Pensions. Planning the future you want today. Pensions (Personal & Executive) friendsfirst.ie

Transcription

1 Pensions Pensions (Personal & Executive) friendsfirst.ie Planning the future you want today

2 About Friends First Friends First is one of Ireland s oldest and most established Life Assurance companies, meeting the financial needs of our customers since We have over 276,000 customers and employ over 300 people in Ireland. Friends First is fully owned by the Dutch Insurance Group, Achmea, one of Europe s leading insurance players. Friends First Life Assurance Company manages total assets of 4bn, generated Total Premiums of 497m in 2015 and is regulated by the Central Bank of Ireland. At Friends First, we are focused on providing leading protection, retirement and investment solutions which are tailored to your individual needs and will provide you with the required benefits when they are needed most. We want to assist you in meeting your goals through your lifetime, but acknowledge that your needs and circumstances will change. So where possible our products are flexible offering a range of options and alternatives which you can choose during the term of your plan. About Achmea Achmea was founded in the Netherlands in 1811 as a mutual insurance company with strong co-operative roots. Its main shareholders are the Achmea Association, a representative body of its customers and Rabobank also a mutual organisation which is one of Europe s leading banks. Achmea remains committed to the mutual ownership model, with a strong focus on developing products and services that meet its individual and corporate customers needs. As a result, Achmea is not listed on any stock exchange. Achmea employs 15,400 people in its Dutch business and 2,500 across its international operations. It insures approx. 8 million people in the Netherlands which is one of the top 10 largest insurance markets in the world. In the Dutch market, Achmea is the largest provider of non-life, health and income protection insurance and is also a leading provider of life and pensions. Achmea manages total assets of 102bn, and had total equity of 10.3bn in It generated total premiums of 20bn from its domestic and international operations in Achmea holds a financial strength and long-term counterparty credit rating (Standard & Poors) of A- and had solvency of 2.15 times the minimum margin cover at the end of In addition to the Netherlands, Achmea is also active in 5 other countries including Ireland, Turkey, Greece, Slovakia and Australia. Achmea s aim is to consolidate its market leadership in the Netherlands and to build an integrated European Insurance group by developing significant market positions in a number of international markets where it is present. Achmea, resulting from its ability to adapt to a changed market environment but remain true to its mutual ethos, now aspires to become the most trusted insurer in its home market and ultimately in international markets where it is present through operating companies.

3 Contents 2 Enjoy your future with a pension 5 Conductor your tailored retirement plan 8 Friends First and your Pension Investment 15 Your tax benefits and retirement options explained 20 s that may apply 22 Additional Customer Information 24 Your questions answered 1

4 Everyone needs to plan for their retirement. Without making some provision in advance, there is no way to be sure that you will have enough money to fund a reasonably comfortable lifestyle after you retire. 2 Enjoy your future with a pension

5 Enjoy your future-with a pension Life expectancy is rising all the time and people retiring today can expect to live well into their 80s. So your retirement could account for anything from 15 or 20 to even 40 years. Which would be a long time to spend without enough financial provision to enjoy it. Although many people will qualify for the basic State pension, at a current rate of just a week, this is highly unlikely to support even the everyday necessities of the average retired person. It s easy to put off making your retirement plans, especially when you are young. There are so many other more immediate demands on your income, such as your mortgage, rent, car, holidays and day-to-day living expenses. But the later you leave it, the more difficult and financially demanding it is likely to be. As a nation we are getting older and living longer which makes early planning for your retirement all the more important. With a little planning, it is you who will get to decide the quality of your lifestyle after you retire, not the government. With the right financial provision, you can look forward to many comfortable and enjoyable years after finishing work - planning holidays and enjoying your favourite sport, hobby or activity. Simply making the most of your retirement. 1. Amount of State Contributory Pension, January 2016, weekly maximum personal rate from age years How to fund your retirement There are many ways of putting aside money to fund your lifestyle after retirement, including: Saving cash in a deposit account or savings plan Investing in shares Buying property at home or abroad Investing in your own business Putting money into investment funds Starting a pension plan All have their pros and cons, but there is little doubt that the most efficient way of building up a retirement fund is to take out a pension plan. This is largely because of the generous tax benefits you will enjoy tax relief on contributions, tax free investment growth and a tax-free lump sum at the end. Why a pension plan is the best option In the simplest of terms, a pension plan is a tax efficient, long-term savings account into which you put money on a regular or lump sum basis with the aim of building a retirement fund over time. Because the government recognises the importance of financial planning for retirement and wants to encourage people to take out pension plans, it grants very generous tax benefits to those who do so. Which makes using a pension plan to save for your retirement the best, most tax-efficient route to a financially comfortable future. 3

