Occupational pensions. Pre-purchase information

Transcription

1 Occupational pensions Pre-purchase information

2 Skandia's occupational pensions pro ramme This brochure provides a general description of the various forms of insurance in Skandia's occupational pensions programme, which is directed at all types of companies and includes modern insurance solutions for business owners as well as employees. Below is a brief summary of what is included. The various components are explained in more detail further down in this brochure. Skandia's occupational pensions programme is highly flexible, making it possible to custom-tailor insurance solutions for groups of employees as well as for individuals. Skandia offers various forms of asset management for your pension savings, and you can conveniently switch management forms for future savings. Within Skandia you can also switch management forms for capital that has already been built up, through a policy transfer. The insurance is contracted through Skandia Link and Skandia Liv, jointly referred to herein as Skandia. The programme includes the following types of insurance: Company-owned occupational pension insurance Pension insurance for business owners Company-owned endowment insurance as security for direct pension obligations Privately owned endowment insurance Skandia's occupational pensions programme features a number of insurance components that can be combined and complement each other in various ways. Retirement pension Retirement pension is the core of Skandia's occupational pensions programme. The amount of your retirement pension depends on the amount of premiums paid in, the growth in value of your savings, and the length of time your benefits will be paid out. Family and survivors' pension A retirement pension can be complemented with survivors' pension in the form of repayment protection, a family pension, or strict survivors' pension. This entails that the accumulated savings or insurance protection will be paid out as survivors' benefits upon the death of the insured. Disability insurance Disability insurance pays benefits for loss of income in the event of an incapacity for work caused by an illness or accidental injury. Company-owned endowment insurance A company-owned endowment insurance policy can be purchased by an employer as security for a direct pension obligation to an employee. Privately owned endowment insurance As a complement to company-owned insurance, privately owned endowment insurance can also be purchased. Anyone can be named as a beneficiary in a privately owned endowment insurance policy. Waiver-of-premium insurance Waiver-of-premium insurance is an optional form of cover entailing that Skandia will pay all or part of the insured's premiums after a certain, contracted period if the insured suffers from an incapacity for work due to an illness or accidental injury. Interim solution Under an interim solution, certain default insurance components come into force immediately when a company applies for an occupational pension plan for its employees with Skandia. The interim solution applies for a limited period of time, until the employees have made their personal insurance choices within the occupational pensions programme. Complementary insurance More information about the following types of insurance is provided in separate brochures. Healthcare insurance Healthcare insurance is directed at companies that put a premium on prompt, first-rate private healthcare for their employees as a complement to the national healthcare system. Skandia has agreements with the leading private hospitals in Scandinavia. Group insurance Group insurance is directed at companies with at least ten employees and offers complementary, attractively priced insurance protection for their employees. Life assurance, disability capital insurance, accident insurance and child insurance are examples of insurance components that can be included in a group insurance plan. Advanta es of our occupational pensions pro ramme Good for you as a policyholder and employer Convenient insurance solutions Simple administration Extensive experience Good for you as an insured and employee Need-based insurance solutions Security for you and your family Flexible management forms

3 The insurance contract When insurance is purchased from Skandia, a contract is entered into between the policyholder and Skandia. This contract is verified by special contract documents that are sent to the policyholder and the insured. By insured is meant the person whose life the insurance covers. For occupational pension insurance policies and company-owned endowment insurance purchased as security for a direct pension obligation, the employer is the policyholder. For private pension insurance, the business owner is the policyholder. For privately owned endowment insurance, ordinarily the insured is the policyholder. In an occupational pension plan, the insured is to be regarded as the policyholder in accordance with the rules of the Insurance Contracts Act. This applies unless otherwise stipulated in the contract with respect to: the right to information the ability to name beneficiaries for survivors' protection fund selection transfers to a new employer when employment ends the right to insurance benefits The insurance contract regulates, among other things, when premiums are to be paid and how benefits are paid out and to whom. Skandia adheres to the actuarial guidelines and actuarial computation bases that have been drawn up in accordance with the Insurance Business Act. The various forms of insurance are also governed by the Insurance Contracts Act and Swedish law in general. The Swedish Financial Supervisory Authority is the regulatory authority that conducts oversight of Skandia's business. Skandia's handling of personal data, cancellation rights, its Customer Satisfaction Guarantee and how any complaints are handled are described toward the end of this brochure. When Skandia's liability takes effect Skandia's liability takes effect the day after the insurance application has been received by Skandia, under the condition that the application documents are complete and it is not stated that the insurance shall come into force at a later date. If the premiums are invested in unit linked management with Skandia Link, Skandia's liability takes effect when the premiums have been received by Skandia. Health declaration For certain types of insurance, approval of a health declaration is required in order for the insurance to be granted. If a health declaration leads to insurance being granted at a higher premium or with certain exclusions, Skandia's liability does not take effect until Skandia has informed about the higher premium and the policyholder has accepted. A health declaration can also be required if a change in the insurance contract is requested later during the insurance period. In some cases, a simplified health declaration is used, entailing that the policyholder or insured certifies that he/she is "fully fit for work" in accordance with the definition used at any time by Skandia. False information It is important that the questions in the health declaration are answered completely and correctly. False or incomplete information could render the insurance invalid.

