Your guide to our proposal - Royal London Group · 2020. 3. 12. · Our proposal 6 . We explain our proposal in more detail and how it would afect your . With Profts Policy. What

) ROYAL LONDON

YOUR GUIDE TO OUR PROPOSAL

We want to know what you think

We have a proposal which would let us share out more of theUnited Friendly Industrial Branch Fund Estate with policyholders

like you sooner than would otherwise be the case.

This would increase both the current value of your policy and the minimumamount we promise to pay out. Our proposal would give you more certainty

over the amount we’ll pay you or your family when your policy is claimed.

This booklet explains everything you need to know at this stage about our proposal.

CONTENTS Inside this booklet, you’ll fnd:

SECTION PAGE First, some background A reminder of how your With Profts Policy works and how it fts into Royal London.

3

We recommend that you read this section frst.

Our proposal 6 We explain our proposal in more detail and how it would afect your With Profts Policy.

What our proposal could mean for you To bring our proposal to life, we’ve provided an example based on Margaret – a typical

12

With Profts Policyholder in the United Friendly Industrial Branch Fund. Tis example shows the efect our proposal could have on a policy like yours.

Why is Royal London doing this?We explain why we think our proposal will beneft you and Royal London.

16

Timeline and what you need to do Our timeline for implementing our proposal and information about the steps you need

18

to take along the way.

Important legal information Important information about the legal process we’d use to make the changes.

20

Your questions answered Your frst port of call for any questions you might have.

24

Glossary We use some technical terms in this booklet. We’ve highlighted them all with initial

27

capitals and italics, e.g. ‘Scheme’, and you’ll fnd them explained here.

Some policyholders may be faced with issues that will make it harder for them to read through and understand their information pack. For example, they may have a disability (either mental or physical) or a terminal illness. If you feel you might beneft from additional assistance, please contact us and let us know your circumstances. We may be able to ofer additional help and support. The Your questions answered section on page 24 of this booklet explains how you can contact us to discuss the information in your information pack.

2 | Your guide to our proposal

FIRST,SOME BACKGROUND

This section gives a reminder of how your With Profts Policy works and how it fts into Royal London. We recommend that you read this section frst.

About when you became part of Royal London Royal London purchased the United Assurance Group (UAG) in 2000. Te United Friendly policies, including yours, then transferred to Royal London. We’ve been looking after these policies ever since.

If the name Royal London doesn’t ring any bells, we’re the largest mutual life, pensions and investment company in the UK. We’ve been helping people plan for life’s fnancial milestones for over 150 years.

As a Mutual Organisation, we don’t have shareholders.Tis means we can reinvest more of our profts to beneft our customers. For example, by improving products and customer service.

About your With Profts Policy It’s been a while since you took out your policy with United Friendly, so we’ve recapped some of its key features. If you need more detail, please read the How your With Profts Policy works leafet included with your information pack.

Your policy is an Industrial Branch With Profts Policy, which means you most likely paid Premiums to a collector who called regularly at your home. If you’re still paying Premiums, you might have changed to a standing order or direct debit to pay these.

Your guide to our proposal | 3

Your With Profts Policy is one of the following types of product as stated in your letter:

Whole of Life

The policy pays out a lump sum when the Life Covered dies.

You pay Premiums until the last policy anniversary before the 85th birthday of the Life Covered.

Whole of Life withPeriodic Payments

The policy has the same features as a Whole of Life Policy (see left).

The policy also pays out cash payments (known as Periodic Payments) every 5 years.

Endowment

•

•

•

•

• The policy pays out a lump sum after a fxed number of years.

You pay Premiums throughout the term of the policy.

If the Life Covered dies during the term of the policy, the policy pays out a lump sum.

•

•

For each type of policy above, you can cash in your policy or stop paying Premiums early. However, the amount we’ll pay out may be reduced as you might not have paid all your Premiums.

Your policy has a Guaranteed Minimum Amount we’ll pay out in return for the Premiums you promise to pay us.

We aim to increase the Guaranteed Minimum Amount by adding Annual Bonuses to it, provided you’ve paid your Premiums. We may also add a Final Bonus to the payout when your benefts are claimed to make sure the amount we pay out refects your Policy Value.

We use Policy Values to make sure the amount we pay out is fair. We calculate your Policy Value as the Premiums you’ve paid plus any investment returns earned, less deductions Royal London makes to cover the cost of managing your policy.

We may also increase the size of your Final Bonus when your benefts are claimed.Tis is to allow for your share of the Estate of the United Friendly Industrial Branch Fund (UFIB Fund). We explain the UFIB Fund Estate and how we share it between policyholders like you in the Our proposal section on page 6 of this booklet.


Te following diagram shows how we calculate the total amount we’ll pay out when your benefts are claimed:

Guaranteed Minimum Amount

Final Bonus (based on your

Policy Value)

Final Bonus (based on share

of the Estate)

Policy Value

= Payout

About our With Profts Funds Royal London has purchased a number of insurance businesses since 2000, including UAG which owned United Friendly. Each time we did this, the insurance policies in these businesses were transferred to us. We then took on responsibility for managing separate With Profts Funds for the transferring policies.

Your policy is invested in the UFIB Fund. Te UFIB Fund has been closed to new policies since before Royal London purchased UAG. So it’s getting smaller as policies pay out.

We also have the Royal London Open Fund. Tis fund is open to new policies. It’s a much larger, more varied fund than the UFIB Fund.

We manage each of our With Profts Funds separately from each other. Tis means that each With Profts Fund needs to hold back enough money to:

• Protect against future risks, e.g. the risk of investment markets performing poorly, or the risk of more policies being claimed in a particular year than we expect;

• Meet rules set by our Regulators; and

• Make sure we can always pay at least the Guaranteed Minimum Amount promised to policyholders.

