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For a personal pension, stakeholder pension, s226 retirement annuity or FSAVC pension open market option

ANNUITY POLICY FOR AN OPEN MARKET OPTION FROM A: PERSONAL PENSION SCHEME, STAKEHOLDER PENSION SCHEME, S226 RETIREMENT ANNUITY CONTRACT OR FSAVC SCHEME

This is your annuity Policy. It contains the full legal explanation of your annuity and the Policy Conditions – that is, the contractual terms and conditions – relating to it.

The Policy outlines our understanding of the tax treatment and regulations governing the annuity in force at the date the Policy is issued. It is important to understand that like all legislation, the tax treatment and other provisions can change in the future.

A number of specific words and expressions are used in this Policy. These words and expressions are shown in bold print and their meanings are set out in section C of the Policy.

ADDRESS FOR CORRESPONDENCE

Please address any letter about this document, called the "Policy", to:

Adviser Annuity Acceptance, Prudential, Stirling FK9 4UE

IMPORTANT

This Policy is a general-purpose open market option policy. It describes a variety of options, features and benefits. Some of these may not be relevant to the annuity you have purchased. The Policy needs to be read alongside the accepted Annuity Quotation in order to understand the particular options, features and benefits that apply.

Please keep this Policy in a safe place, along with the accepted Annuity Quotation, the Statement of Benefits and the Key Features document.

INTRODUCTION

You have decided to start your pension under a Scheme – which is a personal pension scheme, a stakeholder pension scheme or an FSAVC scheme – or under your retirement annuity contract.

Alternatively, if you have already started your pension under the Scheme in the form of an unsecured pension or an alternatively secured pension, you have decided to replace that pension with a lifetime annuity.

As part of this decision, you have exercised your open market option – an option which enables you to purchase your lifetime annuity with a different insurer from the provider of the Scheme or retirement annuity contract. You have chosen Prudential as the provider of your lifetime annuity.

The administrator, manager or trustee(s) of the Scheme or the provider of the retirement annuity contract has paid Prudential a premium in respect of your pension entitlement. As a result, Prudential will set up a lifetime annuity for you, and you can start to receive your pension.

You will receive (or have already received) other documents from us. These include the following:

Please read these documents and the Policy carefully. They all contain important information. You should keep them all in a safe place, and make sure that the people who will handle the affairs of your estate if you die know where they are.

2. IMPORTANT NOTES

Contracting-out benefits – protected rights pension

This Policy covers protected rights pension, which is a type of pension that can arise if you were contracted-out of the State Second Pension or its predecessor, the State Earnings-Related Pension Scheme, under the Act. Contracting-out benefits may arise by being contracted out through the Scheme or through having transferred benefits from a previous employer’s occupational pension scheme to the Scheme. Annuities from retirement annuity contracts do not include contracting-out benefits.

If the Annuity Quotation does not show any protected rights pension then your annuity will not include any contracting-out benefits and you should therefore disregard all references to protected rights pension.

Annuity terms to be in accordance with the provisions of the Scheme or retirement annuity contract

Some of the terms – such as the level of increases to pensions and guarantee periods – chosen for your annuity must be permissible under the provisions of the Scheme or the retirement annuity contract. At the time when the Annuity Quotation is accepted, we require confirmation that the accepted terms are permissible. We cannot accept any liability if they are not allowed under the provisions of the Scheme or retirement annuity contract. If we discover that any of the terms of your annuity do not comply with those provisions, we may have to change the amount and/or terms of your annuity. See also section D14 of this Policy.

Lifetime allowance

At the time when the Annuity Quotation is accepted, we require confirmation that the value of the benefits does not exceed the Lifetime Allowance.We cannot accept any liability if it is later discovered that your available Lifetime Allowance has been exceeded and you have become liable to pay a Lifetime Allowance Charge. 5

GENERAL

Subject to section D14, we have agreed to provide the benefits described in the Policy and the Annuity Quotation. The agreement results from the payment by the administrator, manager or trustee(s) of the Scheme or the provider of the retirement annuity contract to buy benefits for you following your exercise of the open market option under the Scheme or under the retirement annuity contract.

AGREEMENT FOR FIRST ANNUITANT TO DEAL DIRECTLY WITH PRUDENTIAL AND DECIDE CERTAIN TERMS OF THE CONTRACT

The Policy has been set up for your benefit. It is designed to allow you to deal directly with us and to allow you to decide certain terms of the contract (where mentioned in the Policy). The Policy is therefore sent to you or your financial adviser for safekeeping.

POLICYHOLDER

The policyholder will be either:

ADDITIONAL AGREEMENT WHERE FIRST ANNUITANT IS POLICYHOLDER

Although the contract was entered into by the administrator, manager or trustee(s) of the Scheme or by the provider of the retirement annuity contract, the Policy has been set up solely for your benefit and the benefit of any dependants stated to be so entitled. This agreement is designed to give you direct contractual rights with us. The administrator, manager or trustee(s) of the Scheme or the provider of the retirement annuity contract have determined that all contractual rights under the Policy are to be enforceable only by you, the first annuitant or such other person who may be entitled to receive the benefit, and not by the administrator, manager, trustee(s) or provider. B AGREEMENT

MEANING OF WORDS

In the Policy the words "Prudential "we", "us" and "our" refer either to:

The words "you" and "your" refer to the first annuitant being the client named in the Annuity Quotation.

The "annuitant" is a person receiving an annuity. This can refer either to you or to your spouse, civil partner, or other dependant as defined below, depending on the context and circumstances.

Act

This is the Pension Schemes Act 1993.

annuity change date

This is the date on which we change the amount of a fixed increase annuity, an LPI annuity, an RPI-linked annuity or a With-Profits annuity under section D6. The annuity change date will be the anniversary of the annuity start date.

Any change under section D6 is calculated as at the annuity change date and takes effect from that date. Please note, however, that if the annuity is payable "in arrears", the new amount will actually be payable from the next payment date following the annuity change date.

annuity start date

This is the effective date from which the Policy is set up. If the annuity is set up to be payable "in advance", the first annuity starts to be paid on the annuity start date. If, however, the annuity is set up to be payable "in arrears", the first annuity will start on a later date, called the first arrears date. The annuity start date is indicated in the Annuity Quotation and the Statement of Benefits. It will be either:

Annuity Quotation

This is the guaranteed annuity quotation or withprofits annuity illustration provided by us and which has been formally accepted by you, the first annuitant. A copy of the accepted Annuity Quotation is issued with the Policy and the Statement of Benefits as confirmation of the accepted terms.

The accepted Annuity Quotation forms part of the contractual documentation and this Policy needs to be read and understood in conjunction with it. These two documents should be kept together with the Statement of Benefits and the Key Features document.

The Annuity Quotation will be issued either by Prudential Retirement Income Limited or The Prudential Assurance Company Limited.

civil partner

A registered same-sex civil partner. Since 5 December 2005, it has been possible for samesex partners to register in the UK as civil partnerships. Certain provisions that previously applied only to spouses are now extended to civil partners.

first annuitant

The first annuitant is you, being the client named in the Annuity Quotation, and also a member of the Scheme or the owner of the retirement annuity contract.

first annuity

An annual amount payable to you, the first annuitant. The first annuity is the total annual amount (including any protected rights pension) shown in the Annuity Quotation as being payable to the first annuitant.

The first annuity will be, in whole or in part:

More detail on the significance of these different types of annuity is given in section D6. Details of which one or more of these options apply to the first annuity will be indicated in the Annuity Quotation.

first arrears date

If the payments are set up to be paid "in arrears", the first payment will be made after the annuity start date. The actual date of the first payment in this case is the first arrears date. (For payments made "in advance", see the definition of annuity start date and section D1).

fixed increase annuity

This is any part of the first annuity, second annuity or third annuity which is indicated in the Annuity Quotation as being subject to fixed annual increases, and for which the payments will be increase at the same level throughout the life of the relevant annuitant. The rate(s) at which the annuities will increase will also be shown in the Annuity Quotation. The way in which fixed increase annuities are increased is described in section D6.

FSAVC pension

This is pension payable in respect of membership of an FSAVC scheme and it will be relevant to the Policy if the Scheme is an FSAVC scheme.

FSAVC scheme

This is a free standing additional voluntary contributions scheme, which is a registered pension scheme under the terms of the Finance Act 2004. Before 6 April 2006, FSAVC schemes were approved by HM Revenue & Customs under Chapter I of Part XIV of the Income and Corporation Taxes Act 1988.

guarantee period

This is a period during which the first annuity will continue to be paid, notwithstanding the death of the first annuitant within that period. The guarantee period (if any) is set out in the Annuity Quotation. The guarantee period cannot exceed:

Key Features document

This is a document that we issue to you before you decide to buy your your benefits with us. The Key Features document sets out the basic terms and conditions of the contract with Prudential and is designed to help you make your decision about buying your annuity with us. As it sets out the basic features of the contract, the Key Features document forms part of the contract documentation, alongside the accepted Annuity Quotation, the Statement of Benefits and the Policy. The Policy reflects the terms and conditions set out in the Key Features document, but in much greater detail.

level annuity

This is any part of the first annuity, second annuity or third annuity which is indicated in the Annuity Quotation as being nonincreasing, and for which the payments remain at the same level throughout the life of the relevant annuitant.

Lifetime Allowance and Lifetime Allowance Charge

The Government has set a limit for each tax year on the value of the benefits that can be taken from registered pension schemes, above which a liability for a Lifetime Allowance Charge may arise. This limit is called the standard Lifetime Allowance.

The standard Lifetime Allowance for tax years 2006/07 to 2010/11 has been set by the Government and is shown below:

The standard Lifetime Allowance is expected to increase each subsequent tax year.

The standard Lifetime Allowance may, however, be varied in relation to an individual if his or her benefits are eligible for certain protections as authorised by HM Revenue & Customs.

When benefits are taken, the value of the benefits will be compared with the individual's available personal Lifetime Allowance at that time.

If an individual takes benefits valued above his or her personal Lifetime Allowance, the excess (when paid) will be taxed at 25% if taken as pension and at 55% if taken as a cash sum. This charge is called the Lifetime Allowance Charge.

lifetime annuity

A lifetime annuity is an annuity which is guaranteed to be payable for the lifetime of the first annuitant. A lifetime annuity can only be paid under a pension scheme which is a money purchase arrangement and the first annuitant must have been given the opportunity to select the insurance company. Under the Finance Act 2004, pension benefits from registered pension schemes can, depending on the terms of the scheme and the age of the individual scheme member, be paid in the form of: a lifetime annuity, a scheme pension, an unsecured pension or an alternatively secured pension. This Policy is designed to provide a lifetime annuity only.

LPI annuity

This is any part of the first annuity, second annuity or third annuity which has been set up to have "limited prices indexation". This means that the amount paid each year will increase in line with changes in the RPI subject to a maximum specified percentage as set out in the Annuity Quotation.

pension credit rights

If an annuitant becomes divorced (or if his or her civil partnership is dissolved), his or her ex-spouse (or ex-civil partner) may be awarded pension credit rights in relation to the benefits under the Policy.

personal pension

This is a pension payable in respect of membership of a personal pension scheme and it will be relevant to the Policy if the Scheme is a personal pension scheme.

personal pension scheme

This is a personal pension scheme, which is a registered pension scheme under the terms of the Finance Act 2004. Before 6 April 2006, personal pension schemes were approved by HM Revenue & Customs under Chapter IV of Part XIV of the Income and Corporation Taxes Act 1988.

Policy

This document, together with any endorsements, any addenda, or any appendix that we issue to supplement it.

policyholder

As set out in section B3, this means either:

The Statement of Benefits will indicate whether the Policy is written in the first annuitant’s name or the name of the administrator, manager or trustee(s) of the Scheme.

protected rights pension

This is an annual amount paid as a result of the first annuitant being contracted-out of the State Second Pension (or the State Earnings- Related Pension Scheme) on a “money purchase” basis, under section 9(3) of the Act. The protected rights pensions (if any) in respect of the first annuitant, the second annuitant and the third annuitant (if applicable) are shown in the Annuity Quotation. There will be a protected rights pension only if the benefits under the Scheme included this benefit.

Registered pension scheme

A pension scheme or pension arrangement that is registered with HM Revenue & Customs. This gives the scheme or arrangement various tax advantages in respect of payments, investments and benefits.

retirement annuity contract

This is a retirement annuity contract, which is a registered pension scheme under the terms of the Finance Act 2004. Before 6 April 2006, retirement annuity contracts were approved by HM Revenue & Customs under Chapter III of Part XIV of the Income and Corporation Taxes Act 1988 (previously s226 et seq of the Income and Corporation Taxes Act 1970).

retirement annuity pension

This is a pension payable in respect of membership of a retirement annuity contract and it will be relevant to the Policy if the Policy has been set up to buy a lifetime annuity as a result of an open market option from a retirement annuity contract.

RPI

Subject to section D6 (f), this is the Retail Prices Index published by HM Government.

RPI-linked annuity

An RPI-linked annuity is any part of the first annuity, second annuity or third annuity which pays a retirement income linked to changes in the RPI. The income is fixed for the first year and then changes each year in line with changes in the RPI. An RPI-linked annuity will not necessarily increase and may even decrease (see section D6 (f)).

If the annuity is an RPI-linked annuity, this will be indicated in the Annuity Quotation.

Scheme

This is the personal pension scheme, stakeholder pension scheme or FSAVC scheme named in the Statement of Benefits, and of which the first annuitant is a member. This definition is not relevant if the Policy has been set up to buy out benefits under a retirement annuity contract.

second annuitant

This is the first annuitant's legal spouse, civil partner or other dependant. If a dependant is named in the Annuity Quotation, then that named dependant is the second annuitant. The second annuitant may be defined as the first annuitant’s spouse, civil partner or other dependant either at the annuity start date or at the date of his or her death. The definition that applies will be shown in the Annuity Quotation. In the case of any contracting-out benefits, the benefits must always be paid to the spouse or civil partner at date of death (see sections D2 (i) and D3)

second annuity

An annual amount, as shown on the Annuity Quotation, which includes any protected rights pension. There will be a second annuity if the annuity has been set up on what we call a "joint life" basis. If at the date of the first annuitant's death there is a third annuitant (i.e. the second annuitant is no longer the first annuitant’s legal spouse or civil partner and the first annuitant has a new spouse or civil partner), then we will reduce any second annuity by the amount of the third annuity. See section D3.

stakeholder pension

This is pension payable in respect of membership of a stakeholder pension scheme and it will be relevant to the Policy if the Scheme is a stakeholder pension scheme.

stakeholder pension scheme

This is a stakeholder pension scheme, which is a registered pension scheme under the terms of the Finance Act 2004. Before 6 April 2006, stakeholder pension schemes were approved as a personal pension scheme by HM Revenue & Customs under Chapter IV of Part XIV of the Income and Corporation Taxes Act 1988.

Statement of Benefits

This is a document that we issue as confirmation that the contract with us has been concluded and the annuity has been set up. It gives brief details of the benefits. Full details of the amounts of the payments and the options that have been selected are set out in the Annuity Quotation.

third annuitant

This is the first annuitant’s legal spouse or civil partner at the date of the first annuitant’s death, if at that time the second annuitant is no longer his or her legal spouse or civil partner and the first annuitant has a new spouse or civil partner.

third annuity

An annual amount of protected rights pension (if any). There will be a third annuity only if there is a protected rights pension and if, at the date of the first annuitant’s death, the second annuitant is no longer his or her legal spouse or civil partner and the second annuitant has a new spouse or civil partner. The third annuity will change or increase on the same basis that applies to the protected rights pension element of the second annuity.

With Profits annuity

A With-Profits annuity is an annuity which pays a retirement income linked to the performance of the Prudential With-Profits Fund. If any part of the first annuity, second annuity or third annuity is a With-Profits annuity, the Annuity Quotation will be called a "With- Profits Annuity Illustration", and we will issue a separate With-Profits Appendix which describes the special terms which apply. The With-Profits Appendix needs to be read in conjunction with this Policy and the Annuity Quotation.

Conditions

FIRST ANNUITY

We will pay the first annuity to you, the first annuitant. It starts with effect from either:

and is paid as described in section D4. The Annuity Quotation will indicate whether the first annuity is payable "in advance" or "in arrears". The first annuity cannot in any circumstances be exchanged for a lump sum payment (see also Condition D8 (b)) .

SECOND ANNUITY

General

This section D2 applies where the Annuity Quotation indicates that there is a "joint life" pension. A "joint life" pension means that on the first annuitant’s death, a pension will then be payable to another person if they are alive at that date, and this pension will be the second annuity (or the third annuity – see section D3).

Compulsory requirements

A "joint life" pension is compulsory in respect of any protected rights pension, but only if the first annuitant is married or has a civil partner when this Policy is set up. If the first annuitant is neither married nor in a civil partnership when the Policy is set up, the first annuitant can choose whether or not a "joint life" pension will apply to any protected rights pension.

Joint life option for other pensions

A "joint life" pension is not compulsory in the case of:

Such pensions will be set up on a "joint life" basis only if the first annuitant has so requested.

Amounts shown in Annuity Quotation The Annuity Quotation will show which parts of pension have been set up on a "joint life" basis and the resulting amount of the second annuity.

Payment to second annuitant Subject to section D3, if the second annuitant is still alive when the first annuitant dies, we will pay the second annuity in respect of the second annuitant.

We will pay the second annuity as described in section D4.

The second annuity cannot in any circumstances be exchanged for a lump sum payment (see also Condition D8 (b)).

Start date of second annuity Subject to section D2 (g), the second annuity, including any part that relates to protected rights pension, will start as indicated on the Annuity Quotation. There are two possibilities:

Start date of second annuity if first annuitant dies during guarantee period

General

If the first annuitant dies before the end of the guarantee period (if any) that part of the second annuity which is not protected rights pension will start as indicated on the Annuity Quotation. There are two possibilities:

The second annuity (excluding any protected rights pension) may start with effect from the date described in section D2 (f) above, irrespective of whether the guarantee period has expired. In this case, if the first annuitant dies within the guarantee period, the remaining payments of the first annuity (as described in section D5 (d)) will be said to "overlap", and therefore be paid simultaneously with the second annuity; or

Otherwise, the second annuity (excluding any protected rights pension) will start with effect from the date described in section D2 (f) above or at the end of the guarantee period, whichever is later. In this case, if the first annuitant dies in the guarantee period, then the remaining payments of the first annuity (as described in section D5 (d)) will not "overlap". The second annuity (excluding any protected rights pension) will start only once the guarantee period has expired.

Protected rights pension

If the first annuitant dies before the end of the guarantee period (if any) that part (if any) of the second annuity which is protected rights pension will start in accordance with section D2 (f).

Where protected rights pension continues to be paid in respect of the first annuitant under a guarantee the concept of "with overlap" or "without overlap" does not apply. Section D5 (c) explains the way in which the guarantee operates in that case.

Second annuity cannot be re-allocated Except where sections D2 (i) or (j) or section D3 (b) apply, the second annuity cannot be re-allocated to another person, even if the second annuitant dies during the lifetime of the first annuitant, or is divorced from the first annuitant or where their civil partnership has been dissolved.

Requirement to pay contracting-out benefits on death to legal spouse or civil partner If the first annuitant is married or in a civil partnership, that part (if any) of the second annuity which is protected rights pension must by law be paid to the first annuitant’s legal spouse or civil partner at the date of death. See also section D3 (b) for the effect of remarriage or taking a new civil partner on contracting-out benefits.

Effect of divorce or dissolution on the second annuity

Where the second annuitant is defined in the Annuity Quotation as being the first annuitant's spouse at the date of his or her death, any part of the second annuity that is not protected rights pension will not be payable in the event that the first annuitant divorces the second annuitant after the annuity start date unless the first annuitant remarries. Likewise, where the second annuitant is defined in the Annuity Quotation as being the first annuitant's civil partner at the date of his or her death and the a civil partnership is dissolved after the annuity start date, then the second annuity (apart from any protected rights pension) will not be payable unless the first annuitant enters into a new civil partnership.

Where the first annuitant has remarried, or has entered into a new civil partnership the relevant part of the second annuity will be payable to the new spouse or civil partner. See sections D2 (j)(iii) and D3 (b) in relation to protected rights pension.

In the case where the second annuitant is defined in the Annuity Quotation as the spouse or civil partner at the date of retirement or at the date the annuity starts, any part of the second annuity that is not protected rights pension will be payable to that person, irrespective of a divorce or dissolution and, if applicable, remarriage or new civil partnership. See, however, sections D2 (j)(iii) and D3 (b) in relation to protected rights pension.

In the case where there is a protected rights pension, if the first annuitant has divorced and not remarried, that part of the second annuity which is protected rights pension may be paid to another dependant. Likewise, where a civil partnership is dissolved and the first annuitant does not enter into a new civil partnership, then that part of the second annuity which is protected rights pension may be paid to another dependant.

If the first annuitant has remarried or has a new civil partner, section D3(b) will apply.

THIRD ANNUITY

General

This section D3 applies where:

This section does not apply where the first annuitant was unmarried or was not in a civil partnership at the date the Policy was set up, and he or she decided not to set up any protected rights pension on a "joint life" basis (see section D2 (b)).

Requirement to pay protected rights pension on death to legal spouse or civil partner As stated in section D2 (i), if the first annuitant is married or in a civil partnership, that part (if any) of the second annuity (if any) which is protected rights pension must by law be paid to the first annuitant’s legal spouse or civil partner at the date of death.

As such, where the second annuitant is still the legal spouse or civil partner at the date of the first annuitant’s death, there will be no separate third annuitant.

Where the first annuitant and second annuitant have become divorced (or their civil partnership has been dissolved) after the annuity start date, and the first annuitant has remarried (or entered into a new civil partnership) before the date of death, any part of the second annuity which is protected rights pension cannot be paid to any second annuitant named in the Annuity Quotation.

In such circumstances:

Payment to third annuitant If section D3 (b) applies and if the third annuitant is still alive when the first annuitant dies, we will pay the third annuity in respect of the third annuitant.

We will pay the third annuity as described in section D4.

The third annuity cannot in any circumstances be exchanged for a lump sum payment (see also Condition D8 (b)).

Start date of third annuity The third annuity, being composed entirely of protected rights pension will start with effect from the date set out in either section D2 (f) or D2 (g)(ii), depending on whether the first annuitant dies before or after the end of any guarantee period.

If the first annuitant dies before the end of a guarantee period in respect of protected rights pension, section D5 (c) will also apply in relation to the third annuity.

PAYMENT OF BENEFITS

Payment to first annuitant We will pay the first annuity for the rest of the life of the first annuitant, or, where there is a guarantee period which continues after the death, (subject to section D5) until the end of the guarantee period. Subject to sections D5(c) and (d) and section D13, the first annuity must be paid to the first annuitant.

Payment to second annuitant and/or third annuitant We will pay the second annuity for the rest of the life of the second annuitant (and, where applicable, the third annuity for the rest of the life of the third annuitant) except where:

The Annuity Quotation will reflect these special provisions if they have been selected for the second annuity. If they have been selected, they will apply automatically to the third annuity. Payment must be made to the relevant annuitant.

Payment intervals

We will pay annuity instalments at the intervals set out in the Annuity Quotation. For administrative reasons we reserve the right to alter the interval at which instalments will be paid, subject to a maximum interval of one year. We will notify the relevant annuitant in writing and in advance of any intended change. Where the annuity is stated in the Annuity Quotation to be payable "in advance", payment will be made at the start of the specified interval. Where the annuity is stated to be payable "in arrears", payment will be made after the end of the specified interval. The Annuity Quotation will indicate whether the annuity is payable "in advance" or "in arrears".

Death of annuitant or annuitant ceases to be entitled to annuity

If the annuitant dies or stops being entitled to an annuity partway between two annuity payments:

Splitting annuities

We will not split any payment between two or more people, except in the circumstances where either:

Payment method

Payments to annuitants will be by cheque (crossed account payee only) or by direct transfer to a bank or building society account.

Overseas annuitants

Special arrangements may be necessary for the payment of an annuity if we are making payments to an annuitant and he or she moves overseas. The relevant annuitant should contact us for further details if this applies. In any event, if we start the annuity whilst an annuitant is a United Kingdom resident and he or she then moves overseas, the annuitant must inform us when he or she leaves the United Kingdom.

ANNUITY GUARANTEE

General

This section D5 applies if:

Different guarantee periods may apply to different parts of the first annuity. Likewise, the terms that apply to the guarantee period may be different for different parts of the first annuity.

If a guarantee period has been selected in relation to part or all of the first annuity, this will be reflected in the Annuity Quotation.

Compulsory requirements

It is not compulsory to select a guarantee period in respect of any pension payable under the first annuity, but if one is selected, then certain compulsory requirements will apply.

Under current legislation, any guarantee period in respect of protected rights pension must not exceed five years. For other benefits the guarantee period must not exceed ten years. Any guarantee period selected for all or part of the first annuity must be permissible within the provisions of the Scheme or the retirement annuity contract.We reserve the right to change any guarantee period or the terms that apply to it, if we discover that the guarantee period or the terms selected do not comply with those provisions.

Guarantee period for protected rights pension

This section applies only if there is any protected rights pension, and a guarantee period has been selected. If the first annuitant dies before the end of the guarantee period (if any) and there is no second annuitant or third annuitant, we will pay the further instalments of the protected rights pension for the remainder of the guarantee period to the first annuitant’s legal personal representatives. If there is a second annuitant (or third annuitant, if section D3 (b) applies) who is alive on the first annuitant’s death before the end of the guarantee period, the guarantee operates to increase the second annuitant’s protected rights pension (or the third annuity, if section D3 (b) applies) up to the level of the first annuitant’s protected rights pension for the remainder of the guarantee period.

Guarantee period for other pension

This section applies where there is pension payable under the Policy other than protected rights pension, and a guarantee period has been selected. If the first annuitant dies before the end of the guarantee period (if any) we will pay the further continuing instalments of the first annuity which are not protected rights pension for the remainder of the guarantee period. Subject to sections D8 (c)(iii) and (iv), we will pay these instalments to the first annuitant’s legal personal representatives. If the Annuity Quotation so indicates, the further continuing instalments will take account of any changes to the pension that would have been due under section D6.

Effect of guarantee period on start date of second annuity and/or third annuity

See section D2 (g) for details of the effect of the guarantee period on the date that the second annuity and/or third annuity starts.

CHANGES TO AMOUNTS OF ANNUITY PAYMENTS

General

The provisions that apply under this section D6 depend upon the type of pension and upon the selection made, as set out in this section D6 and in the Annuity Quotation. The first annuity, the second annuity and/or the third annuity may be (in whole or part):

Any basis selected for all or part of an annuity must be permissible within the provisions of the Scheme or retirement annuity contract.We reserve the right to change the terms that apply to an annuity, if we discover that the basis selected does not comply with those provisions (see also section D14).

Different terms can apply for different parts of an annuity

An annuity may be comprised of different parts – for example it may be partly protected rights pension and partly other pension. If this is the case, then different options may apply or may have been selected for these distinct parts of an annuity. For example, one part may be a fixed increase annuity and the other part may be a level annuity. Similarly, the two parts may be set up to increase at different percentage rates. If different options apply to the distinct parts of an annuity, this will be indicated in the Annuity Quotation.

Optional bases for changes to amounts of annuities

Pensions can be set up using any of the bases described in section D6 (a), providing they are permitted within the provisions of the Scheme. This includes protected rights pensions. Once an annuity basis has been selected, it cannot however be changed, unless we have to change it because we discover that it does not comply with the provisions of the Scheme or the retirement annuity contract (see section D14).

Date from which changes to amounts of annuity payments take effect

If this section D6 applies, we will change the amount of each annuity at yearly intervals on the annuity change date. Where the annuity has been set up to be paid "in advance", the new amount will be payable with effect from the annuity change date. Where the annuity has been set up to be paid "in arrears", the new amount will be payable with effect from the next payment due under the Policy following the annuity change date.

Fixed increase annuities

A fixed increase annuity will be increased by the percentage rate(s) indicated in the Annuity Quotation.

RPI-linked annuities

An RPI-linked annuity will be fixed for the first year and will then change each year in line with yearly changes in the RPI. If the yearly change in the RPI falls below zero and becomes a negative amount, the RPI-linked annuity will be reduced by the same percentage, unless a “negative inflation” guarantee has been selected for the annuity. If this guarantee has been selected, the RPIlinked annuity will not fall in the event that the change in the RPI falls below zero. The yearly changes in the RPI-linked annuity will be determined at each annuity change date. The new amount will normally be based on the change in the RPI over the 12-month period ending 3 months before the annuity change date. For example, if the annuity change date is in June, the increase will be based on the yearly RPI figure for March.

An RPI-linked annuity will continue to be so linked for as long as the RPI continues to be published by HM Government, and it remains the basis for determining the return on Government linked stocks. If the RPI is replaced by another index, whether based on UK or wider European inflation, we reserve the right to adopt that index instead, both for new and existing RPI-linked annuities or to make any other changes or arrangements which we consider to be reasonable in the circumstances. Similarly, we reserve the right to adopt a different index or make other reasonable changes or arrangements if the RPI ceases to be the basis for determining the return on Government linked stocks. In any of these circumstances, we will notify the relevant annuitant if, in our opinion, he or she is likely to be materially affected.

LPI annuities

The new amount of an LPI annuity will be determined at each annuity change date and will be based on the change in the RPI subject to a maximum percentage specified in the Annuity Quotation. In this case, the change in the RPI is based on the yearly RPI figure for the September of the calendar year immediately preceding the year in which the relevant annuity change date falls. For example, if the annuity change date is in October, the increase will be based on the yearly RPI figure for September in the previous calendar year, not the September which has just passed. The RPI rate that we use for this purpose is announced each year in the Occupational Pensions Revaluation Order.

With-Profits annuities

Further conditions applying to changes to amounts of payments of With-Profits annuities are set out in the With-Profits Appendix, which is issued where relevant.

TAXATION

We will deduct income tax from any payment if required by law and pay it to HM Revenue & Customs on the relevant annuitant’s behalf. We are not liable for and do not deal with any inheritance tax arising on payment(s) (if any) made under section D5 of the Policy, following the first annuitant’s death. We are not liable for and do not deal with any Lifetime Allowance Charge that may arise in the event that the benefits payable under this Policy exceed the Lifetime Allowance. See section A2(c).

NON-PROFIT BENEFITS; SURRENDERS; TRANSFER OF OWNERSHIP

Non-profit benefits

Unless the annuity is a With-Profits annuity, the benefits arising under this Policy will not share in the profits of any company in the Prudential Group of Companies.

Surrenders

The benefits arising under this Policy may not be cancelled for a cash payment or any other benefits.

Transfer of ownership

The benefits arising under this Policy are not capable of mortgage or transfer to any other party except that:

If any transfer of ownership takes place, each annuitant will become entitled to receive the annuity which is payable for his or her life. A trust under (iii) or (iv) can make special provision as to who is to benefit from any guarantee payments made under section D5. Please note, however, that Prudential does not provide trust wording or advice on trusts, and the annuitant should seek assistance from his or her own legal adviser. Guarantee payments may also be the subject of a provision in the first annuitant’s will.

PRODUCTION OF DOCUMENTS AND OTHER EVIDENCE

From time to time and before making any payment we may need to see:

PROOF OF AGE AND MARRIAGE/CIVIL PARTNERSHIP

NOTICES TO ANNUITANTS

Each annuitant must give us an address to which we will send any notices. These notices will be treated as having been received by the relevant annuitant two postal days after posting (excluding Sundays and Bank Holidays). Changes in address need to be notified to us promptly.

AMENDMENT OF POLICY CONDITIONS

DIVORCE AND DISSOLUTION

If as a result of a divorce or the dissolution of a civil partnership, pension credit rights are awarded to an annuitant's ex-spouse or ex-civil partner or if an annuity payable under this Policy becomes subject to a pension sharing order under section 28(1) of the Welfare Reform and Pensions Act 1999 or Article 26 of the Welfare Reform and Pensions (Northern Ireland) Order 1999, we will make any necessary changes to the terms of the Policy to comply with those pension credit rights or that order. Such changes may include the reduction of any annuity in order to take account of payments that have to be made to another party. However, changes cannot normally be made to alter the options which were selected for the annuity as at the annuity start date.

The effect of a divorce or dissolution on the second annuity is explained in sections D2 (j) and D3 (b).

ANNUITY TERMS NOT IN ACCORDANCE WITH PROVISIONS OF THE SCHEME OR RETIREMENT ANNUITY CONTRACT

As stated in section A2 (b), we do not accept any liability if the terms or options selected for part or all of the annuity are not permissible within the provisions of the Scheme of the retirement annuity contract. It is the joint responsibility of the first annuitant and the administrator/ manager/trustee(s) of the Scheme or the provider of the retirement annuity contract to ensure that the benefits purchased are permissible If, we discover that the terms or options selected for part of all of any annuity are not permissible within the provisions of the Scheme or retirement annuity contract, we can change the amounts and/or terms of the annuity. We can also make any adjustments necessary to correct payments that have already been made. If, as a result of such a discovery, we find that the amounts of the annuity payments already made need to be increased, we will make the necessary payment, but we do not pay any interest in respect of the underpayments.

APPLICABLE LAW

The law of England and Wales applies to the Policy and any disputes connected with it will be settled in the courts of England and Wales. The administrator/manager/trustee(s) of the Scheme or the provider of the retirement annuity contract, the first annuitant, the second annuitant (if any), the third annuitant (if any) and we agree irrevocably to submit to the jurisdiction of the courts of England and Wales.

FINANCIAL SERVICES COMPENSATION SCHEME

The Policy is covered by the Financial Services Compensation Scheme for the purpose of providing compensation in the unlikely event of Prudential’s insolvency. If a charge is imposed on us under the Financial Services Compensation Scheme (or any other investor compensation scheme), we can pay for it by imposing on our policyholders whatever level of charges is necessary and reasonable, subject to complying with legal and regulatory requirements. As such, if such a charge is imposed in relation to the Policy we may make an appropriate deduction from benefits payable under the Policy.

COMPLAINTS

We hope you will never need to, but if you ever wish to complain about any aspect of the service you receive from us, please first of all write to us at: Adviser Annuity Acceptance Prudential Stirling FK9 4UE Please quote any relevant Quote Reference or Customer Reference number. The Customer Reference number can be found on the Statement of Benefits. If you are not satisfied with our response to your complaint, you may be able to take the complaint to the Financial Ombudsman Service, at South Quay Plaza, 183 Marsh Wall, London E14 9SR. The Financial Ombudsman Service considers complaints as a free service and your legal rights will not be affected if you subsequently decide not to accept its findings. You or your beneficiaries can also refer any complaint to the Pensions Advisory Service (TPAS) which may be contacted at 11 Belgrave Road, London SW1V 1RB. The telephone numbers of these organisations are:

Financial Ombudsman Service: 0845 080 1800

Pensions Advisory Service (TPAS): 0845 601 2923

LONG-TERM BUSINESS

The benefits arising under this Policy are part of our "long-term business" within the meaning of the Financial Services and Markets Act 2000.

PENSIONS BUSINESS

This annuity is also classed as pensions business under section 431B of the Income and Corporation Taxes Act 1988 (as amended). The premium which the administrator, manager or provider of the Scheme or the provider of the retirement annuity contract paid to Prudential must relate to pension business in the way described in section 431B of the Income and Corporation Taxes Act 1988 (as amended). If we discover that this premium did not meet these requirements, we may modify the Policy in whatever way is necessary to ensure that HM Revenue & Customs does not impose any penalty on us.

"Prudential" is a trading name of The Prudential Assurance Company Limited, of Prudential Annuities Limited and of Prudential Retirement Income Limited. This name is also used by other companies within the Prudential Group, which between them provide life assurance, pensions, savings and investment products. The Prudential Assurance Company Limited and Prudential Annuities Limited are registered in England and Wales. Registered office at Laurence Pountney Hill, London EC4R 0HH. Registered numbers: 15454 and 2554213 respectively. Prudential Retirement Income Limited is registered in Scotland. Registered office at PO Box 25, Craigforth, Stirling FK9 4UE. Registered number: SCO47842. Authorised and regulated by the Financial Services Authority.