4 Premiums and policy value Defined contribution insurance For defined contribution insurance, the policyholder determines how large the premium, or contribution to the insurance, will be. The premium can be paid in lump-sum or through periodic payments. For example, the premium can be based on the employee's salary, so it is important that Skandia is always informed about changes that affect the insurance. Every premium that is paid in builds up a benefit that is based on the computation assumptions that apply for the insurance at the time of each premium payment. If you choose GarantiPensionPlus with Skandia Liv, the higher amount of the basic guarantee or the enhanced guarantee will be paid out. For traditional life management with Skandia Liv, the attained benefit is guaranteed. For unit linked management with Skandia Link, the benefit is based on the performance of the underlying funds. Defined benefit insurance For defined benefit insurance, the policyholder purchases insurance with Skandia Liv that pays a set level of benefits during the disbursement period. For example, the benefit can be based on a certain percentage of the employee's salary. If the employee's salary changes, then this affects the size of the premium, so it is important that Skandia is always informed about changes that affect the insurance. Based on Skandia Liv's computation assumptions, a premium is determined. The computation assumptions may change during the term of the insurance. Calculation of premiums Premiums are calculated after taking into account assumptions about interest, mortality, overheads and tax. Overheads are costs for sales and administration. Tax consists of the policyholder tax or income tax that Skandia is obligated to pay for the insurance. Premiums for disability and waiver-of-premium insurance are calculated primarily on the basis of morbidity assumptions. Payment of premiums How and when premiums are to be paid is determined by the contract between Skandia and the policyholder. Premiums can be paid periodically as invoiced or via direct debit ("autogiro"). For insurance that will begin paying benefits immediately, the premium must be paid in lump sum. If premiums are to be paid at the policyholder's discretion and in any amount, a pension account will be opened. The policy's uaranteed value with Skandia Liv For insurance that includes a savings element, the policy's guaranteed insurance amount on every contracted disbursement occasion is based on accumulated paid-in premiums less fees. If premium payments are discontinued prematurely, the guaranteed insurance amount will be adjusted downward. This lower insurance amount is called the paid-up amount. If the policy has no guaranteed value when premium payments were discontinued, then the policy becomes invalid. The policy's fund value with Skandia Link The fund value is built up of invested amounts, that is, paid-in premiums and the change in value of the underlying funds. The fund value is also affected by taxes and fees that are charged to cover operating expenses. The fees consist of two parts a fixed fee that is charged once a year, and a variable fee that is charged once a month. These fees are deducted from the fund value. 4

5 Insurance solutions Pension and endowment insurance Pension and endowment insurance differ from each other primarily in terms of taxation. For pension insurance, premiums are deductible within certain limits, and amounts paid out are subject to income tax. The insurance must also meet certain other requirements in accordance with the Income Tax Act. For endowment insurance, premiums are not deductible, but amounts paid out are exempt from income tax. Beneficiaries The insurance terms and conditions include a general beneficiary clause that specifies which person or persons are to receive benefits from the insurance. The policyholder, or in certain cases the insured, can change the general beneficiary clause in writing. Possible beneficiaries for a pension insurance plan with survivors' protection are the insured's spouse/cohabitant or previous spouse/cohabitant and children of either of them. By children is also meant adopted children, stepchildren and foster children, but not children's heirs. For company-owned occupational pension insurance, the insured is always the beneficiary of retirement pension benefits. For privately owned endowment insurance, anyone can be named as a beneficiary. Endowment insurance that is owned by a company has no beneficiary clause, but is instead paid out to the policyholder in accordance with an agreement signed upon purchase of the insurance. 5

