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Fix for 5 years for a great rate with us.

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Provides a secure income over a set term, with a guaranteed value at maturity

Protected Retirement Plan

Fixed Term Annuity FAQs

Can my client transfer their plan?

Yes. Our conversion option allows your client to end their existing plan and transfer out at any time. So they won't have to wait until their plan is due to end if they don't want to. They can transfer out to another retirement product or take as a taxable cash lump sum at any time, for any reason, as long as financial advice has been given. Please note the amount we pay when they convert their plan may be a lot less than the guaranteed maturity value they would have received if they had kept their plan for the full term agreed when it was set up.

All customers automatically qualify for this feature when they take out a fixed-term annuity with us, so there’s no need to opt in and there’s no extra charge.

How is the transfer value calculated?

To calculate the current value, we look at what the investments we bought when your client took out the plan can now be sold at. If the price has gone down we take the difference away from the guaranteed maturity value we would have paid out had they waited until the maturity date. If the price has gone up we will add the difference to the guaranteed maturity value we would have paid.

Your client may take the transfer value as a lump sum payment which will be taxed as income.

We won’t apply any fees or penalty to convert your client’s plan.

Please note the amount we pay when they convert their plan may be a lot less than the guaranteed maturity value they would have received if they had kept their plan for the full term agreed when it was set up.

How are the benefits under the Fixed Term Annuity guaranteed?

The LV= Protected Retirement Plan has a Guaranteed Maturity Value (GMV) and LV= reserves capital to back this guarantee.

The Protected Retirement Plan doesn’t allow your client a choice of how their money is invested and so any risk is born by LV= and is factored into the pricing of the plan. Due to this, the benefits payable to your client aren’t affected by any investment returns after the plan starts.

Funds are invested on behalf of LV= by Threadneedle Asset Management (Threadneedle) at the start of the plan, and are placed into fixed interest investments such as corporate bonds. This means any risk relates to the possibility of default rather than a change in value related to stock market movements. Funds will be invested to match the cash flow requirements of the LV= portfolio of Protected Retirement Plans and as such, plans are not linked to a single investment. This is similar to how we buy assets to cover a portfolio of lifetime annuities.

How is the money invested?

The money is invested by Threadneedle Investment Services on behalf of LV=. Generally, this means investing in fixed interest investments such as corporate bonds to match the plan liabilities. We factor elements of risk into our plan pricing and rates. From your client’s perspective, there’s no impact as their benefits are fixed at outset.

What is the current maximum income allowable under GAD and ...

... what happens if a client’s income is more than the maximum limit?

From 6 April 2015, this only applies if your client is transferring in from a capped drawdown scheme.

We may have to restrict a client’s chosen income, or their beneficiary’s income, as a result of applying limits set by law and the Government Actuary’s Department (GAD) unless flexi-access drawdown is chosen. The limit is based on an individual’s age, pension fund size and the annuity rates set by GAD. At each income review date we have to review the client’s income, or their beneficiaries income, to make sure we don’t pay more than 150% of the GAD limit (which we call the ‘GAD maximum’). Also, at each GAD review date, which is normally every 3 years until your client reaches age 75 and yearly thereafter, we have to calculate a new GAD maximum.

If we do have to restrict a client’s or beneficiary’s income, we’ll tell them. We’ll pay the difference between the income they have chosen and the income we pay when the plan ends. We’ll also show this amount in the yearly statements. When the plan ends we’ll also add interest to this amount.

How are Fixed Term Annuity benefits taxed?

The income we pay your client and their beneficiary will normally be taxed under Pay As You Earn (PAYE) system. This is similar to tax on employment income.

We will deduct tax according to their tax code on their P45 and pass the tax on to HM Revenue & Customs.

Any lump sum payable under value protection is taxed at source.

If the annuitant dies before age 75, the amount will be paid tax-free.

If they die at age 75 or older, for tax year 2015/16 only the amount will be taxed at 45%; From 2016/17 it will be taxed at the nominated beneficiary’s personal rate of income tax.

In order to avoid the possibility of a further charge to inheritance tax, where possible we’ll exercise our discretion when selecting who should receive any lump sum death benefit, although the annuitant’s wishes will be taken into account.

Tax treatment depends on your client’s personal circumstances.

For more details on how the benefits from this plan will be taxed, please see the key features document.

Any references to taxation are based on our understanding of current legislation and HM Revenue & Customs practice which can change.

LV=, County Gates, Bournemouth, BH1 2NF, UK