Your guide to saving for retirement The Trust Guide

Transcription

1 Your guide to saving for retirement The Trust Guide

2 Saving for your future Aims of the Trustee Board It s important to consider your needs and goals for retirement as early as you can, so you have the best chance of achieving them. The Trust is here to help you plan and save for your retirement. The Trust has an independent Trustee Board, whose main role is to look after members interests and ensure benefits are paid out in line with the Trust Deed and Rules. Below we have summarised how we, the Trustee Board, aim help you on your retirement savings journey. Trust information Helping you to understand and plan your retirement before, during and after your employment. News We keep you updated on important information and help you understand the impact of changes which affect planning for retirement. Statements We post a statement in My Account each year. This lets you know how your savings are progressing, so you have an idea of what income you might get at retirement. Investments We offer a wide range of investment choices. You can decide where to invest, manage and monitor your account, throughout your membership. If you don t want to make your own investment choices, we automatically invest your money in a strategy which moves your savings between asset types at different life stages, to help protect you from volatility. Options at retirement We offer you the full range of options on how you take an income, when it s time to retire. We ll also help you understand your choices so you can make a decision and guide you through the process to set it up. Support You are not on your own. Our administrators, Xafinity, are available to help you throughout your saving period and into retirement. You are also given your own online account, MyAccount, where you can check out your savings 24/7, make changes to your investments and personal details and manage your retirement income. If you have any questions, comments or suggestions, please let us know so we can continue to improve the Trust for your benefit. The Trustees 2

3 Contents Can t I rely on the State Pension? What are the alternatives? How does the Trust work? So, is saving into the Trust right for me? How do I join the Trust? What if I want to change how much I save? How much income will I need when I retire? Can I transfer my old pensions into my Personal Account? What happens if I leave? How can I take an income? What would be paid out if I die? What happens if... Where can I get more support? About the Trust Guide: This guide provides information about the Trust - a retirement savings and income plan, set up by your employer. The Trust is a way of saving for your retirement so you still have an income when you stop working. To help achieve this, you can choose from a number of investment options available. Please note, depending on the investments you choose, the level of risk and potential investment performance differ. For more information please read the Trust Investment Guide. The value of your retirement savings will depend on a number of factors including: when you start saving; how long you save for; how much you save; the charges taken; and the return on your savings. Your payments are taken from your salary before income tax is taken off, this means you don t pay income tax on the amount you save and the cost to you is lower. You can find out more about how much you can save in the What if I want to change how much I save? section of this guide. Your employer normally pays in too. Details on how much your employer will pay in are covered in the Trust Benefit Summary this is available once you are a member and log in to My Account. Generally you won t pay tax on any growth made by your retirement savings and when you take an income you can take up to 25% of the value as a tax-free lump sum. Please bear in mind tax treatment depends on your individual circumstances, including if you re a Scottish taxpayer, and may change in the future. When you take an income you have different choices available to suit your needs. For more details, please read the Trust Retirement Guide. 3

4 Can t I rely on the State Pension? To answer this you need to consider if you could live off of the current maximum of a week for the 2018/19 tax year? To qualify for any State Pension, you ll need to have at least ten years of qualifying National Insurance contributions and you ll need 35 qualifying years to receive the maximum amount. Some people might receive more than this if they would have been entitled to a higher income under the old rules. You can find out how much you might get from the government website. You ll need to register for the Government Gateway if you re not already registered. Increasing State Pension age You also need to consider when you d like to stop working? The State Pension normally starts when you reach the State Pension age. Women s State Pension age is being gradually increased from 60 to 65 by 6 December The State Pension age for both men and women will then start to increase to reach age 66 by 6 October The government has also announced the State Pension age will increase to age 67 between 6 April 2026 and 6 April They are also proposing to increase it further, to age 68, between 6 April 2037 and 6 April earlier than originally planned. If you want to find out more about your State Pension, visit the Working, jobs and pensions area at In short: many people don t rely on the State Pension, as it doesn t provide enough income for how they want to live and/or because they want to stop work earlier than the State Pension age. 4

5 What are the alternatives? There are a number of alternatives to relying on the State Pension for an income when you stop working, but they re not always reliable, or desirable. People also put off saving, missing out on valuable help from their employer. Start saving in your next job you re not planning on staying long Your retirement savings are portable, which means they could go with you if you change jobs. Save when you re older Every month you put off saving means one less opportunity to put aside some money for your retirement and could mean you ll need to save more later. Carry on working This might not always be possible. If you re healthy and can work it s fine, but what if things change? Use the value in your property (down-sizing) This can be risky. What if the value of your property drops? Consider the value of your home, the cost of an alternative and the cost of moving how much would you have left? Rely on an inheritance from your family What guarantee is there that you ll receive an inheritance? It is possible funding the long-term care needs of a family member may reduce any potential inheritance. For most people the only real alternative to the State Pension is to save for their retirement. 5

6 How does the Trust work? The Trust is simply a way to save for your retirement, with two key advantages over other solutions: 1. You don t pay income tax on the amount you save in to your Personal Account, and 2. Your employer will normally pay in to your account. YOU PAY IN You can choose: how much you save; where to invest your savings; your target retirement age; YOUR EMPLOYER PAYS IN how you use your savings to provide an income; and to take an income and carry on working.. YOU SAVE INCOME TAX MORE MONEY SAVED FOR YOUR FUTURE You can make these changes at any time during the saving phase (i.e. when you are working) and make further choices when you take an income. When you join, your savings are automatically invested in the Life Stage strategy. If you wish, you can change your investment funds at any point in the future. Information on investments and the choices you have are covered in the Trust Investment Guide. The value of your retirement savings is not guaranteed and can go down, which will reduce the income you get in the future. 6

7 So, is saving into the Trust right for me? Here are some questions to help you decide: YES The current maximum State Pension is a week per person would this give you the retirement lifestyle you want? NO Are you sure? It s worth considering all your current outgoings and what they d be if you were retired. Then check whether your State Pension and other income would be sufficient. YES You re likely to be in the majority do you have other pensions and savings? NO Are you a member of your employer s retirement savings plan (the Trust)? NO Are you being enrolled into the Trust? YES YES I m thinking about leaving Unless your circumstances have changed, this is likely to remain the right choice. It is still worth considering whether your: payments are enough, or investment choices need a review. Remember the earlier you start saving for retirement, the more chance your savings will have to grow. Joining the Trust is a great way to help you save for retirement. Your employer also pays into your account, so by leaving you will miss out on their payments. 7

8 How do I join the Trust? Your employer will provide details of how you become a member of the Trust when you qualify. It s never too late to start saving for your retirement. Usually, the sooner you start the less it will cost you and the higher income you ll get. It s surprising how much difference saving a little extra can make to what you might get in the future. Let s look at a case study: Using the Retirement Planner John, who s 25 years old and earns 25,000 a year, wanted an idea of how much secure income he might receive when he s 67, if he and his employer saved 8% of his salary. The result showed he might get an income of 25,000 a year. John 25 years old Earns 25,000 a year With his employer, John saves 8% of his salary until age 67 The forecast showed he might get 25,000 a year when he retires Assumptions each year: 5% investment growth Salary increases by 3% Inflation is 2.5% Charges are 0.5% 8 John could afford a little more each month, so he upped the payment to 10% of his salary (an extra 2%). This meant an extra would go into his Personal Account each month. However, tax savings meant his take home pay would only go down by a month - the cost of a dozen latte s from a premium coffee shop. This extra amount increased his forecast income to 31,000 a year, using the same assumptions. John saves 10% of his salary until age 67 The forecast income increase to 31,000 a year John could see by saving a little extra he could make a big difference to his future. Note: The figures are estimates and not guaranteed. What John will get back could be higher or lower than shown in the Retirement Planner. The secure income is payable for John s life and does not increase each year.