6 Insurance protection Pension insurance Retirement pension A retirement pension is built up through savings paid in through insurance premiums. Benefits are paid out as long as the insured remains alive or during a specific, set period of time. When the insured dies, payments cease. The value of the insurance then accrues to the insurance collective if the insurance was not combined with repayment protection, survivors' pension or family pension. Repayment protection Repayment protection is based on the insurance capital at the date of the insured's death. This usually applies prior to the age of retirement, but depending on the structure, it can also apply during the actual disbursement period. The repayment protection is paid out to the insured's survivor(s) in accordance with the beneficiary clause. Benefits must be paid out for a minimum of five years, in accordance with the rules of the Income Tax Act. Family or survivors' pension A family or survivors' pension is insurance that gives the insured's survivors financial protection. The insurance protection is structured according to the insured's needs, applicable rules and Skandia's product offer. Upon the death of the insured, the pension benefits are paid out to the person or persons named as beneficiaries. Both family and survivors' pension benefits must be paid out for a minimum of five years, in accordance with the rules of the Income Tax Act. Disability pension Disability insurance is purchased to protect the insured against loss of income due to an incapacity for work if he or she suffers from an illness or accidental injury and can no longer work as previously. The insurance benefits correspond to the portion of salary that is not compensated by the national insurance system. Payment of disability insurance benefits cannot commence until the insured has been on sick leave for at least three months. Payments cease not later than when the insured reaches the contractual age under the plan. Disability insurance protection lapses if premium payments are discontinued. Endowment insurance Privately owned endowment insurance death benefit Privately owned endowment insurance does not include any savings element and can be purchased to supplement a pension insurance plan. The benefit is paid out in a lump sum that is determined in the insurance contract to the appointed beneficiaries upon the death of the insured. The insurance applies only for death before a certain, contracted date. If the insured lives beyond the conclusion of the insurance term, the insurance lapses without any payment of benefit. Company-owned endowment insurance Direct pension solution Endowment insurance capital is built up through savings paid in through pension premiums. Benefits are paid out as long as the insured remains alive or during a specific, set period of time. When the insured dies, payments cease. The value of the insurance then accrues to the insurance collective if the insurance was not combined with survivors' pension. If the survivors' protection is coupled with repayment protection, payment of benefits will be based on the value of the policy at the date of the death of the insured. Other survivors' protection can be designed according to the policyholder's needs, applicable rules and Skandia's product offer. Survivors' protection is paid out during a contracted period to the policy- holder upon the death of the insured, provided that a coinsured is alive. A coinsured is one or more persons, other than the insured, for whose life the insurance applies. Waiver-of-premium insurance Waiver-of-premium insurance is an add-on insurance for both pension and endowment insurance. If the insured suffers from an incapacity for work due to an illness or accidental injury, then Skandia will pay all or part of the premiums for the basic insurance cover during the contracted insurance term. How much Skandia pays depends on the degree of the insured's incapacity for work. The insurance remains in force at the latest until the insured turns 65. Limited insurance cover Skandia has limited liability for disability benefits and waiver-of-premium protection for a period of 24 months from when the insurance first came into force. This limit applies if the insured suffers from an incapacity for work due to depression or a stressrelated condition, age- or wear-related condition of the back, joints and muscles, or fibromyalgia. Risk insurance Risk insurance is insurance that does not contain any savings element. For example, it can pay a set level of benefits upon the death of the insured. Disability and waiver-of-premium insurance are examples of risk insurance. These forms of insurance do not apply for death, disability or waiver-of-premium attributable to war or political disturbances. Nor do they apply if the insured is or has been active in particularly high-risk activities, in accordance with what is stipulated in the insurance terms and conditions. 6

7 Other content of the insurance contract Indexin Certain types of insurance can include indexing for inflation protection. This means that the premiums and/or benefits increase according to an index or percentage that the policyholder can choose within certain limits. Ri ht to increase cover An insurance policy can include a right to increase the level of cover. This means that the policy's benefit or premium can be raised to a certain extent, subject to completion of a simplified health declaration. The right to increase cover can be exercised, for example, when an employee's salary changes. Family option An insurance policy can include a family option, entailing that the insured has the right, without requirement for a new health declaration and within certain limits, to expand the cover with survivors' protection or increase the level of existing survivors' protection. In most cases, a requirement is that waiver-of-premium protection is included. A family option can be exercised within a certain period of time after the insured has become married, enters into a cohabitation relationship, or has children. Ri ht to amend the contract prior to receivin benefits Before an insurance policy begins to pay benefits, there are certain opportunities to make changes. The policyholder or for occupational pension insurance the insured, can amend the insurance sometimes without having to complete a health declaration. For occupational pension insurance, the insured's survivors can defer payment of benefits or change the duration of the disbursement period upon the death of the insured, provided that the policy has survivors' protection. The change must be made before payment of benefits commences and must be in compliance with the Income Tax Act. Limitations may apply in view of the policy's design and Skandia's product offer at the time in question. Transfers of pension insurance Insurance capital can be transferred to Skandia from another insurance company under the condition that the policy is covered by transfer rights. For all new pension insurance contracts with Skandia, it is possible to apply to transfer the insurance capital to another insurance company if permitted by the rules of the particular policy in question. During the first five years in disbursement, it is not possible to transfer the insurance capital. Both the policyholder and the insured must give their approval before a transfer can be made. Transfer may only be made of the entire policy value to a new pension insurance plan, with the same insured as previously. It is important to keep in mind that it is not possible to transfer the actual insurance solution, but only the capital. For certain policies, a health declaration is required. If risk protection has been purchased as a complement to the savings element, it may be forfeited in connection with a transfer. The actual insurance capital may also be affected by the fees that apply upon transfer. In addition, in the event the collective funding ratio is low, Skandia Liv may apply a Market Value Adjustment of the insurance capital that corresponds to the deficit in collective funding, i.e., when the value of Skandia Liv's assets is less than the value of the customers' aggregate insurance capital. Surrenders An insurance policy may be surrendered under the condition that it is possible in view of the individual policy's design and the rules that apply under the Income Tax Act. For some types of insurance, a health declaration is required. Skandia charges fees for surrenders. Skandia's ri ht to chan e the insurance terms and conditions In the insurance terms and conditions, Skandia has retained the right to make changes in the insurance contract if needed due to the policy's design, for actuarial reasons or out of consideration for the insurance collective. Disability or waiver-of-premium protection can also be cancelled for the same reason. Skandia informs the policyholder of any change or if any insurance has been cancelled. The change or cancellation applies from the coming premium period. Skandia also has the right to change or cancel the insurance pursuant to the rules that apply under the Insurance Contracts Act. This applies if the insured has provided false or incomplete information that was significant when the insurance was granted, expanded or renewed. 7

