268Early conversion or surrender of life policies
(1)Where a policy of life insurance to which this section applies has been issued and, within four years from the making of the insurance in respect of which it was issued, any of the following events happens, that is to say—
(a)the surrender of the whole or part of the rights conferred by the policy;
(b)the falling due (otherwise than on death) of a sum payable in pursuance of a right conferred by the policy to participate in profits; and
(c)the conversion of the policy into a paid-up or partly paid-up policy;
the body by whom the policy was issued shall pay to the Board, out of the sums payable by reason of the surrender or, as the case may be, out of the sum falling due or out of the fund available to pay the sums which will be due on death or on the maturity of the policy, a sum determined in accordance with the following provisions of this section, unless the body is wound up and the event is a surrender or conversion effected in connection with the winding-up.
(2)The sum payable under subsection (1) above shall, subject to the following provisions of this section, be equal to the lower of the following, that is to say—
(a)the appropriate percentage of the premiums payable under the policy up to the happening of the event; and
(b)the surrender value of the policy at the time of the happening of the event less the complementary percentage of the premiums mentioned in paragraph (a) above.
(3)If the event is one of those mentioned below, the sum payable to the Board shall not exceed the following limit, that is to say—
(a)if it is the surrender of part of the rights conferred by the policy, the value of the rights surrendered at the time of the surrender;
(b)if it is the conversion of the policy into a partly paid-up policy, the surrender value at the time of the conversion, of so much of the policy as is paid up; and
(c)if it is the falling due of a sum, that sum.
(4)If the event was preceded by the happening of such an event as is mentioned in subsection (1) above, subsection (2) above shall apply—
(a)as if the lower of the amounts mentioned therein were reduced by the sum paid under this section in respect of the earlier event; and
(b)if the earlier event was such an event as is mentioned in paragraph (a) or (c) of subsection (3) above, as if the surrender value of the policy were increased by the amount which, under that paragraph, limited or might have limited the sum payable under this section in respect of the earlier event.
(5)For the purposes of this section the appropriate percentage, in relation to any event, is the percentage equal to the following fraction of the percentage found by doubling that mentioned in section 266(5)(a) as in force for the year of assessment in which the event happened, that is to say—
(a)if the event happens in the first two of the four years mentioned in subsection (1) above, three-sixths;
(b)if it happens in the third of those years, two-sixths; and
(c)if it happens in the last of those years, one-sixth;
and the complementary percentage, in relation to any event, is 100 per cent. less the appropriate percentage.
(6)Where the annual amount of the premiums payable under a policy of life insurance is at any time increased (whether under the policy or by any contract made after its issue) so as to exceed by more than 25 per cent.—
(a)if the insurance was made on or before 26th March 1974, the annual amount as at that date, or
(b)in the case of any other insurance, the first annual amount so payable,
the additional rights attributable to the excess shall be treated for the purposes of this section as conferred by a new policy issued in respect of an insurance made at that time, and the excess shall be treated as premiums payable under the new policy.
(7)This section applies to any policy of life insurance which is a qualifying policy unless—
(a)it is a policy in respect of the premiums on which relief under section 266 is not available by virtue of subsection (3)(c) of that section; or
(b)it is a policy of life insurance issued in connection with an approved scheme, as defined in Chapter I of Part XIV;
and in relation to a policy of life insurance issued in respect of an insurance made before 27th March 1974 applies only in accordance with subsection (6) above.