PENSION INCOME PLUS ANNUITY Policy Conditions
Pension Income Plus Annuity Policy Conditions Welcome to LV=, and thank you for choosing our Pension Income Plus Annuity. These policy conditions, together with your policy schedule, application form, and any documents we send you confirming changes to your plan, form a contract between the policy owner and Liverpool Victoria Friendly Society Limited. These are important documents so please keep them in a safe place. This contract is signed on behalf of Liverpool Victoria Friendly Society Limited. It starts on the date stated in your policy schedule. Mike Rogers Chief Executive If we can help you, by providing these documents in Braille, large print or audiotape, please let us know. Document reference: PIPA (3) This is an important document. Please keep it in a safe place. 1
Contents Definitions 3 What is the LV= Pension Income Plus Annuity? 6 Section A Money we pay to you whilst you are alive A1 Lump sums we pay you at the start of your annuity 6 A2 Income we pay you 7 A3 Declared Investment Returns and how this affects your regular income 7 A4 Guaranteed income in the first two years 10 A5 Guaranteed income throughout the policy term 11 Section B Money we pay after you die B1 Who we will pay death benefits to 13 B2 If you die before the end of a guaranteed payment period 14 B3 If you die in the first two years 15 B4 If you ve chosen value protection 16 B5 If you ve chosen a dependant s annuity 17 Section C How you can change your policy C1 If you want to convert to a non-profit annuity 18 C2 If you want to change your Assumed Investment Return rate (AIR) 19 Section D General conditions D1 Who owns your annuity 20 D2 Charges built into your annuity 20 D3 Medical and lifestyle evidence we may ask for from you or your dependant 20 D4 Other evidence we may ask for from you or your dependant 21 D5 How annuity payments are taxed 21 D6 Other deductions which may reduce your annuity benefits 21 D7 Overpayments 21 D8 When your policy starts 21 D9 When we can change the amount of your annuity before your income start date 22 D10 When we can change the amount of your annuity after your income start date 22 D11 Currency 22 D12 The law that applies to your annuity 22 2
Definitions This section explains what we mean when we use the words listed below in your policy schedule, these policy conditions, and any documents we send you to confirm any changes to your policy. We explain them because they may have other meanings in every day use. We have highlighted these words in bold so you know when they apply (other than personal terms such as you and we ). you means the annuitant, who is the person named in your policy schedule to receive the annuity income from this policy for the rest of their life. Or, once you have died, any dependant under the policy we, us, or our means Liverpool Victoria Friendly Society Limited. annuity means the income, before tax, we pay you from each part of this policy. If your policy contains more than one annuity your income payments will be added together. annuity purchase price means the amount of money we use to buy your annuities. If your policy is set up as an open market option (OMO), we use the total payment received instead. Assumed Investment Return (AIR) means the investment return rate you chose at the start of the policy. This is shown on your policy schedule. We use this to calculate the income we pay you in respect of the first year, and the basic annuity amount each year after this. You can change the AIR at any anniversary of the income start date from the second anniversary onwards, unless we are still paying a regular income within a guaranteed payment period. basic annuity means the underlying income we would pay you before taking into account any guaranteed minimum income, two year guarantee or any mutual bonus. The amount is based on your previous year s basic annuity, after we have adjusted it to take account of your chosen AIR and the current rate of declared investment returns. At the first policy anniversary instead of using your previous year s basic annuity we use your starting income. Declared Investment Returns (DIR) means the rate we use to recalculate your basic annuity each year. You can find out more about the fund your money is invested in by reading Your guide to how our with-profits fund is managed. You can get a copy from our website, www.lv.com or by phone. defined contribution scheme means a pension scheme or arrangement where your benefits directly relate to what was paid into the scheme, and the investment return earned. These are often called money purchase schemes as the actual amount of the benefits isn t known until you take them, and is determined by the pension fund available and the rates used to buy your annuity. dependant means the person we will pay a dependant s annuity to after your death, until they die, if you ve chosen this and they outlive you. We will only pay a dependant s annuity to: someone you are married to or in a civil partnership with when your policy starts, or someone you are married to or in a civil partnership with, or someone who is dependent on you (either financially or because of physical or mental disability), when you die. 3
dependant s annuity means the regular income we will pay to your dependant after your death if they outlive you and you ve chosen this benefit option. The amount of annuity income we will pay them is a set percentage of your annuity. If you ve chosen this benefit option we show this in your policy schedule. guaranteed minimum income means the minimum annuity income we will pay you, as shown in your policy schedule. If you change your AIR your guaranteed minimum income will change. If this happens we will tell you the new amount. guaranteed payment period means the period from the income start date of your policy during which we will pay your annuity, even if you die during this period. If you ve chosen this option it will be shown in your policy schedule. income start date means the date we can start paying your income. If you have chosen to be paid in arrears the date you receive your income will actually be after your income start date. This will be shown on your Policy schedule. lifetime allowance means the amount of tax privileged pension savings that you can build up in all of your pension schemes, before an additional tax charge becomes payable when you take your benefits. lifetime allowance excess means the amount of your pension fund given to us to buy your annuity which is above your personal lifetime allowance. If this applies to you we will refund this as a lump sum and show this in a benefit crystallisation event statement. This can only be paid out if you are aged under 75. LV Personal Pension Scheme means our personal pension scheme, which is a UK registered pension scheme. mutual bonus means an additional amount we may add to your annuity. This is not guaranteed. Please see our Principles and Practices of financial management and Your guide to how we manage with profits for more details. non-profit annuity means a conventional annuity which isn t linked to the performance of our with-profits fund. nominated beneficiary means the person you would like us to pay any lump sum or continuing payments under a guaranteed payment period or a value protection lump sum, when you die. If you ve chosen a nominated beneficiary in the application form you can change this at any time before you die. open market option (OMO) means the option to use your funds from your existing registered pension scheme to buy an annuity from an insurer of your choice. If you ve chosen this option the trustees or Scheme Administrator of your existing pension scheme or arrangement will pay you any tax free cash. Pension fund means the fund you use to buy an annuity. policy means these policy conditions, your policy schedule, and any documents we send you to confirm any changes to these. policy anniversary means each 12-month anniversary from the income start date of your policy. policy owner means you, or the trustees of your existing pension scheme. We show this in your policy schedule. 4
purchaser means the registered pension scheme buying your annuity, which we show in your policy schedule. start date means the date when your annuity starts, which we show in your policy schedule. starting income means the annuity income we pay in respect of the first year from the income start date. tax free cash payment means the tax free cash (also known as pension commencement lump sum) you ve chosen to take before your annuity starts. For transfers we show this in your policy schedule. total payment received means the total amount of money we received to buy your annuity and pay you any tax free cash payment. We show this in your policy schedule. transfer means you ve chosen to transfer your pension fund to the LV Personal Pension Scheme. value protection means a lump sum we pay out when you die, or if you ve taken the option of joint value protection, after the last of you dies. If you ve chosen this option we show this in your policy schedule. 5
What is the Pension Income Plus Annuity? The Pension Income Plus Annuity uses your pension fund to provide you with an income for the rest of your life. This can either stay the same, or change each year, depending on the Assumed Investment Return (AIR) you choose and the declared investment returns we apply to your policy. It also provides a guaranteed minimum income which may increase but will never fall below the level it is at, when your policy starts. The only exception to this is if you change your AIR or convert to a non-profit annuity. Your Pension Income Plus Annuity will be set up with either: n a transfer, or n using your open market option (OMO). We invest your pension fund in our with-profits fund. The expert asset management team aim to achieve the best possible investment returns for you. You ll also share in the performance of our other businesses through the addition of any mutual bonus. We ve explained this in more detail in Your guide to how our with-profits fund is managed, which you should read along with these policy conditions. For OMOs using pension funds from more than one pension scheme or arrangement, we will set this up as one policy for each scheme or arrangement. For transfers, your policy provides benefits allowed under the rules of the LV Personal Pension Scheme. If at any time there is a conflict between these policy conditions and the rules of the LV Personal Pension Scheme, we will refer to the rules when making any decisions. If you want a copy of these rules, please let us know. If we change your policy we will issue an endorsement, for example if you convert to a non-profit annuity. Section A Money we pay you whilst you are alive This section tells you what benefits we will pay you whilst you are alive, depending on what options you chose. We show you the options you have chosen in your policy schedule. A1 Lump sums we pay you at the start of your annuity For transfers we ll pay you a tax free cash payment at the start of your annuity, if you chose this. We show the amount we pay you in your policy schedule. For OMOs your current pension scheme will pay you any tax free cash payment. You only get the chance to choose to receive a tax free cash payment at the start of your annuity. We may also pay you a lifetime allowance excess lump sum at the start of your annuity. If this applies to you, we show this in a benefit crystallisation event statement. We will pay this after we ve taken off a tax charge, which is currently 55%. 6