8 Expatriates A person who is entitled to make fund switches and who intends to establish residence in the USA, Japan, Australia or Canada is obligated to inform Skandia prior to moving abroad. After moving abroad, the right to make fund switches ceases immediately. Prior to moving abroad, the person entitled to make fund switches will have an opportunity to decide which fund allocation shall apply as long as he or she resides in the country in question. In cases where no agreement has been reached on fund allocation, the existing insurance capital will be placed in a fund determined by Skandia Link with low or medium risk. The renewed right to make fund switches applies as soon as an application for repatriation to Sweden or other country than the aforementioned has been received by Skandia. If the insured has the right to make fund switches for an occupational pension plan, the policyholder who remains in Sweden can rescind the right to make fund switches as long as the insured resides in one of the aforementioned countries. 8

9 Forms of mana ement for your occupational pension By having your occupational pension with Skandia, you have the best prospects of receiving a high return on your savings. With us you can choose from some of the market's strongest offerings in traditional life management and funds. An occupational pension plan can have the same content and same premium regardless of whether it is managed through our new offering, which we call GarantiPension Plus, in traditional life management, or in unit linked management. The difference lies in how the pension capital is built up. Here you can read about the advantages of the investment opportunities you have GarantiPension Plus in Skandia Liv Skandia Liv has developed an offering for policyholders who have chosen GarantiPension Plus as their occupational pension solution. It combines the best of two savings forms, giving you the guarantee of traditional pension insurance along with the opportunity for high returns provided by investment in equities. Advanta es of GarantiPension Plus Adapted to your age Through GarantiPension Plus, we invest your money according to your age. If you are young, a larger allocation will be made to equities, which normally generate higher returns over time. As you approach retirement age, the share of equities is scaled back in favour of more secure investments, to reduce the risk in your savings. Basic uarantee As a basic measure of security for you, GarantiPension Plus features a moneyback guarantee. This means that when you turn 65, you are guaranteed that at least the sum of your pension contributions (premiums less costs and fees) will be set aside for payment of your pension benefits. Enhanced uarantee when you need it most GarantiPension Plus contains an enhanced guarantee that ensures growth in value of your pension capital during the savings period. The higher the growth in value, the higher your guarantee amount when you turn 65. If you choose GarantiPension Plus before turning 55, you will be guaranteed at least 90 % of your total pension capital at 65. If you choose GarantiPension Plus after turning 55, the enhanced guarantee will be slightly lower. The enhanced guarantee is designed to prevent your pension capital from losing value during declines in the financial markets. The insurance amount is calculated using the higher of the base guarantee and the enhanced guarantee. Payment of benefits You decide yourself if you want to receive lifetime benefits or payment during a set period (but a minimum of five years). You can begin drawing pension benefits from 55 years of age. Guarantees The guarantees offered in GarantiPension Plus apply under the condition that payment of benefits begins when you turn 65. Here's how the uarantees work SEK Age Total pension capital = total contributions plus growth in value. Enhanced guarantee you are guaranteed at least 90 % of your total pension capital when you turn 65. Basic guarantee at 65 years you are guaranteed that at least the sum of your paid-in savings premiums will be set aside for payment of your pension benefits This example represents neither a forecast nor an obligation Approximate allocation of contributions for a 25-year pension* Fixed-income securities 25% Real estate 5% Equities 70% * Management of the pension capital is adjusted to the prevailing risk and market situation. 9