To do this, we keep a pot of money aside in each With Profts Fund which we call the Estate.


OUR PROPOSAL

This section explains our proposal in more detail and how it would afect your With Profts Policy.

Your With Profts

Fund

Sharing out the Estate

Increase to Policy

Value

At the moment…

Your policy is invested in the UFIB Fund.

We manage our With Profts Funds separately from each other. This means the UFIB Fund needs to hold back enough money in its Estate to protect policies like yours against future risks.

Since the UFIB Fund is getting smaller, the amount of money we need to hold back in the UFIB Fund Estate is also getting smaller.

This means we’re currently able to share out some of this money:

• By increasing your Policy Value each year; and

• By adding an extra amount when your policy is claimed.

If your policy was claimed just after we expect to implement our proposal, we expect we’d be able to increase your Policy Value by 7% to allow for your share of the UFIB Fund Estate.

This percentage is exposed to future risks and could go up or down.

If our proposal goes ahead…

We’ll merge the UFIB Fund into the Royal London Open Fund.

The Royal London Open Fund will take on responsibility for holding back enough money to protect policies like yours against future risks.

In exchange for this, and to help cover costs associated with our proposal, a payment (the Scheme Contribution) will be taken from the UFIB Fund Estate and paid to the Royal London Open Fund.

We’ll share out all of the UFIB Fund Estate (minus the Scheme Contribution) at once with policyholders like you. We’ll do this by making a one-of increase to their Policy Values.

You won’t be entitled to any increases to your Policy Value from the Royal London Open Fund Estate once your policy is in the Royal London Open Fund.

We’ll apply a known percentage increase to your current Policy Value. We call this increase the Uplift.

We currently expect the Uplift to be 11%.

We’ll also apply the Uplift to the value of the benefts bought by any future Premiums you might pay. The Premium amounts paid under your policy wouldn’t be afected by the Scheme.

Fairness

Level of certainty

At the moment…

We currently expect that:

• Policyholders who remain in the UFIB Fund for longer might receive a larger percentage increase to their Policy Value from the UFIB Fund Estate; and

• Policyholders in the fund whose benefts are claimed sooner might receive a smaller percentage increase to their Policy Value from the UFIB Fund Estate.

We don’t think this is the fairest outcome for all policyholders.

The percentage that we’re able to increase your Policy Value by from the UFIB Fund Estate is uncertain.

This is because the percentage is exposed to future risks. For example, the risk that investment markets perform poorly.

If our proposal goes ahead…

The same Uplift (in percentage terms) will apply to all policies in the UFIB Fund.

We think this is an even fairer outcome for policyholders.

We’ll secure your share of the UFIB Fund Estate at the point we implement our proposal.

You’ll have more certainty over the amount we’ll pay you or your family when your policy is claimed.

However, the Uplift could be more or less than the percentage that we’d increase your Policy Value by from the UFIB Fund Estate if our proposal didn’t go ahead.

When we expect to implement our proposal

We expect to implement our proposal at 11:59pm on 31 December 2020. We’ll only go ahead with our proposal if policyholders like you are supportive.

6 | Your guide to our proposal Your guide to our proposal | 7

• • If our proposal goes ahead, you’ll...

GAIN THE FOLLOWING

Increased initial cash-in value

Due to the Uplift, if you cash in your policy or your benefts are claimed shortly after we implement our proposal, it’s likely that the amount your policy pays out will be higher than it would have been without our proposal.

Special Bonus

You’ll receive a one-of increase to your current Guaranteed Minimum Amount. We’ll award this increase as a Special Bonus.

We currently expect this Special Bonus to be 33% of your Guaranteed Minimum Amount. The same Special Bonus (in percentage terms) will apply to all policies in the UFIB Fund.

The Special Bonus will increase the minimum amount we promise to pay out. This might give you greater peace of mind.

The Special Bonus will only increase your Guaranteed Minimum Amount. It won’t increase your Policy Value.

GIVE UP THE FOLLOWING

Scheme Contribution

The Royal London Open Fund will receive a payment from the UFIB Fund Estate. This amount is the Scheme Contribution mentioned on page 6.

No more UFIB Fund Estate

You won’t receive any future money from the UFIB Fund Estate.

This is because we’ll have shared out all the UFIB Fund Estate (minus the Scheme Contribution) at once with policyholders like you when we implemented our proposal.

What would stay the same if our proposal goes ahead?

• Your policy will still be a With Profts Policy. Tis means that the whole of your Policy Value will continue to go up and down with investment performance and other factors.

• If you’re still paying Premiums, the Premium amounts paid under your policy wouldn’t be afected by our proposal.

• We’ll continue to aim to add Annual Bonuses to your Guaranteed Minimum Amount, provided you’ve paid your Premiums.

• We’ll continue to aim to add a Final Bonus to your policy when your benefts are claimed.

• If your policy pays you Periodic Payments, your policy will still have this feature. Our proposal won’t afect the size of your Periodic Payments.

Royal London Open Fund Estate If our proposal goes ahead, we’ll share out all of the UFIB Fund Estate (minus the Scheme Contribution) at once with policyholders like you when we implement our proposal.

Since you’ll have received all the money from the UFIB Fund Estate that you’re entitled to, you won’t be entitled to any share of the Estate of the Royal London Open Fund once your policy transfers to that fund.

What happens if our proposal doesn’t go ahead?

• We’ll continue to manage the UFIB Fund separately from the Royal London Open Fund and our other With Profts Funds. We’ll do this until the UFIB Fund becomes too small to manage efectively. We expect the UFIB Fund will become too small to manage efectively in about 20 years.

