Legal & General Annuities Terms

Legal & General Terms and Conditions

1 Introduction

This introduction is not a part of the annuity conditions (the "Terms and conditions of our annuity policy"). It aims to help you understand the annuity conditions.

Our annuity policy provides regular income payments. We pay the benefits to the annuitant throughout the rest of his or her life.

The annuity can be bought with:

a single contribution from a pension scheme; or
a single contribution being paid to our personal pension scheme and immediately arranging for that amount to buy an annuity.

We offer two types of annuity policy - non-profit and with-profits. The conditions applying to both types of policy are set out in this booklet.

An annuity policy can have a range of extra options, but not all options will be available in every case. The conditions applying to all extra options are set out in this booklet.

An annuity policy can be made up of several parts, and different options can apply to those different parts.

Every option affects the cost of the annuity, and some have a greater effect than others.

The actual combination of options applying to any particular annuity policy will depend on the application made to us, the relevant law and HM Revenue & Customs (HMRC) rules.

The quotation we prepared will set out the options we have been asked to provide.

There are also some general conditions applying to all annuity policies.

2 The policy

We (Legal & General Assurance Society Limited) will issue the annuity policy to the policy owner (the annuitant or the trustees of the pension scheme, as set out in the application to us) in return for a single contribution.
We will pay the benefit from the policy to the annuitant or his or her dependants in line with the policy conditions (as set out in this booklet).
All amounts due to or from us under the annuity policy must be paid in sterling to or by our principal pensions office at: Legal & General House Kingswood Tadworth Surrey KT20 6EU. Payments must be made in a way that is acceptable to us. This will normally be in sterling to a UK bank account. If we arrange for anything else, the annuitant will bear any additional costs that arise.
The annuitant and any other person entitled to receive benefit under the annuity policy must confirm in writing that they have received the benefits. That written confirmation will be sufficient proof that we have met our responsibility to pay benefits. In most cases, clearance through the annuitant's bank account will be sufficient confirmation.
We will not be responsible for any mistakes in benefits resulting from any information we receive in connection with the annuity policy being incorrect, or relevant information not being provided.

3 Benefit

We will pay benefits every month, every three months, every six months or every year, as we agreed with the policy owner. The period between benefit payments is called the "payment period".
If we pay the benefit in advance (for the payment period ahead), we will pay the first instalment on the "annuity commencement date" (see 3e) agreed by us and the policy owner, or as soon as practicable after that date. If the agreed annuity commencement date is earlier than the date we receive the contribution (referred to in 2a above), the first instalment will be the total of any payments due for the period from the annuity commencement date to the date we receive the contribution.
If we pay the benefit in arrears (for the payment period just passed), we will pay the first instalment at the end of the payment period which started on the agreed annuity commencement date, or as soon as practicable after that date.
Except where section 9 on page 7 applies, we will stop paying benefits to the annuitant when the annuitant dies. We will stop paying a dependant's benefit when the dependant dies.
The "annuity commencement date" will be the "policy commencement date" or such other date as is agreed between us and the policy owner. The "policy commencement date" will be the date of receipt of all necessary requirements to implement the annuity.

4 Payment "with proportion" or "without proportion" after death (only if benefit is paid in arrears)

The payment will either be made "with proportion" or "without proportion". Which applies will be agreed between us and the policy owner on the basis of the application made to us.
If we pay the benefit in arrears, after the annuitant's death we may make a final payment "with proportion" depending on the choice specified in the application to us.
If, under the annuity policy, we will make a final payment "with proportion", the following will apply.

If the annuitant dies on a day other than the day on which an instalment of benefit is due, as soon as practicable after the next payment date we will pay an appropriate amount which reflects, and is for, the period between the last payment and the date of death.
If the annuitant dies on a day when an instalment of benefit is due, we will pay that instalment of benefit and then no further payments (except as provided in sections 8 and/or 9 below).
After the death of a dependant receiving a dependant's benefit, we will make a final pay ment in the same way.
Payment will be made to the annuitant's estate, or the dependant's estate, whichever is appropriate.

If, under the annuity policy, any final payment will be "without proportion", we will not make any payment for the period between the last instalment of benefit before the annuitant's death and the date of death. A dependant's benefit is treated in the same way.

5 Increases in benefit (non-profit annuity policies only)

Benefits will increase every year in line with the policy application made to us. Each increase will be either a fixed percentage each year or in line with the Retail Prices Index (see section 10). The first increase will be made on the first anniversary of the annuity commencement date, and further increases will be made on each following anniversary. Increases will be "compounded". This means that each increase will be based on the total benefit including any previous increases.

6 Alteration to benefit (with-profits annuity policies only)

With-profits annuity policies will participate in the profits of Legal & General from time to time in accordance with our Articles of Association. Any bonuses we declare for with-profits annuity policies will be paid in the form of extra benefit, so altering the total benefit payment. The bonus cannot be exchanged for any other form of payment. The level of income paid is not guaranteed to stay the same or go up every year and could go down after the operation of the Anticipated Bonus Rate or on expiry of the temporary bonus.

Any altered benefit, as described in this section, will take effect from the first date on which a payment is due:

after the date of the alteration; or, if benefit is paid in advance
on or after the date of the alteration.

The date of the first alteration will be the first anniversary of the annuity commencement date or another date agreed between us and the policy owner, and then on that date every year afterwards. That date is known as the alteration date.
To make the alteration we will first remove any extra benefits arising from a temporary bonus in payment immediately before the date of the alteration (as described in 6f below), then reduce the remaining benefit by the Anticipated Bonus (if an Anticipated Bonus Rate has been specified in the application to us, or any subsequent requests to alter the Anticipated Bonus Rate) and we will then add any bonus or bonuses declared by us for policies of this type.
If the period in respect of which this reduction is made is not one year, the Anticipated Bonus referred to will bear the same relationship to the Anticipated Bonus Rate as the relevant period bears to one year. If the period is one year, the Anticipated Bonus will be the same as the Anticipated Bonus Rate.
Bonuses can be either temporary or annual. If we declare a temporary bonus, the extra benefit arising from it will be withdrawn at the next alteration date. If we declare an annual bonus, once we have added it to the benefit, we cannot take it away except as a result of making a reduction by the Anticipated Bonus (if any) as described above.
We do not guarantee that we will declare future bonuses or that any bonuses declared in any year will be as high as the previous year's. So it is possible that the benefit provided by the annuity policy will be lower after an alteration than it was before, unless the benefit is already level with the Guaranteed Minimum Annuity (see 6h below).
The benefit provided under the annuity policy will never fall below the Guaranteed Minimum Annuity or, if there is no Guaranteed Minimum Annuity, the first benefit payment less any reductions through the mechanism of the Anticipated Bonus Rate. Similarly, a dependant's benefit will not fall below the dependant's Guaranteed Minimum Annuity or, if there is no Guaranteed Minimum Annuity, the appropriate percentage of the first benefit payment less any reductions by the Anticipated Bonus.
If the benefit is ever greater than it would otherwise have been because of the guarantee set out in section 6h above, we will work out the amount of benefit to pay after the alteration as if the guarantee had not applied. We will then apply the guarantee to the altered amount.
Our Articles of Association currently state that at least 90% of our life and annuity fund's profits which Legal & General resolves to make available for distribution and which are certified by the board of directors of Legal & General Assurance Society Limited as having been derived from with-profits business will be allocated to policyholders in the form of bonuses. But if this changes, then so will what we pay as bonuses on this policy.
Any bonuses we declare depend mainly on how well our investments perform and are at our discretion. Future bonuses are not guaranteed.

7 Restrictions

The benefit we pay under the annuity policy might be limited to a maximum set by the pension scheme from which the annuity arises.
If a maximum annuity is set, we will not increase any benefit by an amount that would result in the benefit going over the maximum, unless the increase is no more than 3% in any one year.
If we do not apply all or part of any increase under 7b above, and a future increase in the Retail Prices Index (see section 10) means that we can pay part or all of the increase we held back, we will pay that amount from the next anniversary of the annuity commencement date. If we hold back any amount under this condition and the annuitant is not the policy owner, we will pay it to the policy owner as soon as practicable after the annuitant's death.
If the annuitant is receiving benefits from both a non-profit annuity policy and a with-profits annuity policy arising from the same pension scheme, any maximum annuity will apply to the total of both benefits. In this case, the limit will be applied to the benefit from the non-profit annuity policy before it is applied to the benefit from the with-profits annuity policy. However, no restriction will be applied to any benefit paid as "Guaranteed Minimum Pension" (see 7e) or "protected rights" (see 7f) (both of which arise from contracting out of the earnings-related part of the state pension) under the non-profit annuity policy.
If a member of a personal pension scheme or a money purchase occupational scheme has been contracted out of the earnings related part of the state pension, then that member will have "protected rights". This is not a guaranteed benefit and replaces the earnings related part of the state pension for the period while the member is contracted out. These protected rights have to be kept separate from any other type of contributions, as there are restrictions on the way that benefits can be paid from them.
If an occupational pension scheme has been contracted out of the earnings related part of the state pension before 6 April 1997, then scheme members will have a "Guaranteed Minimum Pension". This is a guaranteed benefit and replaces the earnings related part of the state pension for the period while the scheme member is contracted out.
Having a maximum level of benefit does not mean that the benefit will necessarily ever reach that maximum.

8 Benefits for dependants

Benefits can be paid to a dependant after the annuitant's death who could be the annuitant's husband, wife, registered civil partner or another dependant. The amount of the benefit will be a percentage of the annuitant's annuity, as set out in the application to us.
The benefit can be paid on a "named spouse or civil partner or dependant" or an "any spouse or civil partner" basis (see 8c and 8e below) depending on the application made to us.
Benefits can be paid on a "named spouse or civil partner or dependant" basis to a husband, wife, registered civil partner or other dependant (named in the application to us) if the following conditions apply

If the dependant is a husband or wife, the annuitant must be married to them at the time of the annuitant's death.
If the dependant is a civil partner, the annuitant must be in a registered civil partnership with them at the time of the annuitant's death.
If the dependant is not a husband, wife or registered civil partner, they must be dependent on the annuitant at the date of the annuitant's death. If the annuitant is not the policy owner, "dependant" will have the meaning set by the rules of the pension scheme the annuity policy arises from. If the annuitant is the policy owner, "dependant" will mean some one who, in our opinion, depends on the annuitant financially. Financial interdependence will be acceptable for this purpose.
If the annuity policy provides benefits for a dependant other than a spouse or registered civil partner and the annuitant is married or in a registered civil partnership at the date of death, we will pay any Guaranteed Minimum Pension or protected rights provided by the relevant pension scheme to, and only to, the wife, husband or registered civil partner. In this case, no part of the Guaranteed Minimum Pension or protected rights will be paid to the named dependant.
Benefits can be paid on an "any spouse or civil partner" basis only to a wife, husband or registered civil partner. It will be payable to the wife, husband or registered civil partner at the annuitant's date of death even if this is not the same person as named in the application. If the annuity policy provides benefits for a dependant for benefits other than that paid as Guaranteed Minimum Pension or protected rights, the annuitant must have been married to their husband or wife or in a registered civil partnership with their civil partner for at least the last six months of their life and their husband, wife or registered civil partner must not be 10 years or more younger than them.
The dependant's benefit will be a percentage of:

the benefit the annuitant was receiving at the date of death; or
if the dependant�s benefit will not start until the end of a period for which payments are guaranteed, the benefit being paid at the end of that period.

We will work out increases in or alterations to dependant's benefit in the same way as we work out increases in or alterations to the annuitant's benefit.
If the annuity policy states that a dependant's benefit cannot start before the end of a set period (the guaranteed minimum payment period), and the dependant dies before the end of that period, we will not pay any dependant's benefit.
If a guaranteed minimum payment period applies (see section 9), a dependant's benefit can be paid "with overlap" (see 8l) or "without overlap" (see 8m) as chosen in the application to us. If the annuitant dies after the end of a guaranteed minimum payment period, or there is no guaranteed minimum payment period, we will start paying the dependant's benefit on the first payment date after death.
We will not pay any benefit to any person other than the dependant named in the application made to us except as described in 8d or 8e above.
We will stop paying the dependant's annuity when that person dies unless a further payment is due in line with section 4.
If a guaranteed minimum payment period applies and under the annuity policy we would pay a dependant's benefit "with overlap", we will pay the dependant's benefit immediately from the first payment date after the annuitant's death. We will not wait until the end of the guaranteed minimum period to start paying the dependant's benefit. If the dependant also dies before the end of the guaranteed minimum payment period, we will stop paying her or his benefit when she or he dies.
If a guaranteed minimum payment period applies and, under the annuity policy, we would pay a dependant's benefit "without overlap", if the annuitant dies before the end of the guaranteed minimum payment period we will start paying the dependant's benefit at the end of that period.
The term "wife" or "husband" or "spouse" does not include a "common law" wife or husband. Civil partners must be in a civil partnership registered under the Civil Partnership Act 2004.

9 Guaranteed minimum payment period

The annuity policy can specify a guaranteed minimum payment period (that is, a period benefits are guaranteed to be paid for, even if the annuitant dies before the end of it). If the annuitant dies during this period, we will pay the remaining guaranteed payments as regular benefit payments until the end of the guaranteed minimum payment period.
Whether or not a guaranteed minimum payment period applies will depend on the options chosen in the application to us.
If the annuitant dies during a guaranteed minimum payment period, we will pay any benefit instalments due to the person chosen by the annuitant and whose written details have been supplied to us. If no choice was made we will make any payment to the annuitant's estate.

10 Retail Prices Index

This section applies only to any benefit or limit which increases in line with the Retail Prices Index. The "Retail Prices Index" is an index of the cost of all goods reflecting changes in those costs from month to month. It is produced by the Office for National Statistics. We will use the Retail Prices Index or any other index which in our opinion replaces it. When we work out the amount of any increase in benefit, we will refer to the increase in the Retail Prices Index over an appropriate 12-month period (in line with either the rules of the scheme under which the policy is written or, relevant law or based on the annuity anniversary, whichever is appropriate). If there is no increase in the Retail Prices Index, or the Retail Prices Index is negative, the benefit will stay the same. The amount of benefit in any year will never be greater than:

the amount of benefit in the previous year; plus
the increase in line with the Retail Prices Index.

Increases in benefit other than to meet the Guaranteed Minimum Pension will take place at each anniversary of the annuity commencement date. Increases to meet the Guaranteed Minimum Pension will take place in line with the Retail Prices Index.

11 Evidence of entitlement

Before we pay any benefit we will need to see satisfactory evidence that the annuitant is still alive. Similarly, before we pay benefits to a dependant after the annuitant's death, we must see satisfactory proof that the dependant is still alive. We also need satisfactory evidence of the dependant's age and:

the annuitant's marriage to or registered civil partnership with that person; or
that the person was dependent on the annuitant as described in 8c above; whichever is relevant.

12 Cashing in or transferring the annuity

If the annuity policy is written under a personal pension scheme and the annuitant is not the policy owner, the benefits provided under the policy cannot normally be transferred to anyone else (except by the annuitant's will after their death), cashed in or exchanged for a lump sum. Also, the annuitant cannot transfer or cash in the policy.
Circumstances under which the policy can be partly or wholly surrendered or transferred will include:

pension sharing on divorce or dissolution of a registered civil partnership under the Welfare Reform and Pensions Act 1999,
orders made under the Proceeds of Crime Act 2002, and
surrenders under Section 73 of Pensions Act 1995 where the policy owner is the trustee of a defined benefit pension scheme and has insufficient assets to secure full benefits for its members.

Where the policy owner is not the annuitant, the policy can be assigned by the trustees of the scheme to the annuitant.

If the annuity policy is written under an occupational pension scheme and the annuitant is not the policy owner, the benefits provided under the policy cannot be transferred to anyone else, cashed in or exchanged for a lump sum. The policy owner can assign the policy to the annuitant, but not to any one else.
If the annuitant is the policy owner, the benefits provided by the annuity policy cannot be assigned to anyone else, cashed in or exchanged for a lump sum. Also, the annuitant cannot assign or cash in the policy.

13 Tax status

If the annuitant is the policy owner the annuity policy will be issued to the annuitant under the terms of chapter 4 of the Finance Act 2004 (and any future changes to or replacement of this act).
If the annuitant is not the policy owner the annuity policy will be issued to the trustees of the pension scheme.

14 Contributions paid directly by the annuitant or their employer

This section applies if, and only if, Legal & General is issuing the policy in return for a contribution which has been paid to a Legal & General personal pension under which benefits are immediately paid to the annuitant.
If the annuitant pays the contribution, they get tax relief, at the basic rate of income tax on any relievable contribution paid. We will reclaim that tax relief from HMRC. If the annuitant pays the higher rate of income tax they may be entitled to the higher rate of tax relief. In this case they must claim the difference between the basic rate and the higher rate from HMRC. We will not do this for them.
The annuitant can take part of the fund arising from the contribution as a lump sum. Any amount paid as a lump sum will not be used to buy the annuity.
Tax relief can be reclaimed by HMRC if the contribution exceeds the greater of £3,600 or relevant UK earnings in the tax year, or if it exceeds the Annual Allowance for the tax year.

Pension Annuity