Scottish Widows is changing the way it calculates benefits for guaranteed annuity rate policies from...
Scottish Widows is changing the way it calculates benefits for guaranteed annuity rate policies from tomorrow which means the final or 'terminal' bonuses for most guaranteed annuity rate policies will be increased.
Changes to the system are being carried out with the full authorization of the Financial Services Authority, to reflect the ruling made in the Equitable Life v Hymans judgment in the House of Lords in 1999, which said the guaranteed annuity rate must stand if interest rates drop to a low level , as agreed in contracts with policyholders.
Alternations now mean most GAR policyholders should receive "significantly higher pensions" says a spokeswoman for Scottish Widows, providing the selected pension benefits meet the terms for the guarantee set out in the original policy contract, but no policy will be lowered in value.
Enhanced pensions will be backdated to January 1, 1999 and paid out of the £1.8bn Additional Account which LloydsTSB financed through the March 2000 takeover to cover any anomaly payments such as the GARs, so with-profits policyholders are not expected to pay for the increases out of their funds.
Any balance that is left that is not needed to meet GAR agreements will be evenly distributed over with-profits policies which existed prior to the demutualisation, but officials predict there is unlikely to be little left.
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