COB 6.5 Content of key features and important information: life policies, key features schemes, ISA and CTF cash deposit components and stakeholder pension schemes19

COB 6.5 applies in accordance with COB 6.1.1 R.

A firm must ensure, unless COB 6.5.3 R applies, that:

1. (1)

   the key features it produces for a life policy or a key features scheme other than a stakeholder pension scheme (whether or not held within a PEP or an ISA) 19includes the information required by COB 6.5.11 R, set out in the order shown divided by appropriate and prominent sub-headings, some of which are prescribed in the rules;

   19
2. (2)

   the information it produces under COB 6.4.13R (1) for a cash deposit ISA or cash deposit CTF complies with whichever of COB 6.5.42 Ror COB 6.5.42A applies to it;15

3. (3)

   the information document or abbreviated form of key features it produces:

   1. (a)

      relating to friendly society tax exempt policies or traded life policies contains the applicable information specified in COB 6.5.43 R- COB 6.5.44;14

   2. (b)

      relating to broker funds contains the applicable information in COB 6.5.45;14

4. (4)

   the post-sale confirmation document it produces contains the applicable information specified in COB 6.5.46 R;11

5. (5)

   the key features it produces or issues for a stakeholder pension scheme:

   1. (a)

      includes the relevant sub-headings set out at COB 6.5.11 R, the applicable information specified in COB 6.5.12 R - COB 6.5.40 R appropriate to those sub-headings; and

   2. (b)

      is, subject to COB 6.5.6 R, accompanied by or includes the decision trees specified in COB 6.5.8 R, unless the stakeholder pension scheme is being purchased as a result of a personal recommendation; and11

6. (6)

   11all:14

   1. (a)

      key features; and14

   2. (b)

      abbreviated key features mentioned at COB 6.5.2 (3)(a) above,14

   it produces in relation to a distance contract with a retail customer include or are accompanied by all the contractual terms and conditions and the information in COB App 1 except to the extent that they are separately provided to the retail customer in a durable medium in good time before the retail customer is bound by the contract or offer.14

A firm may adapt the prescribed content and format requirements in COB 6.5 only when it can demonstrate that this is necessary to reflect the terms and nature of a particular product and that, in relation to a distance contract with a retail customer, in doing so it does not omit the contractual terms and conditions and information in COB App 1.11

Where a firm knows that a certain decision tree or trees will not be relevant to a private customer to whom key features are to be given, the firm can omit them and include only the relevant decision tree or trees.

1. (1)

   Whether a firm produces decision trees within or separate from key features, it must (unless COB 6.5.9 R applies and subject to COB 6.5.8A R) reproduce the text, content and format set out in COB 6 Annex 1.

2. (2)

   If COB 6 Annex 1 is subsequently amended:

   1. (a)

      the firm must amend its decision trees as soon as reasonably practicable and, in any case, within three months of the date when the amendments to COB 6 Annex 1 come into force; and

   2. (b)

      the firm may continue to use decision trees that complied with the previous version of COB 6 Annex 1 until it has done so.

A firm must ensure that its decision trees include:

1. (1)

   (in the place in the relevant table in the Further information text at COB 6 Annex 1 where the square brackets appear):

   1. (a)

      in the heading of the table, the current tax year; and

   2. (b)

      the Basic State Pension rates and Pension Credit minimum income rates for the current tax year;

2. (2)

   (where the square brackets appear) at the bottom of the cover page and at the bottom of each page of the flow charts, the current tax year; and

3. (3)

   (where the square brackets appear) in the introductory text where additional explanatory text within Further information is signposted, the appropriate page number.512

1. (1)

   A firm must, subject to (2), make the changes required by COB 6.5.8A R as soon as reasonably practicable and, in any case, within three months of the start of the tax year.

2. (2)

   Where, in any year, a firm is required to make changes to the trees under COB 6.5.8 R and COB 6.5.8A R, it may make both sets of changes at the same time, provided that it does so within the time limits in COB 6.5.8 R (2)(a).5

A firm must ensure, subject to COB 6.5.8 R (2), that it uses only the most recent version of its decision trees.5

Where a firm makes use of both electronic and hard copy versions of the decision trees specified in COB 6.5.8 R, it must synchronise the timing of any changes to those trees as far as reasonably practicable.5

The only adaptations, other than those in COB 6.5.8A R - COB 6.5.8E R, that a firm may make to the decision trees specified in COB 6.5.8 R are those suitable to brand the decision tree with the corporate image of the firm, to reflect the design of its stakeholder pension scheme promotional material or to reflect the use of interactive delivery.5

A firm must include this heading: 'key features of the [name of life policy/key features scheme19/stakeholder pension scheme]'.

