Income

Starting income will be based on a number of factors including:

• age and postcode (if provided)
• size of pension fund
• annuity rates and prevailing market conditions
• payment options chosen including choice of ABR.

Future income will then either rise or fall depending on the bonuses we declare and whether they’re higher or lower than the level of ABR. It will be taxed as earned income.

Bonuses

Bonuses are not guaranteed and will depend on a number of factors including investment performance, our mortality experience and expenses. There are two types of bonus:

• Annual bonus, which, once added cannot be withdrawn (other than by the effect of the ABR), and
• Temporary bonus, which is payable for one year and can be changed or withdrawn at any time.

We normally declare our bonuses in February of each year. However, they're not actually applied until your client's 'policy alteration date', which is usually the anniversary of when their annuity was set up.

How to work out the new income level

1. Deduct any temporary bonus applied in the previous year from last year’s income;
2. Reduce the remaining balance by the chosen ABR;
3. Add the declared bonuses for the current year;
4. Add the chosen ABR back on.

Income won’t fall below a fixed percentage of starting income

Our With Profits Annuity offers a minimum income level (‘underpin’), which is based on the selected ABR. These minimum income levels are shown below:

Current asset split

The split of assets backing our With Profits Annuity (as at 31 December 2011) was:

Charges

An estimation of our charges is included within the pension income we quote. Any variations from this may be taken into account when we declare our bonuses.