10 Traditional life mana ement with Skandia Liv The value that is created in a life assurance policy with traditional life management is called the insurance capital. The insurance capital shows the policy's total value and is often greater than the policy's guaranteed value, that is, the value that is built up over time to form the contracted insurance amount. The difference between the insurance capital and the guaranteed value is called the surplus. The surplus forms the basis of bonuses paid upon disbursement and is not guaranteed. About the surplus and bonuses A surplus can arise in Skandia Liv's business if the result of asset management for the insurance is more favourable than what Skandia Liv anticipates when calculating insurance amounts and premiums. The result can be more favourable: if the actual return on the assets is higher than anticipated, if the insureds' lifetime deviates from the assumption, if fewer insureds than calculated are ill and do not use their waiver-ofpremium insurance, or if the costs for running the business are lower than assumptions. If a surplus arises, it is smoothed over time and then allocated among the various insurance policies through the bonus rate. This allocation is done in different ways, depending on the type of insurance under management. For insurance with ordinary, traditional life management, this smoothing is done over several years. For GarantiPension Plus with traditional life management, smoothing is done in part monthly and the rest over several years. The surplus is allocated to every policy based on how much they have contributed to the total surplus that has accumulated in Skandia Liv. The surplus can decrease if Skandia Liv's business generates a negative result. This means that Skandia Liv cannot make any guarantees on the surplus. When the time comes for payment of benefits, any accumulated surplus is allocated to the policies as a supplement to the insurance amount. This supplement is not guaranteed and can decrease if Skandia Liv believes that the insurance capital would otherwise not be sufficient to cover future benefits. However, the benefits can never fall below the contracted insurance amount. Allocation of the surplus is smoothed over time so that benefits do not need to be reduced in connection with small declines in Skandia Liv's operating result. Skandia Liv has a funding reserve that may be used to cover future operating losses. According to Skandia Liv's Articles of Association, the money in the funding reserve may also be used to pay bonuses to the policyholders. The Articles of Association may be amended, but only under the condition that such amendment is compatible with insurance contracts in force. Performance of the insurance capital The insurance capital is affected during the course of a year by the following items: Plus items Paid-in premiums Return Risk revenue Minus items Payment of benefits from the insurance Risk charges Policyholder tax Right to waiver of premium Operating expenses This is how things look as long as no death occurs. In the event of death, the insurance capital is affected immediately. Return The return that Skandia Liv pays on the insurance capital is dependent on the change in value of the company's assets and on Skandia Liv's asset management costs. Risk revenue Assume that a policy is a retirement pension plan without survivors' protection. Since such insurance would lapse without payment of any benefits in the event of death, the policyholder runs a risk of losing the insurance capital. As compensation for this risk, the insurance receives risk revenue. This is calculated taking into account the degree of risk and probability of death, which in turn depend on age and gender. Risk charges If a death benefit is to be paid out that is greater than the insurance capital, then Skandia Liv pays the difference 10

11 between the death benefit and the insurance capital. Skandia Liv assesses a risk charge for this risk, which takes into account the degree of risk and probability of death, which in turn depend on age and gender. Policyholder tax Each year Skandia Liv pays a so-called policyholder tax, which is calculated according to a taxable base that is obtained by multiplying the company's assets at the start of the year by the average government lending rate for the preceding year. On this base, a tax charge of 27 % is currently assessed for endowment insurance and 15 % for pension insurance. The annual statement of policy shows what impact this has on the individual insurance policies. Right to waiver of premium In most cases, waiver-of-premium insurance can be added for a fee. Operating expenses Skandia Liv charges a fee to cover its costs for sales and administration of insurance contracts. This can be done in part through a percentage deduction from the premium and in part through a percentage deduction from the insurance capital, or through a one-time charge. Information on fees for an individual policy can be obtained through a quotation and product flier or from an insurance adviser. Asset management charges are not included in operating expenses, but are deducted from the preliminary allocation of the surplus. Mana ement of the insurance capital The goal of asset management is to achieve the highest possible return with a balanced measure of risk. Since life assurance savings are long-term, the asset management also has a longterm focus. This allows the asset management to disregard short-term movements in the financial markets. Reference and target portfolios A framework is in place as guidance for how investments are to be allocated in Skandia Liv's asset portfolio. The reference portfolio shows the investment limits for fixed-income securities and equities, i.e., traditional asset classes that are easy to assess in the near term. The target portfolio is a modern outgrowth of the reference portfolio. It shows long-term targets for the management of alternative assets that are more difficult to assess in the near term, such as infrastructure and commodities. Through this distinction, the asset management can more easily identify the optimal mix of asset classes in both the short and long term. Diversification Diversification, or the spread of investments across several asset classes and markets, is very important for the total return. Skandia Liv's internal asset management is complemented by more than 50 external, carefully selected asset management partners around the world. Active asset management entails a continuous process of considerations and decisions that are closely monitored and controlled. The goal is always to offer security and the highest possible return at a wellbalanced level of risk. Asset Liability Management (ALM) Skandia Liv works actively with Asset Liability Management, which entails that the company's obligations are taken into account in the investment of assets. The aim is that the portfolio will generate a favourable return at the same time that future benefits can be secured. This analysis takes into account the age distribution among our policyholders, the starting date and duration of benefits, and the level of benefits, among other things. In addition, consideration is given to the rules that apply for traditional life management. More information For more information about Skandia Liv's asset management and current figures/key ratios, visit our website, at skandia.se/liv. 11

