Terms of Commission for Independent Financial · PDF file2 Introduction Legal &...

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IMPORTANT INFORMATION

This information may be downloaded to your PC in whole or in part provided that any reproduction or

copy, or any derivative, is true to the original, and it is EITHER used for personal use OR in support of an Agency Agreement with Legal & General. Professional advisors who are properly authorised may use it in

the process of giving financial advice relating to Legal & General products.

Copies or derivatives of the document may not be sold, marketed, or used for commercial gain.

Notwithstanding the above, Legal & General Assurance Society Limited retains ownership of copyright in all such reproductions, copies or derivatives.

Copyright © Legal & General Assurance Society Limited, 2007 One Coleman Street, London, EC2R 5AA. All rights reserved.

Terms of Commission for Independent Financial Advisors

Version 11

(Last updated 01/07/10)

Legal & General Assurance Society Limited, Registered in England No. 166055 Registered Office: One Coleman Street, London, EC2R 5AA. www.legalandgeneral.com

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Introduction Legal & General’s Commission for directly authorised Independent Financial Advisers (‘Intermediaries’) on life, pensions and investment products is calculated by reference to the product/Commission tables and the Commission bases as outlined in this document. This schedule sets out the terms upon which Commission is payable to the Intermediary by Legal & General for the sale of Products. This schedule reflects the terms upon which Commission is payable at the date on which it was prepared by Legal & General. Legal & General will, upon request, make available the current terms by means of a telephone help-line or by publishing on-line or through any other media.

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General Provisions 1. Terms of Business This Commission Schedule is incorporated by reference into the Intermediary’s Terms of Business

with Legal & General. Unless otherwise stated the words, definitions and expressions used in this document, including definitions set out in Schedule 1, shall have the same meaning and effect as those set out in such Terms of Business.

This document reflects the terms upon which Commission is generated at the date on which it was prepared by Legal & General. Legal & General will, upon request, make available the current terms by means of a telephone help-line or by publishing on-line or through any other media.

2. Remuneration Basis Intermediaries can opt to receive commission on indemnity terms in accordance with Part C of the

Terms of Business “Commission on Indemnity Terms” or on a non-indemnity basis pursuant to Part B of the Terms of Business. This election can be made on a case-by-case basis.

Intermediaries receiving Commission on Indemnity Terms can opt to submit business on either an indemnity or non-indemnity basis. Non-indemnity Intermediaries can only submit business on a non-indemnity basis.

3. Splitting Commission between Intermediaries and 3rd Parties

Intermediaries are able to split Commission up to six ways depending on product type. Commission on protection products can only be split between a maximum of two Intermediaries.

The same Commission style and sacrifice terms will apply to all Intermediaries.

Where Commission is split, Commission is determined by the lead Intermediary’s terms.

Commission on Indemnity Terms may be paid to a non-indemnity Intermediary. In which case Part C of the Terms of Business will apply to such Intermediary.

4. Commission Sacrifice

The Intermediary can sacrifice Commission on most products on a case-by-case basis. If it’s a split case the sacrifice percentage chosen by the first Intermediary will apply to every additional Intermediary also recorded against that product. This rule does not apply to bond business.

5. Redrawn Policies (Alterations/Substitutions/Amendments)

Where a Product is altered, substituted or amended by agreement with the customer, Legal and General may vary the amount of Commission paid or payable by virtue of that alteration, substitution or amendment at its sole discretion. In this case, the policy will be cancelled and all Commission paid will be clawed back. A new policy is then set up and Initial/Renewal Commission for the new amount will be paid in accordance with the alteration, substitution or amendment.

6. Top Ups to Unit Linked Protection Policies

With effect from February 2009, no commission will be payable on Unit Linked top up policies issued under any circumstances as a result of a review. This includes all Protection policies that undergo a review (Whole of Life included).

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7. Increasing & Decreasing Premiums

The following events can increase or decrease premiums:

7.1 Indexation When premiums are increased or decreased in line with inflation e.g. index linking the policy, Initial and Renewal Commission remains the same.

7.2 Guaranteed Insurability Option (GIO) When this option is exercised a new policy is written and the premiums increase. Intermediaries receive both Initial and Renewal Commission based on the GIO amount. 7.3 Further Mortgage Option (FMO) When this option is exercised a new policy is written and the premiums increase. Intermediaries receive both Initial and Renewal Commission based on the FMO amount. 7.4 Reviewable Critical Illness Cover (CIC) If premiums increase or decrease as a result of the 5 year review Initial and Renewal Commission remain the same. 7.5 Convertible Term Assurance Where this option is exercised, Initial Commission will be payable on the full amount of the new premium.

