Following STM Group Plc’s acquisition of London & Colonial Holdings Limited in 2016, the Gibraltar based life assurance provider London & Colonial Assurance PCC Plc (LCA) now offers two investment linked annuity products, the Flexible Pension Annuity (FPA) and the Flexible Life Annuity (FLA) for the UK tax resident market.
Both annuities utilise LCA’s Protected Cell Companies (PCC) structure which affords a high level of policyholder protection. In addition to this, both are covered by the UK Financial Services Compensation Scheme.
The Flexible Pension Annuity (FPA) is a pension annuity purchased on behalf of the policyholder by the trustees of the pension scheme holding the pension assets. The product allows full flexibility, providing the policyholder the option to elect how much income to take each year in line with pension freedoms. The policy is purchased by the trustees of the registered pension scheme, therefore there is greater investment flexibility.
The Flexible Life Annuity (FLA) is a life annuity that can be purchased out of any available funds. During the lifetime of the annuity, the policyholder can elect to change the amount of the annuity payments (either increase or decrease). A wide range of assets is allowed in the FLA. HM Revenue and Customs personalised bond rules apply, so investments need to be advised by a qualified investment adviser.
London & Colonial Assurance PCC Plc (‘LCA’) is a Gibraltar based life insurance company operating out of Gibraltar’s highly regulated and long established financial centre. LCA was established in 2001 as a public limited company and a life insurance provider and is part of STM Group Plc since 2016.
LCA is licensed to write Class I – Life and annuity and Class III – Linked long-term assurance business and was primarily established to provide an alternative to conventional annuities for high-net-worth individuals wishing to use their pension funds to purchase an annuity that provides greater flexibility for income and investment choice.
LCA's annuity products utilise the Protected Cell Companies (PCC) structure as it affords a high level of policyholder protection.
A PCC structure is subject to the provisions of specific Gibraltar PCC Law which was implemented in 2001 (Protected Cell Companies Act 2001). In a PCC, legally recognised ‘cells’ are created within the company in order to segregate and protect each policyholder’s assets from other policyholders and the company itself. This means that each individual policy is linked to a ‘cell’ and the assets backing the policy are owned by the ‘cell’ and hence completely legally ring-fenced from all other policyholders’ and shareholders’ assets. Put very simply, a PCC is a form of company comprised of individual parts, known as ‘cells’.
For each client that purchases an LCA annuity, a unique ‘cell’ is opened within LCA.
Each ‘cell’ has its own designation (the policy number) and is completely independent of all other ‘cells’ and of the company’s core. It is the Directors’ duty to keep and account for the assets and liabilities of each ‘cell’ separately. The PCC legislation prohibits the assets of a ‘cell’ to be used to satisfy any liability not attributable to that ‘cell’.
It is similar to a honeycomb where the cells are all individually protected within the beehive.
In the unlikely event that anything should happen to LCA, your client’s policy (and the assets within the policy) would remain secure from and untouched by any potential creditor. In other words, each ‘cell’ is ring-fenced from all other ‘cells’, providing 100% policyholder protection.
Please note: 100% policyholder protection does not apply to the ongoing valuation of the investment as the value of investments can fall as well as rise. All the assets that LCA purchases within each policy are legally and beneficially owned by LCA. The policyholder has purchased the rights to the value of these assets but the policyholder does not own the assets. LCA does not make investment decisions. LCA will only purchase or sell assets within any policy if LCA receives a written request from the appointed investment adviser associated to the specific policy.