1. (1)

   A firm must describe the nature of the life policy or key features scheme19 or stakeholder pension scheme under the following headings: 'its aims', 'your commitment', or, 'your investment' (whichever is more appropriate) and 'risk factors'.

   19
2. (2)

   Under 'risk factors' a firm must give a brief description of the factors which may have an adverse effect on performance or are otherwise material to the decision to invest.

A firm must include a projection, illustrating how the principal terms of the proposed transaction apply to the private customer:

1. (1)

   where the proposed transaction is for a life policy other than: 17

   1. (a)

      a long-term care insurance contract which is a pure protection contract;1317

   2. (b)

      a linked life stakeholder product.17

   3. (c)

      one that relates to a CTF or a stakeholder product sold through basic advice,17

2. (2)

   where the proposed transaction does not relate to a CTF or a stakeholder product sold through basic advice and is for a key features scheme19 or a linked life stakeholder product:17

   19
   1. (a)

      and relates to an election to make income withdrawals or purchase of a short-term annuity21; or

   2. (b)

      where the private customer's primary objective is to acquire;

      1. (i)

         a specified sum of money on a specified date; or

      2. (ii)

         a specified sum of money on death; or

      3. (iii)

         an annuity of a specified amount payable as from a specified date.

1. (1)

   All projections included in key features, except a specimen projection in a decision tree for a stakeholder pension scheme, must be calculated in accordance with COB 6.6 (Projections), using the lower, intermediate and higher rates of return in COB 6.6.50 R, and followed by the appropriate statements form COB 6.6.15 R.

2. (2)

   In addition, if the projection in (1) is for a pension scheme or a stakeholder pension scheme, a firm may also include a type P projection in the key features (see COB 6.6.34 R (5)). The pension must assume increases linked to the retail prices index using the appropriate intermediate rate in COB 6.6.51 R. 6

1. (1)

   A life policy projection in key features must be specific to the private customer, calculated on the basis of the private customer's age and sex, the sum assured, the premium and other principal factors of the proposed life policy unless:

   1. (a)

      the life policy is a single premium life policy; or

   2. (b)

      the total premiums payable do not exceed £120 a year (or £130 a year if the premiums are paid every four weeks); or

   3. (c)

      the total premiums are less than £1,000; or

   4. (d)

      the key features are part of a direct offer financial promotion; or17

      17
   5. (e)

      the projection is in respect of a stakeholder product (which is not a stakeholder pension).17

2. (2)

   If (1)(a), (b), (c) or (d) applies and no customer specific projection is included, a projection must be provided which typically represents the type of business which the firm conducts (or proposes to conduct) in relation to the life policy in question.

3. (3)

   A scheme projection in key features must be based on either:

   1. (a)

      the actual amount which the private customer is proposing to invest; or

   2. (b)

      an amount which typically represents the type of business which the firm conducts (or proposes to conduct) in relation to the scheme in question;

   unless it is for income withdrawals or purchase of a short-term annuity21, when it must be on the basis of (a).

In addition to COB 6.5.13 R and COB 6.5.18 R, a firm must set out in the form of questions and answers a description of the principal terms of the life policy, key features scheme19, or stakeholder pension scheme, and any other information necessary to enable the private customer to make an informed decision.

For life policies which can have a surrender value, a firm must include the contents of COB 6.5.24 R unless COB 6.5.28 R applies.

When completing COB 6.5.24 R, a firm must:

1. (1)

   under the heading 'the early years' include figures for the first five years of the life policy or, if the life policy has a fixed term of less than five years, as many of them as fall before the maturity date;

2. (2)

   under the heading 'the later years' include figures for the tenth and every subsequent fifth year of the term of the life policy (or of the contract period as defined in COB 6.6.25 R if that is shorter) and for the final year, except in the following cases:

   1. (a)

      for a whole-life policy, figures must be included for every tenth year and:

      1. (i)

         the final year, assuming that the life policy will continue (unless and until converted to a fixed term) until the insured life (or the youngest insured life) attains the age of 75 years or to a term of ten years if that is later; or

      2. (ii)

         the year in which the projected fund reaches zero if earlier than (i); the consequences of this must be drawn to the private customer's attention;

   2. (b)

      in the case of a single premium life policy with no fixed term, a term of ten years should be assumed, but figures for a longer term may be shown in addition;

   3. (c)

      for a ten-year life policy, the figures for the final year may be included in the 'early years' table;

   4. (d)

      21for an alternatively secured pension, figures must be included for each year for a term of ten years, but figures for a longer term can be shown in addition; and

   5. (e)

      where there is any significant discontinuity in the trend of surrender or transfer values, figures should be given for all the intervening years.