A2 Income we pay you We will pay your annuity income from the date shown in your policy schedule for the rest of your life. Your policy schedule will also confirm whether payments will be made: n every month, or n every three months, or n every six months, or n once a year. Your income will either remain level, or will change every year depending on the AIR you chose and our declared investment returns. We show you the starting income in your policy schedule. We will pay all income on the payment due date, or the working day immediately before this. We will pay the last regular income payment on the payment date that falls on or before the day you die. We may continue to pay income after you die, depending on when you die and the benefits shown in your policy schedule, as described in section B. A3 Declared Investment Returns and how this affects your regular income We will apply declared investment returns to your annuity based on the performance of our with-profits fund. We will apply them separately to each annuity if you have more than one within your policy. a) Declared Investment Returns We will add any declared investment returns to your basic annuity after allowing for your chosen Assumed Investment Return (AIR). We show you the AIR you chose in your policy schedule. Declared investment returns will be greater than, equal to or less than zero, depending on how our with-profits fund performs. The declared investment returns will reflect: n investment performance, n charges n our own and/or industry mortality experience (which means we look at trends of when people die) and how we think they might change in future. If they are less than your chosen AIR then your income will decrease but will not go below your guaranteed minimum income. 7
When the declared investment returns increase your basic annuity, your guaranteed minimum income may also increase. Please see condition A5. We will declare investment returns four times a year in March, June, September & December and these will apply from 1 May, 1 August, 1 November & 1 February. The declared investment returns we apply to your policy will relate to the latest declaration before your policy anniversary. Please note, we may change the dates when we declare investment returns in the future and if we do then declared investment returns applied to your annuity may not be on the dates shown above. If we do we will tell you. Example 1 Kamshika decided to use her pension fund of 50,000 to buy an LV= Pension Income Plus Annuity. Her income start date was 1 August 2011. In March 2012 we declared an annual investment return of 2.5%. We then declared an annual investment return of 2% in June 2012. To work out Kamshika s annuity income due for the year from 1 August 2012 we would use the 2% declared investment return. The June declaration applies from 1 August and was the most recent declaration before her policy anniversary. We will also declare annual investment returns in September and December but these will not affect Kamshika s policy. b) How this affects your regular income We work out your new basic annuity for each year, as follows: 1) For the first year we will pay your starting income as shown in your policy schedule 2) On the first policy anniversary We take your starting income Multiplied by (1 + the declared investment return rate that applies), Divided by (1+ your chosen AIR). Equals your new basic annuity. 3) At each policy anniversary after the first we use the same calculation using your basic annuity from your last policy anniversary. Please note: We won t apply this calculation method if at a policy anniversary you change your AIR. See Condition C2 for more details. We then check to see whether any of your annuities qualify for any of our guarantees, which may increase the income we pay you. We explain these guarantees in Conditions A4 and A5. The following is a worked example to show you how we calculate the income we pay, taking into account investment returns. The figures in the example are just to help show you how we do the calculations and don t relate to your own policy. 8
Example 2 Simon decides to use his pension fund to buy an LV= Pension Income Plus Annuity. The table below shows how his yearly annuity payments may look in the second and third year, based on an AIR of 3%. This is based on the following assumptions: n he has a starting income in the first year of 10,609 n he doesn t change his AIR over the 3 years n declared investment returns (DIR) of 4% and then 2% in the next year Year 1 starting income 10,609 Year 2 annuity calculation step 1 - to 10,609 x 1.04 (1 + DIR) = 11,033.36 take into account Simon s AIR 11,033.36 / 1.03 (1 + AIR) = 10,712 So Simon s new basic annuity is 10,712 Year 2 annuity paid 10,712 Year 3 annuity calculation step 1 - to 10,712 x 1.02 ( 1 + DIR) = 10,926.24 take into account Simon s AIR. 10,926.24 / 1.03 (1 + AIR) = 10,608 So Simon s new basic annuity is 10,608 Year 3 annuity paid. 10,608 In this example we would pay Simon 10,712 in the second year and 10,608 in the third year. Simon s basic annuity in the third year is simply his basic annuity in the second year after adjusting for the AIR he chose and the DIR. Continuing the example if we then declared a negative investment return of 1% we would work Simon s year 4 income out as follows: Year 4 annuity calculation step to take into account Simon s AIR 10,608 x 0.99 (1 + DIR) = 10,501.92 10,501.92 / 1.03 (1 + AIR) = 10,196.04 So Simon s new basic annuity is 10,196.04 Year 4 annuity paid 10,196.04 This example does not take into account Simon s guaranteed minimum income, which may be higher than his basic annuity. Please see Example 5 to see how guaranteed minimum income will be taken into account. The actual annuity we pay you may be more than your basic annuity if a mutual bonus is declared. Please see Your guide to how our With-profits fund is managed for more details. 9
