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THE SKANDIA PLAN
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BASIC PLAN DETAILS
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What is the Skandia Plan? 4
an unrivalled investment choice 4
Who can apply? 4
Who can we insure? 4
Premiums 5
Cover limits 5
Plan basis 6
Residence outside the uK 6
Commencement date 7
Future flexibility 7
Plan structure 7
additional benefits 7
LIFE COVER
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OPTIONAL BENEFITS AT AN EXTRA COST
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total disability benefit 9
Waiver of premium benefit 10
OTHER OPTIONS
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Inflation option 11
Maximum insurability options 12
Changing the sum assured 13
INVESTMENT CHOICE
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Fund choice 14
CHARGES 16
Charges for protection benefits 16
administration charges 17 Investment charges 17
SURRENDERS 18
Partial surrender 18 Paid-up policies 18CONTENTS
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TAXATION 19
Policyholder taxation 19
Life assurance company taxation 19
Inheritance tax 19
Pre-owned assets tax (Poat) 19
EXCLUSIONS 20
Life cover 20
total disability cover and waiver of premium benefit 20
UNDERWRITING 21
the application 21
Genetic testing 21
Smoking 21
HELP AT HAND
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If your client needs to claim 22
If you have any questions 22
TRUSTS AND ASSIGNMENTS
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FURTHER INFORMATION
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This communication is designed for and directed at professional financial advisers. No other person should rely upon the information contained within this communication.
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WHAT IS THE SKANDIA PLAN?
the Skandia Plan is a unit-linked, whole life assurance plan, with the tax advantages of qualifying status. Your clients can also include disability benefits, if they want to. Plus, it gives them the flexibility to increase their cover in the future if their needs change. the plan can be used both for personal protection and to cover the partners or shareholders of a business. If your client wants to use it to cover a potential inheritance tax payment, we have a range of draft trusts available.
AN UNRIVALLED INVESTMENT CHOICE
You and your clients can choose from more than 500 funds, from over 50 fund managers. You can split each regular investment between a maximum of 10 funds, with a minimum of 1% in each fund.
WHO CAN APPLY?
We can normally accept applications from either one or two people aged 18 or over.
In this guide we refer to the applicant (and the policyholder) as ‘your client’.
WHO CAN WE INSURE?
the life assured must be aged 18 or more, and under the age of 81 at the start of the insurance.
For joint life first event applications, both lives must be under 81. For joint life last event applications, only the younger life must be less than 81 years old.
If a life assured is not an applicant, the applicant(s) will need to show ‘insurable interest’ in that life assured. a husband and wife automatically have insurable interest in each other; this also applies to couples in a registered civil partnership*.
* as defined by the Civil Partnership act 2004.
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PREMIUMS
Monthly premiums Yearly premiums
Minimum premium (total) £20 £200
Payments can be made by Direct debit Cheque or direct debit the first premium can be paid by cheque for both premium frequencies. MINIMuM PREMIuM INCREaSE
If your client wants to increase the sum assured, our minimum premium increase is £2 a month, or £20 a year.
DuE DatES
Regular premiums are due on the 1st of the month.
FREQuENCY
It’s not possible to change the frequency of premiums after the acceptance date. It’s therefore important to choose a frequency which your client can maintain throughout the period of insurance.
DaYS oF GRaCE
We allow 30 days of grace for paying premiums. If your client has not paid the premiums by the end of that period, either the insurance will end or, if the plan has a value, it will be made paid-up.
REINStatEMENt
Your client can ask us to reinstate the life cover within 13 months of the due date of the unpaid premium. to do this, they must pay the outstanding premiums and go through new underwriting. In some circumstances, your client may not be able to reinstate the insurance. However, they could apply for a new plan with a full application and underwriting.
SMoKER StatuS
Your client will pay premiums relevant to their smoker status at outset. they cannot change this status after the plan has started, even if, for example, they give up smoking.
COVER LIMITS
the normal maximum sum assured at the start of the plan is £5 million. However, in certain circumstances, we may be able to offer higher sums assured. In this case, we would not allow any future increases to the sum assured. If your client needs cover of more than £5 million, please contact our underwriting department on 023 8072 6908.
the minimum sum assured is set by the rules governing qualifying status by HM Revenue & Customs (HMRC) and will vary with the age of the life or lives assured and the level of their regular premiums. It’s calculated as 75% of the total premiums payable up to their 75th birthday.