3. (3)

   in the 'Total paid in to date' column, include cumulative totals of premiums paid (making adjustment as necessary to take account of any automatic premium changes);

4. (4)

   in the 'Total actual deductions to date' and 'Effect of deductions to date' columns, include the cumulative sum of the charges and expenses (as defined in COB 6.6.23 R) and the cost of any protection benefits expected to be levied against the life policy; they must be calculated in accordance with COB 6.5.29 R;

5. (5)

   in the 'What you might get back' column, include projections of surrender values for the life policy:

   1. (a)

      these must be calculated in accordance with COB 6.6.38 R (projections of surrender values) assuming the premium and any other relevant matters given for the purposes of COB 6.5.13 R (Nature of policy) and COB 6.5.15 R (An Example);

   2. (b)

      the surrender value of a premium on a particular date must be calculated by assuming that any premium payable on that date is payable on the following day; and

   3. (c)

      where any surrender values are guaranteed they must be provided with a suitably adjusted heading and introductory text;

6. (6)

   where the life policy is a personal pension, replace 'What you might get back' with 'What the transfer value might be' and make suitable amendments to the explanatory text; for a personal pension policy with income withdrawals or short-term annuity21 it must be replaced with 'Open market value';

7. (7)

   where the private customer is entitled to exercise and has chosen, or expressed the intention, to exercise the right to make partial surrenders, include a column headed 'Withdrawals' or, in the case of a personal pension with income withdrawals or short-term annuity21, 'Total income taken'; the sum of withdrawals must be shown;

8. (8)

   for a personal pension with income withdrawals or short-term annuity21, include a table headed 'What effect will the deductions have?' instead of 'The early years' and 'The later years'; where there is any charge or penalty in calculating the open market value, all the years to which this applies should be given; and

9. (9)

   in the case of a long-term care insurance contract based on single premium investment bonds, where the standard ten-year table does not illustrate adequately how the charges taken from a policy can increase considerably with age:13

   1. (a)

      the table must be extended to show figures at ten-year intervals and the year in which the private customer attains 100 years or the year the fund is exhausted if earlier; but

   2. (b)

      the standard ten-year figure must be used for the reduction in yield and the accompanying words amended accordingly;17

      17
10. (10)

    in the case of a stakeholder product (which is not a stakeholder pension) the table may be given on the basis of generic figures and values.17

COB 6.5.23 R - COB 6.5.25 R do not apply to a life policy which will never have a surrender value; the following warning must be given instead of the tables: 'WARNING - this policy has no cash-in value at any time'.

The following statements must appear beneath the information required by COB 6.5.23 R, unless COB 6.5.28 R applies:

1. (1)

   'What are the deductions for?'

2. (2)

   'The deductions include [the cost of life cover, sickness benefits,] [commissions/remuneration,] expenses, charges, any surrender penalties and other adjustments.'

3. (3)

   'The last line in the table shows that over the full term of the policy the effect of the total deductions could amount to £x.'

and then either:

1. (4)

   'Putting it another way, leaving out the cost of life cover [and sickness benefits] this would have the same effect as bringing investment growth from x% a year down to y% a year.' or

2. (5)

   'Putting it another way, if the growth rate were to be x%, which is in no way guaranteed, this would have the effect of reducing it to y% a year.'

The information relating to 'Total actual deductions to date' and 'Effect of deductions to date' in COB 6.5.23 R, and the information relating to reduction in yield required by COB 6.5.27 R, do not need to be given for the following categories of life policy:

1. (1)

   a without-profits life policy of which the benefits, except on surrender or variation, are guaranteed benefits;

2. (2)

   a life policy for a term not exceeding five years; and15

3. (3)

   a life policy held within a CTF.15

In COB 6.5.24 R the 'Total actual deductions to date' and the 'Effect of deductions to date' must be calculated for each of the years detailed in COB 6.5.25 R. These are the amounts of all deductions that are expected to be levied against the assets and premiums in respect of charges and expenses (as defined in COB 6.6.23 R), and surrender penalties, as well as allowance for the cost of risk benefits (defined in COB 6.6.28 R) to the end of the year. They must be calculated as follows.

1. (1)

   The premiums must be accumulated at the intermediate rate prescribed in COB 6.6.49 R for the category of life policy to which the key features relates (the 'prescribed rate'), making no allowance for charges and expenses and other deductions.

2. (2)

   'Effect of deductions to date' must be derived by subtracting the amount shown in the column 'What you might get back' from premiums accumulated in accordance with (1).

3. (3)

   The figures in the column 'Effect of deductions to date' must reflect the charges and expenses accumulated at the prescribed rate. The column headed 'Total actual deductions to date' must show the sum of actual deductions.