8. Premium Refunds If for any reason Legal & General refunds a premium to a customer in respect of a policy, any

Commission paid or credited in respect of that premium will be repayable to Legal & General. 9. Renewal Commission Renewal Commission will become payable in respect of each premium received after the Initial

Commission Period ends. Renewal Commission is calculated as a fixed percentage of the premium for protection business, but as a percentage of the fund for investments and pensions (“Fund-Based”). Please note however that there are exceptions where pension renewal may still be payable as a percentage of the premium for existing products no longer open to new business.

10 Indexed Whole of Life For all indexed whole of life policies an additional 10% Initial Commission is paid to the Intermediary.

There is no increase in Renewal Commission. 11. Pension Renewals Where the retirement date is after 65 years of age, Commission on further recurrent premiums will

be treated as single premium business.

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12. Continuation Pension Policies In the event that a continuation product is required by a customer, due to the change of terms of

employment or otherwise, the continuing product will have the same Commission attributes as the original product.

Any entitlement to Initial Commission on the original product will cease from the date the

continuation policy commences. Any unearned Initial Commission will be reclaimed and a corresponding credit will be made in respect of the new product.

13. Commission Statements

Delivery timescales for commission statements are as follows:

The paper statement will be received 4 business days after the actual statement date e.g. if the statement date is Monday, 1

st January, the paper statement will be received on Friday, 5

th January.

However, the actual money will hit an agent's bank account on the 3rd working day including the date of issue i.e. Wednesday, 3

rd January. If the statement date was Thursday, 4

th January, then the

paper statement will arrive at the agent's commission address on Wednesday, 10th January, and the

cash in bank account by Monday, 8th January.

13. Indexation on Level Term Assurance Policies and Family and Personal Income Plans

With effect from the 23rd

May 2010, Legal & General will offer advisers an up-lift in commission of 10% LIC for introducing business with the indexation option included. As is currently the case, initial and renewal commission will not change as a result of any increase (or decrease) in premium due to an annual indexation review.

14. Legal & General will pay Commission on a non-indemnity basis for policies introduced on the lives of

principals, directors or partners of the Intermediary’s company or firm and for policies on the lives of staff or close relatives of any of the aforementioned. The definition of ‘close relative’ is that contained in the FSA Rules namely: -

As defined in article 3(1) of the Regulatory Activities order and article 2(1) of the Financial Promotion Order (in relation to any person):

(a) his spouse;

(b) his children and step-children, his parents and step-parents, his brothers and sisters and his step-brothers and step-sisters; and

(c) the spouse of any person within (b).

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PROTECTION TABLE (INDEMNITY)

Years LTA/ LTA+CIC/

FLIP

Whole Of Life Level

FPIP/MDTA

(Inc CIC) MPI/IPB MPI/IPB

(Yearly

Premiums) (Monthly

Premiums)

1 0.115

2 0.2524 0.0618

3 0.3575 0.1020

4 0.4585 0.1218

5 0.5792 0.1608 0.5792 0.5218 0.4965

6 0.6715 0.1990 0.6715 0.6056 0.5756

7 0.7603 0.2179 0.7603 0.6843 0.6517

8 0.8455 0.2551 0.8455 0.7631 0.7247

9 0.9475 0.2734 0.9475 0.8549 0.8121

10 1.0255 0.3094 1.0255 0.9249 0.879

11 1.1004 0.3448 1.1004 0.9947 0.9432

12 1.1187 0.3622 1.1187 1.0122 0.9589

13 1.1187 0.3965 1.1187 1.0122 0.9589

14 1.1187 0.4134 1.1187 1.0122 0.9589

15 1.1187 0.4467 1.1187 1.0122 0.9589

16 1.1187 0.4631 1.1187 1.0122 0.9589

17 1.1187 0.4954 1.1187 1.0122 0.9589

18 1.1187 0.5113 1.1187 1.0122 0.9589

19 1.1187 0.5427 1.1187 1.0122 0.9589

20 1.1187 0.5582 1.1187 1.0122 0.9589

21 1.1187 0.5735 1.1187 1.0122 0.9589

22 1.1187 0.6037 1.1187 1.0122 0.9589

23 1.1187 0.6186 1.1187 1.0122 0.9589

24 1.1187 0.6479 1.1187 1.0122 0.9589

25 1.1187 0.6623 1.1187 1.0122 0.9589

26 1.1187 0.6766 1.1187 1.0122 0.9589

27 1.1187 0.6766 1.1187 1.0122 0.9589

28 1.1187 0.6907 1.1187 1.0122 0.9589

29 1.1187 0.6907 1.1187 1.0122 0.9589

30 1.1187 0.7047 1.1187 1.0122 0.9589

31 1.1187 0.7047 1.1187

32 1.1187 0.7186 1.1187

33 1.1187 0.7186 1.1187

34 1.1187 0.7323 1.1187

35 1.1187 0.7323 1.1187

36 1.1187 0.7459 1.1187

37 1.1187 0.7459 1.1187

38 1.1187 0.7593 1.1187

39 1.1187 0.7593 1.1187

40 1.1187 0.7726 1.1187

41 0.7726

42 0.7858

43 0.7858

44 0.7989

45 0.7989

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RENEWAL COMMISSION CALCULATION FOR PROTECTION Where Renewal Commission is paid the amount is 2.5% of the premium amount and is payable to the end of the contract. The table below outlines (for Commission Paid on Indemnity Terms) when Renewal Commission begins, depending on the length of the policy. For example for a 3 year policy term, Renewal Commission begins at month 14.