A4 Guaranteed income in the first two years We guarantee your income for the first two years of your policy. That means the income from each of your annuities in the second year of your policy will not be less than your starting income for each annuity, as long as you don t die during this time. We explain what happens if you die during the first two years after the start date in Condition B3. However this guarantee doesn t prevent your basic annuity from decreasing in year two. We will use your basic annuity to calculate your income in the third year of your policy. The following is a worked example to show how the two year income guarantee works, taking into account declared investment returns. The figures in the example are just to help show you how we do the calculations and don t relate to your own policy. Example 3 Vanessa decides to use her pension fund to buy an LV= Pension Income Plus Annuity. She chooses an AIR of 4%. Her starting income in the first year is 10,400. In the second year we apply a declared investment return of 3% to her policy. This means that her basic annuity is calculated as follows: Year basic annuity 1 10,400 10,400 2 10,400 x 1.03 (1 + DIR) = 10,712 10,300 10,712 / 1.04 (1 + AIR) = 10,300 However, we guarantee that income from each of your annuities won t fall in the first two years which means the actual annuity we would pay Vanessa in the second year would be 10,400 10
A5 Guaranteed income throughout the policy term We guarantee that the income from your annuity will never be less than your guaranteed minimum income, unless you change your AIR (which we explain in Condition C2). Your guaranteed minimum income for each annuity in your policy is shown in your policy schedule. If you ve chosen an AIR of 0% your starting income is the same as your guaranteed minimum income. This means that your annuity income will never go below your starting income, unless you change your AIR or convert to a non-profit annuity. If you ve chosen an AIR of more than 0% your starting income is more than your guaranteed minimum income (this is because your guaranteed minimum income is based on an AIR of 0%). Your annuity income may go up or down, but will never go below your guaranteed minimum income. The guaranteed minimum income will increase at 50% of any increase in income (before mutual bonus) you receive above its previous highest level. To calculate the increase in your guaranteed minimum income, we will compare your previous highest basic annuity (excluding any mutual bonus) to your new basic annuity; your guaranteed minimum income will only be increased if your new basic annuity is higher than the previous highest basic annuity. 11
Example 4 Steve s pension fund bought him a starting annuity of 12,000, his guaranteed minimum income was 10,000 Steve s basic annuity has gone up and down in line with the declared investment returns taking into account his selected Assumed Investment Return as follows: Basic annuity Year 1 12,000 Year 2 12,480 Year 3 12,480 Year 4 12,450 Year 5 12,470 Therefore over the years his guaranteed minimum income has been calculated as follows: Year 1 his guaranteed minimum income is 10,000 Year 2 as Steve s basic annuity has increased from year 1 his guaranteed minimum income also increases: 12,480 (his new basic annuity) - 12,000 (his basic annuity in year 1) = 480. To work out the percentage increase in his basic annuity divide 480 by 12,000 then multiply by 100% to give you 4% As his minimum guaranteed income will increase at 50% of the 4% increase this will be 2%. 10,000 x 2% = 200 so Steve s guaranteed minimum income is now 10,200. Year 3 As his basic annuity has not increased his guaranteed minimum income will not increase. So Steve s guaranteed minimum income is still 10,200 Year 4 As his basic annuity has not increased his guaranteed minimum income will not increase. In fact his basic annuity has decreased but as we guarantee that his guaranteed minimum income will never decrease it stays at 10,200 Year 5 As Steve s basic annuity has gone up we will compare this with his previous highest basic annuity - 12,480 previous highest annuity - 12,470 basic annuity for year 5 Therefore although Steve s basic annuity has increased from the previous year because it is lower than his previous highest basic annuity his guaranteed minimum income will not increase and remains at 10,200. 12