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PLAN BASIS
Your client can choose between: • maximum sum assured with minimum
premiums
• standard sum assured and premiums • minimum sum assured with maximum
premiums, and
• any level of cover between the maximum and minimum, with appropriate premiums. PREMIuM GuaRaNtEE We guarantee that your client’s premiums will not increase during the first ten years of the plan. Just before the ten-year anniversary, we will review the premiums to make sure that they can still sustain the sum assured. If not, your client will have the choice either to increase their premiums, or to reduce their cover.
If your client has chosen to pay premiums at the minimum level, they will probably need to increase their premiums at the ten-year point to keep the same sum assured. this is because we calculate the minimum premiums at outset at a level that will support the sum assured for the first ten years only. If your client chooses premiums at the standard level, they will not need to change them if:
• their plan has grown as assumed in the calculation of the premiums, or more; and
• our assumed growth rate, based on the funds they are invested in at that time, has not reduced.
We calculate the initial premiums to sustain cover until your client is 109, using the mid growth rates based on the initial funds selected. Details of growth rates used for particular funds are available on the old Mutual Wealth website: www.oldmutualwealth.co.uk/ funds/fund-information
at the review date, the review calculation will take account of any change in the selected funds, and any change to the assumed rates we use for those funds.
after the ten-year premium review, we will check the plan’s sustainability every year, and let your client know if and when they need to take action.
When we set a new premium following a review, we automatically calculate the minimum premium that will support the sum assured for a further five years, irrespective of the basis of your client’s plan. If your client wants to increase the revised premiums to a standard level, they should ask us to do so.
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RESIDENCE OUTSIDE THE UK
When the Skandia Plan is applied for, the applicant (and the life assured, if different) must be resident in the uK, the Isle of Man, or the Channel Islands. If the life assured moves abroad at a later date, this may affect their benefits other than life cover, depending on the new country of residence.
Please see exclusions on page 20 for details.
COMMENCEMENT DATE
the commencement date is the first day of the month after the plan goes on risk. We give free cover from the date the plan goes on risk until the commencement date. For example, if your client’s application goes on risk on 15 July, the commencement date is 1 august and free cover applies from 15 July.
the first yearly premium is due on the commencement date and the first monthly premium is due on the acceptance date – the date the plan goes on risk. For example, if the plan goes on risk on 15 July, it will have a commencement date of 1 august. the client will pay the first premium in July and the next one on 1 September.
If your client makes a claim and we pay it before the client has paid the regular premium due that month, we will deduct that premium from the sum assured.
FUTURE FLEXIBILITY
Your client can increase their cover using the maximum insurability options at any anniversary of the commencement date, unless they are rated for health reasons. Please see page 12 for details. Your client can also choose to inflation-proof the sum assured at any plan review date. Please see page 11 for details. alternatively, if your client’s need for cover reduces in the future, they can reduce the cover at any time subject to the minimum allowed to ensure that it remains qualifying. If your client needs more cover in the future than we allow using the increase options, the increase will be subject to full underwriting.
PLAN STRUCTURE
When we set up the plan, we divide it into between two and ten identical policies. this allows your client to reduce the level of their premiums, and to take cash from the plan by surrendering one or more of the policies. the number of policies is set according to the level of premiums paid, and there is no option to divide the plan further. See also surrenders on page 18.
ADDITIONAL BENEFITS
Your client can include two additional benefits to their plan at an extra cost. these are total disability benefit and waiver of premium benefit. You can find more details about them on pages 9 and 10.
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LIFE COVER
The main objective of The
Skandia Plan is to provide
life assurance for as long as
your client lives. In certain
circumstances, the amount we
pay on death may be higher
than the sum assured.
You can set up your client’s plan at outset to pay the death benefit on: • a single life basis
• the first death of two lives assured • the second death of two lives
assured.
Where a life assured is not an applicant, your client will need to show ‘insurable interest’ in the life assured.
INVEStMENt aDDItIoN
If, when we value your client’s plan following a death claim, the value of the units is more than the sum assured, we will pay the higher amount.