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INITIAL COMMISSION PERIODS

Policy Term

(Years)

LTA/ LTA+CIC/ MPI/IPB/FLIP

(Months)

WHOLE OF LIFE/ Over 50s (Months)

FPIP/MDTA/SA CIC

(Months)

1 4 2

2 9 3

3 13 5

4 17 6

5 22 8 22

6 26 10 26

7 30 11 30

8 34 13 34

9 39 14 39

10 43 16 43

11 47 18 47

12 48 19 48

13 48 21 48

14 48 22 48

15 48 24 48

16 48 25 48

17 48 27 48

18 48 28 48

19 48 30 48

20 48 31 48

21 48 32 48

22 48 34 48

23 48 35 48

24 48 37 48

25 48 38 48

26 48 39 48

27 48 39 48

28 48 40 48

29 48 40 48

30 48 41 48

31 48 41 48

32 48 42 48

33 48 42 48

34 48 43 48

35 48 43 48

36 48 44 48

37 48 44 48

38 48 45 48

39 48 45 48

40 48 46 48

41 46

42 47

43 47

44 48

45 48

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Over 50's Whole of Life product The Over 50s product is calculated on the Lautro scale using whole of life factors. The earnings period for this product is fixed at 48 months. To calculate clawback for Over 50’s Whole of Life products, please refer to the 12 months plus column in the Clawback Matrix. EASY GUIDE TO CALCULATING COMMISSION (INDEMNITY) Example Calculations LTA/MPI/FPIP/DTA/SACIC Policies:- Monthly Premium X 12 X Factor X Override 1. Term 25 year contract – Monthly Premium £10.00 – Override 130% £10 x12 x 1.1187 x 130% = £174.52 2. MPI 15 year contract – Monthly Premium £10.00 – Override 130%

£10 x 12 x 0.9589 X 130% = £149.59 Yearly Premium X Factor X Override 1. FPIP 20 year contract – Yearly Premium £120 – Override 130% £120 x 1.1187 x 130% = £174.52 2. MPI 15 year contract – Yearly Premium £120 – Override 130%

£120 x 1.0122 x 130% = £157.90

Whole of Life:- Whole of Life Policy Term = 85 – Age Next Birthday Monthly Premium X 12 X Factor X Override 1. Term 25 year contract – Monthly Premium £10.00 – Override 130% £10 x12 x 0.6623 x 130% = £103.32 Yearly Premium X Factor X Override 1. Term 25 year contract – Yearly Premium £120.00 – Override 130% £120 x 0.6623 x 130% = £103.32

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EASY GUIDE TO CALCULATING COMMISSION (NON-INDEMNITY) – EXCLUDING WHOLE OF LIFE

Term in Years

LTA/MDTA/FPIP/FLIP Factor

MPI/IPB

INITIAL COMMISSION PERIOD

1 0.1167 0.1000 4

2 0.2625 0.2250 9

3 0.3792 0.3250 13

4 0.4958 0.4250 17

5 0.6417 0.5500 22

6 0.7583 0.6500 26

7 0.8750 0.7500 30

8 0.9917 0.8500 34

9 1.1375 0.9750 39

10 1.2542 1.0750 43

11 1.3708 1.1750 47

12+ 1.4000 1.2000 48

Example Calculations Annual Premium X Factor X Lautro Rate / Initial Period 1. Term 25 year contract – Monthly Premium £10.00 – Override 130% £120.00 X 1.4 X 130% / 48 = £4.55 For whole of life and pension policies, an extra 10% is payable on non-indemnity cases. The calculation remains identical to that of an indemnity case. AGE LIMITATIONS 85 years on whole of life assurance, therefore the policy term = 85 – age next birthday 80 years on term assurance 65 years on some pre stakeholder pension contracts (some pay up to selected retirement age). 60 convertible term assurance The above is the maximum ages we will pay commission on for the relevant products. A minimum of a 1-year factor is applicable for the above if the client is above these ages. This does not include pensions.