Section B Money we pay after you die This section tells you what benefits we will pay to your dependant, nominated beneficiary, or to your estate after you die, depending on what options you ve chosen. We show you the options you ve chosen in your policy schedule. If you ve not chosen any death benefits your income will stop when you die, and no further benefits will be paid. B1 Who we will pay death benefits to Who we pay any death benefits to depends on what types of benefits are in your policy and the options you ve chosen. The following table shows you who we ll pay any death benefits to: Options you ve chosen a dependant s annuity a guaranteed payment period with a continued regular income a guaranteed payment period payable as a lump sum value protection Who we will pay death benefits to We will pay this to the dependant shown in your policy schedule (if they are still alive) or if you have chosen any spouse/civil partner we will pay this to your spouse/civil partner at your date of death If you die before the end of this period the person we will pay the income to is at our discretion. We will take into account your nominated beneficiary details, but aren t bound by this. We will pay this at our discretion. We will take into account your nominated beneficiary details, but aren t bound by this. We will pay this at our discretion. We will take into account your nominated beneficiary details, but aren t bound by this. 13
B2 If you die before the end of a guaranteed payment period This section only applies if you ve chosen a guaranteed payment period and you die within this period. If you ve chosen a guaranteed payment period a further benefit may be paid from your annuity after you die. If you ve chosen this option this is shown in your policy schedule. The following table shows you what we pay depending on whether you ve chosen the continued regular income or lump sum option: If you ve chosen a guaranteed payment period with a continued regular income We will continue paying the income, for the rest of the period. The income will change each year on the policy anniversary the same way your annuity income would have done if you were still alive. If you ve chosen a guaranteed payment period payable as a lump sum We will pay the total of the payments due for the rest of the period as a lump sum based on the level of the annuity paid before death. This lump sum is subject to a tax charge (which is currently 55%). If we pay this as a lump sum, we will use your basic annuity at the date you die, which won t include any mutual bonus currently being paid. If you die after you ve converted your annuity to a non-profit annuity, we will calculate the lump sum using your annuity income at the date you die and will take into account any increase you ve chosen. The following table shows you what happens if you ve chosen a guaranteed payment period with a lump sum: If your policy only includes one annuity The maximum lump sum that we can pay is the annuity purchase price (for OMOs and scheme pensions we use the total payment received) less the total of all the annuity income already paid to you. If your policy includes more than one annuity These rules apply separately for each annuity. This means that the maximum lump sum that we can pay for any annuity is the proportion of the annuity purchase price (for OMOs and scheme pensions we use the total payment received) used to buy that annuity less the total of all the annuity income already paid to you for that annuity. If you die within a guaranteed payment period, and the total of all the annuity income already paid to you is greater than the amount used to buy your annuity, we cannot pay a lump sum. Instead we will continue paying the income for the rest of the period. 14
Example 5 David is 64 when he decides to use his pension fund of 100,000 to buy an LV= Pension Income Plus Annuity with a ten year guaranteed payment period, to be paid as a lump sum. Six years after his income start date David dies having already received total income of 36,000. When he dies David s basic annuity is 500 a month. We will calculate the lump sum as follows: 500 x 12 months a year = 6,000 6,000 x 4 years remaining = 24,000 less 55% of 24,000 = 13,200 tax charge 24,000-13,200 = 10,800 We will pay a lump sum payment of 10,800 If you chose a dependant s annuity as well as a guaranteed payment period we will pay your dependant s annuity either from the next payment due date after you die, or after the end of the guaranteed payment period. We show you which of these you chose in your policy schedule. Example 6 Geoff decides to use his pension fund to buy an LV= Pension Income Plus Annuity which pays 10,000 in the first year, with a ten year guaranteed payment period. He also chooses a dependant s annuity of 50% of his annuity, to be paid to his wife, Helen, after the guaranteed payment period. Unfortunately, five years after his income start date, Geoff dies. 15 As Geoff dies within the guaranteed payment period we will pay Geoff s annuity of 10,000 (if that was still the annuity level at death) to Helen for the rest of the guaranteed payment period (five years). After this, if Helen is still alive, we will pay her the dependant s annuity of 50% of the annuity we would have paid to Geoff if he was still alive. For example if Geoff s annuity was still 10,000 a year we would pay Helen 5,000 a year. B3 If you die in the first two years If you die during the first two years after your income start date: a) and you chose a guaranteed payment period of two years or more, the income we pay in the second year after the income start date will be no less than your starting income for each annuity. We explain this in Condition A4. b) and you didn t choose a guaranteed payment period (or your guaranteed payment period has ended), and you chose a dependant s annuity, the dependant s annuity we pay in the second year after the income start date will be no less than the chosen percentage of your starting income. c) and you didn t choose a guaranteed payment period of two years or more, and you either didn t choose a dependant s annuity or your dependant has died, your annuity will stop.