4. (4)

   The deductions for each year must be calculated by subtracting from the 'Effect of deductions to date' for that year the 'Effect of deductions to date' for the previous year (if any), increased by the amount of interest for the year calculated at the prescribed rate.

5. (5)

   'Total actual deductions to date' is the sum of the figures derived in accordance with (4) for the year in question and all previous years; where it is negative, nil must be shown for that year.

For key features schemes19, a firm must include the contents of COB 6.5.31 R unless the key features scheme19 is to be held within a stakeholder CTF.15

When including the contents of COB 6.5.31 R, a firm must replace the wording in brackets as directed by the instructions in those brackets and:

1. (1)

   when the inclusion of a scheme projection within key features is compulsory in accordance with COB 6.5.15 R (2), include figures calculated in accordance with COB 6.6 (Projections):

   1. (a)

      at the end of years 1, 3, 5 and 10 and (optionally) for years 2 and 4;

   2. (b)

      then for each fifth year following the tenth year which falls within the period of the projection; and

   3. (c)

      the final year of the projection;

2. (2)

   when a scheme projection is not required by COB 6.5.15 R (2) but is included at a firm's discretion, include figures at the end of years 5 and 10 and (optionally) for years 1 and 3 or for years 1 to 4, all calculated in accordance with COB 6.6 (Projections);

3. (3)

   in the 'Investment to date' column, include:

   1. (a)

      the actual amount which the private customer is proposing to invest; or

   2. (b)

      an amount which is representative of the type of business which the firm conducts (or proposes to conduct) in relation to the contract in question;

   but where, under COB 6.5.15 R (2), a projection is included in the key features, the amount shown as the 'Investment' must be the same as the amount used as the basis for the projection;

4. (4)

   in the 'Effect of deductions to date' column, include the cumulative sum of charges and expenses (as defined in COB 6.6.23 R) for each of the years shown, these figures must be calculated in accordance with COB 6.5.35 R- Calculation Method for Effect of charges to date;

5. (5)

   in the 'What you might get back' column, include figures taking account of charges and expenses showing what the value might be if the scheme were cashed in;

6. (6)

   where the contract is a personal pension, replace 'What you might get back' with 'What the transfer value might be', and make suitable amendments to the explanatory text; for a personal pension contract with income withdrawals or short-term annuity21 the replacement must be 'Open market value';

7. (7)

   include extra columns in the Table in the following cases:

   1. (a)

      where the private customer is entitled to exercise and has chosen, or expressed the intention, to exercise the right to make partial withdrawals, an extra column must be included headed 'Withdrawals' or, in the case of a personal pension contract with income withdrawals or short-term annuity21, 'Total income taken'; 'Withdrawals' must include distributions of income;

   2. (b)

      where the investment involves periodic redemptions at pre-determined intervals to make payments to the private customer, a column headed 'Redemptions' is needed;

   3. (c)

      where the investment distributes income and does not involve the automatic reinvestment of this income, a column headed 'Income' must be included;

   in (a), (b) and (c) the arithmetic sum of the withdrawals or redemptions or income payments must be stated, on the assumption that these are made throughout on the same basis as contemplated at the time the projection was prepared; the method set out in COB 6.6.36 R must be used to calculate distributions of income;

8. (8)

   for a personal pension contract with income withdrawals or short-term annuity21, include in a table under the heading 'What effect will deductions have?' figures for every fifth year; where there is any charge or penalty in calculating the open market value, all the years to which this applies must be given;

   21
9. (9)

   include a statement that allowance for tax relief has been made in the calculation where any tax relief available to the scheme has been taken into account in the calculation of charges and expenses.

10. (10)

    in the case of a stakeholder product (which is not a stakeholder pension) the table may be given on the basis of generic figures and values.17

The statements in (1) and (2), or in (1) and (3) must appear beneath the information required by COB 6.5.31 R:

1. (1)

   'The last line in the table shows that over [n] years the effect of the total charges and expenses could amount to £x';

2. (2)

   'Putting it another way, if the growth rate were to be (x)%, which is in no way guaranteed, this would have the effect of reducing it to (y)% a year';

3. (3)

   'Putting it another way, this would have the same effect as bringing investment growth from (x)% a year down to (y)% a year'.24

1. (1)

   The figure [n] in the prescribed wording in COB 6.5.33 R is the number of years in figures given at the bottom of the table, as appropriate for each transaction.

2. (2)

   The 'Investment to date' must be accumulated to the end of [n] years at the relevant rate of return (x)% making full allowance for the charges and expenses (as specified in COB 6.6.23 R).

3. (3)

   The rate of return (y)% must be found which, if applied (on a compound basis) to the amounts included in the 'Investment to date' column over the [n] years, without making any allowance for the charges and expenses, would produce the same sum as that calculated in (2).

