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This customer information notice is a summary and so does not set out all of the detailed aspects of the Mortgage Endowment Promise. If there is any inconsistency between this customer information notice and the Demutualisation Scheme, the Demutualisation Scheme prevails.
In September 2000, The Standard Life Assurance Company issued the Mortgage Endowment Promise ("the MEP") to the majority of our UK and Irish mortgage endowment planholders.
The MEP provided that, subject to the fulfilment of a number of conditions, including in relation to the growth in Standard Life's capital, an eligible plan would meet its targeted value at maturity as long as the "6% a year test" was met. Under the MEP, the 6% a year test would be met if the earnings on the assets backing the plan were on average at least 6% a year (after tax) from 28 September 2000 to the maturity of the plan.
On 10 July 2006 The Standard Life Assurance Company demutualised. As part of the demutualisation Scheme, which the Scottish Court approved on 9 June 2006, the MEP was revised.
Projections carried out shortly after the MEP was introduced showed that certain eligible planholders ("MEP Top Up Planholders") would have a shortfall when their plans matured, even if the future earnings on the assets in which their plans were invested were on average 6% each year (after tax). Therefore, the MEP also provided that, subject to fulfilment of the conditions of the MEP, a top up payment would be paid to each of these planholders on maturity to reduce the impact of any shortfall. The maximum amount of this potential top up ("the Maximum Top-Up Amount") was equal to the shortfall estimated at the time those projections were made, assuming that the earnings from that time until maturity on the assets in which their plans were invested were on average 6% each year (after tax). This was communicated to each MEP Top-Up Planholder shortly after the MEP was introduced.
The MEP was revised when Standard Life demutualised. One of the conditions of the MEP, regarding future growth in Standard Life's capital, was replaced with a link to the future investment return achieved on the substantial majority of the assets backing most of our UK with profits policies. This revision was intended to ensure that the obligations in respect of the MEP could operate with certainty, within the changed corporate structure of the Standard Life group following demutualisation, and in a manner that was fair to all planholders.
The MEP is complex. However, by replacing the capital growth condition with clearly prescribed investment thresholds, much greater certainty in the operation of the MEP has been achieved.
Entitlement to any payment under the MEP will now be exclusively determined on and subject to the terms and conditions set out in the demutualisation Scheme.
Working out whether a payment is due under the MEP for MEP Top-Up Planholders and, if it is, the amount of the payment, involves several steps, as follows:
We calculate the shortfall amount. This is the amount by which the actual maturity value falls short of the targeted maturity value. If the actual value exceeds the targeted value there is no shortfall amount and there is no payment under the MEP.
We then apply the 6% a year test. If the earnings on the assets backing the plan have been on average at least 6% a year (after tax), over the period from 28 September 2000 until the maturity date, then the 6% a year test has been met.
If the 6% a year test has been met, the top-up payment we make ("the MEP payment") is a percentage of the shortfall amount.
If the 6% a year test has not been met, the MEP payment is normally a percentage of the Maximum Top-Up Amount. The MEP payment will be restricted, if necessary, to be no more than the shortfall amount.
The demutualisation Scheme sets out the rules for calculating the percentage ("the Applicable Proportion") that we use when calculating the MEP payment in Step 2. In line with this the Applicable Proportion applying to maturing claims from 1 January 2021 is being fixed at 100% and will apply to all maturing claims from this date.
If you have any queries about the payment that may be made under the MEP please contact us on the number below.
The estimated MEP payment shown in your annual statement is based on an Applicable Proportion of 100%. The Applicable Proportion has been fixed at 100% for all maturing claims from 1 January 2021. The MEP amount you will receive depends on the investment returns on your policy. It is, therefore, not possible to determine the exact amount of your MEP payment until the maturity date of your plan. It could be lower or higher than the amount shown on your statement.
The MEP payments are intended to be broadly equivalent to what might have been paid by The Standard Life Assurance Company if it had remained a mutual company, in accordance with the letters it sent to MEP Top-Up Planholders following the announcement about the MEP made in the UK in October 2004 and in Ireland in January 2005.
In general it seems unlikely that MEP policies will meet the 6% a year test, at least on a short to medium term view of potential investment returns. The outcome of the test for an individual plan will only become known at its maturity date. It must therefore be emphasised that it is not possible to determine accurately the amount, if any, that will be paid to a MEP Top-Up Planholder until the relevant plan has matured.
In order to qualify for a payment under the MEP, a MEP Planholder must also satisfy certain eligibility criteria. These criteria must be met from the first review of your MEP plan, following the introduction of the MEP, up to your plan maturity date:
We will not make any MEP payment if, at any time during that period:
If you are contemplating altering or assigning your plan, and you are not sure whether this will cause your plan to cease to be eligible under the MEP, call our customer services department on 0345 60 60 003 between 9am and 5pm, or speak to your independent adviser. If for any reason you are in doubt about the implications of such loss of eligibility, we strongly recommend that you consult your solicitor or independent adviser.