Our principles and practices

Principles and Practices of Financial Management: Scottish Widows plc

Our Principles and Practices of Financial Management (PPFM) is set out in sections covering different aspects of, for example, how we invest your money and determine how much you get back. You can view or download the entire 53-page document.

Our PPFM was first published on 30 April 2004. We made some changes to the wording, partly in response to new FSA requirements, in 30 June 2005 and some further amendments on 31 December 2005 and 31 August 2008.

The PPFM is a technical document that has been prepared to enable a knowledgeable observer to understand the material risks and rewards from purchasing or holding a with-profits policy with Scottish Widows plc.

Underneath you can find some FAQs about PPFM in shorter form, which may answer some of your questions. We have also produced Your guide to with-profits - a summary which you may find helpful.

Our annual PPFM Report

You can also view or download our annual Report on Principles and Practices of Financial Management for 2009. This confirms that during 2009 we managed our business in line with the Principles and Practices of Financial Management and summarises the steps we have taken to ensure that we treat customers fairly. It also contains the With-Profits Actuary's statement on the management of the with-profits business.

Your guide to with-profits

To help you understand our PPFM, we have summarised the necessarily technical language in a straightforward jargon-free summary called Your guide to with-profits. All new with-profits policyholders now automatically receive this summary when they take out their policy, and copies were sent with annual statements issued in 2006. You can also view Your guide to with-profits here or you can contact us on 0845 845 0845* and we will send you one.

If, when you’ve read the above documents, you still feel unclear about how we manage our with-profits business, you should seek further advice from your financial adviser.

Scheme of Transfer

Scottish Widows’ Fund and Life Assurance Society demutualised and transferred most of its business to Scottish Widows plc, a company in the Lloyds Banking Group, on 3 March 2000. The legal document that governed the basis of how that transfer was implemented is called a ‘scheme of transfer’. That scheme of transfer governs much of how we operate our with-profits fund. It is referred to in our PPFM and some relevant extracts are included within the PPFM.

If, however, you wish to read the full text of the Scottish Widows scheme of transfer you can view or download it here. Please note that this is a highly technical document and is provided for reference and completeness only.

Our PPFM explains that payouts for policies that started on or before 3 March 2000 may be increased by distributions from the Additional Account and Retained Account, which were set up by the scheme of transfer. As explained in the PPFM, we expect most of the Additional Account to be used meeting contingencies and for other purposes for which the Account was set up. The most recent bonus rates approved by the Board include an addition from the Additional Account, which equates to an increase in the investment return of 0.15% per annum from the date of demutualisation. Payouts also include a distribution from the Retained Account, which was also set up at demutualisation. This enhancement increases asset values at demutualisation by 2%.

Asset mixes of our with-profits fund

The Scottish Widows with-profits fund invests in a mix of assets such as company shares (also known as equity shares), property, bonds (also known as fixed-interest securities) and cash deposits. The proportion of our with-profits fund that is put into each of these different types of asset will vary over time. The mix of assets can be different for different parts of the fund. You can view or download the asset mix of each part of the with-profits fund here.

Investment factsheet for our with-profits fund

The investment factsheet for the main part of our with-profits fund can be viewed or downloaded here.

Other information

Actuarial Profession

The Actuarial Profession represents and regulates members of the Institute of Actuaries in England and Wales, and the Faculty of Actuaries in Scotland. The Actuarial Profession has issued a briefing note which explains the technical background to with-profits bonus announcements. You can read that briefing by visiting the Profession’s website or by downloading it here.