6 Enjoy your future-with a pension The government applies benefits to pension plans in three ways: Tax relief on contributions You enjoy tax relief on the contributions which you, or your company, pay into a pension plan. This relief is applied at the marginal rate on personal contributions, so if you are a higher rate taxpayer (40% at January 2016, source: invested in your pension fund would have a net cost to you of just 60. Tax-free investment growth The investments of pension funds are allowed to accumulate without paying tax on their income and capital gains. Tax free-lump sum on retirement You can take a portion of your pension fund as a tax-free lump sum upon retirement. The benefits to you of these tax-reliefs can differ depending on your status as an employee, director or self-employed. So you need to consider how you can plan your pension and enjoy the maximum tax relief available. More detail on this can be found further on in this brochure. Investment choice With modern pension plans, you do not have to compromise on your investment options because you have decided to save through a pension plan. You can invest your money in a tax efficient way through a very wide range of investment options. The sooner you start the better It is never too early or too late to start a pension, but the earlier you start the better. That s because the money you put in now has more time to grow and benefit from the effects of compounding (i.e. where the interest earned on the money you put aside goes on to earn interest itself). Starting a pension early also allows you to use a smaller proportion of your salary in the knowledge that it will have time to grow. The later you leave it, the more you will need to contribute to ensure a comfortable lifestyle after you retire. But the most important thing is that, early or late, you actually start planning your pension. Reading this brochure is an excellent first step! 4

7 Everyone s lifestyle and financial circumstances are different and will change throughout their working life. Which means that a pension plan which can adapt to your changing circumstances and needs is the ideal way to plan for your retirement. Conductor your tailored retirement plan 5

8 Conductor your tailored retirement plan Conductor from Friends First is a flexible pension plan which is designed to meet your retirement planning needs throughout your changing life and career. Regardless of whether you are just starting your pension plan with small monthly contributions or your retirement is approaching and you want to make the most of your fund with lump sum payments, Conductor can adapt to fit your needs. Conductor gives you as much control over your pension investment as you d like from a straightforward off the shelf (ready-designed) monthly investment option to a pension portfolio specifically tailored to your individual needs, (where you get to choose the funds and even the shares in which your money is invested). Conductor making the most of your pension One of the best things about Conductor is the way in which it manages the three fundamentals of a good pension plan: your contributions, your investment options and the charges which apply. These factors directly affect the amount of money available to you when you retire, so it s worth examining them in greater detail. Your contributions Ultimately, how much you put into your pension plan is up to you. Depending on your circumstances, you can start off with a small amount and increase this as your earnings go up, so that your pension contributions keep step with your income. If you are relatively late starting your pension you will probably need to contribute a sizeable proportion of your income in order to fund a comfortable retirement. Your Financial Broker is the best person to advise you on the amount you should be contributing in order to meet your needs. Everyone s life and financial circumstances can and do change. Marriage, children, a return to education, a new career, an inheritance, a property sale and sometimes even redundancy can and will have an impact. Conductor, however, is designed with such changes in mind, so that whatever happens you can continue planning and saving for your retirement. With Conductor you can increase, reduce or pause your contributions to accommodate your financial circumstances or even contribute a lump sum if you so wish. 6

9 Conductor your tailored retirement plan Your investment options When you invest money in a pension fund it s vitally important that the fund(s) you choose reflect your retirement goals, your attitude to risk and your level of involvement in your investment choices. Conductor is so flexible that it offers a complete choice of investment options to those just starting a pension investment, as well as to those with more experience in the investment world. Conductor gives you access to low risk and higher risk funds, as well as funds which are fully managed by a team of experts and self-directed funds where you get to choose the specific asset in which your money is invested. Whatever you choose, and no matter what your attitude is towards risk and reward, you can feel safe in the knowledge that your money will be managed by professional, awardwinning Fund Managers whose job is to make your money work harder. Conductor currently offers more than 40 different funds across a variety of fund managers, investment styles and risk levels. Your Financial Broker can advise you further on the funds, risk profiles and investment solutions that best suit your circumstances and your retirement goals. Conductor s investment options are explored in more detail on page 8. s As with any investment plan there are charges associated with Conductor. However, it s good to know that there are no big upfront charges which means that your pension contributions can start working for you almost straight away. For more on the types of charges which may apply go to page 20. 7

10 Your pension fund is likely to become one of the largest financial assets you will ever own. You need to think carefully about your retirement goals and the approach you take to investing for your retirement. 8 Friends First and your Pension Investment

