FOR ADVISERS ONLY
Our proposal to distribute the Scottish Life Fund Estate sooner
We emailed you recently to let you know that we’re writing to certain planholders invested in the Scottish Life with profits fund to ask for their feedback on a proposal we’re making.
Within the Scottish Life with profits fund, we hold a pot of money called the Estate which helps to protect these planholders against future risks and helps to meet rules set by our regulators. We’re asking these planholders for their feedback on a proposal which would change how we distribute the Estate to these planholders.
Distributions from the Estate are currently uncertain
The Scottish Life Fund is closed to new business. As plans are claimed, the number of plans left in the fund goes down. This means the amount of money we need to hold back in the Estate is getting smaller. We’re currently able to distribute some of the Estate to eligible planholders but we don’t know how much of the Estate we’ll be able to distribute when a plan is claimed. This is because we don’t know when the plan will be claimed or how big the Estate will be at that time.
We want to give planholders more certainty
Our proposal would let us distribute more of the Estate to eligible planholders sooner than would otherwise be the case. This would increase the current value of their plan and give them more certainty over the amount we’ll pay them when their plan is claimed.
We need feedback from our planholders
We’d use a court-approved process – a Scheme of Arrangement – to change how we distribute the Estate to our eligible planholders. Before we start that process, we want to know if those planholders are supportive of our proposal by giving their feedback online or by post by 7 May 2021.
If you have any questions that aren’t covered below or in the Your guide to our proposal booklet please call us on 0345 646 1016 (or +441625 718588 if you’re calling from outside the UK) between 8am and 6pm Monday to Friday (excluding bank holidays).
If planholders are supportive of our proposal, we’ll go to the High Court of Justice in England and Wales to ask for approval to make them a formal offer later this year. To keep us on track, we’ve provisionally booked the High Court hearing for 15 July 2021.
If the High Court gives us the go ahead, we’ll write to planholders again with a formal offer and ask them to vote on it. We’ll send them another information pack which will include a personalised illustration to help them understand what our proposal could mean for them.
If planholders vote in favour of the formal offer, we’ll go back to the High Court and ask for its final approval. If we get this approval, we expect the earliest our proposal could take effect would be 31 December 2021.
The Your guide to our proposal booklet contains more information about the legal process.
If we believe that factors outside of our control (such as changes to the coronavirus situation in the UK) mean it’s no longer appropriate for us to continue with our proposal, we’ll pause our proposal and let you and your client know.
- The Royal London Open Fund, our largest fund, will take on responsibility for holding back enough money to protect planholders’ plans against future risks and to meet rules set by our regulators.
- In exchange for this, and to help cover costs associated with our proposal, a portion of the Estate will be paid to the Royal London Open Fund.
- We’ll be able to distribute the rest of the Estate to eligible planholders by increasing the value of their plan values by a known percentage when we implement our proposal. This will secure their distribution from the Estate at that point
So our proposal involves the planholder giving up some of the Estate to gain more certainty over their payout. We would use a court-approved process – a Scheme of Arrangement – to offer this exchange. Before that process can begin, we want planholders’ feedback on our proposal by 7 May 2021.
No. We’ll continue to administer your client’s plan in the same we as we currently do.
If our proposal doesn’t go ahead, we won’t make these changes. The amount that we’ll be able to increase plan values by from the Estate will remain exposed to future risks and could be higher or lower than under our proposal.
Our proposal would allow us to give planholders a known distribution from the Estate. This means they’ll have more certainty over the amount they’ll receive when they access their savings. We’re making our proposal now so as many planholders as possible can benefit from it.
Our proposal is part of our plan to simplify and modernise the way we do things for the benefit of our longstanding customers. We’re also proposing similar changes to policies in the Refuge Assurance Industrial Branch (RAIB) Fund, the United Friendly Industrial Branch (UFIB) Fund, and the United Friendly Ordinary Branch (UFOB) Fund this year. So you may also hear from certain planholders invested in these three funds as well.
Your client won’t be eligible for our proposal if their ProfitBuilder plan matures before our proposal takes effect, which is expected to be on 31 December 2021. Your client’s ProfitBuilder plan has the option to delay receiving benefits through extending the plan term. If the plan is due to mature this year and your client is interested in our proposal, then they may want to extend their plan before they receive their maturity benefits.
Your client won’t be eligible for our proposal if they take their retirement savings before our proposal takes effect, which is expected to be on 31 December 2021. If they’re due to retire this year and interested in our proposal then you may want to speak to them before they take their retirement savings.
If your client has a Talisman pension plan and their selected retirement age will be reached sometime this year, they won’t be eligible for our proposal from that date even if they don’t yet intend to retire. This is because their plan will stop being invested in the Scottish Life with profits fund when they reach their selected retirement age, in line with their terms and conditions. If they’re interested in our proposal then they may want to increase their selected retirement age.
In 2018 we asked certain planholders whose pension plan contained a Guaranteed Annuity Rate (GAR) if they would like to exchange their GAR for an uplift to their plan. We used a similar process – a Scheme of Arrangement – to make this change.
For those plans covered by the previous Scheme of Arrangement, there will be no change to the previous increase applied to their plan. If the planholder opted out of that Scheme in order to keep their GAR, the GAR will remain unchanged by our new proposal.
For plans covered by both the previous Scheme and our new proposal, the Uplift from our new proposal would apply in addition to the changes made by the previous Scheme.
We believe the information pack provided to planholders recently and the pack which would be provided later this year if we make a formal offer will give planholders enough information to make an informed decision.
Unlike our GAR proposal in 2018, this proposal does not have any impact on planholders’ guarantees. Our new proposal asks planholders to make a risk-based decision relating to the level of Estate distribution that will be awarded to their plan. Therefore we do not intend to pay towards the cost of advice for any planholders who choose to seek advice in relation to our proposal.