9 What if I want to change how much I save? You can change the amount you save by contacting your HR Team. You ll need to check with them when you can make any changes. How much can I save? For most people, it s as much as they can afford. However, there is a yearly limit on the tax savings you can receive. From 6 April 2018 the limit for most people will be 40,000. For some higher earners (earning over 150,000 a year), the limit is reduced in line with their earnings. More information is on the government website. To work out what counts towards your limit under the Trust, you need to add up the total payments made by you and your employer into your Personal Account during the tax year (6 April to 5 April). You will also need to include payments to any other retirement savings plans during this period. How much will it cost me to save more? As shown in the example on the previous page, income tax savings make the cost of saving into the Trust less than you might think. Below are a couple of examples of the cost of saving for a basic rate and higher rate tax payer. Example 1 basic rate tax payer If you earned 25,000 and chose to increase your savings by 2% of your earnings: Your payment is a month Your tax saving is 8.33 a month extra goes in to your Personal Account each month, but it only costs you of your take home pay. Example 2 higher rate tax payer If you earned 50,000 and chose to increase your savings by 2% of your earnings: Your payment is a month Your tax saving is a month extra goes in to your Personal Account each month, but it only costs you of your take home pay. The next section of this guide aims to help you think about how much income you need in the future. Important tip The most help you can get with your savings is the payments your employer may offer you. It s a good idea not to miss out on this support, as its money you wouldn t get otherwise and money you won t ever get back. 9

10 How much income will I need when I retire? To plan for stopping work, we need to understand how much income we ll need, how much we might get from the State and what we need to save to close any gap. This can be quite difficult because: We re unlikely to know what we ll need in the future what type of lifestyle we will want and how the price of things will change. The State Pension has changed a lot in recent years, in terms of how much we might get and when we will get it We can t always afford to save much when we have debt, are trying to get a roof over our heads, or looking after a family But don t give up. Making a start as soon as you can is the important thing delaying can cost thousands and mean having to retire later than you planned. You can find out more about the State Pension on page 4 of this guide. In terms of how much you can afford to save, it s worth looking at page 9 to see how tax savings reduce the actual cost to you. Let s consider how much might be needed in the future, to help create a plan or goal: How much will we need in retirement? There are various views from experts on this - suggesting somewhere between 4/5ths and half of our salary would be needed to allow us to stop work. So, if you earn 26,000 a year, that s between 1,100 and 1,700 a month. A study by Keyretirement.com in 2016, came up with the average cost of basic living being 970 a month per person. So aiming a little higher should afford us some luxuries. Of course, this is the average. If you live in London or the South East it s likely costs could be significantly higher. Similarly, if you leave in an area where the cost of housing and services are lower you might need less. So, we can give ourselves a rough target income to aim for between half and 4/5ths of our salary, plus extra for what we d like our retirement to look like (hobbies, travelling, new car, treating friends and family, eating out). 10

11 Can I transfer my old pensions into my Personal Account? Yes. When considering whether to transfer you ll need to compare and review the benefits and features you re likely to get from your existing plan and what you might get if you moved into the Trust. Your existing provider or administrators will be able to give you an illustration of your benefits at retirement and a current transfer value. There are several reasons why people consider transferring their old pension plans: Cost modern workplace retirement plans usually have lower charges than personal pensions and older plans Control (and convenience) having your savings in one place makes it easier to keep an eye on your savings and managing them Choice not all plans offer the full range of income options for retirement In most cases you re likely to be worse off if you transfer out of a defined benefit scheme (also known as a final salary scheme), even if your employer gives you an incentive to leave. For this reason, we won t accept a transfer from this type of pension scheme unless you have taken financial advice. Please contact us if you are thinking about transferring from a defined benefit scheme or a pension plan with guaranteed benefits. You should speak to a financial adviser to find out the risks and potential benefits of transferring. Please bear in mind you will be charged for any financial advice you receive. To make a transfer into your Personal Account, we just need a completed transfer-in form. Once we receive the form we ll contact the provider/administrator, arrange for the transfer and let you know when it s done. 11

12 What happens if I leave? If you leave your employer no further payments can be made into the Trust and you will have the following options, depending on your circumstances: If you are under age 55* If you are over age 55* You can leave your Personal Account invested in the Trust until you retire, when it can be used to provide you with an income; or You can transfer the value of your Personal Account to another registered pension scheme. 12 You can decide to take an income immediately; or * The government has announced an increase to the minimum pension age from age 55 to 57 from You can leave your Personal Account invested in the Trust until you retire, when it can be used to provide you with an income; or You can transfer the value of your Personal Account to another registered pension scheme. What happens to my Personal Account if I leave it invested in the Trust? You won t be able to make any more payments into your Personal Account. However, you will still be able to change how it is invested and the value of your savings will continue to move in line with the funds you re invested in. Often people refer to their pension being frozen when they leave their employer - this is not the case. How do I transfer my savings to another retirement savings plan? If you want to move your savings to another retirement savings plan, you can get the current value and ask for this to be done by logging in to My Account. The transfer value will be the value of your Personal Account when the transfer payment is made. What if I want to leave the Trust while still working for my employer? If you want, you can leave the Trust while you are still employed. You will need to complete an Opt-out form and give it to your employer. If you do leave the Trust, you will miss out on any future payments from your employer. What if I m absent from work? Most absences from work are for relatively short periods and won t affect your membership of the Trust. If you are absent from work for longer and still being paid by your employer, you may remain a member of the Trust. Full details will be provided by your employer and are covered in the Trust Benefit Summary.

13 How can I take an income? When you decide to start using your retirement savings to give yourself an income, you have a number of choices to suit your needs: take a quarter of your savings as a cash sum, with no tax to pay (current rules for retirement savings plans allow most people to take 25% of their savings free from tax); buy an annuity to provide a guaranteed income for life; keep your savings invested and take a regular income, as and when you need to; or take all or part of your savings in cash, at or shortly after your target retirement age. More information to help you understand the different retirement income choices and how each are taxed can be found in the Retirement section of the website or in the Trust Retirement Guide. What would be paid out if I die? The benefits payable vary depending on your circumstances: What if I die while I m a member of the Trust? The value of your Personal Account would normally be paid to your spouse/ dependants. However the rules of the Trust give the Trustee the discretion to decide the recipient of any lump sum. The Trustee will take any nomination you make into consideration although it will not be bound to follow it. What if I die after taking an income? What s payable will depend on the choices you made at retirement. 13

14 What happens if I get married? If you are still employed you should inform your employer. If you are no longer employed you should let know if you have changed your surname. You should also review who you would like the Trustee to consider when paying out any lump sum death benefits and update your nomination of beneficiaries form. I have children? You should review who you would like the Trustee to consider when paying out any lump sum death benefits and update your nomination of beneficiaries form. I get divorced? When making financial settlements following divorce the courts must usually take account of the value of any retirement savings and income. The concept of pension sharing is now established and the Court can order the pension of either spouse to be shared between the two parties. Regulations govern the implementation of pension sharing orders. There is a prescribed method of dealing with pension sharing issues, including timescales for responses to the Court and certain charges may be levied for additional administration. You may wish to review your nomination of beneficiaries form. I move house? If you are still employed you should inform your employer of your new address. If you are no longer with your employer you can update your details by logging in to My Account. I want to assign my benefits? You cannot assign charge or mortgage your benefits under the Trust. I have been a member of another employer s scheme? It may be possible to transfer benefits into the Trust from previous pension arrangements. Please contact, the Trust administrator for further information. I am currently saving into a personal or stakeholder pension plan? You can pay into as many pension schemes as you wish. So as well as being a member of the Trust you may also pay into other pension arrangements, such as a stakeholder or personal pension. There may be some tax charges if your savings to all arrangements exceed the yearly limit, covered on page 9. 14

15 Where can I get more support? The Trust supports you by... Providing online access to your account 24/7 You can view and manage your Personal Account using the Trust s secure online service called My Account. Here you can: See Personal details you can also make changes to keep your records accurate, including your target retirement age. Check out your savings and investment you can check the latest value of your savings, see the payments made into your Personal Account and see your latest yearly statement. You can also make changes to where your savings are invested, check if your savings are on track, and do What if? calculations to help you plan for the future. Use interactive planning tools these can help you get an idea of what income you might get and see what difference changes to how much you save and when you take an income might make. The site also provides guides and page content to help you get a better understanding of what you can do to create a savings plan for your future. 15

16 Disclosure of Information As a member of the Trust, you and your beneficiaries have the right to information and documents about the Trust. The following documents are on the website: 16 Trust Guide; Trust Investment Guide; Trust Retirement Guide; Investment fund factsheets; Annual Report and Financial Statements; Statement of Investment Principles; and A statement each year. If you leave your employer you will receive a statement showing the value of your Personal Account and the cash value available for transfer to a new pension arrangement. Supporting you with disputes If you have a query about the Trust, the administrators will normally be able to resolve it. However, in the unlikely event of you being dissatisfied with the response, you (or your representative) may contact the Trustees, preferably in writing, at the following address: Trustees of the National Pension Trust c/o Xafinity Punter Southall Phoenix House 1 Station Hill Reading RG1 1NB

17 When you contact the Trustees you must give your: name; address; date of birth; National Insurance number; name of the Employer you work for; a full explanation of your complaint; and as much supporting information as possible. Complaints can be made by a member or any surviving beneficiary and should normally be made within six months of the event which led to it. If you are, or will no longer be a beneficiary of the Trust, you must raise the complaint within six months of this ending. The Trustees will try to provide you with a written reply within two months of you making your complaint. If it is not possible to give you a full written response in this time, the Trustees will explain the reason for delay and when a full reply will be available. In any case, the Trustees will make a decision within four months. You will be sent notification within 15 working days of any decision. The reply will state clearly the decision made about your complaint and will refer to the relevant aspect of the Trust Deed and Rules, legislation, or where any discretion affects the decision. If you disagree with the decision, the reply from the Trustees will remind you of your right to take up your complaint with the Pensions Ombudsman. It is important to note this dispute procedure will stop if: a complaint becomes exempt; Court or tribunal proceedings begin; or the Pensions Ombudsman begins investigation. 17

18 Other bodies that can support you... Pension Tracing Service If you have lost track of your pension benefits with an old employer, you can contact the Department for Work and Pensions Pension Tracing Service who will provide you with an up-to-date address of the trustees of that scheme. The Pension Tracing Service s address is: The Pension Tracing Service The Pension Service 9 Mail Handling Site A Wolverhampton WV98 ILU Telephone: Website: Data Protection Act 1998 The Trustees have registered the Trust under the data protection legislation. You have the right to check that your personal details held by the Trust are accurate and security is maintained. The Trustees and your Employer have a legal obligation to process data relating to you for the purpose of administering and operating the Trust and paying benefits under it. This may include passing on data about you to the Trust auditor, administrator and other third parties as may be necessary for the administration and operation of the Trust. The Trustees and your Employer are regarded as Data Controllers in relation to the data processing referred to above. Financial Advice Neither the Trustees, nor your Employer, are able to provide you with financial advice. If you wish to contact an Independent Financial Adviser (IFA), the websites or can put you in touch with one who is local to you. Pensions Wise A free and impartial government service to help you understand your retirement options. You can get guidance from or if you prefer to speak to someone, you can talk to an impartial guidance specialist on the phone or face to face by calling between 8am and 10pm, Monday to Sunday. Pension Wise won t recommend any products or tell you what to do with your money. 18

19 The Pensions Ombudsman You may also refer complaints to the Pensions Ombudsman who will investigate and determine any complaint or dispute of fact or law. The services of the Ombudsman are available to assist members, beneficiaries and prospective members. The Pensions Ombudsman can be contacted at: 11 Belgrave Road London SW1V 1RB Telephone: Website: The Pensions Regulator (TPR) The Pensions Regulator (TPR) is a regulatory body which has a range of powers to help safeguard pension rights of members of pension schemes and is able to intervene where trustees, employers or professional advisers have failed in their duties. TPR can be contacted at: Napier House, Trafalgar Place Brighton, East Sussex. BN1 4DW Tel: customersupport@thepensionsregulator.gov.uk Website: 19

20 And finally... If you would like a copy of this guide in a different format for ease of reading, please contact the Trust Administrators. This guide was created in March 2018 and information relating to taxation and regulations is based on the position at that time and details published for the 2018/19 tax year. Xafinity Part of Xafinity Punter Southall Phoenix House 1 Station Hill Reading RG1 1NB Xafinity Consulting Limited. Registered Office: Phoenix House, 1 Station Hill, Reading, RG1 1NB. Registered in England and Wales under Company No Xafinity Consulting Limited is authorised and regulated by the Financial Conduct Authority. 002NPT (03/18)