B4 If you ve chosen value protection This section only applies if you ve chosen value protection. If you have chosen this option a further benefit may be paid from your annuity after you die. The amount of value protection is shown in your policy schedule. If you also chose a dependant s annuity, we will pay your value protection lump sum after both you and your dependant die. If you haven t chosen a dependant s annuity, we will pay your value protection lump sum when you die. The following table shows you how this works for just one annuity and if your policy includes more than one annuity: If your policy only includes one annuity We will pay your chosen value protection lump sum, less the total of the annuity income already paid to you and your dependant, if any, less tax (which is currently 55%). If your policy includes more than one annuity These rules apply separately for each annuity. This means we will pay: your chosen value protection lump sum for each annuity less the total of all the annuity income already paid to you and your dependant (if any) for that annuity less tax (which is currently 55%). Example 7 Brenda is 65 when she decides to use her 100,000 pension fund to buy an LV= Pension Income Plus Annuity with a 100,000 value protection lump sum. She also chose a named dependant s annuity to be paid to her husband, John. Unfortunately, seven years after her income start date Brenda dies, having been paid a total of 50,000 of annuity income before tax. At this point we pay the dependant s annuity to John. Four years later, John also dies, having been paid a total of 30,000 of annuity income before tax. As there is a dependant s annuity, we will only pay the value protection lump sum after both Brenda and John have died. The amount payable is the original value protection amount of 100,000 less the combined annuity income of 80,000, which equals 20,000. As the resulting value protection lump sum is greater than zero, we will pay the lump sum of 20,000 (less 55% tax of 11,000) = 9,000 after John dies. 16
B5 If you ve chosen a dependant s annuity This section only applies if you chose a dependant s annuity. The type of dependant s annuity you ve chosen and the proportion of your income they will receive is shown in your policy schedule. When you die we will pay a dependant s annuity to: n a named dependant, or n your surviving spouse or civil partner if you ve chosen an any spouse basis. If you chose a dependant s annuity and you die within a guaranteed payment period see Condition B2. If your annuity doesn t include a guaranteed payment period, or you die after a guaranteed payment period, we will pay a dependant s annuity from the next payment due date after you die. Dependant is your spouse or civil partner If the named dependant was your spouse or civil partner when your annuity started as long as they are still alive we will pay them a dependant s annuity. If you ve chosen a dependant s annuity for your spouse or civil partner on an any spouse basis, and you don t have a spouse or civil partner when you die, then we won t pay a dependant s annuity. Dependant isn t your spouse or civil partner If you ve chosen a dependant s annuity for a named dependant (other than your spouse or civil partner), and they die or are no longer dependent on you when the dependant s annuity is due to start, then we won t pay a dependant s annuity. If we pay a dependant s annuity, we will continue to pay this on the day of, or the working day before, the payment due date, until the dependant dies. The income will either remain the same, or will change each year on the policy anniversary by the same percentage that your annuity would have done if you were still alive. We will pay the last regular income payment on the payment date that falls on or before the day they die. After they die we won t pay anything else, unless your annuity includes a guaranteed payment period continued regular income and you both die within this period, or if your annuity includes value protection. If we pay a dependants annuity this may also include a mutual bonus. 17
Section C How you can change your policy This section tells you how you can change your policy from the second policy anniversary onwards. You should consult your financial adviser if your circumstances change as you may be able to benefit from the changes you are able to make to your policy. C1 If you want to convert to a non-profit annuity On the second policy anniversary, and on every policy anniversary after that, you have the option to convert all the annuities in your policy to non-profit annuities (if your policy includes more than one annuity you must convert them all at the same time). The option to convert is available to you, and if you die and you chose a dependant s annuity, it will be available to the dependant if they are still alive. This option isn t available whilst we are paying an income within a guaranteed payment period. If you convert your annuity to a non-profit annuity, you can choose to set it up with a level or increasing income. If you choose the increasing income option, we will recalculate your annuity each year on the policy anniversary. When you ask us to convert we will let you know what increase options are available. If you convert, we will calculate your new annuity using the current method applicable at the date of conversion. We may change this method from time to time, but only so that we will always be fair to both you and the remaining members of our with-profits fund. Important: if you decide to convert to a non-profit annuity you can t convert back again to a Pension Income Plus Annuity at any time. We may: n ask for evidence of your or your dependant s health before agreeing terms for the conversion, or n offer a lower level of income than we are paying from your Pension Income Plus Annuity, or n decline the request. We ask for evidence of your health and lifestyle in order to calculate a value for your policy. If you are in poor health the value will be less than if you are healthy because the income we have committed to pay you would be expected to be paid for a shorter time. When we have calculated a value for you, it is used to buy a non-profit annuity. You will be given a quote showing the new income before your policy is converted. If your dependant dies before you and you wish to convert at the first opportunity after they die, we won t ask for any medical evidence relating to your health as long as we receive proof of your dependant s death within a year of the date they die. As we ve already explained, you can still only convert on the second policy anniversary or on any policy anniversary after that. If your dependant wishes to convert at the first opportunity after you die, we won t ask for any medical evidence relating to their health as long as we receive proof of your death within a year of the date you die. If we continue to pay your income as regular income after you die during a guaranteed payment period, your dependant won t be able to convert until the end of the guaranteed payment period. 18
