Subject to paragraph 2, the free paid-up policy of a registered friendly society or an industrial assurance company shall assure payment, on the events on which the sums assured by the surrendered policy were payable, of sums bearing the same proportion to those sums (including any addition by way of bonus) as the amount of the premiums actually paid under the surrendered policy bears to the amount of the premiums which would have been payable under the surrendered policy had the full number of premiums become payable thereunder.

Where any sum has been paid by the registered friendly society or industrial assurance company under the surrendered policy, before the surrender of the policy, the sums assured by the free paid-up policy shall beF1 and approved by an actuary in accordance with principles which take account of the substitution of 12½ per cent. for 15 per cent. effected by section 29 of the Finance Act 1988 and which are approved byF2 an independent actuary whose appointment has been agreed by the society or company (as the case may be) and the policyholder..

Where the surrendered policy provided for payment of a sum by way of return of a premium on any event, the free paid-up policy shall provide that, on that event, such part of the premiums actually paid under the surrendered policy shall be repaid as would have been payable on that event if the surrendered policy had remained in force.

In paragraphs 1 and 3 the words “premiums actually paid”, in their application to a policy in respect of which under the prescribed scheme (as defined by Article 29(3)) or an approved scheme (as so defined) payment of any premium due has been discharged by payment ofF3 87½ per cent. of that premium, shall include premiums in respect of which such payment has been made.

In its application to a policy of which the sum assured or guaranteed has been increased as mentioned in paragraph 5 and the increase has been amended under regulation 6 or 8 of the Industrial Assurance (Life Assurance Premium Relief) (Change of Rate) Regulations (Northern Ireland) 1989 paragraph 1 shall have effect subject to the following modification, namely the amount assured by the free paid-up policy shall be computed and approved by an actuary in accordance with principles which take account of the amendment and which are approved by theF5 Commission.

For the purpose of this paragraph and of paragraph 5( b)(i):

• “the original premiums” means the premiums of the amount payable under the policy before the increase in premium was effected under regulation 5(1) or 7(2) of the 1978 Regulations, including, in respect of premiums paid, or which would have been payable, after 6th April 1979, payments of that amount included in premiums paid, or which would have been payable, after that date;

• “the original sum assured” means the sum (including any addition by way of bonus) assured or guaranteed under the surrendered policy on 6th April 1979 before the increase under regulation 6 or 7 of the 1978 Regulations took effect, together with any addition made thereto in respect of the due proportion of any bonus added on or after 6th April 1979;

• “the amount of the increase in the sum assured” means the sum assured by the surrendered policy in so far as it exceeds the original sum assured as at 6th April 1979, together with any addition made thereto in respect of the due proportion of any bonus added on or after 6th April 1979.