your bond can result in an excessive and artificially high tax liability, it is recommended that you speak to your financial adviser or tax office before taking any withdrawals in excess of the 5% allowable allowance. Certain Personal allowances and Tax credits may also be reduced if a chargeable event occurs and a chargeable event gain arises. Plans written under trust Special considerations apply to plans written under trust. Your financial adviser will be pleased to advise you further. Clerical Medical taxation Clerical Medical will be liable to tax on the income and gains arising from the investment of the underlying assets of the funds. This is allowed for in the unit price. Important note The information contained in this document is based upon our understanding and application of current legislation and HM Revenue & Customs practice. Changes to tax rules and other laws may affect your contract terms. All features, charges, limits and terms described in this document are those current at the time of publication and may be changed in the future. Law The laws applicable to the contract are the Laws of England and Wales. The policy provisions for the Distribution Bond and any further communications will be supplied in English. Conflicts of interest In accordance with FCA regulations we have established and implemented procedures for identifying, and preventing or managing, conflicts of interest. Conflicts of interest can occur in our day to day business activities, for example, where one of our clients could make a gain at the direct expense of another client, or we might be faced with an opportunity to make a gain but this would be to the direct disadvantage of one or more of our clients. Depending on the exact nature of the conflict of interest involved, we may take certain actions to lessen the potential impact of the conflict. Such actions may include putting in place controls between the opposing sides of the conflict, which may control or prevent the exchange of information, and/or involve the appropriate management of staff activities and segregation of duties. In instances where such controls would not be enough to eliminate the potential risk of damage to clients from specific conflicts, we will disclose the general nature and/or source of those conflicts of interest to you and the steps taken to lessen the potential risk, before we take on the relevant business. Our procedures for dealing with conflicts of interest may be revised and updated from time to time. If you would like more information on the procedures, or on any specific conflict of interest that you think might affect you, please contact us. 4

5 Financial Services Compensation Scheme (FSCS) Your bond with Clerical Medical is fully covered by the Financial Services Compensation Scheme. More information about compensation arrangements is available from the Financial Services Compensation Scheme, who can be contacted on or or via their website at How can I contact Clerical Medical? Remember your financial adviser will normally be your first point of contact. We won t be able to give you financial advice. If you have questions, or want to surrender your bond, you can telephone us, send a fax, or you can write to us: Call us on during the following times: Monday to Friday 8.30am to 6pm. We may record your call for quality and training purposes. Fax us on Solvency and Financial Condition Report (SFCR) Our SFCR provides information on the performance and management of our business, including its financial strength. It s produced each year and is available on our website at: information/solvency-2-returns.html cmig.policyholder@clericalmedical.co.uk Head office address: Clerical Medical PO Box Dalkeith Road Edinburgh EH16 9AN United Kingdom Complaints Our aim is to provide you with the highest standard of service. If you have a concern, please call us on and we will be happy to help. A copy of our published complaints procedure is available on request. Complaints we cannot settle may be referred to the Financial Ombudsman Service at Exchange Tower, London, E14 9SR. Telephone: E mail: complaint.info@financial-ombudsman.org.uk Making a complaint will not prejudice your right to take legal action. Clerical Medical is a trading name of Scottish Widows Limited. Scottish Widows Limited is entered on the Financial Services Register and its register number is Clerical Medical is a trading name of Scottish Widows Limited. Scottish Widows Limited is registered in England and Wales No Registered office in the United Kingdom at 25 Gresham Street, London EC2V 7HN. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Financial Services Register number X1223/0618