As we ve already explained, they can still only convert on the second policy anniversary or on any policy anniversary after that. To convert the annuities in your policy you must tell us no more than four months before, and no less than two months before, the policy anniversary when you want to convert. Before we convert the annuities in your policy we will tell you what the new income from your annuities will be, and will ask for your written confirmation that you wish to go ahead and convert. If you do go ahead and convert we will send you an endorsement which will show the amount of the new annuities and how they will increase or stay the same each year, and which conditions will no longer apply to your policy. Please note, if you are taking Flexible Drawdown and you are using your Pension Income Plus Annuity as part of the Minimum Income Requirement, you will not be able to convert to a non-profit annuity if this would give you an income that was less than your guaranteed minimum income. C2 If you want to change your assumed investment return rate (AIR) On the second policy anniversary, and on every policy anniversary after that, you have the option to change your AIR. Your AIR can only be changed within the range available at the time you want to change it. If you die and you chose a dependant s annuity, the option to change the AIR will be available to the dependant whilst we are paying them the dependant s annuity. This option isn t available whilst we are paying an income within a guaranteed payment period. We may: n ask for evidence of your or your dependant s health before agreeing terms for the change n restrict the level of AIR we offer n or, we may decline the request. Your AIR can be changed for one or more of your annuities, and if you have two annuities and wish to change the AIR for both you can choose a different new AIR for each one. To change your AIR for any of the annuities in your policy you must tell us no more than four months before, and no less than two months before, the policy anniversary when you want to change your AIR. If you wish to change your AIR you may wish to consult your financial adviser. If you ask us to change your AIR, we will recalculate: n the basic annuity we will use to calculate your annuity income from the policy anniversary n the annuity income we will pay you from the next policy anniversary n your new guaranteed minimum income. If you change your AIR, the method we use to calculate these figures may change from time to time, but only so that we will always be fair to both you and the remaining members of our with-profits fund. 19
Before we change your AIR for any of the annuities in your policy we will provide you with a quote which will tell you what the new income from your annuities will be, the new basic annuity amount, and the new guaranteed minimum income. We will also ask for your written confirmation that you wish to go ahead and change your AIR. If you do go ahead and change your AIR we will send you an endorsement which will show the amount of the new annuities, the new guaranteed minimum income and the new AIR. Please note, if you are taking Flexible Drawdown and you are using your Pension Income Plus Annuity as part of the Minimum Income Requirement, you will not be able to change your AIR if changing it would mean that your guaranteed minimum income decreased. Section D General conditions D1 Who owns your annuity Who owns your policy is shown on your policy schedule. The form in which we pay your benefits depends on who the purchaser is. If your policy schedule shows you as the policy owner or LV Personal Pension Scheme, then you are the owner and we will pay the annuity benefits in line with the rules of the LV Personal Pension Scheme and these policy conditions. If your policy schedule shows the policy owner as the trustees or administrator of your original pension scheme, they are the policy owner and we will pay the annuity benefits in line with the rules of that scheme. D2 Charges built into your annuity We take off charges at the start of your policy to cover the set up costs. We take this into account before we calculate your starting income. We also take a management charge and an additional investment expenses charge each year, which we take before we announce our declared investment returns. 20 All of our costs are taken either when we calculate your starting income, or when we apply any declared investment returns. This means we won t take any further charges from your policy, unless we are asked to change your policy in any way. D3 Medical or lifestyle evidence we may ask for from you or your dependant Whilst the vast majority of our customers are honest we do have to protect ourselves (and all of our customers) against the effect of incorrect information. As part of our ongoing quality control process we continually monitor all completed applications to help ensure that the information provided is correct, and that people haven t deliberately provided us with false or misleading information. Within six months of the date we issue your policy schedule, we may ask for evidence that the medical and lifestyle information you or your dependant gave us is correct. This is because the level of annuity we pay you or your dependant is based on the answers you give us in the health and lifestyle questions in your quote request form and application form. So it s important that your medical details are correct and up to date. If this is not the case, you may want to contact your doctor.