• We’ll continue to aim to share the UFIB Fund Estate among policyholders like you by gradually increasing the Policy Value of their policies each year and when their benefts are claimed.

• We’ll continue to aim to add Annual Bonuses to your Guaranteed Minimum Amount, provided you’ve paid your Premiums. We may also add a Special Bonus to your Guaranteed Minimum Amount in the future, but this isn’t certain.

• We’ll continue to aim to add a Final Bonus to your policy when your benefts are claimed.

Your guide to our proposal | 98 | Your guide to our proposal

0 Sharing costs if our proposal doesn’t go ahead If our proposal doesn’t go ahead, the costs incurred up until the point at which our proposal is abandoned will be shared between the UFIB Fund Estate and the Royal London Open Fund as follows:

• If policyholders like you are not supportive of our proposal in your feedback in response to this mailing, the costs incurred by that point won’t be charged to the UFIB Fund Estate. They’ll be charged in full to the Royal London Open Fund.

• If policyholders like you are supportive of our proposal in your feedback in response to this mailing, but our proposal needs to be abandoned afterwards, the costs incurred by that point will be shared equally between the UFIB Fund Estate and the Royal London Open Fund.

How we’ll make this happen Our proposal involves you giving up some of the UFIB Fund Estate to gain more certainty. We plan to use a court approved process called a Scheme of Arrangement (or Scheme) to make our formal ofer.

Before we start that process, we want to know if policyholders like you are supportive of our proposal in your feedback in response to this mailing.

If the feedback we receive from policyholders like you is supportive of our proposal, the next step in the Scheme will be to apply for approval from the High Court of Justice in England and Wales (the Court) to make you a formal ofer. We realise that there are important questions which you’ll need answered. If we get the go ahead from the Court, we’ll write to you again later this year with more detailed information and a formal ofer for you to vote on.

Our voting Class proposal If we go ahead with making you a formal ofer, we propose that policyholders like you with a policy in the UFIB Fund vote on the Scheme together in one Class. Te way that voting would work is quite technical and you can fnd out more about it in the Important legal information section on page 20 of this booklet.

0 Important – If we go ahead with making you a formal ofer and ask you to vote on it, the result of the vote will apply to you whether or not you vote. The result of the vote will apply to you even if you vote diferently from the majority.

Please use the comments box in the Feedback Form to tell us if you have any feedback on our proposal to have one voting Class or any other comments about our proposal.


Nothing is happening to your policy right now but it’s important you send us your feedback. If policyholders like you are supportive of our proposal, we plan to write to you again later this year with a formal ofer and ask you to vote on it.

If we make you a formal ofer, we will do so through a legal process called a Scheme of Arrangement (or Scheme). Tis process gives policyholders like you the right to vote on the Scheme and needs the Court to approve it.

How you can be sure that the Scheme is fair

To make sure you and other policyholders are being treated fairly, an Independent Expert will provide a report to the Court on the fairness of the Scheme. The Independent Expert is an experienced senior Actuary who is independent of Royal London.

We’re also considering the interests of our policyholders internally within Royal London. Our With Profts Actuary and Chief Actuary will prepare reports which will also be provided to the Court. We’re also keeping our Regulators, our With Profts Committee and the Royal London Board up to date on the progress of our proposal.


0

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WHAT OUR PROPOSAL COULD MEAN FOR YOU To bring our proposal to life, we’ve provided an example based on Margaret – a typical With Profts Policyholder in the UFIB Fund. This example shows the efect our proposal could have on a policy like yours.

Meet Margaret Margaret has a Whole of Life Policy invested in the UFIB Fund which she took out on her own life to help her children cover the cost of her funeral. She’ll be 75 when we expect to implement our proposal.

Te values we’ve used in this example are for illustrative purposes only. If policyholders like you are supportive of our proposal, we’ll write to you later in the year with a formal ofer. Te information we send you will include a personalised illustration which will show what our proposal could mean for you.

If Margaret dies just after we expect to implement our proposal Te following diagram shows what we’d expect Margaret’s policy to pay out if she were to die just after we expect to implement our proposal.

If our proposal doesn’t go ahead

-£1,000 £2,000 £210 = £3,210

£3,330

If our proposal does go ahead

£1,330 £1,670 £330 =

Guaranteed Minimum Amount Final Bonus (based on her Policy Value) Final Bonus (based on her share of the UFIB Fund Estate) Payout

The Final Bonus amounts in the diagram above are example amounts intended to show what Margaret could receive. Final Bonuses are not guaranteed and are uncertain until any policy is claimed.


If our proposal doesn’t go ahead

If our proposal does go ahead


Margaret’s policy currently has a Guaranteed Minimum Amount of £1,000.

We’d award a Special Bonus that would increase Margaret’s Guaranteed Minimum Amount.

We currently expect this Special Bonus to be 33%. This would increase Margaret’s Guaranteed Minimum Amount from £1,000 to £1,330.

Final Bonus (based on herPolicy Value)

This Final Bonus amount is the diference between Margaret’s Policy Value (£3,000) and her Guaranteed Minimum Amount (£1,000).

So when a claim is made on her policy, we expect to add a Final Bonus of £2,000 to her payout so her payout refects her Policy Value.

This Final Bonus amount is the diference between Margaret’s Policy Value (£3,000) and her Guaranteed Minimum Amount (£1,330).

So when a claim is made on her policy, we expect to add a Final Bonus of £1,670 to her payout so her payout refects her Policy Value.

Final Bonus (based on her share ofthe UFIB Fund Estate)

When a claim is made on Margaret’s policy, we expect to increase her Final Bonus by £210 to allow for her share of the UFIB Fund Estate.

This amount is calculated as 7% of her Policy Value of £3,000.

We’d apply the Uplift to Margaret’s Policy Value.

We currently expect the Uplift to be 11%. This would increase her Final Bonus by £330.

This amount is calculated as 11% of her current Policy Value of £3,000.

Amount paid out on death

If our proposal doesn’t go ahead and Margaret dies just after we’d expected to implement our proposal, we expect her policy to pay out £3,210.

If our proposal does go ahead and Margaret dies just after we expect to implement our proposal, we expect her policy to pay out £3,330.


- Uncertain increase to Policy Value from the UFIB Fund Estate if our proposal doesn't go ahead

Certain increase to Policy Value from the UFIB Fund Estate if our proposal does go ahead

30% .. = E 25% e ... ., .. - 20% :::d! 11% - ifour - .. Ill proposal does go

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15% / ahead

Oil; -; ::) 10% .. --- 7% - if our proposal "' 5%

u .E

75

I Margaret's age when we expect to implement our

proposal

0

doesn't go ahead

76 77 78 79 80 81 82 83 84 85 86 87 88

Age at death

89

0

If Margaret dies further in the future Te diagram on page 12 shows what Margaret’s policy could pay out if she dies just after we expect to implement our proposal. When calculating the payout, we’ve allowed for an increase to her Policy Value from her share of the UFIB Fund Estate.

If Margaret were to die just after we expect to implement our proposal, we currently expect this increase to be:

• 7% of her Policy Value (or £210) if our proposal doesn’t go ahead; or

• 11% of her Policy Value (or £330) if our proposal does go ahead.

Te diagram below shows how the percentage increase we’d make to Margaret’s Policy Value from her share of the UFIB Fund Estate could change if her policy is claimed further in the future. We explain this diagram on the opposite page.

Margaret will be 75 when we expect to implement our proposal.

Based on UK population data, she is expected to live to age 89. Of course, Margaret could die earlier or later than this.


If our proposal doesn’t go ahead, we currently expect to apply a percentage increase of 7% to Margaret’s Policy Value to allow for her share of the UFIB Fund Estate if she dies just after we’d expected to implement our proposal.

However, the percentage increase we’d apply to her Policy Value if her policy is claimed further in the future is uncertain. This is because the percentage increase depends on factors we can’t predict such as how long Margaret lives and the size of the UFIB Fund Estate. However, we think it’s reasonably likely that the percentage increase will be within the purple area on the diagram on the previous page.

We currently expect that policyholders who remain in the UFIB Fund for longer might receive a larger percentage increase to their Policy Value from the UFIB Fund Estate compared to policyholders in the fund whose benefts are claimed sooner, but this isn’t guaranteed.

The orange line on the diagram on the previous page shows the one-of Uplift of 11% to Margaret’s Policy Value we currently expect to apply if our proposal goes ahead.

We’ll also apply the Uplift to the value of the benefts bought by any Premiums she might pay after we implement our proposal. The Premium amounts paid under Margaret’s policy wouldn’t be afected by our proposal.

So, our proposal would give Margaret certainty over how much we’ll increase her Policy Value by to allow for her share of the UFIB Fund Estate. This means she’d have more certainty over the amount we’ll pay her family when her policy is claimed.

If our proposal goes ahead, your policy will still be a With Profts Policy. Tis means that the whole of your Policy Value will continue to go up and down with investment performance and other factors.


- -

8--

e -

WHY IS ROYAL LONDON

DOING THIS? This section explains why we think our proposal will beneft you and Royal London.

Even fairer payouts

We’ll eventually share out all of the remaining UFIB Fund Estate. However, we currently can’t release all of it as soon as we’d like. Tis is because we need to hold some of it back to protect policies like yours against future risks and to meet rules set by our Regulators.

Te UFIB Fund is getting smaller as policies pay out. So the amount of money in the UFIB Fund Estate that we need to hold back is also getting smaller. Tis means we expect that policyholders who remain in the UFIB Fund for longer might receive a larger percentage increase to their Policy Value from the UFIB Fund Estate compared to policyholders in the fund whose benefts are claimed sooner.

We don’t think this is the fairest outcome for policyholders.

Our proposal would mean policyholders like you would get the same percentage increase to their current Policy Values to allow for their share of the UFIB Fund Estate. We think this is an even fairer outcome for policyholders.

We want to implement our proposal before the UFIB Fund gets any smaller. This will allow more policyholders to gain from this.

More certainty

At the moment, the percentage that we’ll increase your Policy Value by from the UFIB Fund Estate is uncertain. Tis is because it depends on factors we can’t predict such as how long the Life Covered lives and the size of the UFIB Fund Estate. If our proposal goes ahead, you’ll have certainty over the size of this percentage increase.Tis means you’ll have more certainty over the amount we’ll pay you or your family when your policy is claimed. 16 | Your guide to our proposal

If our proposal goes ahead, your policy will still be a With Profts Policy. Tis means that the whole of your Policy Value will continue to go up and down with investment performance and other factors.

Sharing the savings

Our proposal is part of a wider series of changes that we plan to make to our business over the next few years. Tese changes will simplify and modernise the way we do things for the beneft of our customers. Tey include modernising internal systems and processes behind the scenes. We also plan to merge the Refuge Assurance Industrial Branch Fund into the Royal London Open Fund at the same time as when we implement our proposal.

Our proposal will help us become a more efcient business. Tis will reduce our costs. We’d be able to share any savings with policyholders like you in the future. We’d do this through lower charges which would mean higher payouts.

Implementing our proposal now allows us to reduce the cost of our proposal. We can spread the cost of implementing our proposal over a larger number of policyholders. Tis avoids placing all the costs on fewer policyholders in the future.

What’s in it for Royal London?

Merging the UFIB Fund into the Royal London Open Fund will make our business simpler to manage. Te changes will help us make Royal London a more modern Mutual Organisation set up for continued success.

If our proposal goes ahead, the Scheme Contribution will be paid out of the UFIB Fund Estate. Te Royal London Open Fund will be responsible for holding enough money in its Estate to protect policies like yours against future risks. Te Scheme Contribution will compensate the Royal London Open Fund for this. We’ll set it at a level that provides a fair return to the Royal London Open Fund policyholders for the risks they’re taking on.


0

0

TIMELINE AND WHAT YOU NEED TO DO

We expect to implement the Scheme at 11:59pm on 31 December 2020. The legal process could take longer than this, so we can’t guarantee the changes would happen on this date.

When you see this symbol you’ll need to complete an action.

By29 May 2020

Tell us what you think

Fill in and return the Feedback Form we’ve included with your information pack or complete the form online to let us know

what you think.

If there are any objections frompolicyholders to any part of our

proposal or the voting Class that we’re proposing,

we’ll tell the Court about these. So please let us know if you have any comments as soon

as possible.

1 Jul 2020 (provisional)

We’ll ask the Court for approval to go

ahead to make a formal ofer

We’ll review what you tell us, and if policyholders like you are supportive of our proposal, we’ll

take it to the Court to ask for approval to go ahead and make a formal ofer. Tis is called the

Convening Hearing.

Jul 2020 - Oct 2020

You vote on our formal ofer online or by post

If the Court gives us the go ahead at the Convening Hearing, we’ll write to you again later this year with a

formal ofer that we’ll ask you to vote on. Tis will include

more information and a personalised illustration to help

you decide how to vote.

We’ll give you at least eight weeks to vote and you’ll be able

to do so by post, online or at the Policyholder Meeting.

Feedback window is now open


Oct 2020

You can attend the Policyholder

Meeting and vote in person

Tere will be a Policyholder Meeting where you can hear about our formal ofer and

vote on it in person.

Te date and venue for the Policyholder Meeting would be

confrmed nearer the time.

Nov 2020

A fnal decision is made by the

Court at the Sanction Hearing

If policyholders like you vote in favour of our proposal, we

would go back to the Court and ask for its fnal approval at the

Sanction Hearing.

We’ll explain what happened at the Policyholder Meeting and the result of the vote

to the Court.

Te timing of the Sanction Hearing would be confrmed

nearer the time.

31 Dec 2020

We expect to implement the

changes onthis date

If the Court approves the Scheme of Arrangement at the Sanction Hearing, we expect to implement the changes

on 31 December 2020.

We’d write to you again in early 2021 to confrm that

the changes have been made and the efect on your Policy Value and Guaranteed

Minimum Amount.

Important – even if you don’tvote, the result of the vote at the Policyholder Meeting will applyto you. You can fnd out moreabout the voting arrangementson page 23.


IMPORTANT LEGAL INFORMATION

This section contains important information about the legal process we’d use to make the changes.

To put our proposal into practice, we plan to follow a legal process called a Scheme of Arrangement (or Scheme). Tis process gives policyholders like you, who we refer to as Eligible Policyholders in this section, the right to vote on the Scheme. We can only implement the Scheme if the Court approves it. Our Regulators and the Independent Expert will also be involved in the process.

What is a Scheme of Arrangement? A Scheme of Arrangement allows a company, like Royal London, to enter into a binding agreement with its creditors (in this case, Eligible Policyholders) and is available under Part 26 of the Companies Act 2006.

To be approved, enough Eligible Policyholders will need to vote in favour of it. We can’t go ahead with the Scheme unless enough Eligible Policyholders vote for it. We also need the Court to approve the Scheme.

Sending you this booklet is the frst step in the process. We’ve broken down the remaining steps on the next two pages.

What is a voting Class? We propose that policyholders like you with a policy in the UFIB Fund vote together in a single Class.

Class is a term which we use to describe the group of Eligible Policyholders who vote together on the Scheme. Eligible Policyholders can vote together in one Class if their existing rights and the way the Scheme will afect them are similar enough that they are able to consider, talk about and vote on the Scheme together. We think this is the case for Eligible Policyholders in the UFIB Fund (who will all receive the same Uplift and Special Bonus, in percentage terms, if the Scheme goes ahead). Terefore we propose that there should be one Class.

If agreed at the Convening Hearing, there will be one Class of Eligible Policyholders who will be able to vote on the Scheme. Tere will be a Policyholder Meeting where policyholders like you can consider, talk about and vote on the Scheme together. You don’t need to attend the Policyholder Meeting to vote – you’ll also be able to vote online or by post.

STEP 1: You tell us what you think about our proposal

After reading your information pack, you let us know what you think about our proposal, including the voting Class we’ve proposed, by completing the Feedback Form or going online to royallondon.com/scheme2020

If policyholders like you tell us that they are supportive of our proposal,we’ll move to the next step (the Convening Hearing). If other policyholderswant us to move forward, but you object to our proposal, we’ll share yourviews with the Court at the Convening Hearing.

STEP 2: We consider your views

STEP 3: Our proposal isconsidered at the Convening Hearing

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STEP 4: We provide youwith more information on our proposaland its impact on you

If policyholders like you are supportive of our proposal, we’ll ask the Court to consider our proposal and the Class we have proposed at the Convening Hearing.

You (or a representative) can also attend the Convening Hearing and present your views to the Court. We’ve provisionally arranged for the Convening Hearing to take place at the High Court of Justice in England and Wales at the Rolls Building, Fetter Lane, London, EC4A 1NL on 1 July 2020.

If the Court is happy for us to proceed, it’ll agree at the Convening Hearing that we can provide you with a formal ofer for you to vote on and will allow us to hold the Policyholder Meeting.