For each year, figures must be given for the effect of deductions assuming the fund grows in accordance with a relevant rate of return (as defined in COB 6.6.33 R). These calculations must reflect all deductions (charges and expenses as defined in COB 6.6.23 R) expected to be levied against the fund and against the private customer's investment. The calculations must be made on the basis of the following principles:

1. (1)

   for each year the 'Investment' must be accumulated, at the relevant rate of return (as specified in COB 6.6.33 R), to the end of each year, making due allowance for the charges and expenses;

2. (2)

   for each year the 'Investment' must be accumulated, at the relevant rate of return, to the end of each year, but making no allowance for the charges and expenses;

3. (3)

   the 'Effect of deductions to date' is the amount calculated in (1) subtracted from the amount calculated in (2);

4. (4)

   a rate of return which is lower than the relevant rate of return must be used where the firm expects that rate would imply an overstatement of the investment potential; and

5. (5)

   the calculations specified in (1) and (2) must allow for any partial encashment of units or shares or distributions of income where under the terms of the scheme the private customer has exercised, or has expressed the intention of exercising, an option to make such encashments or to receive such income or where such encashments or distributions will automatically apply. The allowance must be assumed in accordance with the estimated rate or amount, unless to do so would be inappropriate for that scheme.

1. (1)

   The statement in (2) must appear beneath or within the information required by COB 6.5.20 R.

2. (2)

   "There is an annual charge of [y]% of the value of the funds you accumulate. If your fund is valued at £500 throughout the year, this means we deduct [£500 x y/100] that year. If your fund is valued at £7500 throughout the year, we will deduct [£7500 x y/100 that year."

1. (1)

   17If a firm imposes one annual charge including expenses, it need not make the detailed disclosures required by COB 6.5.24 and COB 6.5.30; but if it does not make those disclosures, it must instead include either:

   1. (a)

      the following statement (the last sentence must be included if and only if it is clear at the time of acquisition that the annual charge will reduce to r% after a fixed period):

      "There is an annual charge of [y]% of the value of the funds you accumulate. If your fund is valued at £250 throughout the year, this means we deduct [£250 x y/100] that year. If your fund is valued at £500 throughout the year, this means we deduct [£500 x y/100] that year. After ten years these deductions would reduce to [£250 x r/100] and [£500 x r/100] respectively."

      or;

   2. (b)

      the information required by COB 6.5.20.

A firm must include under the heading 'How much will the advice cost?' either the statement prescribed in (1), (1A) or (1B), as applicable, or the information required by (2):13

1. (1)

   for life policies (other than long-term care insurance contracts which are pure protection contracts) or stakeholder pension schemes: 'Your adviser will give you details about the cost. The amount will depend on the size of the premium and the length of the policy term. It will be paid for out of the deductions'; or13

2. (1A)

   for key features schemes19: 'Your adviser will give you details about the cost. The amount will depend on the size of your [use: 'investment' or 'contribution'] [add if appropriate: 'and in the case of regular savings the period for which you make them']. It will be paid for out of the charges'; or

   19
3. (1B)

   for long-term care insurance contracts which are pure protection contracts: 'Your adviser will give you details about the cost. The amount will depend on the size of the premium and the length of the policy term.'13

4. (2)
   1. (a)

      the amount or value in cash terms of the commission or remuneration, and an indication of the timing of these payments; and16

   2. (b)

      a statement that commission or equivalent is paid for out of 'the deductions or charges, if more appropriate' and, if applicable, that the amount will depend on the size of the premium or contribution and the length of the life policy, scheme or stakeholder pension scheme term.164

A firm must include the following information in the key features, separately or as part of the information required by COB 6.5.2 R:

1. (1)

   for life policies:

   1. (a)

      a clear indication, in one place, of the nature and amount or rate of any charges or expenses which the private customer will or may bear; if charges or expenses are levied in the form of reduced investment, both the method and effect must be clearly explained; in the case of a single premium charge for mortality or morbidity under linked benefit policies, it is sufficient to describe its nature and basis;

   2. (b)

      the information that Annex III to the Consolidated Life Directive requires to be communicated to policyholders, which is specified in COB 6.5.49 R; and

   3. (c)

      an explanation how the private customer may obtain further information about compensation arrangements and other matters relating to the life policy;

2. (2)

   for all key features schemes19, an explanation that other information about the scheme is available on request and how it may be obtained;

   19
3. (3)

   for regulated collective investment schemes that constitute key features schemes 19and for such investments held within a PEP or an ISA:

   1. (a)

      a statement where details of the latest estimated distribution yield and buying and selling prices can be found;