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Your client can choose to include
total disability benefit and
waiver of premium benefit to
their plan. If the plan covers two
lives, these benefits will apply to
both of them. If your client stops
paying premiums, both of these
will end after the 30-day grace
period, even if the plan still
has a value and the life cover
continues.
TOTAL DISABILITY BENEFIT
this benefit is available with single life and joint life first death plans. the life or lives assured must be under age 60 at outset, and must be accepted on our standard premium rates. Your client can only include this benefit when their plan starts.
a payment of this benefit is an acceleration of the death benefit and, after we pay a claim, the plan will end. Your client can claim for this benefit while the life assured is under age 60. once your client has told us about their claim, we need to wait six months before we can accept it. this allows us to confirm that the condition is permanent.
‘aNY oCCuPatIoN’ DEFINItIoN the criterion we use to assess claims for this benefit is that the life assured must be permanently unable to carry out any occupation.
our definition of this is:
‘ permanent and total incapacity by reason of accident or bodily disorder which, in our opinion, prevents the life assured from ever taking up any gainful occupation’.
CHaNGE oF oCCuPatIoN If one of the lives assured changes their job, your client must tell us within 30 days. If we consider that the new occupation is more hazardous, we reserve the right to cancel the total disability benefit.
oPtIoNaL BENEFITS
at aN EXtRa CoSt
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WAIVER OF PREMIUM BENEFIT
this benefit is available with all types of Skandia Plan, to male lives assured under age 65, or female lives assured under age 60, at outset, who are accepted on our standard premium rates.
‘aNY oCCuPatIoN’ DEFINItIoN the criterion we use to assess claims for this benefit is that the life assured must be unable to carry out any occupation due to an accident or illness. our definition of this is:
‘totally incapacitated by reason of accident or illness which,in our opinion, prevents the life assured from following their usual gainful occupation or any other occupation for which they are fitted by their knowledge or training, and the life assured is not following any occupation for remuneration, profit or reward’.
We will start to waive your client’s premiums after they have been unable to work for six months. We will continue to pay the premiums until the earliest of: • the life assured’s 65th birthday
(for men) or 60th birthday (for women)
• the life assured’s recovery
• the life assured following any gainful occupation
• the death of the life assured • payment of the full sum assured. While we are paying this benefit, we will from time to time ask for medical evidence to show that the life assured is still eligible for it. We will pay for any such evidence that we ask for.
the cost of this benefit is a 2% reduction in the allocation rate for each person covered.
CHaNGE oF oCCuPatIoN If one of the lives assured changes their job, your client must tell us within 30 days. If we consider that the new occupation is more hazardous, we reserve the right to cancel the waiver of premium benefit.
INFLatIoN-PRooFING DuRING a CLaIM
If your client has used the inflation option at every available opportunity since their plan started, we will continue to increase the sum assured and the premiums during the claim. See page 11 for details of the inflation option. If your client claims for this benefit during the plan’s first year, we will assume that they would have accepted the inflation increase, and will waive their premiums at the increased level.
In all other circumstances, we continue to waive your client’s commitment to pay premiums at the same level as those paid immediately before the benefit starts.
oPtIoNaL BENEFITS
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Because your client’s Skandia
Plan will last throughout their
life, their protection needs will
probably change over time.
We include options at no extra
cost that allow your client to
change the sum assured, so they
have flexibility if they need it in
the future.
the yearly ‘review date’ of the plan is the anniversary of the commencement date. this is the date on which changes may be made to the plan, and underwriting-free increases may be taken. The use of these options may, however, be limited by the rules regarding qualifying plans.
INFLATION OPTION
Your client can increase their cover each year to offset the effects of inflation. this option is available to everyone we accept, whether on standard terms or non-standard terms. We will not ask for any further health evidence when they use the option, even if their health has worsened. a unique feature of the old Mutual Wealth inflation option is that it is not lost following a refusal, and we will continue to offer increases in subsequent years. there is no upper age limit on the use of this option.
Your client can choose to have this increase happen automatically. In this case, if they wish to accept the increase offered, they need do nothing. However, we will write to tell them the amount of the increase in their premiums, and give them the option to decline the increase if they wish to do so. If they ever refuse an increase, we will stop making the increases automatically, but will continue to offer your client an increase each year.