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PROPORTION OF COMMISSION CLAWED BACK FOR PROTECTION POLICIES

Month Term of Policy (Years)

lapsed 1 2 3 4 5 6 7 8 9 10 11 12+

1 75.00% 88.90% 92.30% 94.10% 95.50% 96.20% 96.70% 97.10% 97.40% 97.70% 97.90% 97.90%

2 50.00% 77.80% 84.60% 88.20% 90.90% 92.30% 93.30% 94.10% 94.90% 95.30% 95.70% 95.80%

3 25.00% 66.70% 76.90% 82.40% 86.40% 88.50% 90.00% 91.20% 92.30% 93.00% 93.60% 93.80%

4 0.00% 55.60% 69.20% 76.50% 81.80% 84.60% 86.70% 88.20% 89.70% 90.70% 91.50% 91.70%

5 0.00% 44.40% 61.50% 70.60% 77.30% 80.80% 83.30% 85.30% 87.20% 88.40% 89.40% 89.60%

6 0.00% 33.30% 53.80% 64.70% 72.70% 76.90% 80.00% 82.40% 84.60% 86.00% 87.20% 87.50%

7 0.00% 22.20% 46.20% 58.80% 68.20% 73.10% 76.70% 79.40% 82.10% 83.70% 85.10% 85.40%

8 0.00% 11.10% 38.50% 52.90% 63.60% 69.20% 73.30% 76.50% 79.50% 81.40% 83.00% 83.30%

9 0.00% 0.00% 30.80% 47.10% 59.10% 65.40% 70.00% 73.50% 76.90% 79.10% 80.90% 81.30%

10 0.00% 0.00% 23.10% 41.20% 54.50% 61.50% 66.70% 70.60% 74.40% 76.70% 78.70% 79.20%

11 0.00% 0.00% 15.40% 35.30% 50.00% 57.70% 63.30% 67.60% 71.80% 74.40% 76.60% 77.10%

12 0.00% 0.00% 7.70% 29.40% 45.50% 53.80% 60.00% 64.70% 69.20% 72.10% 74.50% 75.00%

13 0.00% 0.00% 0.00% 23.50% 40.90% 50.00% 56.70% 61.80% 66.70% 69.80% 72.30% 72.90%

14 0.00% 0.00% 0.00% 17.60% 36.40% 46.20% 53.30% 58.80% 64.10% 67.40% 70.20% 70.80%

15 0.00% 0.00% 0.00% 11.80% 31.80% 42.30% 50.00% 55.90% 61.50% 65.10% 68.10% 68.80%

16 0.00% 0.00% 0.00% 5.90% 27.30% 38.50% 46.70% 52.90% 59.00% 62.80% 66.00% 66.70%

17 0.00% 0.00% 0.00% 0.00% 22.70% 34.60% 43.30% 50.00% 56.40% 60.50% 63.80% 64.60%

18 0.00% 0.00% 0.00% 0.00% 18.20% 30.80% 40.00% 47.10% 53.80% 58.10% 61.70% 62.50%

19 0.00% 0.00% 0.00% 0.00% 13.60% 26.90% 36.70% 44.10% 51.30% 55.80% 59.60% 60.40%

20 0.00% 0.00% 0.00% 0.00% 9.10% 23.10% 33.30% 41.20% 48.70% 53.50% 57.40% 58.30%

21 0.00% 0.00% 0.00% 0.00% 4.50% 19.20% 30.00% 38.20% 46.20% 51.20% 55.30% 56.30%

22 0.00% 0.00% 0.00% 0.00% 0.00% 15.40% 26.70% 35.30% 43.60% 48.80% 53.20% 54.20%

23 0.00% 0.00% 0.00% 0.00% 0.00% 11.50% 23.30% 32.40% 41.00% 46.50% 51.10% 52.10%

24 0.00% 0.00% 0.00% 0.00% 0.00% 7.70% 20.00% 29.40% 38.50% 44.20% 48.90% 50.00%

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25 0.00% 0.00% 0.00% 0.00% 0.00% 3.80% 16.70% 26.50% 35.90% 41.90% 46.80% 47.90%

26 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 13.30% 23.50% 33.30% 39.50% 44.70% 45.80%

27 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 10.00% 20.60% 30.80% 37.20% 42.60% 43.80%

28 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 6.70% 17.60% 28.20% 34.90% 40.40% 41.70%

29 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 3.30% 14.70% 25.60% 32.60% 38.30% 39.60%

30 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 11.80% 23.10% 30.20% 36.20% 37.50%

31 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 8.80% 20.50% 27.90% 34.00% 35.40%

32 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 5.90% 17.90% 25.60% 31.90% 33.30%

33 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 2.90% 15.40% 23.30% 29.80% 31.30%

34 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 12.80% 20.90% 27.70% 29.20%

35 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 10.30% 18.60% 25.50% 27.10%

36 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 7.70% 16.30% 23.40% 25.00%

37 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 5.10% 14.00% 21.30% 22.90%

38 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 2.60% 11.60% 19.10% 20.80%

39 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 9.30% 17.00% 18.80%

40 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 7.00% 14.90% 16.70%

41 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 4.70% 12.80% 14.60%

42 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 2.30% 10.60% 12.50%

43 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 8.50% 10.40%

44 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 6.40% 8.30%

45 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 4.30% 6.30%

46 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 2.10% 4.20%

47 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 2.10%

48+ 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

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PENSIONS TABLE – NON STAKEHOLDER

YEARS INITIAL COMMISSION PENSIONS PENSIONS

PERIOD CONTINUATIONS

(months)

1 1

2 2 0.0414 0.0414

3 4 0.0820 0.0618

4 5 0.1020 0.0820

5 6 0.1218 0.1020

6 7 0.1414 0.1218

7 8 0.1608 0.1414

8 10 0.1990 0.1608

9 11 0.2179 0.1800

10 12 0.2366 0.1990

11 13 0.2551 0.2179

12 14 0.2734 0.2366

13 16 0.3094 0.2551

14 17 0.3272 0.2734

15 18 0.3448 0.2915

16 19 0.3622 0.3094

17 20 0.3794 0.3272

18 22 0.4134 0.3448

19 23 0.4301 0.3622

20 24 0.4467 0.3794

21 24 0.4631 0.3965

22 24 0.4631 0.4134

23 24 0.4793 0.4301

24 24 0.4793 0.4467

25 24 0.4954 0.4631

26 24 0.4793

27 24 0.4954

EASY GUIDE TO CALCULATING COMMISSION (INDEMNITY) Pension Policies (Non – Stakeholder):- Any Pension increment sold, pre-stakeholder, could potentially be stakeholder charge cap driven. This basically reduces Commission on all charge cap driven products. Override is no longer available on Individual Pension policies with effect from the 13

th May 2010.

Charge cap driven example (PPP’s & GPP’s) :- Monthly Premium X 12 X Factor X Override X 12% 1. Term 25yrs contract – Monthly Premium £10.00 – Override 130% £10 x12 x 0.4954 x 130% x 12% = £9.27

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Non Charge cap driven example (EPP’s) :- Monthly Premium X 12 X Factor X Override 1. Term 25yrs contract – Monthly Premium £10.00 – Override 130% £10 x12 x 0.4954 x 130% = £77.28 With effect from 01/01/2003, the following changes were made on commission payable for Personal Retirement Plans:-

Current Basis New Basis

Single premiums 4% 1.7% OTO7 policies 3% 1.7% Regular premiums: - initial commission 35% LAUTRO 16% LAUTRO - renewal commission 1.5% Nil

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PENSIONS – GROUP STAKEHOLDER (ALL SALES) AND INDIVIDUAL STAKEHOLDER / SIPP (SOLD BEFORE 11

th MAY 2009)

For all stakeholder contracts there are three Commission options available depending on the product and premium levels. These three options are:-

• Commission Paid on Indemnity Terms

Equal to a multiple of the first month’s regular premium (or one – twelfth of yearly premium). A clawback period will apply. The multiples range from 1 times to 2.5 times the monthly (or equivalent) premium. Override is not available with this option. Further Commission Paid on Indemnity Terms may be payable for increments. This is dependent on the total premium received over the annual review period being greater than 110% of the expected annual premium. The expected premium will be the highest premium that has previously generated commission. Reviews will take place each year on or around the anniversary of the start of the regular contributions into the plan and this is the only time commission can be generated on increments. These reviews will look at the expected premium and the actual premium within the review year so it is likely that any increment made during a review year will have its commission spread over 2 annual reviews, because at the first review the increment will only be present for part of that review year.

This review may also generate a reclaim of commission. This will only occur if the actual premium is lower than 95% of the expected premium. Commission clawback in respect of a particular commission payment is spread over a 3-year period, which starts on the payment of that particular commission payment. Any increase to premium on the annual review that does not hit the >10% increment will be carried forward to offset any potential clawbacks.

Lower commission amounts and shorter clawback periods apply to new plans commencing within four years of the earlier of the member’s selected retirement age or their 65th birthday.

No increment commission is paid at yearly reviews within five years of the earlier of the member’s selected retirement age or their 65th birthday. If premiums are suspended within the agreed clawback period a commission reclaim will apply. If premiums are re-instated within the agreed clawback period, part of the reclaimed commission will be re-paid on the anniversary dependant on the number of months left within the clawback period. If premiums are re-instated outside of the clawback period, commission will only be paid on increments to the initial premium.

Increment example

Case set up on 2 x monthly premium with £100 regular. So 2*£100 = £200 paid as initial commission. Case increments after 6 months to £200 regular

In the first year the expected premium will be £1200 but the actual premium will be £1800. Commission will therefore be based on a £600 annual increment (£1800 - £1200) and will pay increment commission of £600 / 12 = £50 * 2 = £100

In year 2 the expected premium will be £1800 but providing premiums continue the actual premium will be £2400. Commission will be based on a £600 annual increment (£2400 - £1800) and will pay increment commission of £600 / 12 = £50 * 2 = £100

Hence the £200 expected increment commission (2 * £100 increment) is spread over the two annual review points following the increment.

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• Level Commission Equal to a percentage of each regular premium. Override is available with this option, but only for GPP after 26

th May 2009.

• Fund Based Commission

Payable monthly from the start of the policy and equal to a percentage of the value of the fund. Override is not available with this option.

• A combination of Commission Paid on Indemnity Terms and Fund Based Commission

• A combination of Level Commission and Fund Based Commission. Commission Options for Single Premiums:-

• Initial Commission

Equal to a percentage of the single premium. Override is available with this option, but only for GPP after 26

th May 2009.


Payable monthly and equal to a percentage of the value of the fund. Override is not available with this option.

• A combination of Initial Commission and fund based commission.

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PENSIONS – INDIVIDUAL STAKEHOLDER (SOLD ON OR AFTER 11TH

MAY 2009)

• Level Commission Equal to a percentage of each regular premium. Override is not available with this option.


Payable monthly from the start of the policy and equal to a percentage of the value of the fund. Override is not available with this option.

• A combination of Level Commission and Fund Based Commission. Commission Options for Single Premiums:-

• Initial Commission

Equal to a percentage of the single premium. Override is not available with this option.


Payable monthly and equal to a percentage of the value of the fund. Override is not available with this option.

• A combination of Initial Commission and fund based commission.

18

2005 - 2008 Versions of Individual Stakeholder Pension and Single Charge Individual Personal Pension / SIPP (2005 versions are only available for incremental business with effect from 01/08/06)

Single Premiums/Transfer Values £10,000 and over under £10,000

Initial Term* % of SP/TV N/A

(yrs)

0 - <5 [FBC or initial + FBC]

5 - <10 2.00%

10 - <15 2.50%

15 plus 3.0%

Fund Based 0.40% n/a

Initial + Fund Based 1.5% + 0.15% FBC n/a

Level n/a n/a

* to age 65 or SRA whichever is the sooner. Note: Commission terms for group stakeholder and group single charge personal pensions are linked to

product versions determined through the scheme underwriting process. They do not depend entirely on premium levels for individual members.

Annuities Internal annuities pay a flat rate of 1% of the consideration value. This is the total consideration value after tax free cash is taken and before any additional fund is added by ourselves under the GMP process. The commission is paid in an identical frequency to the payments made to the client so for example if the annuity is set to pay annually in arrears the commission is delayed until 1 year post contract date of the annuity. External annuities pay commission as and when the annuity is processed so the frequency of the client payments is irrelevant.

19

BONDS There are several options available for IFA’s to choose on the sale of a bond. The 2 basic options are full initial or initial plus trail (Fund Based commission), the lower the level of Initial Commission, the higher the amount of Fund Based commission we will pay.

21

Below are all the commission options available: -

Bond commission options for IFA's by product

Perc

enta

ge o

f T

rail

fund

ed b

y U

E

Age

nt L

evel O

verr

ide P

erm

issib

le ?

Tw

eak F

acto

r A

dju

stm

ent

Port

Bond

Sta

nd

ard

(IF

A)

Port

Bond

Sta

nd

ard

(C

oF

un

ds)

Dis

c G

ift

Port

folio

(IF

A)

Port

Bond

Hig

h A

lloc (

IFA

)

Port

Bond

Hig

h A

lloc (

Cofu

nds)

Port

Bond

In

it C

harg

e (

IFA

)

Port

Bond

In

it C

harg

e (

Cofu

nds)

Investm

en

t B

ond

+ D

eath

G'te

e

Investm

en

t B

ond

WP

Gro

wth

Bon

d

WP

Gro

wth

Bon

d 8

0+

WP

Incom

e B

ond

WP

Incom

e B

ond

80+

WP

Cap P

rot

Plu

s Incm

e B

ond

WP

Cap P

rot

Plu

s G

rwth

Bond

WP

Cap P

rot

Plu

s Inc B

on

d 5

yr

WP

Cap P

rot

Plu

s G

rth B

ond 5

yr

WP

Cap P

rot

Incm

e B

ond

WP

Cap P

rot G

rwth

Bond

WP

Cap P

rot

Incm

e B

ond (

5 y

r)

WP

Cap P

rot G

rwth

Bond

(5 y

r)

Port

Bond

Sta

nd

ard

(B

arc

lays)

Clo

sed

WP

Bon

d m

onth

ly c

hg 8

0+

Clo

sed

WP

Bon

d m

onth

ly c

hg

Clo

sed

WP

Bon

d initia

l chg

80+

Clo

sed

WP

Bon

d initia

l chg

Clo

sed

WP

Inco

me B

ond 8

0+

Clo

sed

WP

Inco

me B

ond

Normal

6.0% Init (no fund based) N/A No 1.00 ��

5.0% Init (no fund based) N/A Yes 1.00 ��

5.50% Init (no fund based) N/A Yes 1.00 ��

5.0% Init + 0.25%Monthly FBC N/A No 1.00 ��

4.0% Init + 0.50%Monthly FBC N/A Yes 1.00 ��


0.9% Monthly FBC (Nil Init) N/A No 1.00 ��


2.5% Init + 0.5%Monthly FBC N/A Yes 1.00 ��


4% Init (no fund based) N/A Yes 1.00 ��

2% Init+ 0.25% Monthly FBC N/A No 1.00 ��

1% Init + 0.50% Monthly FBC N/A Yes 1.00 ��

0.75% FBC N/A No 1.00 ��

22

Enhanced

* 5.0% Init + 0.5% Monthly FBC 0.25% No 1.00 ��




* 4.0% Init + 0.75% Monthly FBC 0.25% Yes 1.00 ��

* 4.0% Init + 1.0% Monthly FBC 0.50% Yes 1.00 ��

* Denotes trail commission is part funded by unit encashment

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Portfolio Bond:-

From 21 July 2008 the current Portfolio Bond charging structure will become Portfolio Bond – Standard. With the exception of the Discounted Gift Portfolio Bond the new range of available Portfolio Bond products from this date will be:

Portfolio Bond – High Allocation (Direct to Legal & General)

Portfolio Bond – High Allocation (Cofunds platform)

Portfolio Bond – Initial Charge (Direct to Legal & General)

Portfolio Bond – Initial Charge (Cofunds platform)

Portfolio Bond – Standard (Direct to Legal & General)

Portfolio Bond – Standard (Cofunds platform)

Standard – Essentially the same as our existing Portfolio Bond. Aimed at customers who want to pay a level amount of charges over the term of their investment.

Initial Charge – Aimed at customers who prefer to pay a significant amount of their charges up-front and receive loyalty bonuses as a reward for remaining invested over the longer-term. The product is also flexible as no early surrender charges apply, but customers need to appreciate their investment should be for at least 5 years, ideally longer.

High Allocation – Aimed at customers who are looking to see an immediate gain on their investment by receiving a high initial allocation rate (perhaps to make up for a loss on a previous investment). They would be willing to pay charges over 7 years and have higher surrender charges during this period.

There is a scale in place for commission reclaim applied over the first 3 years (this applies only to initial commission on the Portfolio - Initial Charge):-

Commission clawback There will be a commission clawback if all the following apply:

* Initial charge option chosen.

* The allocation rate on the illustration (including any allowance for limited offers and commission sacrifice), plus initial commission paid, is in excess of 100%

* A full or partial surrender is made within the first three years of the investment. The amount reclaimed will be based upon the excess over 100% and when the surrender takes place as follows:

Year of surrender

Clawback as a % of amount in excess of 100%

1 100%

2 67%

3 33%

24

Commission bases in Detail Single Premium Initial Commission (a) Applies only to single premiums. (b) Override commission is payable on some policy types as shown in the relevant product/commission

tables and related notes. (c) The amount of basic Initial Commission (i.e. excluding override commission) will be the percentage

of single premium. 2. Regular Premium Level Commission (a) Applies only to regular premiums. (b) Override commission is payable on some policy types. (c) The amount of basic Commission (i.e. excluding override commission) will be the percentage of

annual premium. 3. Fund-based Commission (a) May apply either to regular or single premiums. (b) Override commission is not payable (c) The annual amount of Commission will be the percentage of fund value. 4. Clawback for Single Premiums/Transfer Values On 4 January 2005 clawback of single premium and transfer value commission paid on the following Products was introduced:- Individual Stakeholder Group Stakeholder Individual PP (2000) Group PP (2000) SIPP (2000) This will apply to new plan applications received with effect from 4 January 2005. Applications received by 31 December 2004 and completed by 31 March 2005 will not be liable for clawback; those received by 31 December 2004, which complete after 31 March 2005 will be subject to potential clawback. The current levels of single premium commission remain unchanged, but the following clawback will apply:- Exit within % Clawback -------------- ----------------- 1 year 100 2 years 75 3 years 50 4 years 25 “Exit” above will refer to either transfer out or surrender of the plan. All other Products will remain unchanged. In addition, commission clawback will not apply at this time to:-

25

a) New or incremental single premiums/transfers to above named existing plans/schemes and b) New or incremental single premiums/transfers in respect of new members to above named existing

schemes. c) Partial surrenders where policy start date is on or after 01/10/2008 will be liable for clawback at the

above rate. Changes to commission clawback terms for single contributions and transfer payments received on or after 4

th May 2010 were introduced:-

• Applies to Individual Stakeholder and Individual PP (2000)

• Applies to all single contributions and transfer payments received on or after 4th May 2010

• No changes to clawback position on existing single contributions and transfer payments received prior to 4

th May 2010.

• Current commission levels for single contributions and transfer payments remain unchanged. The clawback period will be changed from 4 years to 5 years. The percentage clawback of commission will also change. Exit within % Clawback of commission paid 1 year 100 2 years 85 3 years 70 4 years 55 5 years 40 "Exit" above means transfer out of, taking benefits from or surrender of the plan. Providing investments attributable to the single contribution and/or transfer payment are held for a five year period then all commission is secured and the terms that the clients receive are unaffected by these changes. 5. Contribution Based Commission This is funded by an equivalent deduction from the allocation rate of 100% from the contribution or transfer value to which the payment relates. The maximum deduction is 5%. Contribution based commission may not be used for protected rights. 6. Funded Commission This is funded by an additional annual management charge of up to 1% of the fund per year. Advisers may choose between contribution based and funded commission options where these styles are available. You cannot mix commission options within an arrangement. For example, if you have chosen contribution based commission for regular contributions under an arrangement, a contribution based commission style must be used for single contributions or transfer values paid to the arrangement.

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EXECUTIVE PENSION PLAN (FROM 27 JANUARY 2003) As part of Legal & General’s commitment to offering “value-for-money” pension products, we carried out a review of the product terms that were available under our Executive Pension Plan (EPP). As a result, we removed a number of commission styles available to new business written on or after Monday, 27 January 2003. At the same time will introduced a mandatory minimum level of sacrifice on new regular premium business for those commission styles that remained. This would enhance the product terms by increasing the allocation to units, but reduce the level of commission payable. It is important to note that these changes are only in respect of new regular premium business written on or after Monday, 27 January 2003. And any subsequent increments to that business. They do not apply to life cover, increments to existing plans set up before this date or to transfers and single premiums to any plans. These will continue to attract the same levels of commission based on the commission styles currently available. The following commission styles are now available:

Commission Style

5 IFA Tied Level (no override)

32 IFA Indemnity Commission

For the remaining commission styles a mandatory minimum level of commission sacrifice will be introduced which will apply to new regular premium business. The level of minimum sacrifice will be specific to premium type (i.e. regular premiums), commission style and the term, from inception, to normal retirement date (NRD). Any subsequent regular premium increments to plans established on or after Monday, 27 January 2003, will be subject to the same level of minimum sacrifice. No commission will be payable where the term to NRD is less than 10 years, irrespective of the agent’s override (where applicable). Mandatory Minimum Sacrifice (Level Commission) For commission style 11 (level commission), the mandatory minimum sacrifice percentages that will apply are as follows:-

Term to Mandatory New Level New Old New

NRD Sacrifice Commission Allocation % Reduction in Reduction in

(%) (%) to units Yield (%) Yield (%)

10 years 85 1.2 99.8 3.3 1.9

11 years 80 1.6 99.4 3 1.8

12 years 75 2 99 2.8 1.8

13 years 70 2.4 98.6 2.6 1.7

14 years 65 2.8 98.2 2.4 1.7

15 years + 60 3.2 97.8 2.3 1.7

For commission styles 33 & 34 (LAUTRO Initial Commission (LIC), the mandatory minimum sacrifice percentages that will apply are as follows:

27

Term to Mandatory New Old New

NRD Sacrifice Allocation % Reduction in Reduction in

(%) to units Yield (%) Yield (%)

*10 years 160 LIC 99.6 for 5 years, 100 thereafter 3 1.9

*11 years 140 LIC 98.4 for 7 years, 100 thereafter 3.1 1.9

*12 years 120 LIC 97.2 for 7 years, 100 thereafter 2.8 1.9

13 years 100 LIC 96.0 for 7 years, 100 thereafter 2.5 1.9

14 years 80 LIC 94.8 for 7 years, 100 thereafter 2.3 1.9

15 years + 60 LIC 94.0 for 7 years, 100 thereafter 2.1 1.8

* Assumes agent’s override equals mandatory minimum sacrifice level. The agents’ actual level of override may affect the new initial allocation rate and reduction in yield. All the figures above assume a regular monthly premium of £300 invested in the managed fund.

The level of Renewal Commission will remain unchanged provided the term from inception to NRD is 10 years or more.

No Renewal Commission will be payable where the term is less than 10 years.

The commission sacrifice screens on the quotation system will automatically default to the minimum level of sacrifice for regular premiums and will not require manual intervention. However, the level of sacrifice can be increased if required.

The mandatory minimum sacrifice percentages only apply to regular premium business. They do not apply to either single premium business or transfer business. Nor do they apply to regular incremental business on plans established before Monday, 27 January 2003. Business of this nature will continue to attract the higher levels of commission currently available.

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