LIFESTYLE SWITCHING YOUR GUIDE

Transcription

1 LIFESTYLE SWITCHING YOUR GUIDE

2 WHAT IS IT? LIFESTYLE SWITCHING INVOLVES SWITCHING FROM EXISTING FUNDS AND MAKING FUTURE PAYMENTS TO A DIFFERENT FUND OR FUNDS WITHIN YOUR PENSION PLAN AT PRESET TIMES PRIOR TO RETIREMENT. The aim of the Lifestyle Switching approach is to invest payments in such a way as to help reduce the investment risk as you approach retirement. For example, when you are younger you may wish to invest in funds which have a higher proportion of shares (equities) to try to achieve greater growth. As you approach your retirement date you may wish to move to less risky investments. The funds and the timing of the switches will have been selected at the outset of the plan. If you would rather this didn t happen, you can decide not to have payments invested using Lifestyle Switching. Some restrictions may apply to switches into and out of certain funds. There may also be some delay on cashing in units in certain funds. The value of investments is not guaranteed and can go up and down depending on investment performance (and currency exchange rates where a fund invests overseas). The value of your plan could fall below the amount(s) paid in. Although charges, terms and limits may change, at present, there is no charge for Lifestyle Switching transactions. Full terms and conditions are available on request from Scottish Widows. 1

3 Changes introduced from April 2015 allow you greater flexibility in how you can take benefits from your plan. There are now three ways to use the value of your plan at age 55 or above to provide for your retirement. You could choose one or more of the following Annuity purchase buying one or more annuities to provide a regular and secure income for life. Pension encashment taking part or all of the value of your plan as a cash lump sum of which 25% will be tax-free, with the remainder subject to tax. Flexible access adopting a flexible approach by using a suitable product to keep your pension fund invested and then taking income as it is needed. Other investment programmes or approaches may suit your needs better and you should speak to your financial adviser for further information. Your adviser may make a charge. IMPORTANT INFORMATION We reserve the right to change the selection of funds we make available at any time and there may be restrictions on the amount you can invest in certain funds. HOW DOES IT WORK? At the start of your plan the payments have automatically been directed to your chosen preset Lifestyle Switching option. At a selected number of points in the future the value of your existing investments will begin to be switched to different funds over the period of years chosen. Any new payments made into the plan after these points in time will be redirected to the appropriate funds. These points in time are determined by the number of years you have until you reach your selected pension date. THE PRESET OPTIONS... Scottish Widows offers three preset Lifestyle Switching options: Cautious Lifestyle, Balanced Lifestyle and Opportunity Lifestyle. These preset options were available at the outset for our Stakeholder Pension, Personal Pension and Individual Buyout plan. They are also available for Personal Pension (Top-Up Plan) and Stakeholder Pension (Top-Up Plan). 2

4 Lifestyle Description Funds Years Funds Years Funds Cautious Lifestyle (annuity) Consensus Fund 100% 10 Consensus Fund 50%, Pension Protector 50% 5 Pensions Protector 75%, Cash Fund 25% Cautious Lifestyle (encashment) Consensus Fund 100% 10 Consensus Fund 50%, Pension Protector 50% 5 SW Pensions Portfolio Five 100% Cautious Lifestyle (flexible access) Consensus Fund 100% 10 Consensus Fund 50%, Pension Protector 50% 5 SW Pension portfolio Four 75%, SW Pension Portfolio Five 25% Balanced Lifestyle (annuity) Mixed Fund 100% 5 Pension Protector 75%, Cash Fund 25% Balanced Lifestyle (encashment) Mixed Fund 100% 5 SW Pension Portfolio Five 100% Balanced Lifestyle (flexible access) Mixed Fund 100% 5 SW Pension Portfolio Four 75%, SW Pension Portfolio Five 25% Opportunity Lifestyle (annuity) 70%, Global 30% 3 Pension Protector 75%, Cash Fund 25% Opportunity Lifestyle (encashment) 70%, Global 30% 3 SW Pension Portfolio Five 100% Opportunity Lifestyle (flexible access) 70%, Global Equity 30% 3 SW Pension Portfolio Four 75%, SW Pension Portfolio Five 25% Due to fluctuations in stockmarkets there s no guarantee the percentage splits between the funds shown in each Lifestyle Switching option will be achieved. 3

5 THE IMPACT OF LIFESTYLE SWITCHING ON ILLUSTRATIONS The personal illustration you received at the outset and any illustrations for an increase in payment are based on the current investment split continuing until you retire. They do not take account of any future investment movements into lower-risk funds. However your selected lifestyle investment programme will automatically move your investments into lower-risk funds as you get closer to your retirement date. The aim of switching to lower risk investments is to help protect the value of your pension fund but it also reduces the growth potential. This means that the final value will typically be lower than illustrated as a result of switching but will be less affected by market conditions close to your retirement date. Annual review statements Unlike the personal illustrations we issue for a new pension plan or an increase in payment to an existing plan, the illustrations shown in your annual review statements do allow for your current investment strategy. They therefore take account of any future investment movements into lower-risk funds. The exact effect of the switching depends on a number of factors including the current size of your pension fund, the level of future contributions and the period remaining until your retirement. For example, if your personal illustration projects a final fund value of 100,000, the impact of lifestyle switching could reduce the illustrated final fund value to: Time to retirement Between Between Less Programme years 5-10 years than 5 years Opportunity 95,300 95,300 95,400 Balanced 93,400 93,400 97,600 Cautious 88,300 92,300 98,700 The above figures are for illustrative purposes only and are not guaranteed. The actual figures could be lower or higher than shown depending upon your chosen lifestyle option (e.g. annuity purchase, encashment or flexible access). Please note the Between years figures are based on a 13 year term, the Between 5-10 years figures are based on a 8 year term and the Less than 5 years figures are based on a 3 year term. The reduction would be in the same proportion for different illustrated values. Bear in mind that the original illustrated value will generally be higher if you have chosen the Balanced Programme than if you have chosen the Cautious Programme, and higher again if you have chosen the Opportunity Programme. 4

6 PHASED INVESTMENT If you did not choose a preset Lifestyle Switching option and make a single payment or transfer payment then you can initially invest it in one or more funds and then switch a proportion of your investment(s) each month into a new fund or funds over a number of years. This means that a proportion of your fund(s) is switched each month. If the switch is phased over two years, 1/24th of the value of the fund(s) will be switched in the first month of the phased switch, 1/23rd of the value of the fund at the second month of the phased switch and so on, for two years. At the end of the two year period all of the remaining investment(s) should be switched out of the initial investment fund(s). Phased investment can only apply over a period of 1, 2 or 3 years. NOTES Pensions are a long-term investment. The retirement benefits you receive from your pension plan will depend upon a number of factors including the value of the plan when you decide to take your pension which isn t guaranteed and can go down as well as up. The value of your plan could fall below the amount(s) paid in. You can only have one programme in place at a time. If you are switching into a programme, you must switch all units from the previous funds. If you want to switch out of a lifestyle programme, then you have to switch out all units. The programme will then stop. If you change your retirement date, you may be able to re-align your lifestyle programme to end on your new retirement date. There is no alternative choice of funds under lifestyle investment programmes. There may be delays in selling the value of certain types of investments, for example, property. This may delay the payment of benefits, switches and transfers. The terms and conditions in this guide are those which applied at the time it was published and could alter in the future. 5

7

8 Scottish Widows Limited. Registered in England and Wales No Registered office in the United Kingdom at 25 Gresham Street, London EC2V 7HN. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Financial Services Register number /18