Understanding your. Retirement options. We are here to help

Transcription

1 Understanding your Retirement options We are here to help

2 The importance of taking professional advice Your pension doesn t automatically pay you an income in retirement Throughout your life you ve probably been paying into a pension, through your employer or through your own personal pension arrangement. Many people believe their pension pays them an income automatically once they retire, but that s not how it works. It may sound confusing, but the pension you ve been paying into over the years is just a pot of money. The idea is that you use this pot of money to buy something that pays out an income during retirement. You have probably heard that the next step is to buy an annuity. While an annuity is probably the most popular choice at retirement, many people do not realize that it is only one of several options available to them, and in fact, an annuity itself comes with several different available options. Don t accept your current providers offer without speaking to us first Many retirement solutions cannot be altered once put in place so it s important to take advice before accepting an offer from your current provider or buying online. Not only can we determine the right product for you, but we will search the whole market to find it at the best rate.

3 Retirement option examined Annuity What is an Annuity? An Annuity is a contract with a provider to pay you an income in exchange for a lump sum investment in this case, your pension fund. Different annuity rates are available from different providers so it is important to shop around. The higher the rate, the more pension income you will receive. How does it work? An Annuity provides a regular income paid for the rest of your life, no matter how long you live. The income you will receive is determined at the point at which you take out the contract and is guaranteed for life, which is why it is very important you get the very best rate available when buying your annuity. Your income is paid as soon as the annuity policy begins, you cannot choose to defer it. The decision as to whether you wish to draw your tax free lump sum and how much to draw must also be made at the point of buying an annuity, you cannot draw it at a later stage or take some now and some later. What types of annuity are available? If you smoke or suffer from certain medical conditions then you may qualify for enhanced rates through an Impaired Life Annuity. It is also possible to build extras into a standard Annuity such as guarantees to provide an income to your spouse/partner in the event of your death and the ability to help protect the income you receive against inflation. The Pro s Lower risk than other options. Pays a regular income no matter how long you live. Option to provide for your spouse or dependent when you die. Option to protect your income against inflation. Option to guarantee a payment to your estate if you die early. The Con s For the majority of Annuities, once you have bought it you cannot cash it in, swap it for something else or alter your Annuity options. The level of your income is not flexible (standard Annuity). Unless you choose otherwise, your spouse or dependents will not automatically be provided for in the event of your death. The options you choose affect the level of income you receive. Generally, the more options you add, the more it will cost you so the lower your income will be.

4 Retirement option examined Income Drawdown What is Income Drawdown? Also known as Unsecured Pension (USP) or Pension Fund Withdrawal, the money in your pension remains invested but you can take some at regular intervals as income to pay for your retirement. You are also able to release your tax free lump sum immediately and delay drawing an income. Flexibility & choice As you can see, Income drawdown is a lot more flexible than an Annuity. It can be used to accommodate semi-retirement by varying the amount of income you draw from your pension. You could subsidize your reduced earnings by drawing a small income from your pension and then, as you progress into full retirement, draw more as your needs dictate. When you die your pension fund doesn't have to die with you. Choosing Income Drawdown allows you greater flexibility when passing benefits on to your spouse. It also allows you to pass lump sums on to your partner or children if you are not married. You also have the ability to defer an annuity purchase until later in life. This is particularly beneficial if you are worried your health will decline as you will be able to take advantage of enhanced annuity rates as they become applicable. Risk An Income Drawdown policy leaves your pension fund invested. This means that your fund is exposed to an element of investment risk. This risk can be managed via the implementation of a bespoke investment portfolio which is tailored to your attitude to risk, however, it s important to remember that as with any investment: Your fund can go down as well as up. The Pro s Flexibility to vary your income to the extent where you don t have to take anything at all if you choose not to. If Annuity rates are low you don t have to buy an Annuity straight away. When you die you can leave the money from your pension to your spouse or dependents. Flexibility to choose when you draw your tax free cash and how much, as well as the ability to draw it in chunks as and when you need it. The Con s There is no guarantee that annuity rates will improve in the future so you may not get a higher income by waiting. Your fund needs to grow to compensate for some of the income you withdraw. If they don t your income could reduce. By keeping the money from you pension invested it could go down in value so when you eventually buy an Annuity your income could be lower.

5 Retirement option examined Third Way What is Third Way? Third Way products are seen as the middle ground between Income Drawdown and an Annuity. These schemes allow investors to lock in the value of their pension fund at key anniversary dates and draw an income between these dates. A Third Way scheme allows you to take up to 25% of the fund as a tax free cash entitlement upfront (where required) and take income (as opposed to an annuity) from the balance. How does it work? A Third Way scheme provides a fixed income for a specified period while guaranteeing the value of the residual fund at the end of the term. This effectively eliminates the investment risk normally associated with a traditional income drawdown arrangement. The Pro s You are able to take all of your tax-free cash lump sum entitlement at outset. You only have to lock into a temporary contract. You can plan your retirement in bite size timescales. You can lock into enhanced levels of income should your health deteriorate in later years. You are able to add a safeguard in the form of a guarantee to limit any drop in your fund value. Bite sized retirement Third Way could be looked at like a series of Annuities. You are buying the peace of mind that you have a guaranteed income without the commitment of a full blown Annuity. At the end of the term a guaranteed maturity sum is available. This can be rolled over into another Third Way product, converted into a conventional Annuity or rolled into an Income Drawdown plan. The Con s Annuity rates may be at a worse level when annuity purchase takes place. Withdrawing too much income in early years may have an adverse effect on preserving your pension purchasing power or preserving the capital value of your fund. There is no guarantee that your future income will be as high as that offered by an annuity purchased today.

6 Introducing our Managed Retirement Service If you are looking for an all-in-one solution to managing your entire retirement then this is the service for you. We will help take the hassle out of retiring by liaising with your pension providers on your behalf and comparing what they offer you to the offers available from other providers. Not only that, but we will provide you with income quotes for the other retirement options listed in this pack* and our specialists are always available to answer any questions you have and offer support. Think of it like a comparison website but backed up with advice from retirement specialists. What s included in the CRS Managed Retirement Service? 6 months before retirement You will receive a retirement options report comparing the income quotation from your current provider to that available from other top providers in the open market, as well as other solutions which may be suitable for you. 3 months before retirement You will receive an updated retirement options report with current income quotations. Unlimited telephone access to our retirement specialists. Advice on which retirement option is the most suitable for you, prepared by a fully qualified financial advisor. Our advice takes into account your health, attitude to risk and family circumstances. We will find you the right solution at the best rate. Come retirement, we will make all of the arrangements to implement your chosen retirement solution for you. How much does the CRS Managed Retirement service cost? Everything from the first retirement options report, right through to your advice report is free of charge and there is no obligation to buy. You do not pay us anything until you are happy with the retirement solution we recommend and instruct us to arrange it for you. The cost will vary depending on the solution we provide and will be clearly outlined within the advice report we produce for you, as well as options as to how to pay. In the majority of cases, charges can be paid for directly from your pension fund so there will be no upfront cost to bear. In fact, in some cases we are able to provide such a significantly better rate to our clients than that available from their current provider that it is possible to save money even with the cost of advice included. How do I take advantage of the CRS Managed Retirement Service? Simply complete the form at the end of this pack and return it to us. Please complete one form for each pension you have. Additional forms are available on our website at *where suitable for you

7 Managed Retirement Service Please complete a form for each pension you have. You may photocopy this form or download more from Once complete, return to : Complete Retirement Solutions, 113 London Road, Hurst Green, East Sussex, TN19 7PN If you have any queries please contact us on Contact Details Title: Forename: Surname: Address: Postcode: Home Phone: address: Mobile Phone: More about you Date of Birth: Marital Status: National Insurance Number: Spouse/Partner Date of Birth: Retirement Date: Pension details Provider name / Administrator: Policy Number: Scheme Name: for Company Pensions Member Number: for Company Pensions Administrator s Address: Dear Sir or Madam, I have today appointed Complete Retirement Solutions LLP to advise me on my financial matters. I would be very grateful if you would accept this letter as my authority to provide them with any information relating to the above contracts that they may request. Thank you in advance for your co-operation. Yours faithfully Signed : Date : Your information will be treated as confidential in line with the Data Protection Act 1998 and will only be shared with other organisations in the pursuit of relevant information to assist the advice process.

8 Tel: Fax: Web: Complete Retirement Solutions LLP is an Appointed Representative of WSW Financial Services Ltd who are authorised & regulated by the Financial Services Authority Registered Office: 113 London Road, Hurst Green, Etchingham, East Sussex, TN19 7PN Registered in England, Registered Number: