No. No policyholder funds will be transferred to Bain Capital, though Bain Capital will, subject to maintaining adequate capital to support policyholder benefits, be able to receive profits generated from the non-profit business. After the Part VII transfer, the With-Profits Fund will be ring-fenced giving legal protections so that the money within it will only be for the benefit of customers in the With-Profits Fund.
Only in extreme circumstances, such as if the company within which the fund sits was to become insolvent, could some of these protections fall away.
Bain Capital will take responsibility for investing all policyholder assets (With-profits and non-profit) but will not be able to make use of policyholder assets for any other purpose.
If our proposals go ahead in full, we expect the legal and regulatory processes to complete by 1 October 2022. Therefore, after this date members holding eligible LV= With-profits policies will begin to receive a payout enhancement when their policy ends or they start receiving an income from it. Members whose eligible LV= With-profits policy comes to an end after 10 December 2021 (the date of our Special General Meeting) but before 1 October 2022, will receive their payouts retrospectively.
The enhancement will be added to policy payouts whenever they occur, which would include - lump sum payments on death, surrender or maturity, and regular income or partial withdrawals from relevant With-profits products. The enhancement will be reviewed periodically, may go up as well as down, and is not guaranteed. The enhancement will not be added to policies where guaranteed benefits exceed the underlying value.
All eligible members are expected to benefit from a one-off member payment. For LV= With-profits members, the transaction delivers an excellent financial outcome giving them greater security by:
Over the last few years the Board has reviewed and considered other alternative options prior to the strategic review; including a restructuring of our funds and business. These options did not generate significant benefits in line with the 'business as usual' plan. Nor would they have compared to the Bain Capital proposals in achieving the best outcome for our members, our brand and our people.
The Bain Capital team leading the transaction with LV= has a strong track record of successfully growing and supporting similar savings, retirement and protection insurance businesses.
Specifically, they have experience in life insurance demutualisation transactions globally.
If members approve our proposals and the legal and regulatory processes are completed, Bain Capital, for an expected £530m plus interest, will own:
The With-Profits Fund will be ring-fenced and closed to new business, and comprise the LV= Fund (LV= With-profits business and liabilities) and the two existing ring-fenced funds for RNPFN and Teachers Assurance.
Bain Capital will support the leadership team to grow the company, so the strong and vibrant LV= brand continues to attract customers and financial advisers.
There are five areas of focus:
The Court, or the High Court of England and Wales, is the final approver of the Scheme of Arrangement. This is because it is a formal legal process which requires Court approval.
If Vote 2 is passed we will seek the Court’s approval for the Scheme of Arrangement. The Scheme of Arrangement will only become effective once we have this approval.
The Court process for the Part VII transfer will be communicated to members if both Votes 1 and 2 are successful.
If members vote in favour of Vote 1, but do not agree to Vote 2, the transaction with Bain Capital would still go ahead, but in a different way. We would not be able to complete a legal process known as a Part VII transfer, which the Board believes is the most efficient way for Bain Capital to acquire LV= and has the most benefits for members. All future new LV= business would be sold by a company owned by Bain Capital, however existing policies would have to remain in LVFS - which would still be a mutual. The business would incur higher costs as a result of a more complicated business model.
Therefore the one-off member payment would reduce from £100 to £60 to reflect these higher costs. We expect members holding an eligible LV= With-profits policy would still receive the same payout enhancement.
Bain Capital will support LV= management in its existing UK corporate responsibility agenda. LV= already has a strong focus that aligns to four areas:
As part of our proposals, it is expected that Bain Capital will take on the responsibility for investment management services for our customers' assets. Bain Capital will propose a new investment manager which will be subject to LV=’s approval, and LV= will ensure that the proposed manager is appropriate before granting this approval. The new investment manager will have a direct impact on policyholder outcomes and, as such, will require approval by the With-Profits Committee and the Investment Committee, who comprise a majority of independent members.
The Board of Liverpool Victoria Life Company (LVLC) will oversee the investment management, with continuing input and recommendations from the Investment Committee and the With-Profits Committee.
In addition, the With-Profits Committee would have strengthened powers of non-objection for any key changes in the management of the With-Profits Fund. This includes changes to the Principles and Practices of Financial Management (PPFMs) or run-off plan, changes in the approach to distributions, material changes to the investment strategy and strategic investments.
Our Articles of Association govern whether or not a customer is eligible for membership. A copy of these can be found at LV.com/future. In general, if you hold certain life and pension products you are eligible to be a member. A list of these products can be found here.
To qualify for the payment, members must have a policy in place at the date of the Special General Meeting (SGM) on 10 December 2021.
Also, they must have taken out a policy or submitted an application for a new policy before 1 March 2021.
All eligible members would receive a one-off payment of £100. To qualify for the payment, members must have a policy in place at the date of the Special General Meeting (SGM) on 10 December 2021 and it must have been taken out (or application submitted) before 1 March 2021.
If the transaction still goes ahead but we can’t complete in our preferred way (as proposed in Vote 2), the one-off member payment will reduce to £60 to reflect a more complex and costly business structure.
Members holding eligible LV= With-profits policies only, would also receive an expected payout enhancement of 0.1% for every complete calendar year that a policy has been held since 1996. The payout enhancement will be reviewed on a regular basis and it is not guaranteed. More information about payout enhancements for With-profits policyholders can be found here.
If our proposals go ahead in full, we expect the legal and regulatory processes to complete by 1 October 2022. The payment would then be given to eligible members shortly after this. If our proposals do not go ahead in full this will affect the timing of the payment.
We expect the one-off member payment to be taxed under Capital Gains Tax rules. However, as the payment will be less than the annual Capital Gains Tax allowance, there should not be any tax to pay unless you have used your allowance or the payment takes you over the threshold. There will be no change to the way tax is attributed to policy benefits. The payout enhancement will not be treated any differently from other policy benefits.
We are a small business with a large number of members and every one of our eligible 1.16million members, both With-profits and non-profits, will receive £100 if our proposals go ahead in full. This payment is also supported by the Independent Expert, who assessed the transaction in full and concluded that the amounts proposed are fair and reasonable. It would be unfair to our With-profit members to pay more than £100 to non-profit members as this would have reduced the amount that they received.
The £530million being paid by Bain Capital broadly replaces the value of the business already allowed for in the LV= Inherited Estate. In total £212million is expected to be distributed to members which is in addition to the £404m we expect to distribute to With-Profits members following the sale of the General Insurance business.
There will be no change to your policies as a result of this. We will continue to look after you and process any claims you may need to make in the same way as we do today.
If the transaction with Bain Capital completes, your policies will also still be protected by the same safeguards. Liverpool Victoria Life Company Limited (LVLC) will continue to be regulated by the FCA and the PRA in the UK, just as Liverpool Victoria Financial Services Limited (LVFS) is, and your policies will continue to be covered by the Financial Services Compensation Scheme.
There will be no change to your Equity Release policy, including the terms and options within it, as a result of the proposed transaction for Bain Capital to purchase the LV= life and pensions business. We'll continue to look after you in the same way as we do today.
As an Equity Release policyholder you are classed as a customer rather than a member. As a result of this you don't have member voting rights and won't be able to cast a vote on the proposals. You also won't be eligible to receive the one-off member payment or payout enhancement. However you'll still be able to enjoy certain member benefits which are available to you – Care Navigator and LV= Doctor Services.
If the transaction with Bain Capital completes, your policy will also still be protected by the same safeguards.
A With-profits policy is a long-term insurance or investment product which is eligible to receive bonuses at the discretion of the Board. You can find a list of our products here.