12 Fundin policy Purpose of funding policy When a traditional life assurance company like Skandia Liv allocates the surplus to its customers, normally this is done with a smoothing over time. The collective funding ratio shows the relationship between the value of the company's assets and the aggregate value of the customers' insurance capital. The collective funding ratio should be neither too high nor too low. The purpose of the funding policy is to indicate how high the collective funding ratio should be and which measures should be taken to keep it within the specified limits. Skandia Liv's investment return is the factor that has the greatest impact on collective funding. The bonus rate is the most important tool for regulating the collective funding ratio. The funding policy is therefore a policy for how we determine the level of the bonus rate. ance capital. This provides a buffer for declines in the stock market, for example. The collective funding ratio should lie within an interval of 95 % 115 %. When it moves outside this interval, action is taken to return it to within this interval. This is done to quickly establish a balance between the value of the assets and the policyholders' total insurance capital. Measures to adjust collective funding If the collective funding ratio deviates from the target funding level, an adjustment is made primarily by raising or lowering the bonus rate. If the collective funding ratio exceeds 115 %, we raise the individuals' insurance capital through a one-time measure (an allocation). If it falls below 95 %, then we lower the individuals' insurance capital through an opposite one-time measure (a reallocation). If the deviation remains, a further allocation or reallocation is to be made within 12 months from the date on which the deviation arose. If the deviation is greater than five percentage points, the allocation/ reallocation must be carried out as Targets and limits for collective funding Skandia Liv strives to maintain collective funding that corresponds to 105 % of the policyholders' total insursoon as possible. If the collective funding ratio is lower than 100 % for more than 36 months, then a reallocation must be made to bring the ratio back up to 105 %. Return on the insurance capital The return can be calculated based on the current level of interest rates and the current collective funding ratio. The level of collective funding indirectly measures how much of the investment return has not yet been allocated to the policyholders. The surplus or deficit collective funding that exists is apportioned via the bonus rate with an equalisation over three years. An extra cautionary measure is taken in times when the investment return has been negative for a long period of time, i.e., 12 months. In such case, the bonus rate is lowered by an extra large amount. The opposite applies when the collective funding ratio exceeds 110 %. Then the bonus rate is raised by an extra large amount. Examples of how the collective funding policy works 130% 120% Allocation as soon as possible when CFR exceeds 120% No allocation when CFR temporarily exceeds 115% Allocation when CFR exceeds 115% for a long time 110% 100% Bonus rate is adjusted 90% 80% Year 1 Year 2 No reallocation when CFR temporarily falls below 95% Year 3 Year 4 Reallocation as soon as possible when CFR falls below 90% Year 5 Reallocation when CFR is below 95% for a long time Year 6 Year 7 Collective funding ratio 12

