Document ID: chunk:federal_register_of_legislation:F2023L00208:front:0:p5
Version: federal_register_of_legislation:F2023L00208
Segment Type: other
Provision Reference: 
Character Range: 11366–14182

basis for pricing the product, associated with the recovery of the costs of establishment or termination. For this purpose, the life company must deduct from the ongoing charges the identified recovery component for a prescribed period of one third of the term of the policy or 10 years if less.

Traditional business and long term risk business
    24.         For traditional business and long term risk business issued by a friendly society prior to the date of commencement, the minimum termination value is zero.
    25.         For traditional business and long term risk business issued by a life company that is not a friendly society prior to the date of commencement, the minimum termination value must be determined using the method set out in Attachment 2 - Part I, with prescribed parameters as set out in Attachment 1 - Part III.
    26.         For traditional business and long term risk business issued on or after the date of commencement the minimum termination value must be determined either:
       (a)          using the method set out in Attachment 2 - Part I, with prescribed parameters as set out in Attachment 1 - Part III; or
       (b)          using the method set out in Attachment 2 - Part II, with prescribed parameters as set out in Attachment 1 - Part IV.
    27.         The method used for determining the minimum termination value must not be changed after the policy is issued.

Immediate annuities and fixed term/rate business
Immediate life annuities

    28.         For immediate life annuities other than those covered by paragraphs 29 and 31, the minimum termination value is zero.
    29.         For immediate life annuities which provide for a return of the whole or a part of purchase price on the death of the annuitant (the death benefit), the minimum termination value is determined as the lesser of:
       (a)          the value, at the rate prescribed in Attachment 1 - Part V, of the future payments of:
           (i)            income assuming the annuity is a term certain for a term equal to the expectation of life of the annuitant; and

           (ii)         the death benefit assuming payment at the expiration of that term; and

       (b)          the face value of the death benefit.
    30.         For the purposes of paragraph 29, the expectation of life of the annuitant must be determined on the basis last adopted by the life company for the purposes of Prudential Standard LPS 340 Valuation of Policy Liabilities. If the annuity provides for more than one life, appropriate allowance must be made for the multiple lives and relevant policy conditions.
    31.         For immediate life annuities which provide a return of the balance of the purchase price on the death of the annuitant, the minimum termination value is determined as the