   2. (b)

      in the case of any purchase, how and when the price to be allocated in respect of each payment will be determined;

   3. (c)

      whether certificates will be issued and, if so, when they will be sent;

   4. (d)

      how units or shares may be redeemed and when payment on redemption will be made;

   5. (e)

      the names and addresses of the scheme manager or authorised corporate director, and the names of the trustees, or depositary (if any);

   6. (f)

      where and how copies of scheme particulars, annual and half-yearly reports and accounts and prospectuses can be obtained;

   7. (g)

      an explanation of any relevant right to cancel or withdraw, or, where it is the case, that such rights do not apply;

   8. (h)

      how complaints and queries are dealt with and how further details of compensation arrangements (if any) can be obtained;

   9. (i)

      a summary of the private customer's potential liability (if any) to income tax and capital gains tax;

   10. (j)

       whether the private customer has a choice to reinvest income, where uninvested money will be held and whether interest is paid on such money;

   11. (k)

       for single-priced schemes:

       1. (i)

          how the scheme may suffer dealing costs as a result of transactions in units; and

       2. (ii)

          whether it is the authorised fund manager's policy that investors who carry out such transactions may be liable to contribute towards those dealing costs by means of a dilution levy or dilution adjustment, and, if not, an explanation of how this may affect the future growth of the scheme;

   12. (l)

       in relation to SDRT provision:

       1. (i)

          how the scheme may suffer stamp duty reserve tax as a result of transactions in units; and

       2. (ii)

          whether the authorised fund manager's policy is such that an SDRT provision may be imposed;

   13. (m)

       if there is any arrangement intended to result in a particular capital or income return from the units or shares or any investment objective of giving protection to their capital value or income return:

       1. (i)

          details of that arrangement or protection;

       2. (ii)

          for any related guarantee, sufficient details about the guarantor and the guarantee to enable a fair assessment of the guarantee; and

       3. (iii)

          a description of the risks that could affect achievement of that return or protection including details of what happens when an investment is encashed before the expiry of any related guarantee or protection;

   14. (n)

       if there is a class of limited issue shares or limited issue units, a summary of the restrictions on the issue and sale of those shares or units.

4. (4)

   for investment trust savings schemes and for such investments held within a PEP or an ISA:

   1. (a)

      when shares will be purchased for the scheme, where uninvested money will be held and whether interest is paid;

   2. (b)

      where information about the investment trustshare price, yield, and premium and discount information can be obtained;

   3. (c)

      where information about the net asset value and latest dividend can be found;

   4. (d)

      whether the private customer has a choice to reinvest income, how it is reinvested, or how it is paid to the private customer;

   5. (e)

      details of any nominees with which shares are registered;

   6. (f)

      how shares can be sold and how the sale proceeds are determined;

   7. (g)

      whether applications and payments will be acknowledged and whether contract notes or certificates are issued;

   8. (h)

      whether there will be a statement of account showing details such as number and cost of shares and balance of cash;

   9. (i)

      an explanation of any right to withdraw or cancel (as specified in COB 6.7) or, where it is the case, that such rights do not apply;

   10. (j)

       where the investment trust report and accounts may be obtained;

   11. (k)

       information about the manager and administrator of the scheme;

   12. (l)

       the private customer's options in the case of items such as rights issues;

   13. (m)

       how to stop investing in or how to leave a scheme and the position in respect of the shares held;

   14. (n)

       terminations or alterations by the scheme manager;

   15. (o)

       taxation details in respect of the private customer's investment; and

   16. (p)

       how complaints are dealt with and how further details of compensation arrangements (if any) can be obtained;

5. (5)

   for ISAs with a stocks and shares (equity and insurance)22 component and PEPs, in addition to (1), (2), (3) or (4):

   2222
   1. (a)

      a description of the nature of the services which will be provided for the private customer;

   2. (b)

      [deleted]22

      22
   3. (c)

      [deleted]22

      22
   4. (d)

      a statement that the favourable tax treatment of ISAs may not be maintained;

   5. (e)

      how and when statements (if any) will be sent;

   6. (f)

      an explanation how the ISA or plan may be terminated or transferred to another ISA or PEP manager; and

   7. (g)

      whether the ISA is a mini-or maxi-ISA agreement and an explanation of the differences between the two.

6. (6)

   For stakeholder pension schemes, an explanation how complaints are dealt with and how further details of compensation arrangements (if any) can be obtained.

7. (7)

   For investments held within a CTF:15

   1. (a)

      a prominent statement that after money is paid into a CTF it is locked in, and that this means that it can only be accessed by the child when he is 18, except as permitted by the CTF Regulations, and any contributions made to the CTF cannot be returned to the donor;15

   2. (b)

      if the CTF is a stakeholder CTF, an explanation of the minimum standards (as described in paragraph 2 of the Schedule to the CTF Regulations) and CTF lifestyling approach (as described in paragraph 2 of the Schedule to the CTF Regulations), together with a statement that satisfying these minimum standards does not mean that the investment is suitable for a customer or that there is any guarantee of performance;15

   3. (c)

      if the CTF is a non-stakeholder CTF, a prominent statement that it is not a stakeholder CTF and that a stakeholder CTF is available from a named alternative CTF provider, together with a detailed description of that stakeholder CTF;15

   4. (d)

      a statement that the CTF will not be opened until any cancellation period has expired; and15

   5. (e)

      a balanced comparison between stakeholder CTFs and non-stakeholder CTFs.15

If COB 6.4.13 R applies, for a cash deposit ISA, the private customer must be given the following information (in accordance with COB 6.4.13 R) and, in relation to a distance contract with a retail customer, all the contractual terms and conditions and the information in COB App 1 in place of key features:1114

1. (1)

   [deleted]22

2. (2)

   a statement making it clear whether the ISA is a mini or a maxi-ISA agreement and explaining the differences between the two;

3. (3)

   the minimum amount needed to open an account;

4. (4)

   the maximum yearly deposit;

5. (5)

   the interest rate earned, and if and how it may vary;

6. (6)

   the calculation of interest;

7. (7)

   how to make withdrawals and any limits;

8. (8)

   details of the arrangements for the application of the right to cancel, including the following:11

   1. (a)

      the options available on cancellation (a firm must either assist the private customer in switching accounts or refund all monies deposited together with interest);11

   2. (b)

      information about how cancellation will operate in circumstances where the account forms part of a maxi-ISA which contains other components;11

   3. (c)

      a statement that the effect of cancelling the last component has the effect of cancelling the entire ISA agreement and may also (where it is the case) delay the customer from entering into another ISA agreement until the next tax year; and11

   4. (d)

      a statement that a private customer who exercises a right to cancel will not incur any additional charges or be affected by any notice period; 11

9. (9)

   the arrangements for handling complaints;

10. (10)

    that the favourable tax treatment may not be maintained;

11. (11)

    that compensation may be available from the Financial Services Compensation Scheme;

12. (12)

    where applicable, that the firm cannot accept money directly and acts only as agent in arranging the cash deposit ISA, identifying the principal to whom such monies should be made payable, and explaining that the principal has accepted responsibility for the activities of the firm in relation to the cash deposit ISA;

13. (13)

    where a private customer can obtain further information about ISAs and, if applicable, other products within the firm's range; and

14. (14)

    a warning that a mini- and maxi-ISA may not be opened in the same tax year and that, by opening a mini cash ISA, the customer will be limiting the amount of investment in equities that he can make through ISAs, if he does not already have a mini stocks and shares or insurance ISA (not applicable for a TESSA-only ISA).10

15If COB 6.4.13 applies, for a cash deposit CTF, the private customer must be given in place of key features:

1. (1)

   the information contained in COB 6.5.42 (4) and COB 6.5.42 (8) and in COB 6.5.40 (7);

2. (2)

   details of the arrangements for exercising any right to cancel;

3. (3)

   a statement explaining where a private customer can obtain further information about CTFs

4. (4)

   in relation to a distance contract with a retail customer, all the contractual terms and conditions and the information in COB App 1.

Where a private customer buys a tax-exempt policy issued by a friendly society, or agrees to make additional contributions to such a policy, the firm may, where there is a right to cancel under COB 6.7 (Cancellation and withdrawal), issue an abbreviated form of key features containing the following details:14

1. (1)

   the amount of the contribution;

2. (2)

   the term over which the contribution will be paid;

3. (3)

   material differences between the terms of any increase and those of the existing policy;14

4. (4)

   the amount or value in cash terms of the commission or remuneration; and14

5. (5)

   in relation to a distance contract with a retail customer, all the contractual terms and conditions and the information in COB App 1.1114

When personally recommending the purchase of a traded life policy, a firm may provide a private customer with the information in COB 6.5.49 R and, in relation to a distance contract with a retail customer, all the contractual terms and conditions and the information in COB App 1 in place of key features (in accordance with COB 6.4.14 R).11

In relation to any fund or scheme of which the firm is a broker fund adviser, at the same time as providing a private customer with a suitability letter (in accordance with COB 5.3 (Suitability)) or before any change in investment objectives or strategies, the firm must inform the private customer in writing of:

1. (1)

   the investment objectives, and the policies and strategies which are proposed to be followed to achieve those objectives;

2. (2)

   the relevant published index or other indicator with which comparison of the performance of the fund or scheme may fairly be made, which is, in the case of:

   1. (a)

      life policies or pension funds:

      1. (i)

         where the long-term insurer has its own managed unit-linked life or pension fund, the average performance of that managed fund; or

      2. (ii)

         the average performance of one or more other funds, which are not broker funds, into which under the terms of the policy the private customer may switch, the objectives of which do not conflict with those of the broker fund; or

      3. (iii)

         where there is no such fund, the sector average of general managed life or pension funds;

   2. (b)

      broker unit trusts, the sector average of unit trusts appropriate to the objectives and strategy of the broker unit trust;

3. (3)

   a published index or sector average which the firm must identify as appropriate to the investment objectives and strategy of the fund or scheme under comparison; and

4. (4)

   the name of any person providing advice under the arrangement.

The post-sale confirmation to be given to private customers in accordance with COB 6.3.3 R must include the information required by COB 6.5.15 R - COB 6.5.19 R(an Example), COB 6.5.23 R to COB 6.5.28 R (Tables and Deductions Summary) and COB 6.5.38 R (Commission and commission equivalent).16

1. (1)

   A firm to which COB 6.5.40 R (1)(b) applies must communicate in writing the information prescribed in COB 6.5.49 R to the policyholder, before the policy is concluded, in an official language of the EEA State of the commitment.

2. (2)

   This information may be in another language if the policyholder so requests, and the law of the EEA State so permits or the policyholder is free to choose the law applicable.

When a long-term insurer receives:

1. (1)

   a request from a private customer for a quotation for the surrender value of a life policy; or

2. (2)

   any other indication that a private customer wishes to surrender a life policy;

which is of a type which may be traded on an existing secondary market for life policies, it must, before or when providing the quotation (or, if no quotation is provided, before accepting a surrender), make the policyholder aware in writing of:

1. (3)

   the fact that, as an alternative to surrendering to the long-term insurer, the life policy may be traded on that secondary market;

2. (4)

   the fact that there may be financial benefits in trading the life policy when compared to surrendering it to the long-term insurer;

3. (5)

   how the policyholder may trade the life policy on the secondary market should he decide to do so; and

4. (6)

   other relevant options available to the policyholder.3

Where a long-term insurer believes that COB 6.5.50 R does not apply because its own policies are of a type which are not tradable, it must review the position every six months and make and retain records indefinitely to support its view.3

1. (1)

   A firm must provide a scheme member or policyholder described in (2) with the information set out in (3) in writing:

   1. (a)

      when there is a request for a retirement quotation more than four months before the scheme member's or policyholder's intended retirement date; and

   2. (b)

      at least four months before the scheme member's or policyholder's intended retirement date.

2. (2)

   A person in relation to whom (1) applies is a private customer who:

   1. (a)

      is a member of a personal pension scheme; or

   2. (b)

      is a member of a stakeholder pension scheme; or

   3. (c)

      is the holder of a free-standing additional voluntary contribution contract; or

   4. (d)

      (where an open market option is available under the contract terms) is the holder of a retirement annuity contract; or

   5. (e)

      (where an open market option is available under the contract terms) is the holder of a pension buy-out contract.

3. (3)

   The information which a firm must provide in writing under (1) is an explanation of:

   1. (a)

      the open market option (including the fact that companies offer different annuity rates and different types of annuity, and that these include:18

      18
      1. (i)

         annuities which provide level or increasing benefits;18

      2. (ii)

         annuities which cover either a single life or make provision for a spouse or a partner; and18

      3. (iii)

         annuities which may be with or without guarantee on the early death of the scheme member or policyholder;18

      and that the scheme member or policyholder may get a better deal by shopping around);18

   2. (b)

      the financial advantages and disadvantages in general terms of making use of this option when compared with taking a pension annuity with that firm;

   3. (c)

      how the scheme member or policyholder may make use of the open market option should he decide to do so; and

   4. (d)

      the advisability of taking professional advice.3

18A firm to which COB 6.5.53 R (3)(a) applies must also provide general information explaining characteristic features of the types of annuity mentioned.

A firm which has provided information under COB 6.5.53 R must, at least six weeks before his intended retirement date, remind the scheme member or policyholder of that communication, and must provide him with an estimated final transfer value.3

When a scheme member or policyholder described in COB 6.5.53 R (2) indicates to the provider of that scheme or policy that he is considering or has decided:

1. (1)

   to discontinue an income withdrawal arrangement; or

2. (2)

   to take out a further sum of money from his pension fund to buy an annuity as part of a phased retirement arrangement;

the provider of that scheme or policy must send the scheme member or policyholder the information required by COB 6.5.53 R, unless the scheme member or policyholder has already been sent the information by the provider in the previous 12 months. 7