11 Friends First and your Pension Investment Everyone s financial needs, attitudes and goals are different so no single approach will suit everyone. Understanding the investment options open to you and how to choose the right approach is, with the help of your Financial Broker, key to meeting your investment goals. The Friends First fund range aims to help you meet your goals regardless of your attitude to risk. We have made our investments easy to understand with a focus on the various different aspects to a fund. Full details on our approach to investments are available in our Fund Range Brochure, which should be read in conjunction with this brochure. We also produce Fact Sheets which provide detailed information on each individual fund. Your Financial Broker will sit down with you to ensure that your investment approach is right for you. They will ensure you have considered, and understood, the basic building blocks of investing: Risk and Return Different types of investments offer different growth potential. However, higher growth potential usually correlates with higher risk. Diversification Diversification is all about spreading your risk: not putting all your eggs in one basket. It is most easily understood if you look at it on two levels not only should you ensure your investment is spread across lots of different things, you should also ensure that these investments behave differently to each other. That is they don t all have their ups and downs at the same time. Your attitude to risk It s one thing saying that an investment carries a certain degree of risk, but the real question is understanding how much risk you, as an investor, are prepared to take on. To help you match the funds you chose with your own appetite for risk we have rated all our funds on a risk scale from 1, being the lowest risk, to 7, being the highest. What type of approach might suit you? Your Friends First Conductor Plan allows you invest your pension fund in a number of different ways. Invest in a Managed Fund This is where a single fund manager will decide on the mix of investments between fixed interest bonds, property, cash and equities. Invest in a Portfolio Fund Your Conductor Plan gives you access to over 40 different funds, across a number of different asset classes, fund managers and investment styles. A portfolio fund is a fund which can invest across the full range of funds available. Each portfolio is designed to meet different risk and performance objectives. Friends First offer two portfolio fund ranges the Magnet Range and the Compass Range. 9

12 Friends First and your Pension Investment Build your own portfolio You can, with the help of your Financial Broker, build a portfolio tailored to your own specific needs. Our range includes funds investing in five asset classes from 8 different asset managers. There are actively and passively managed funds as well as those managed on an absolute, or target, return basis. Enough options to allow you build the portfolio that s right for you. Go Self-Directed Investment funds aren t the only investment option available to you. Our Self-Directed Investment Option allows you become your own fund manager for all, or a part of your fund. It allows you chose the specific investments your fund is linked to. You can open up a stock-broking account to trade in stocks and shares, or invest in fixed term deposit accounts and structured products like tracker bonds. Select a Lifestyle Investment Option The decisions taken in relation to your pension investments will be a key factor in determining the value of your fund at retirement. Over a period of time many things can change and this is especially true of the investment markets. The Friends First Lifestyle Strategy is an investment option that will help to position your pension fund in readiness for retirement. It is designed to help you to reduce the risk of your investments falling in value close to retirement when they would have not time to recover. Upon retirement, you can take a tax-free lump sum from your pension fund. Depending on your circumstances, you have two choices for what to do with the remainder: OPTION 1 OPTION 2 May be appropriate to you if you intend to purchase a retirement annuity. Objective: Reposition the pension fund to provide retirement benefits, (tax free lump sum and retirement annuity), by investing in cash and bonds. The cost of a retirement annuity is typically linked to bonds. Process: We will gradually move the existing pension fund and future contributions from the fund(s) in which they are currently investing to the more conservative Long Bond and Cash investment funds. 10 May be appropriate to you if you intend to continue investing after retirement in an Approved Minimum Retirement Fund (AMRF) and Approved Retirement Fund (ARF). Objective: Reposition the pension fund for ongoing investment after retirement, while including a degree of risk reduction. This is done by including some less volatile assets intended to give a greater certainty regarding the size of the tax free lump sum available. Process: We will gradually move the existing pension fund and your future contributions from the fund(s) in which they are currently investing to the Magnet Stable and Cash investment funds. You can take the decision to adopt a lifestyle investment option at the start or at any stage before the repositioning process is due to start. It will also be possible to opt out of the strategy before it starts. The transition process will start seven years and finish one year before the originally selected normal retirement age. At this point your accumulated pension fund and the ongoing contributions will be entirely invested in new funds. The two options are designed to approximate positions at retirement but cannot be absolutely precise in terms of the balance of your retirement fund that you need at the time.

13 Friends First and your Pension Investment Our Fund Range This is an overview of our Fund Range. For full information on all of the funds please see our separate Fund Range Brochure. Individual fund factsheets are also available on our website at friendsfirst.ie Passive Fund Management The objective of these funds is to give returns that are broadly consistent with the markets they are invested in. Each has an underlying index or benchmark it aims to track. Managed Funds Fund Manager Overall Risk Rating Fund Management Consensus % Global Equity Funds Fund Manager Overall Risk Rating Fund Management Indexed Global (Ex Euro) Equity % Indexed 50/50 Equity % Indexed World Equity % Regional Equity Funds Fund Manager Overall Risk Rating Fund Management Indexed Eurozone Equity % Indexed US Equity % Indexed UK Equity % Indexed Emerging Markets % Fixed Interest Funds Fund Manager Overall Risk Rating Fund Management Indexed Eurozone Corporate % Indexed Eurozone Long Bond % Indexed Eurozone Government % Commodities Fund Manager Overall Risk Rating Fund Management Physical Gold % 11

14 Friends First and your Pension Investment Active Fund Management The objective of these funds is to give returns that out-perform the markets they are invested in. Each fund has an underlying index or benchmark which it aims to out-perform. Managed Funds Fund Manager Overall Risk Rating Fund Management Managed % New Ireland Managed % Global Equity Funds Fund Manager Overall Risk Rating Fund Management International Equity % KBI Global High Yield Equity % Regional Equity Funds Fund Manager Overall Risk Rating Fund Management Eurozone Equity % KBI Eurozone High Yield Equity % Irish Equity % Explorer -Emerging Markets % KBI Emerging Markets High Yield % Fixed Interest Funds Fund Manager Overall Risk Rating Fund Management Fixed Interest % European Long Bond % European Corporate Bond % Index Linked % Commodities Fund Manager Overall Risk Rating Fund Management Optimum Yield % 12

15 Friends First and your Pension Investment Active Fund Management Property* Fund Manager Overall Risk Rating Fund Management * Irish Commercial Property % UK Select Property 5 * 0.75% Cash Fund Manager Overall Risk Rating Fund Management Cash % Deposit % * Under ESMA guidelines the 5 year annualised volatility of these funds merits a risk of 4 out of 7. Property has distinct liquidity risks which Friends First wish to draw to your attention and therefore have allocated a higher risk rating than normal to this asset. Specialist Funds The objective of these funds is not just to give returns which are broadly consistent or better than the markets in which they are invested. Each fund also has additional criteria which it attempts to meet. Specialist Equity Funds Fund Manager Overall Risk Rating Fund Management Stewardship (Ethical) % This is an international equity fund which aims to achieve growth through investing only in companies which meet certain ethical criteria. Protected Equity % 4 Calm Euro Equity 1.00% This fund seeks to protect investors against significant downward movements in equity markets by moving its investments between cash and equities depending on market conditions. Absolute Return Strategies Fund Manager Overall Risk Rating Fund Management Insight Currency % Market Neutral Equity % Multi-Strategy Global Bond % Concept K % Magnet Absolute Multi Manager % Additional Objectives: all of the above Absolute Return Strategies are attempting to deliver positive returns over the medium return regardless as to underlying market conditions. Each does so in very specific ways and with varying degrees of risk. You should refer to the Fund Fact Sheet for details on the specific strategies employed by each. 13

16 Friends First and your Pension Investment Specialist Funds Self-Directed Investment Option Fund Management Advisory Trading Account Available through Cantor Fitzgerald 1.00% Execution Only Account this option gives you the freedom to select your stocks and shares as well as other assets. 0.75% Portfolio Funds The objective of these funds is to use the full breadth of the Friends First fund range to build portfolios designed to maximise returns within given risk paramaters. The Magnet Range Fund Manager Overall Risk Rating Fund Management Magnet Cautious % Magnet Stable % Multi Manager Funds Magnet Portfolio % Magnet Adventurous % These portfolios will predominately use actively managed underlying funds. The Compass Range Fund Manager Overall Risk Rating Fund Management Compass Cautious % Compass Stable % Multi Manager Funds Compass Portfolio % Compass Adventurous % These portfolios will predominately use indexed underlying funds. 14

17 If you are looking to save or invest money for your retirement, a pension plan is the most effective route because of the very generous Government tax benefits that apply. Depending on your employment status these tax benefits and your options upon retirement work in different ways. Your tax benefits and retirement options explained 15

18 Your tax benefits and retirement options explained The following sections will set out how the tax and retirement options apply to your circumstances if you are: A Company Director/Employee Self-Employed Company Director/Employee Benefits and Retirement Options Company Director/Employee Benefits and Retirement Options If you are employed by a company, either as a Company Director or as an employee, then your Conductor pension plan is generally established as a one man Company Pension Plan, where you will always be the only member of the scheme. The Company will determine whether membership of a Pension Plan is compulsory, and whether the plan will provide additional benefits such as life cover. The pension plan is set up under a trust for your benefit and all decisions affecting the pension must be made by the trustees of the scheme. By setting the pension fund up under trust your pension fund is protected from the company s creditors. Tax relief on contributions Revenue allows your company to invest generous amounts of money into a company pension on your behalf. It is up to the company to decide how much to invest. Bear in mind that the sooner you start saving for retirement the lesser impact there will be on company cash flow. The company can claim Corporation Tax relief in full on contributions which are within Revenue limits and you will not incur any Benefit-in-Kind. The actual amounts and limits your company can invest on your behalf are dependent on a number of factors. Your Financial Broker will be able to advise you of the maximums for your particular circumstances. 16 However, the limits are very generous and the following are some examples of the maximum amounts allowed if you are starting your pension for the first time: Age % of Salary Male % of Salary Female 30 Up to 72% Up to 67% 40 Up to 108% Up to 100% 50 Up to 216% Up to 200% 55 Up to 432% Up to 400% If you make personal contributions from your own resources you can also claim tax relief at the highest rate of tax you pay. It is up to you and the company to decide how much, if any, you will personally have to contribute. Additional Voluntary Contributions can also be made at any time. These personal contributions are included in the overall maximum amounts set out above and are also subject to the following limits: Age Band Up to age % Age 30 but less than 40 20% Age 40 but less than 50 25% Age 50 but less than 55 30% Age 55 but less than 60 35% Age 60 and older 40% Percentage of Gross Salary As at January 2016, the maximum salary that can be taken into account for these purposes is 115,000 and this amount may change.

19 Your tax benefits and retirement options explained No tax on investment growth Your contributions are invested in a wide range of funds which do not pay any tax on the income and capital gains they make. This means that more of the gains can be reinvested in the fund and over time this YOUR RETIREMENT BENEFITS AND OPTIONS EXPLAINED can have a significant impact on the performance of the fund. Benefits at retirement Your pension plan will be set up with a normal retirement age. This age can range from 60 to 70. If you have left employment, you will be able to take retirement benefits from age 50 onwards. You may also defer taking your retirement benefits until after your normal retirement age as long as you take benefits by age 70. All benefits payable under the plan are funded by contributions made by you and/or the company. Therefore, the benefits you receive on retirement will ultimately depend on the value of your pension fund. The plan is set up using policies issued by Friends First, which are in turn subject to Policy Conditions issued to the Trustees. The only benefits which can be paid are those which can be secured using the proceeds of these policies. Underwriting may apply if life cover is provided as part of the benefits under the plan. You are entitled to take a portion of your pension fund as a lump sum. The balance can either be reinvested or used to buy a guaranteed income for life, called an annuity. Option 1 lump sum and annuity You can decide to take up to one-and-a-half times your final salary as a lump sum and use the rest of your fund to buy an annuity. The amount of the lump sum is dependent upon how long you have worked for the company. The maximum of one-and-a-half time s salary assumes you have 20 years of service at normal retirement age only. Option 2 lump sum and continued investment Alternatively, you can elect to take 25% of your fund as a lump sum. If you decide to do this you have a number of choices regarding the balance of your fund. You can re-invest it, take some or all of it as a taxable lump sum or use some of it to buy an annuity. If you wish to re-invest your fund you may be able to do so through an Approved Retirement Fund (ARF) provided you meet certain criteria. These criteria are that you must either have a minimum guaranteed income for life above a set level. This level can be reviewed every year and is currently 12,700 pa (January 2016), or You must invest a certain minimum amount of your fund in either an annuity or an Approved Minimum Retirement Fund (AMRF). This minimum amount is reviewed every year and is currently 63,500 (January 2016). An ARF is an open-ended investment. You can withdraw funds from it whenever you like although you will have to take out a minimum annual withdrawal, which can be 4%, 5% or 6% a year, depending on your age and the value of all of your ARF and vested PRSA policies combined. You can use the funds in your ARF to buy an annuity at any time. An AMRF is like an ARF except that you can only withdraw up to 4% once per year of the value of the contract until the age of 75. Once you turn 75, or meet the minimum guaranteed income for life rule, the AMRF becomes an ARF. Tax Treatment of lump sum benefits taken at retirement Under current tax rules the first 200,000 of the lump sum you take on retirement is tax free. The next 300,000 would be taxed at a rate equal to the Standard Rate of Income Tax. Any amounts in excess of 500,000 would be taxed at a rate equal to the Marginal Rate of income tax and subject to PRSI and USC. These limits are lifetime limits and apply to the accumulated lump sums you have taken from this bond and from any other pension scheme since 7th December 2005 or in the future. Tax Treatment of income taken after retirement Under current tax rules any income taken from either an annuity, AMRF or ARF after retirement is treated as income and as such is subject to income tax, PRSI and USC. 17 Company Director/Employee Benefits and Retirement Options

20 Your tax benefits and retirement options explained Self-Employed Benefits and Retirement Options Self-Employed Benefits and Retirement Options If you work for yourself as a sole trader and your business is not incorporated, then Conductor will be set up as a personal pension. This means that the plan is in your name and you make all the decisions affecting it. Conductor might also be set up as a personal pension if you are an employee but your employer does not offer a company pension scheme. Tax relief on contributions The Revenue allows you to invest generous amounts of your earnings into a pension and claim tax relief at the highest rate you pay. The older you get the higher the amount allowed will be, but bear in mind that the sooner you start saving for retirement the lesser impact there will be on your cash flow. Tax relief on these personal contributions is subject to the following limits: Age Band Up to age % Age 30 but less than 40 20% Age 40 but less than 50 25% Age 50 but less than 55 30% Age 55 but less than 60 35% Age 60 and older 40% 18 Percentage of Earnings As at January 2016, the maximum salary that can be taken into account for the purposes of tax relief is 115,000. This amount may change. No tax on investment growth Your contributions are invested in a wide range of funds which do not pay any tax on the income and capital gains they make. This means that more of the gains can be reinvested in the fund and over time this can have a significant impact on the performance of the fund. Benefits at Retirement If you are self-employed you may take your benefits from your pension plan at any age between 60 and 75. The benefits you receive on retirement will ultimately be dependant on the value of your pension fund. You are entitled to take a portion of your pension fund as a lump sum. The balance can either be re-invested or used to buy a guaranteed income for life, called an annuity. Lump sum Upon retirement you can take 25% of your pension fund as a lump sum. With the balance of the fund you can do one of three things: Use it to buy an annuity a pension for life Cash it in as a taxable lump sum Continue to invest it. If you wish to re-invest your fund you may be able to do so through an Approved Retirement Fund (ARF) provided you meet certain criteria. These criteria must also be met if you wish to cash in any additional part of your fund. These criteria are that you must either have a minimum guaranteed income for life above a set level. This level can be reviewed every year and is currently 12,700 pa (January 2016), or You must invest a certain minimum amount of your fund in either an annuity or an Approved Minimum Retirement Fund (AMRF). This minimum amount is reviewed every year and is currently 63,500 (January 2016).

21 Your tax benefits and retirement options explained An ARF is an open-ended investment. You can withdraw funds from it whenever you like although you will have to take out a minimum annual withdrawal, which can be 4%, 5% or 6% a year, depending on your age and the value of all of your ARF and vested PRSA policies combined. You can use the funds in your ARF to buy an annuity at any time. An AMRF is like an ARF except that you can only withdraw up to 4% once per year of the value of the contract until the age of 75. Once you turn 75, or meet the minimum guaranteed income for life rule, the AMRF becomes an ARF. Tax Treatment of lump sum benefits taken at retirement Under current tax rules the first 200,000 of the lump sum you take on retirement is tax free. The next 300,000 would be taxed at a rate equal to the Standard Rate of Income Tax. Any amounts in excess of 500,000 would be taxed at a rate equal to the Marginal Rate of income tax and subject to PRSI and levies. These limits are lifetime limits and apply to the accumulated lump sums you have taken from this bond and from any other pension scheme since 7th December 2005 or in the future. Self-Employed Benefits and Retirement Options Tax Treatment of income taken after retirement Under current tax rules any income taken from either an annuity, AMRF or ARF after retirement is treated as income and as such is subject to income tax, PRSI and USC. 19

22 As you would expect, there are charges for managing and administering your pension plan 20 s that may apply

23 s that may apply Because Conductor is a very flexible, tailored pension plan which is suited to a wide range of circumstances, charges will vary depending on your chosen options. Your Financial Broker will explain the charges that apply and you ll also find them set out in the policy documents. The types of charges which may apply are as follows: Allocation rate This is the proportion of your contribution which is invested. For example, if the allocation rate applicable to your policy is 95% it means that for every 100 you contribute we will invest 95 in the funds you have chosen. This would effectively be a charge of 5%. Fund management charge These charges differ depending on which investment fund you choose. They are a set annual percentage of the value of each fund. This charge is deducted within each fund, so the quoted unit prices are the prices after this charge has been applied. The charges for each fund are detailed on pages Early exit charge A Conductor pension plan is a long term investment. If you set up a plan and then decide to transfer it to another pension provider or take benefits, in the early years, we impose a charge to recoup the costs we incurred in setting up the plan. Plan management charges These may apply to your plan and are used to pay for the administration of your plan. They would comprise of a once off set up charge and a percentage of the value of your fund each year. These would be in addition to the Fund Management. 21

24 22 Additional Customer Information

25 Additional Customer Information What if my circumstances change? When you invest money into a pension plan it is vitally important that the plan and options you choose reflect what you are trying to achieve from your retirement planning. Your Friends First Pension plan offers a choice of options which can be tailored to your needs as you progress through your financial lifecycle. These options include changes to your contribution level, frequency of your contribution and your fund choice. We would recommend that you regularly review your plan in conjunction with your Financial Broker to ensure it is continuing to meet your goals. In addition, should you need to reduce or pause your contributions this can be facilitated and we will continue to fully manage your plan and give you regular updates. At Friends First, we are fully dedicated to our customers for the lifetime of their policy and this is why we are your Friends for life. Keeping In Touch We will write to you once a year giving you a statement of how your investment is performing. In addition, you can also access up to date details of your plan at any time by registering with our On- Line Service Centre at friendsfirst.ie/service. Once registered you will be able to access policy details, current values, investment performances and fund information. More information If you need help regarding your policy at any stage in the future, please speak to your Financial Broker or call our Customer Services team on q or by to info@friendsfirst.ie For information on the full range of products and funds available from Friends First, please contact your Financial Broker or visit our website at friendsfirst.ie 23

26 24 Your questions answered

27 Your questions answered What payment options do I have? You can make regular payments or occasional lump sums. Regular payments can be made monthly, quarterly, half-yearly or annually. Annual payments can be made by direct debit or cheque. All other regular payments must be made by direct debit. Occasional lump sums must be paid by cheque. Can I stop or vary my contributions? You can increase, reduce or pause your contributions at any time, but bear in mind that reducing or pausing contributions will impact your final retirement fund. What s the difference between a company pension and a personal pension? If your company is contributing to your pension it will usually be set up as a Company pension plan. Company pension plans are set up under trust, with appointed trustees. This means that the funds in the pension scheme must be used solely for the benefit of the members of the pension scheme. Subject to the terms of the Trust Deed and Rules, the Company has the power to amend or terminate the scheme at any time. The plan will be set up as a defined contribution plans under the terms of the Pensions Act 1990 and the Taxes Consolidation Act The plan will have been submitted to the Revenue Commissioners for approval and to the Pensions Authority for registration within one year of its commencement. Your Benefit Statement will detail the Pensions Authority reference number. If you work for yourself, and your business is not incorporated, or your employer does not have a pension scheme, your pension is likely to have been set up as a personal pension. This means that you own it outright and can give us instructions on all aspects of it. There are different rules regarding how much can be contributed to a personal or company pension and what options are available on retirement. These are set out in the tax benefits section previously. What role does the trustee play in a company pension? The role of trustees of a company pension plan is primarily to ensure that the pension is administered properly and that the funds within it are used solely for the benefit of the members of the pension. Your benefit statement will detail who the trustees of the plan are. As the trustees technically own the pension all specific queries should be directed to them as we will usually require their instructions to make changes to the plan. When can I take my retirement benefits? If you have a personal pension plan the earliest you can take your retirement benefits is at 60 years and the latest is at 75 years. If you are a member of a company pension plan your pension will have a normal retirement age, between 60 and 70, set by the trustees. The earliest you can take your retirement benefits is 50. However, if you take your benefits before the age of 60 you will have to cease working for that company. If you own more than 20% of the shares in that same company, you must also sever all links with the company, including giving up your shareholding. Please note that all retirement benefits from company pension schemes related to the same employment must be taken at the same time. What happens if I have to retire early due to ill health? If you have to stop work due to serious ill health, you can usually take your retirement benefits as soon as that happens. However, if you haven t been contributing to your pension for long the fund is likely to be small and the benefits low. It is possible to arrange separate Income Protection cover which will pay you an income if you can t work due to illness or injury. This will help give you more time to fund an adequate pension and you can benefit from tax relief on your premiums. Your Financial Broker will be able to advise you on this. 25

28 Your questions answered Is there a limit to the pension fund I can build up? The Revenue limit the amount that can be paid into a company pension (known as maximum funding) to ensure that the retirement fund does not exceed the amount necessary to provide the maximum retirement pension set by Revenue. This limit is exclusive to company pensions and is based on the length of time you have been working as a PAYE employee in the Company concerned and your final earnings from that employment. Your Financial Broker will advise you on the maximum funding in your own circumstances. Separate to the maximum funding limit. The Revenue impose a Standard Fund Threshold for taxation purposes to all types of pension products not just company pensions. The impact of this is to impose a tax charge on the amount of your retirement fund above the threshold before retirement options are given to you. This amount is currently 2,000,000 and this amount can be reviewed. The maximum funding rules may allow a retirement fund greater than the Standard Fund Threshold and your Financial Broker will advise you on the taxation implications of this. What happens if I change job? With a personal pension plan you simply continue to make your contributions in the same way. If you join a company pension scheme with your new employer you can continue making contributions to your personal pension plan. However, you will not be able to claim tax relief on those contributions. If you have a company pension plan and you move to a new employer you must stop contributions to your existing company pension plan. However, you can request that the fund you have built up be transferred to another company pension scheme (if you have joined one), a personal retirement bond or in some circumstances a Personal Retirement Savings Account. 26 What happens if I separate or divorce? If you are: legally separated divorced your civil partnership has been dissolved you are no longer a cohabitant a Court application for a Pension Adjustment Order in respect of benefits may be made. You can contact the Pensions Authority ( for further information regarding Pension Adjustment Orders under the Family Law Acts or the Civil Partnership and Certain Rights and Obligations of Cohabitants Act What is an annuity? One of the options you have when you retire is to buy an annuity from a life insurance company. An annuity gives you a guaranteed pension income for the rest of your life. When you buy an annuity you can opt for a pension that remains level or one that increases every year. If you have dependants you can also include a provision for your pension to continue after your death to your surviving spouse or other dependants. As an additional option, this option will reduce the amount of pension initially payable to you but will ensure the pension has the potential to continue to be paid after you death. The amount of your annuity will depend on the size of your fund, the options you choose and the general level of annuity rates at the time you retire. However, you are not limited to buying your annuity from Friends First. You can shop around to get the best rate available on the open market.

29 Your questions answered What happens to my fund if I die? If you have a personal pension plan, the value of your fund is passed over to your dependants as part of your estate. Under a company pension plan, the trustees have discretion to pay out the value of the fund to beneficiaries. You can advice the trustees who you wish these beneficiaries to be and they will generally adhere to your wishes. In the early years of your plan your fund is likely to be relatively small. As such it is advisable to take out additional life cover if you have dependants. It is possible to arrange life cover through an Executive or Self-Employed Term Assurance Policy and benefit from tax relief on your premiums. Your Financial Broker will be able to advise you on this. 27

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32 Warning: Past performance is not a reliable guide to future performance. Warning: The value of your investment may go down as well as up. Warning: Funds may be affected by changes in currency exchange rates. Warning : If you invest in this product you may lose some or all of the money you invest. FUND WARNINGS: 1. Performance Fees: The growth of the Insight Currency fund will be subject to a 20% monthly performance fee which only applies when the growth rate exceeds 7% p.a. The Market Neutral Equity fund will be subject to a performance fee of 10% of any growth achieved above cash returns (specifically 3-month EURIBID). The Concept K fund will be subject to a performance fee of 15% of any growth achieved above the Euro Overnight Index average rate (EONIA). The Magnet Absolute fund invests in a range of funds and strategies, many of which may individually incur performance fees. For the most up to date information on this fund please refer to the factsheet on the fund centre on friendsfirst.ie. 2. The price protection on the Protected Equity+ Fund, Series 3 is provided by Deutsche Bank AG. 3. Money invested in the Deposit fund is placed with one or more Banks. The payment of interest and security of capital is provided by the Bank(s). The Bank(s) and not Friends First are providing the security on the Deposit fund. Please refer to the Fund Factsheet. 4. The property fund managers reserve the right to place a withdrawal limit or/and to defer encashment for up to six months or such time as is necessary to facilitate the sale of assets if required. PLEASE NOTE: The risk rating provided in this document represents Friends First s view. Your personal risk profile or outlook may differ from this view. Please talk to your Financial Broker for assistance in choosing the most appropriate approach for your needs. Friends First is part of Achmea Friends First Life Assurance Company dac, Friends First House, Cherrywood Business Park, Loughlinstown, Dublin 18. The information in this brochure is based on our understanding of current law and revenue practice. Friends First Life Assurance Company dac is regulated by the Central Bank of Ireland. ffgeneral BR113, Nov. 16