To help you make your decision and cast your vote, we’ll give you more detailed information on our proposal. We’ll also give you a personalised illustration showing you how we’d expect our proposal to afect your policy if it goes ahead.


https://royallondon.com/scheme2020

STEP 5: You vote on our proposal

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You’ll be able to vote online, by post or in person at the Policyholder Meeting. If enough Eligible Policyholders vote in favour of our proposal, we’ll move to the next step.

It’s important to note that you’ll be bound by the result of the vote. This means that if you don’t vote, the outcome will still apply to you. You won’t be able to “opt out”.

If Eligible Policyholders do not vote in favour of our proposal, the Scheme process ends and our proposal will not be taken forward.

STEP 6: The Court decides whether our proposal cango ahead at the Sanction Hearing

If the vote is passed,the fnal step in the Scheme process is the Sanction Hearing where the Court would be asked to approve the Scheme and confrm that we should go ahead with our proposal.

You can attend the Sanction Hearing and present your views to the Court either in person or through a representative. If you don’t raise concerns about the voting Class at the Convening Hearing, you could still raise objections at the Sanction Hearing. However, the Court will expect some good reasons why you didn’t object to the voting Class at an earlier stage.

The Sanctions Hearing would take place at the High Court of Justice in England and Wales at the Rolls Building, Fetter Lane, London EC4A 1NL. We’d confrm the date in advance, but currently expect the Sanction Hearing to take place in November 2020.

If approved, the Scheme would become efective on a date agreed by the Court. We expect this date to be 31 December 2020. We’d write to you again in early 2021 to confrm that the changes have been made and the efect on yourPolicy Value andGuaranteed Minimum Amount.

What can you do if you object to our proposal or disagree with the Class we’re proposing? You can give us your views on the Class composition or any other part of our proposal using the Feedback Form provided. If you disagree with our voting Class proposal, you should tell us using the comments box in the Feedback Form and we will let the Court know.

We’ll inform the Court at the Convening Hearing of comments or objections that we receive. If you wish, you (or a representative) can also attend the Convening Hearing.

How will the voting work? We’re proposing that there will be one voting Class so that Eligible Policyholders in the UFIB Fund will vote together on our proposal. Everyone voting will be able to vote online, by post or in person at the Policyholder Meeting. After the Policyholder Meeting, we will count up the votes cast at the meeting and the relevant postal and online votes we receive.

In order for the vote to pass, the Scheme must be approved by:

• More than half (greater than 50%) of the Eligible Policyholders who vote (we call this the Number Test); and

• Tose Eligible Policyholders voting for the Scheme must represent at least three quarters (75%) of the total value of all the votes cast (we call this the Value Test). We explain how we will work out the value of your vote below.

If the vote passes, we’ll move to the next step (Step 6) where the Court will decide whether to approve the Scheme.

What happens if the required majority of Eligible Policyholders don’t vote for the Scheme? If the required majority of Eligible Policyholders don’t vote for the Scheme, the Scheme will not go ahead. In that case, everything will stay as it is today.

We explain what happens if the Scheme doesn’t go ahead on page 9 of this booklet.

How will we work out the value of your vote? Te value of your vote for the purpose of the Value Test (your Voting Value) will be based on the Policy Value of your Eligible Policy (or Eligible Policies). We will provide further detail on how your Voting Value has been calculated in the information pack that we’ll send later this year (if policyholders like you are supportive of our proposal).


What happens if you have more than one Eligible Policy? If you have multiple Eligible Policies in the UFIB Fund, you will have one vote for the purpose of the Number Test.

For the purpose of the Value Test, your Voting Value will refect all of your Eligible Policies in the UFIB Fund. We’d notify this to you in writing at Step 4.


https://representative.If

YOUR QUESTIONSANSWERED

We’ve answered some important questions you might have here, however we understand that you may have more questions. If you don’t see the answer you need below, please call us on 0345 600 4116 (or 01625 718330 if you’re calling from outside the UK) between 8am and 6pm Monday to Friday (excluding bank holidays). You’ll need your policy number(s) which you can fnd at the top of the letter included with your information pack.

If you have a trusted family member or friend that you want to call us on your behalf, that’s no problem as long as you’re with them so that we can check that it’s okay with you frst.

How do I know if I’d be better of with your proposal, or with how things are today? We’ve included the Margaret example in the What our proposal could mean for you section on page 12 of this booklet to help you understand the diference between what your policy could pay out if our proposal does or doesn’t go ahead.

As you’d still have a With Profts Policy, we cannot be certain what we’d pay out when your policy is claimed. However, our proposal would give you more certainty over your fnal payout.

If policyholders like you are supportive of our proposal, we’ll send you another information pack later this year. Tis will include our formal ofer and a personalised illustration to help you understand what our proposal could mean for you.


What happens if my benefts are claimed before the proposal takes efect? Our proposal wouldn’t apply to you if any of the following happens before we implement our proposal:

• Te Life Covered dies;

• You cash in your policy and take your benefts; or

Your Endowment Policy reaches the end of its policy term. • The Life Covered has died. What should I do? We’re sorry to learn that the Life Covered has passed away. Te Life Covered’s next of kin should call us and we’ll talk them through what they need to do. Please make sure they have the Life Covered’s death certifcate when they phone.

Alternatively they can visit our website royallondon.com/existing-customers/help-and-support/make-a-claim/tell-us-about-a-bereavement where they can arrange for a member of our bereavements team to call them at a time that suits.

I have more than one policy with you. Why aren’t all of my policies listed in my letter? Our proposal only applies to With Profts Policies in the UFIB Fund. Any policies you have in our other With Profts Funds are not afected by our proposal. However, we may write to you in the future proposing similar changes to our other closed With Profts Funds.

How do I know this isn’t a scam? We understand that everyone needs to be cautious these days. If the name Royal London doesn’t ring any bells, we’re the largest mutual life, pensions and investment company in the UK. We’ve been looking after your policy since it transferred to us from the United Assurance Group in 2001. So you feel safe that we’re not trying to scam you, you can fnd us registered with the Financial Conduct Authority here: register.fca.org.uk.

I’ve changed my contact details. How can I notify Royal London? Please give us a call to change your contact details. Tere may be certain documents we need to update your details.

Will the proposal change the UK tax treatment of my policy? Our proposal will not change the treatment of your policy for UK tax purposes.


https://royallondon.com/existing-customers/help

I’ve appointed a person under a power of attorney to look after my afairs. Do I need to tell them about this? If you’ve told us about the person that you’ve appointed under your power of attorney previously, this information pack has been sent to them to act on your behalf. If our proposal goes ahead and we make you a formal ofer later this year, the person appointed under a power of attorney will be able to vote on your behalf.

If you’ve appointed a person under a power of attorney but haven’t told us about it yet, please call us so we can keep their information on fle. You should then tell that person about our proposal and discuss this information pack with them.

I’m authorised to act on behalf of the policyholder under a power of attorney. What should I do now? You, the attorney, should read this information pack carefully and then respond on the policyholder’s behalf. You’ve received this pack because our records show that:

• You’re the policyholder’s attorney;

• If there’s more than one registered attorney, you’re the most recently registered attorney; or

• Where more than one attorney was recorded at the same time, you’re listed frst.

You may not be the only attorney to have been appointed by the policyholder. Please check the terms of your appointment and if you know of anyone else appointed as an attorney, please also share and discuss this pack with them.

I’m bankrupt or about to be declared bankrupt. Do I need to tell anyone about this? If you have been declared bankrupt, ownership of your relevant Eligible Policies may have automatically transferred to the trustee in bankruptcy. If this applies to you, you should share this pack with them. If you’ve been declared bankrupt recently or you think we may not be aware of your bankruptcy, please get in touch with us.

Do I need to discuss this with the policy benefciary? You may wish to share this pack with them, but you don’t need to.


GLOSSARY The fnancial services industry probably isn’t the frst place you’d look to fnd plain English – there’s lots of jargon and gobbledygook in how we need to describe your policy and our proposal. We’ve tried to make sense of the key terms in here, so please use this as a reference guide when you need to.

Term Defnition Actuary Someone who uses mathematical skills to measure risk and

estimate its fnancial impact.

Annual Bonus Gradual increases to the Guaranteed Minimum Amount we promise to pay out. Once added, an Annual Bonus becomes part of your Guaranteed Minimum Amount and cannot be taken away.

Chief Actuary The individual with responsibility for the actuarial function of Royal London. This involves ensuring that the risks that Royal London are exposed to are understood and monitored on a regular basis to ensure Royal London is able to meet its liabilities to policyholders and its regulatory capital requirements.

Class A group of Eligible Policyholders who vote together on the Scheme.

Convening Hearing The Court hearing where the Court is asked to approve the convening of the Policyholder Meeting.

Court The High Court of Justice in England and Wales, which will consider and, if thought ft, approve the Scheme at the Sanction Hearing.

Eligible Policies With Profts Policies in the UFIB Fund.

Eligible Policyholder The legal owner of the Eligible Policy.

Endowment Policy A policy that pays out at the end of a set period of time or upon the death of the Life Covered if earlier.

Estate A pot of money in a With Profts Fund that With Profts Policyholders who have With Profts Policies in that fund are collectively entitled to a share of.

The Estate is the amount by which the investments of a With Profts Fund are greater than the Policy Values of the With Profts Policies in that fund.


Feedback Form A form that you can use to provide us with your feedback on our proposal, including the voting Class. The Feedback Form is included in your information pack.

Final Bonus The bonus that is added to your payout if your Policy Value is greater than your Guaranteed Minimum Amount.

The size of the Final Bonus depends mainly on the performance of investments in the UFIB Fund and it also allows for your share of the UFIB Fund Estate.

Financial Conduct Authority (FCA)

The Financial Conduct Authority is one of Royal London’s Regulators. Its objectives are to secure an appropriate degree of protection for consumers, to protect and enhance the integrity of the UK’s fnancial system, and to promote efective competition in the interest of consumers.


The minimum amount that your policy will pay out as long as you’ve paid your Premiums. It’s made up of your Sum Assured and any Annual Bonuses that have been added.

Independent Expert An experienced senior Actuary who will review our proposal for fairness and provide a report to the Court. The Independent Expert has a duty to the Court and does not work for Royal London.

Industrial Branch With Profts Policy

With Profts Policies which, when taken out, typically had a Premium receipt book as well as a policy document. Premiums were typically payable to a door-to-door collector.

Life Covered The person on whose life the life insurance policy is based.

Mutual Organisation A company which doesn’t have shareholders – its members are its customers. The profts of a Mutual Organisation may be shared amongst its With Profts Policyholders and its members, or reinvested in the organisation to give better returns or lower charges.

Number Test One of the tests that must be passed in order for the Scheme to be implemented. The Number Test is passed if more than half of the Eligible Policyholders who vote on the Scheme vote in favour of the Scheme.

Periodic Payments A feature of some of our Whole of Life Policies. Periodic Payments are cash amounts paid out every 5 years. You might also hear them called Periodic Endowments or Quinquennial Payments.

Policy Value We calculate the Policy Value of your With Profts Policy as the Premiums you paid and any investment returns earned, minus deductions Royal London makes to cover expenses and the costs of providing benefts and guarantees.

Policyholder Meeting The meeting of Eligible Policyholders convened by the Court to consider and, if thought ft, to approve the Scheme.

Premium Regular payments you promise to make to us in exchange for the benefts that your policy provides.

It may be that you’ve now stopped paying Premiums. This could be because you decided to stop paying Premiums, or because you reached the end of the Premium payment term of your policy.

Principles and Practices of Financial Management (PPFM)

A document maintained by an insurer which describes how a With Profts Fund is managed.

Prudential Regulation Authority (PRA)

The Prudential Regulation Authority is one of Royal London’s Regulators. The PRA is responsible for the prudential regulation and supervision of banks, building societies, credit unions, insurers and major investment frms in the UK.

Refuge Assurance Industrial Branch Fund

This is one of Royal London’s closed With Profts Funds.

Regulators The Financial Conduct Authority and the Prudential Regulation Authority.

Royal London The Royal London Mutual Insurance Society Limited.

Royal London Board The board of directors of Royal London.

Royal London Open Fund

Our largest With Profts Fund. This fund is still open to new policies.

Sanction Hearing A meeting of the Court to consider whether to sanction the Scheme.

Scheme of Arrangement (or Scheme)

A legal process which allows a company like Royal London to enter into an arrangement with some or all of its creditors (in this case, the Eligible Policyholders) to change legal rights under an existing agreement with those creditors.

Scheme Contribution If the Scheme goes ahead, we’ll merge the UFIB Fund into the Royal London Open Fund and the Royal London Open Fund will take on responsibility for holding back enough money to protect policies like yours against future risks.

In exchange for this, and to help cover costs associated with our proposal, a payment (the Scheme Contribution) will be taken from the UFIB Fund Estate and paid to the Royal London Open Fund.

We’ll share out all of the UFIB Fund Estate (minus the Scheme Contribution) at once with policyholders like you when we implement our proposal.


Smoothing Smoothing is one of the main features of With Profts Policies and we use it to determine payouts.

We try to add Final Bonuses in a way that softens the impact of sudden movements in a fund’s underlying investments. Instead of adding big Final Bonuses in good years and small or no Final Bonuses in bad years, we try to smooth them out. So we hold back some of the investment gains earned during good years, and release them as bonuses when returns have been poorer or when the fund has made a loss.

We aim for the efect of Smoothing to cancel itself out over the long term. This means that, over time, the amounts we hold back in good years should ofset the amounts distributed as bonuses in bad years.

Special Bonus A one-of increase to the Guaranteed Minimum Amount we promise to pay out. Once added, a Special Bonus becomes part of your Guaranteed Minimum Amount and cannot be taken away, in the same way as Annual Bonuses.

Sum Assured The minimum amount we guarantee to pay out when your policy is claimed, excluding any bonuses, in exchange for your Premiums.

United Assurance Group (UAG)

United Assurance Group, which consisted of United Friendly and other companies writing non-proft business and/or other non-life assurance business.

United Friendly United Friendly Insurance plc.

United Friendly Industrial Branch Fund (UFIB Fund)

The United Friendly Industrial Branch Fund. This is one of Royal London’s closed With Profts Funds.

Uplift The percentage by which we’ll increase your current Policy Value if our proposal goes ahead.

We’ll also apply the Uplift to the value of the benefts bought by any Premiums you might pay after we implement our proposal. The Premium amounts paid under your policy wouldn’t be afected by the Scheme.

Value Test One of the tests that must be passed in order for the Scheme to be implemented. The Value Test is passed if those Eligible Policyholders voting in favour of the Scheme represent three quarters (75%) or more of the total Voting Value.

Voting Value The value of your vote for the purpose of the Value Test (your Voting Value) will be based on the Policy Value of your Eligible Policy (or Eligible Policies). We will provide further detail on how your Voting Value has been calculated in the information pack that we’ll send later this year (if policyholders like you are supportive of our proposal).

Whole of Life Policy A policy that pays out when the Life Covered dies.

With Profts Actuary The Actuary responsible for advising the directors of Royal London on the discretionary aspects of with profts business.

With Profts Committee A committee charged with considering the interests of all of Royal London’s With Profts Policyholders. It exercises independent judgement when advising the Royal London Board on how to treat With Profts Policyholders fairly.

With Profts Fund A fund that contains With Profts Policies.

With Profts Policy An insurance policy designed to help you save for a rainy day or help cover expenses when the Life Covered dies. Your Policy Value changes with movements in investment markets and other factors such as the Premiums you pay, any deductions we make and the amount of Smoothing we apply. However, there is a Guaranteed Minimum Amount the policy will pay out as long as you pay your Premiums.

With Profts Policyholder

The holder of a With Profts Policy.


·r· United Friendly Industrial Branch With Profts Policies were taken out when collectors came door-to-door. Some of our policyholders have moved house in the years in between, and we may no longer have current address information for them. If you’re still in touch with your neighbours from around the time you took out your policy and there’s a chance they might have one of these policies too, please mention this information pack and encourage them to get in touch with us on 0345 600 4116 (or 01625 718330 if they’re calling from outside the UK).

We’re happy to provide your documents in a dif erent format, such as Braille, large print or audio – just ask us by calling 0345 600 4116 (or 01625 718330

if you’re calling from outside the UK).

Royal London Royal London House, Alderley Rd, Wilmslow SK9 1PF

royallondon.com

The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. It provides life

assurance and pensions and is a member of the Association of British Insurers and the Association of Financial Mutuals. Registered in England and Wales number 99064.

Registered ofce: 55 Gracechurch Street, London, EC3V 0RL.

XXXX 2020 FUNDCON GUIDE 2020

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Documents

Your guide to our proposal - Royal London Group · 2020. 3. 12. · Our proposal 6 . We explain our proposal in more detail and how it would afect your . With Profts Policy. What