The terminal bonuses for Scottish Widows GAR policyholders are to be increased by up to 30% followin...
The terminal bonuses for Scottish Widows GAR policyholders are to be increased by up to 30% following a change in the way the provider calculates benefits.
A House of Lords judgement in a case brought by an Equitable Life policyholder stated that those individuals with GAR policies should be able to receive higher pensions when interest rates are low.
In order to comply with the implications of this case, Scottish Widows said it would add to terminal bonuses up to a value of 30% to policies. The change in practice will be back-dated to 1 January 1999.
The life office said it would meet the cost of the additional payouts from a war chest it had accrued when it demutualised in March 2000. The firm has a £1.7bn Additional Account, of which it predicts these payments will amount to £1.4bn.
This money was set aside to cover this kind of contingency, with any balance being paid over time to policyholders, although there are no specific plans to distribute this at present.
The firm stressed the changes would not affect the value of any policy negatively.
The changes apply to 170,000 GAR policies from about 140,000 people, Scottish Widows has more than 1.8 million policyholders in total.
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