13 Unit linked mana ement with Skandia Link An occupational pension plan can have the same content and same premium regardless of whether it has traditional life management or unit linked management. The difference lies in how the pension capital is built up. Skandia Link offers occupational pension insurance with unit linked management, which entails that the insurance capital is dependent on the return of the underlying mutual funds. In our offering we have gathered a broad selection of funds that benefit from developments in markets around the world. We work according to a thorough selection process in which only the funds and fund companies that live up to our high standards are selected. The selection process is continuously ongoing, and we eliminate funds from our offering that do not meet our performance targets. In this way we strive to make it easy for you to choose and your pension capital has good opportunities to grow. Switchin funds Normally it is the owner of the policy who has the right to make fund switches. For occupational pension plans, it is usually the employer who owns the policy. Under an agreement with the employer, the employee is usually given this right and thereby becomes the person entitled to make fund switches. If the employee wants to allow another person to handle fund switches, then Skandia must be notified of this in writing. The person who is entitled to make fund switches can do so at any time, free of charge. The insured bears the risk for any changes in value. For purchases and sales of funds quoted in foreign currency, a foreign exchange transaction is made. Based on the exchange rate, a surcharge of at present 0.25 % is assessed to calculate the fund's buying price, and a deduction of at present 0.25 % is charged to calculate the fund's selling price in Swedish kronor. The surcharge and deduction cover the risk and costs that Skandia has in connection with fund trading. The foreign exchange transaction is handled by Skandia's finance department. Performance of the insurance capital The insurance capital, i.e., the fund value, reflects the value development of the selected funds. In addition, the insurance capital is affected during the course of the year by the following items: Plus items Paid-in premiums Risk revenue Minus items Risk charges Overheads Disbursements from the insurance Right to waiver of premium Policyholder tax Paid-in premiums Paid-in premiums are the money that the employer has paid toward the insurance. Premiums are invested, after deducting any investment charges, in the selected funds. If no funds have been selected or the choice is unclear, then the premium is invested in a fund determined by Skandia Link with low or medium risk until it is clear for Skandia Link which fund selection applies. Risk revenue If the policy is for retirement pension without survivors' protection, then it lapses without payment of any benefits upon the death of the insured. The insured therefore runs a risk of losing the value that exists in the insurance, and as compensation for this risk, the insurance receives risk revenue. This is calculated taking into account the degree of risk and probability of death, which in turn depend on age and gender. The policy is credited with risk revenue twice a year. During the disbursement period, the insurance is credited with risk revenue every time payment is made from the policy. Risk charges If a death benefit is to be paid out that is greater than the insurance capital, then Skandia pays the difference between the death benefit and the insurance capital. Skandia assesses a risk charge for this risk twice a year, which takes into account the degree of risk and probability of death, which in turn depend on age and gender. The risk charge is deducted from the policy's fund value. Overheads Skandia charges a fee to cover its costs for sales and administration of insurance contracts. This fee consists of two parts a fixed and a variable portion. The fee is charged by selling fund units. The size of this charge is stated in the information that Skandia sends out at the start of the year. Right to waiver of premium In most cases, waiver-of-premium insurance can be added for a fee. Policyholder tax Each year Skandia Liv pays a so-called policyholder tax, which is calculated according to a taxable base that is obtained by multiplying the fund value at the start of the year by the average government lending rate for the preceding year. On his base, a tax charge of 27 % is currently assessed for endowment insurance and 15 % for pension insurance. The tax is deducted from the fund capital at the start of the year. The amount of this tax for the individual insurance policies is shown in yearly information that Skandia sends out. 13

14 Tax rules Pension insurance The insurance must meet certain requirements in accordance with the Income Tax Act in order to be classified as pension insurance. These can entail certain limitations to access to the insurance capital. Retirement pension benefits cannot be paid out until the insured turns 55, and payments must be made for a minimum of five years, according to the income tax rules. The insurance cannot be surrendered or transferred, other than in certain specific cases. For example, in connection with a change of employment, a transfer may be made from a previous employer to a new employer, or to the insured. The category of beneficiaries is limited, and the benefits must be paid out for a minimum of five years. Skandia's insurance contracts meet all requirements to be classified as pension insurance, which means that premiums are tax-deductible within certain limits. It also means that the person to whom the pension benefits are paid is obligated to pay income tax, and that the pension benefits must be declared as earned income. Employers who pay premiums for occupational pension insurance, and business owners who pay their own premiums towards pension insurance, pay a special payroll tax on the premium. Deduction rules Main rule for occupational pensions Under the main rule in the Income Tax Act for occupational pension insurance, premiums corresponding to a maximum of 35 % of the employee's salary are tax-deductible. The ceiling amount for the deduction is 10 times the Price Base Amount. By salary is meant pensionable income according to a pension agreement during the current or preceding tax year. Complementary rule for occupational pensions For changes in a pension agreement, for a new pension agreement if employment ends prematurely, and when the employer's promise for pension benefits is insufficiently secured, the so-called complementary rule of the Income Tax Act may be used. In such case, deduction is allowed or costs to achieve a certain, maximum level of retirement pension. For more information about the opportunities provided by the complementary rule, talk to a Skandia insurance adviser. Business owners working in a sole proprietorship or partnership For business owners working actively in a sole proprietorship or partnership, in addition to a standard deductible amount of SEK 12,000, pension premiums corresponding to 35 % of the person's income are tax-deductible, up to a ceiling of 10 times the Price Base Amount. Endowment insurance Endowment insurance premiums are not tax-deductible, and amounts paid out are not subject to income tax. Direct pension An endowment insurance policy that includes a savings element can be purchased by an employer as security for a promise to pay a so-called direct pension. The employer then use the tax-exempt payments from the insurance to pay pension benefits to the former employee or his/ her survivors. As security, the policy is pledged to the employee, and upon his/her death to the survivors. Pension benefits paid out are subject to income tax for the beneficiary. When pension payments are made, the employer may deduct the amounts, but must also pay the special employers' payroll tax on the amount paid out. Privately owned endowment insurance An endowment insurance policy that pays a set amount upon the death of the insured can be purchased by the insured as a complement to an occupational pension plan or private pension insurance. The premium for the insurance is invoiced together with other premiums for pension solutions in Skandia's occupational pensions programme. This means that the premium for an employee's insurance is sent to the employer. If the employee then fails to pay for the premium through a net salary deduction, he/she will be taxed for the value of the premium. 14