If when we ask your doctor cannot confirm the medical and lifestyle information you give us, then we will ask you to give us further medical evidence. If you cannot do this we will reduce the annuity income to the amount we would have provided if we hadn t taken account of this information at the start date of your policy. We will use all of the medical information we ve been able to confirm. If we have overpaid your annuity income we will take the overpayment back by taking it from your future annuity income. We may spread this over several payments so as not to leave you too short. If we have to reduce your income we will let you know before we reduce it and within six months of the date the policy is issued. D4 Other evidence we will ask for from you or your dependant We may need to see evidence, such as a passport as evidence of your name and age, before we pay money out from your policy or make any changes to your policy. We recognise that these are valuable documents that other people may need to see at the same time. We will look after the documents carefully, and return them quickly. From time to time we may also ask for evidence that you, or whoever is receiving the annuity income, are still alive. When you die we will ask for evidence of the date you die. And, before we start paying a dependant s annuity will ask for evidence that they are still alive and still dependent on you. D5 How annuity payments are taxed We take off income tax from your annuity income under the Pay As You Earn (PAYE) system. D6 Other deductions which may reduce your annuity benefits From time to time we may need to pay a tax, duty or other payment from your policy due to a law, order or regulation. If we need to do this we will let you know as soon as possible. D7 Overpayments We will of course do our very best to make sure we set up your annuity correctly and pay you the correct regular income, and tax free cash payment if applicable. However, if we do make a mistake we will change the amount we pay you and claim back any money that we ve mistakenly paid out. Of course, if we do this we will let you know as soon as possible and before we claim back any money. Also, if we continue to pay any regular income after it should have stopped, for example after you die, we will claim back any money that we ve mistakenly paid out. Again, if we do this we will let you personal representatives know as soon as possible. If we were to ever make an underpayment we would of course, make up any shortfall as soon as possible. We would contact you if this was ever to occur with your policy. D8 When your policy starts Your policy will start on the day we receive your completed application form. However we will only be able to begin paying your income when we have received the funds from your previous pension scheme. We call this your income start date. Your annuity start date and income start date will be shown on your plan schedule. 21
D9 When we can change the amount of your annuity before your income start date We show you how much income you might get in your personal quote, which is guaranteed for 30 days. If we receive your application and funds from your previous pension scheme after the quote guarantee date, we cannot guarantee that the annuity rate will stay the same. If the annuity rate we offer you because of this is reduced by more than 1%, we will let your financial adviser know. 22 D10 - When we can change the amount of your annuity after your income start date We have designed your policy with the aim that the amount of your annuity will only change to reflect the declared investment returns we apply and the AIR chosen (see Condition A3, A4 and A5). It will also be recalculated if you change your policy (see Conditions C1 and C2). We work out the annuity for your policy based on our current understanding of: n the way your policy is taxed, and n the factors that we re legally able to take into account. Other than these reasons we could only change the annuity after the income start date of your policy for the following: n You and your doctor cannot provide evidence of any medical and lifestyle information we ask for, as explained in Condition D3 n Changes to legislation that affect the way its taxed n Changes to legislation that affect the factors we can legally use n A decision by a UK court or the European Court of Justice that affect the factors that we can take account of n To comply with a court order, for example if you get divorced These are the only times when we can change your annuity. We can t change your annuity for any of the following reasons: n To increase our profits n To make up for any losses we ve made in the past n If there have been any changes in your health since the start date of your policy n If the change would mean that it became an unauthorised payment under the pension tax regime. If your annuity is going to change we will let you know at least 60 days before we change it. D11 Currency Every payment into or out of your policy must be in the UK currency, which is currently pounds sterling. D12 The law that applies to your annuity The policy is governed by the law of England as applied by the courts for that part of the UK where you live. We will always communicate in English.
LV.Com You can get this and other documents from us in Braille, large print or on audiotape by contacting us. Liverpool Victoria Friendly Society Limited: Keynes House, Tilehouse Street, Hitchin, SG5 2DX. LV= is a registered trade mark of Liverpool Victoria Friendly Society Limited (LVFS) and a trading style of the Liverpool Victoria group of companies. LVFS is a member of the ABI, AFM and ILAG. Authorised and regulated by the Financial Services Authority, register Number 110035. NM Pensions Trustees Limited, (registered in England No. 4299742), act as Trustees and Scheme Administrators. Authorised and regulated by the Financial Services Authority, register number 463402. Registered address for all companies: County Gates, Bournemouth BH1 2NF Tel: 01202 292333 21229499 10/12