Your client may choose not to have the increases happen automatically each year. If so, we will write to them offering an increase, and they will need to let us know before the review date if and when they want to increase their cover in a particular year. this approach may be more suitable for clients who will only want to increase their cover occasionally, rather than every year. the amount of increase we offer is the greater of 10% of their current sum assured and the Retail Prices Index increase over the previous year. Your client may be able to increase their cover by more than this with full underwriting – see changing the sum assured on page 13.
Wherever possible, we will offer a 10% increase in the sum assured for a 10% increase in premiums. However, as your client gets older, the increase in premiums is likely to escalate more quickly than the increase in the sum assured.
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MAXIMUM INSURABILITY OPTIONS
Your client can use these guaranteed increase options once each year, provided we accepted their application on standard terms at outset.
When your client has other protection plans with us which contain similar increase options, the maximum we will increase all the plans is the highest amount in any one of them. For example, if your client had both a Skandia Plan and a Protect policy covering the same life assured, the marriage option on the Skandia Plan would allow an increase of £30,000 and the Protect policy would allow £50,000. If they were to marry and used the increase option on their Skandia Plan, they would only be able to increase the cover of their Protect policy by the balance of £20,000.
Changes made using these options take effect from the review date following the request. However, in the case of the birth, marriage or civil partnership and mortgage options, we increase the sum assured immediately after we receive the request, but do not increase the premiums until the following review date, in order to protect the plan’s qualifying status. this means that policyholders who ask for an increase in the middle of a plan year may not have to increase their premium for several months.
the table opposite shows the financial and age limits for each option included with the plan.
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Option Option to be used Maximum increase for a single event Maximum overall increase
Evidence required
birth before age 56 £15,000 per child £60,000 birth or adoption
certificate. Marriage, or civil
partnership as defined by the Civil Partnership act 2004
before age 56 £30,000 £30,000 Marriage
certificate or civil partnership schedule. Mortgage before age 56 Lower of increase in an existing mortgage or remortgage,
and £30,000. £30,000 Evidence from the solicitor. Retirement – single
life policies only Within three months of retirement
Lower of life cover lost on retiring from an Lower of life cover lost on retiring from an occupational pension scheme, and £50,000.
£50,000 Evidence from the pension scheme administrator that the scheme does not offer a life cover continuation option. business assurance increase – partnership or shareholder cover
before age 61 Lower of:
• the increase in the value of the life assured’s interest in the business (usually three times the increase in the business profits over the last 12 months); and • the greater of 10% of the sum assured and inflation
over the previous year as measured by the RPI.
No overall limit Evidence from the firm’s accountant demonstrating the increase in the value of the business. Increase in estate
value for inheritance tax (IHt)
No age limit Lower of:
• the increase in the proportion of the liability covered since the previous policy review date; and
• the greater of 10% of the sum assured and an amount equal to inflation over the previous year as measured by the RPI.
No overall limit Evidence of the value of the estate and that your client took this policy out for IHt planning. Changes to IHt
rates, tax band reliefs or exemptions
Within six months of the effective date of the change
the increase will reflect the effect of the legislative change on the proportion of the liability covered immediately before the change.
No overall limit Evidence of the value of the estate and that your client took the policy out for IHt planning.
CHANGING THE SUM ASSURED
at any plan anniversary, your client can ask us to increase or reduce their sum assured. We cannot reduce to an amount that is less than 75% of the premiums payable from that date to the 75th birthday of the life assured.
If your client wants to increase their cover by an amount greater than is allowed under our inflation and maximum insurability options, we may be able to do this, subject to full underwriting.
In both cases, we will adjust their premiums to the appropriate level, which may affect the allocation rate for future premiums (see allocation rates on page 14).
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INVESTMENT CHOICE
THE SKANDIA PLAN OFFERS YOUR CLIENTS THE WIDEST CHOICE OF FUNDS AND FUND MANAGERS OF ANY UNIT-LINKED WHOLE LIFE PLAN CURRENTLY AVAILABLE IN THE UK MARKET. YOU CAN FIND ALL THE LATEST INFORMATION ABOUT THE FUNDS AVAILABLE WITH THE SKANDIA PLAN IN THE LATEST ISSUE OF INFORMER, WHICH IS AVAILABLE FROM US ON REqUEST, OR ON ADVISER VIEW.
FUND CHOICE
You can choose from more than 500 funds, and over 50 fund managers. this will enable you to tailor the investment element of your client’s plan precisely to their needs and attitude to risk.
Initially, you can select up to ten different funds for us to invest your client’s
premiums in. Each fund must have at least 1% of the total. after outset, your client can split their investment even further, if they want to.
occasionally, we need to close or merge funds. If we do, we will let you and your client know beforehand, so you can reconsider their needs.
SWItCHING aND REDIRECtIoN Your client can switch their existing investment into different funds at any time. If we receive their written instructions at our head office before 10.00am, we will carry out the switch at the bid price on the following day. We currently make no administrative charge for switching existing investments. We reserve the right, however, to make a charge in the future. to safeguard all the investors, we may defer a switch for up to two weeks or, if the fund holds property, for up to 12 months.
Your client can also ask us to redirect their future premiums into different funds at any time.
aLLoCatIoN RatES
We will allocate your client’s premiums into their chosen funds as shown below:
Monthly premiums
£ Yearly premiums £ Allocation percentage
00.00 – 24.99 200.00 – 249.99 95 25.00 – 39.99 250.00 – 399.99 98 40.00 – 49.99 400.00 – 499.99 99 50.00 – 74.99 500.00 – 749.99 100 75.00 – 124.99 750.00 – 1,249.99 101 125.00 – 499.99 1,250.00 – 4,999.99 102 500.00 and over 5,000.00 and over 103
15 If your client increases or reduces
their premiums, resulting in a different allocation band applying, we will allocate the whole of the new premium at the revised percentage.
When the first premium is paid, we will allocate the units at the offer price on the day we bank the premium. For cheques, this is normally the day we receive them at our head office. For payments by direct debit, we use the offer price on the day we accept the application. For subsequent premiums, we will allocate the units at the offer price on the day the premium is due. If a premium is overdue, we will treat it as we do the first premium.
MaRKEt tIMING
this is a trading strategy which is often associated with frequent purchases and sales of units in collective
investment schemes with the intention of anticipating changes in market prices. It happens when a client wants to exploit a fund whose price does not take account of the most recently available data, and where the client takes a short-term trading position to take advantage of anticipated future market movements.
Market timing can be disruptive to fund management, and can cause dilution in funds which is detrimental to long-term investors.
We monitor market timing, and take appropriate action when we or any manager of the underlying fund see that market timing is taking place.
We reserve the right to reject, defer, apply an appropriate levy or charge, use fair value pricing, or adjust the fund pricing basis on a fund or individual transactions if, under Financial Conduct authority guidelines and best market practice, we reasonably consider any activity to be market timing. We will tell your client of any measures we impose as soon as is reasonably practical, and agree a further course of action. any charge we impose will equal the charge imposed on us by the fund manager as a direct result of your client’s market timing transaction – we will not make an arbitrary or punitive charge.
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THESE INCLUDE THE COSTS OF YOUR CLIENT’S PROTECTION COVER, OF ADMINISTERING THEIR PLAN, AND OF MANAGING THEIR INVESTMENT. WE TAKE THE CHARGES EACH MONTH BY CANCELLING UNITS IN THE PLAN.
CHARGES FOR PROTECTION BENEFITS
the charge for life cover will vary according to the sum at risk. this is the difference between the value of the units and the sum assured, and will vary according to the investment performance. You can find more details about the sum at risk in our leaflet explaining the Skandia Plan, which is included in the Key Features pack. If the value of the units is ever higher than the sum assured, we will not charge for the life cover in that month. as your client gets older, the cost of their life cover increases, and this will affect the outcome of the ten-year review and the subsequent sustainability checks we carry out.
totaL DISabILItY bENEFIt
If your client chooses to include this benefit, we will increase the cost of their life cover by 40% each month.
WaIVER oF PREMIuM CoVER When this benefit is included in the plan, we reduce the relevant allocation percentage by 2% for each person covered.
For example, a regular premium of £500 a year would have an allocation rate of 100%. If this were for a single life plan with waiver of premium cover, we would reduce the allocation rate to 98%. If the plan covered two lives, the allocation rate would be 96%.
CaNCELLING uNItS
We cancel units from the plan to pay these charges. If the plan ever has insufficient units in any month to cover the charges, we will carry the charges forward until enough units have been added to pay them.
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ADMINISTRATION CHARGES
SEttING-uP CHaRGE
We make this charge at outset, and every time the sum assured is increased. We continue cancelling units from the plan until the whole of the charge is paid.
We calculate this charge based on the sum assured, the age at outset of the life or lives assured, and the amount and frequency of the premiums.
aNNuaL MaNaGEMENt CHaRGE this charge is currently 0.75% a year of the plan’s value. We may change it in the future depending on our expenses and any change to the taxes affecting life assurance companies. We will let you know about any such change as soon as we can, but we may make the change without any notice.
at present, we re-credit all of this charge to the plan each month, by adding bonus units.
MaINtENaNCE CHaRGE If your client accepts the inflation-proofing increase we offer each year, we will not make this charge.
We recalculate the maintenance charge at the beginning of each year, taking the rate of inflation and our administration expenses into account. If your client does not increase their sum assured each year, we will make this charge based on the difference between the level of maintenance charge when the sum assured was last increased (or at outset if they have never used the inflation option) and the current level of the charge.
If your client stops paying premiums and makes their plan paid up, we will take the full maintenance charge for as long as their cover continues. We take this charge by cancelling units at the bid price.
INVESTMENT CHARGES
FuND MaNaGEMENt CHaRGES We take these into account when we calculate the price of the units of a plan. they vary between the different funds you and your client can choose from, and are typically between 0% and 2%. Some more specialised funds may have charges higher than 2%.
You can find all the latest information about the fund management charges in the latest issue of Informer, which is available on our website:
www.oldmutualwealth.co.uk uNIt PRICES
We normally calculate the value of units once each day, although we may do this more or less often if we think it necessary.
the price of units varies in line with the value of the underlying assets, and also reflects any expenses of or levies on the fund, for example under the Financial Services Compensation Scheme. the expenses will include the costs of buying and selling assets, property maintenance and valuation costs, internal and
external fund management fees, and other transaction charges.
bID-oFFER SPREaD
this is the difference between the offer price, at which we allocate units to a plan, and the bid price at which we cancel units, which is 5%, rounded up by not more than 1%.
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SURRENDERS
OVER A PERIOD OF YEARS, YOUR CLIENT’S PLAN MAY BUILD UP A VALUE WHICH THEY CAN REALISE BY
SURRENDERING ALL OR PART OF THEIR PLAN. YOUR CLIENT CAN DO THIS AT ANY TIME. IF THEY SURRENDER ALL THE POLICIES IN THEIR PLAN, THEIR COVER WILL END.
PARTIAL SURRENDER
When we set up a Skandia Plan, it is split between a number of policies, so that part of it can be surrendered without jeopardising the qualifying status of the remaining plan. the number of policies is between two and ten at outset, and this number is system-generated and cannot be changed. It varies according to the initial level of premiums your client is paying. It is not possible to surrender a part of one of the policies which make up the Skandia Plan.
PAID-UP POLICIES
If your clients have paid premiums for two years, and they then want to stop, they can make their plan paid-up, providing it has a value. the life cover will remain in force, but any total disability or waiver of premium cover will end.
We will take the full maintenance charge (see page 17) by cancelling units each month. When the surrender value of the plan reaches zero, it is lapsed.
once a plan has been made paid-up, it cannot be reinstated.
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TAXATION
BECAUSE THE SKANDIA PLAN HAS qUALIFYING STATUS, THERE SHOULD BE NO TAX LIABILITY ON THE POLICYHOLDER WHEN THEY MAKE A CLAIM ON, OR SURRENDER, THE PLAN, EVEN IF THEY ARE A HIGHER-RATE TAXPAYER.
POLICYHOLDER TAXATION
the policyholder normally has no personal liability to lower- or basic-rate income tax or capital gains tax in connection with the plan. If they stop paying premiums during the first ten years or during the ten years following an increase to the premium level, they may be liable for higher-rate tax when the benefits are paid, or their entitlement to higher age-related personal reliefs may be reduced or eliminated.
LIFE ASSURANCE COMPANY TAXATION
unit prices take account of our tax position with regard to the investment income and gains from the assets underlying the funds.
the current rate of corporation tax in respect of the policyholders’ proportion of the life assurance fund income and gains is charged at the special insurance company rate of 20% on ‘unfranked’ income (for example rents or interest) or 0% on ‘franked’ income (for example dividends). unit prices can vary to take account of any change in corporation and income tax rates, the policyholder’s proportion of the life assurance fund and also the timing of tax payments.
INHERITANCE TAX
If the plan is written in a suitable trust it can reduce or eliminate any inheritance tax charges.
PoSt buDGEt 2006 IHt CHaRGES oN tRuStS
Since the 2006 budget, discretionary trusts are potentially liable to inheritance tax charges on entry, every ten years and on exit. Partnership or shareholder cover will usually be a commercial arrangement and so not subject to an entry charge.
You can find more information about writing protection policies for IHt planning in our pack inheritance tax planning using regular premium life policies, which is available on request.
PRE-OWNED ASSETS TAX (POAT)
From 5 april 2005, Poat affects any business assurance trust that includes the settlor as a potential beneficiary. Poat only applies if the settlor is included as a potential beneficiary of the trust, and the tax is assessed yearly on the potential benefit, even if nothing is received. the tax due is assessed using an official rate of interest on the market value of the potential benefit. this may increase if the life assured is in poor health. If the tax due is less than £5,000, no tax will be payable.
Poat can be avoided by:
• not exceeding the exempt level of £5,000
• excluding the settlor from benefiting from the trust fund before 6 april of the relevant year of assessment • the settlor electing that the gift with
reservation provisions will apply • excluding the settlor from benefit
during a year of assessment where the proportionate value of the deemed benefit does not exceed £5,000.
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LIFE COVER
the only exclusion which applies to the life cover of a Skandia Plan is for suicide.
If the life assured commits suicide within two years of outset or reinstatement, we will limit the payment on death to a return of the premiums paid since the commencement date, or the reinstatement. When the suicide takes place within a year of increasing the cover of their plan, we will not pay the increased sum assured.
this exclusion will not apply if the plan is being used as security for a loan from a qualifying lender.
TOTAL DISABILITY COVER AND WAIVER OF PREMIUM BENEFIT
We apply the following exclusions to these benefits:
1 Living abroad In order to claim:
• Your client must provide medical evidence to support their claim and diagnosis.
• the claim must have occurred in one of these countries:
australia, austria, belgium, Canada, Channel Islands, Denmark, Finland, France, Germany, Gibraltar, Ireland, Isle of Man, Italy, Luxembourg, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, uK and uSa .
If the claim occurs outside these countries, we may still be able to consider it. Your client may need to provide supporting evidence from a medical practitioner or consultant registered in the uK, and we may ask them to have an examination by a specialist in the uK.
2 Self-inflicted injury, or the taking of alcohol or drugs
(other than as prescribed by a qualified medical practitioner), or participation in any criminal act. 3 War, invasion, act of foreign enemy,
hostilities (whether
war is declared or not), civil war, rebellion, revolution, insurrection or military or usurped power, riot or civil commotion.
4 bodily injury sustained whilst engaged in steeple-chasing, polo, racing by horse, motor sport, mountaineering or
pot-holing.
5 as a result of entering, servicing, operating, travelling in or ascending into or descending from any aircraft or aerial device except as a fare-paying passenger on a licensed commercial airline flying on a regularly scheduled flight. 6 Pregnancy or childbirth.
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UNDERWRITING
THE APPLICATION
During the application process, we ask for information about the life assured’s health, pastimes and family history. In many cases, the answers are enough for us to underwrite the application. However, in some cases, we may need more medical information and, if so, we will pay for this. For example, we may need to:
• contact the life assured’s GP • ask the life assured to attend an
independent medical examination. If we need the GP to send us details of the medical history, the life assured can ask to see a copy of the report.
GENETIC TESTING
In accordance with the association of british Insurers’ (abI) policy on genetics and insurance, the life assured does not need to tell us about any genetic test result they have had if your client’s application for insurance, taken together with any other insurance policies they already have for this type of insurance, totals £500,000 or less for life insurance.
above this limit, the life assured may need to tell us about certain genetic test results when your client is applying for insurance. We will only be interested in genetic test results where the Government’s Genetics and Insurance Committee (GaIC) has approved them for insurers to use.
If you think this may apply to the life assured, please ask us for details of the current position.
these details are also available from the abI website at: www.abi.org.uk/ consumer2/disclosure.htm
However, the life assured must tell us if they either have a family history of, are experiencing symptoms of, or are having treatment for, a medical condition including any genetically inherited condition.
If the life assured wants to disclose to us a negative genetic test result which shows us that they have not inherited a genetic disorder, we will take this into account in setting the premium, providing their clinical geneticist confirms that this test result indicates a reduced risk of developing the inherited disease.
SMOKING
the premiums for life cover take into account whether the life assured smokes cigarettes. on the Skandia Plan we only consider those who smoke cigarettes to be required to pay Smoker Rate premiums. Pipe smokers, cigar smokers and nicotine replacement users are not required to pay Smoker Rate premiums.
To speak to one of our underwriters, please call 023 8072 6908.
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IF YOUR CLIENT NEEDS TO CLAIM
Please notify us about any claims. You can contact the Claims Department: • by telephone on
023 8072 6996, or • by writing to:
Claims Department old Mutual Wealth old Mutual House Portland terrace Southampton So14 7aY
the team is happy to help answer any queries and can send the appropriate forms for your client to complete. You can find more information about how we administer claims in our claims guide, which is available on request.
IF YOU HAVE ANY qUESTIONS
If you need more information about the Skandia Plan you can call the
Protection helpline on 0800 917 2957 between 9.00am and 5.00pm, Monday to Friday.
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YOUR CLIENT MAY CHOOSE TO KEEP ANY LIFE COVER CLAIM PAYMENT OUTSIDE THEIR ESTATE AND FREE FROM INHERITANCE TAX BY WRITING IT IN A
SUITABLE TRUST. WE WILL NEED ALL THE TRUSTEES’ SIGNATURES WHEN ANY POLICIES WRITTEN IN TRUST ARE TO BE CHANGED.
We have draft trust deeds for personal protection policies. If you want to put business assurance polices in a trust, we have a draft business assurance trust available.
If the policy is assigned as security for a loan, the assignee receives any copies of arrears letters if your client does not pay their premiums on time.
Please visit the website,
www.oldmutualwealth.co.uk, or contact your old Mutual Wealth consultant for any trust deeds you need.
You can find more about using trusts for business assurance in our business protection pack, and for personal cover in our inheritance tax planning using regular premium life policies pack.
IF YOU HAVE A qUESTION ABOUT THE SKANDIA PLAN THAT WE HAVE NOT BEEN ABLE TO COVER IN THIS GUIDE, PLEASE CONTACT US ON 0800 917 2957.
We assess the benefits in accordance with the Skandia Plan policy terms, a copy of which is available on request. this guide is based on old Mutual Wealth’s interpretation of the law and HM Revenue & Customs practice as at 1 January 2011. While we believe this interpretation is correct, we cannot guarantee it. tax relief may change in the future.
this communication is designed for and directed at professional financial advisers. No other person should rely upon the information contained within this communication.
TRUST aND ASSIGNMENTS
www.oldmutualwealth.co.uk
Calls may be monitored and recorded for training purposes and to avoid misunderstandings.
old Mutual Wealth Life assurance Limited is registered in England & Wales under number 1363932. Registered office at old Mutual House, Portland terrace, Southampton So14 7EJ, united Kingdom. authorised by the Prudential Regulation authority and regulated by the Financial Conduct authority and the Prudential Regulation authority. Financial Services register number 110462. Vat number 386 1301 59.
When printed by Old Mutual this item is produced on a mixed grade material, which uses a combination of recycled wood or paper fibre from controlled sources and virgin fibre sourced from well-managed, sustainable forests.
SK0043/210-1045R/January 2011 old Mutual Wealth
Po box 37 old Mutual House Portland terrace Southampton So14 7aY T 023 8033 4411 F 023 8022 0464 www.oldmutualwealth.co.uk