15 Other important rules that affect the insurance Division of estate The value of both pension insurance and endowment insurance that is owned by the insured and which constitutes community property is included in the division of estate in connection with a divorce or during a marriage. The value of a companyowned occupational pension plan is normally not included in a division of estate for the insured. Pension insurance is never included in a division of estate upon the death of the insured or his/her spouse. Financial difficulty An occupational pension plan that is owned by an employer is normally protected from the employer's creditors. Upon initial payment of benefits, the policy may be subject to distraint for the beneficiary's liabilities, however, it may also be protected under the rules of the debt recovery code. If a pension or endowment insurance policy is owned by the insured, then it is protected from creditors depending on whether it was distraint-free or subject to distraint in accordance with the Insurance Contracts Act. Even if the insurance is considered to be subject to distraint, it may be protected by other legislation. A judgement is always made in the individual case at hand by the Swedish Enforcement Authority at the time in question. Information The policyholder receives a confirmation of the insurance contract, yearly information about the value development, and information prior to and during the disbursement period. When an occupational pension policy is purchased, in most cases the insured is regarded as the policyholder, and thus the information is sent to the insured. The policyholder also receives a confirmation of the contract for occupational pension insurance. Skandia can also provide information via its online office at skandia.se. Personal data act Personal data provided to Skandia will be used by the company and other companies in the Skandia group to enable the companies to honour contracts entered into or obligations prescribed by law or other statutes. Normally such data is obtained directly from the registered person, however, it may also be obtained from employers or other parties. The data may be updated through external registers, such as Spar. tions that apply as per agreement. Personal data may for the aforementioned purposes be provided to companies in the Skandia group and other companies that the Skandia group cooperates with in countries both in and outside of the EU and EEA. Persons who do not wish to receive addressed offers can contact the company's customer service centre and request an advertising block. In its handling of personal data, the Skandia group will take great care to protect the personal integrity of the individuals concerned. Data will be made available only to persons who need to have access to such data to be able to perform their duties on behalf The data may also be used for market analyses, statistics, and to evaluate products and services. In addition, personal data may be used to inform about the Skandia group's services and products along with the limitaof the Skandia group. These persons will only have access to the information to the extent needed to enable them to perform their duties. The company may record or in some other manner document individuals' communication with the company. According to the Personal Data Act (Personuppgiftslagen (1998:204)), every registered person has the right to receive information about and corrections made to personal data that is registered. Such requests are to be made in writing to Skandia, SE Stockholm. Mark the envelope "Information on personal data". 15

16 More information about Skandia Customer Satisfaction Guarantee Upon purchasing a new insurance policy, the policyholder can take advantage of Skandia's Customer Satisfaction Guarantee. If Skandia is notified in writing within 14 days from the day on which the insurance policy was received, the policyholder can cancel the contract and have all paid-in premiums repaid. Your satisfaction is important for us! If you feel that Skandia has acted wrongly, it is important that you contact Skandia as soon as possible to express your views. Skandia's Head of Complaints is responsible for responding to complaints or making sure that they are addressed by the affected company in the Skandia group. The Head of Complaints is also responsible for ensuring that reviews are conducted in a uniform manner and that justified complaints lead to a correction. If you are not satisfied with the response from the Head of Complaints, you can turn to Skandia's Customer Ombudsman to have your case reviewed. The Customer Ombudsman has an independent and impartial position with respect to Skandia's organisation. Other instances for appeal are the National Board for Consumer Complaints (Allmänna reklamationsnämnden ARN), which has a special department for insurance matters, and the Swedish Consumers Insurance Bureau (Konsumenternas försäkringsbyrå), which can also provide advice on insurance matters. Unresolved disputes may be resolved by a general court of law. Legal protection insurance, which is often included in home insurance, often covers attorney costs for such cases. Contact Skandia Skandia customer service tel.: (domestic calls only) Skandia head offices Postal address: SE Stockholm, Sweden tel.: +46-(0) skandia.se Skandia's Complaints unit Postal address: SE Stockholm, Sweden tel.: +46-(0) fax: +46-(0) klagomalsansvarig@skandia.se Skandia's Customer Ombudsman Postal address: SE Stockholm, Sweden tel. +46-(0) fax: +46-(0) kundombudsmannen@skandia.se 90558:4 eng/citat (feb -11) PHOTO: MASKOT, JOHNÉR; SUSANNE KRONHOLM Livförsäkringsaktiebolaget Skandia (publ) Registered office: Stockholm Reg. no Skandia Insurance Company Ltd (publ) Secondary name: Skandia Link Registered office: Stockholm Reg. no.: