The Retirement Account. Certainty, flexibility and simplicity for life

Transcription

1 Certainty, flexibility and simplicity for life

2 Introducing Retirement Advantage Retirement Advantage is a well-established company that can trace its roots back to We provide those who are in, at or approaching retirement with a range of simple, secure and flexible products to suit their needs. Every year thousands of retirees rely on us for their income. We have over 2billion of funds under our management, and a heritage dating back over 160 years. In January 2018 Retirement Advantage became part of the Canada Life Group (UK) Limited. Canada Life shares a similar heritage, and just as importantly, places the same emphasis on providing outstanding service to customers. Canada Life has operated in the United Kingdom since Today the Group offers life insurance, critical illness cover, retirement planning, annuities, investments and inheritance tax planning, looking after the needs of thousands of individuals and companies. Canada Life is itself part of Great- West Lifeco, with over 30 million customers worldwide and 760 billion in assets under administration. It s time to enjoy your new pension freedom Retirement is an exciting new chapter of life. For the first time in 30 to 40 years you get to choose what you re going to do each day be it relaxing with friends, taking up new hobbies, or carrying on working. The point is it s entirely up to you. To prepare for this major life change you need to think carefully about how to make the most of your financial assets. Pension freedoms mean that you now have more choice and flexibility about what happens to your pension pot than ever before. But of course, before making any important decisions about your future, it s vital that you seek independent, expert advice. As part of Canada Life, Retirement Advantage has more capability than ever before to help customers feel better equipped to make the most of their retirement. 2

3 What s important to you in retirement? Our years of experience have taught us that people most often look for certainty, flexibility and simplicity in retirement. I want a guaranteed income for life and be able to provide for my family when I m gone. I want to have the flexibility to alter my plans if my circumstances change, to access all or some of my money, and give it a chance to grow. We want to organise our retirement finances in one place, be able to reassess our options at regular intervals and pass any money left to our family in a tax efficient way. Based on the needs of our customers, we ve developed The Retirement Account, designed to help you make the most of your pension freedoms. By combining a Guaranteed Annuity, Pension Savings and Pension Drawdown into one simple account, The Retirement Account offers considerable flexibility and choice helping you manage your pension investments and benefits in a tax efficient way. 3

4 What are Pension Savings? What is Pension Drawdown? You can transfer money from your previous pension plans into The Retirement Account, and keep them invested as Pension Savings, protected from tax, until you need them. You may do this if you plan to phase your retirement and don t need all your tax-free cash in one go. You have the choice, at any time to move some or all of these funds into Pension Drawdown or Guaranteed Annuity. Each time you do this, you will receive a tax free cash payment of up to 25% of the money you have moved out of Pension Savings. Pension Drawdown gives you more control over your savings. You can choose to take a regular income and have unrestricted access to your money. Put simply, you allocate your money, with the aid of your financial adviser, to funds that are invested in shares, bonds, property and other financial investments. This gives your pot of money a chance to grow and counter the effect of inflation. However, there is the potential risk of your investments not performing as well as hoped. If you put all of your money into Pension Drawdown you risk running out of money if your income or withdrawals are in excess of fund growth. It s difficult to budget when you don t know how long you re going to live. 4

5 What is a Guaranteed Annuity? When you retire, you need to make sure you have enough money to last the rest of your life. So, in return for some or all of your pension fund, a Guaranteed Annuity can pay you a secure, regular income for life, no matter how long you live. A Guaranteed Annuity may be a sensible way of covering your fixed day-to-day living expenses in retirement, alongside your state pension and any other sources of income. The downside is that, if you put all your money into a Guaranteed Annuity, you won t have a nest egg for unforeseen expenses (like paying for a new boiler or broken down car) or for treats (like holidays). Once a Guaranteed Annuity has started, you won t be able to make any changes to your payment frequency or benefits. Remember, inflation will reduce how much your income is worth over the years. 5

6 Instead of having to choose between a Guaranteed Annuity, Pension Savings and Pension Drawdown, The Retirement Account allows you to combine one, two or even all three in the same place*. You can choose to have the security of a Guaranteed Annuity to cover your everyday living essentials such as food and utility bills. It also gives you the option of easy access and opportunity for growth of your Pension Drawdown funds - meaning you re ready for life s unexpected expenses and occasional treats. Or you can simply set your money aside as Pension Savings until such time as you want to start taking benefits. However the value of investments can go down as well as up. All parts of the account can provide the ability to leave money to loved ones. * To have Pension Savings you must also hold a minimum investment in Pension Drawdown. 6

7 Pension Drawdown A pot of money to use as a nest egg and for occasional expenses or for regular income withdrawals Cash Account Funds from the Guaranteed Annuity and the Pension Drawdown are paid into here Guaranteed Annuity A guaranteed regular income to cover your everyday living essentials Because you decide what funds you take out of the Retirement Account, you can adjust how much income you receive and how much income tax you pay. Pension Savings A pot of money that can be invested for growth until you need it Benefits can be moved into Pension Drawdown at any time. Tax-free lump sum of up to 25% of the amount used each time. 7

8 A snapshot of what The Retirement Account offers The ability to take up to 25% of your pension fund as a tax-free lump sum, with complete freedom to do what you like with the rest. The choice of how much of your money is invested in Pension Savings, Pension Drawdown and how much will purchase a Guaranteed Annuity. You have the flexibility to alter your account as time goes by. For example, you may put all of your money in Pension Drawdown initially, but then gradually move funds to the Guaranteed Annuity as you get older. The flexibility to change your Pension Drawdown and Guaranteed Annuity income levels according to your lifestyle and financial planning needs. 8

9 The ability to take out lump sums from Pension Drawdown whenever you want, to top up your income, or for those unexpected times when a little extra money is needed. A range of thoroughly researched funds which you can invest in according to your preference at any time. The ability to pass on money to your loved ones. What s left in your Pension Drawdown or Pension Savings can be passed on to whoever you wish. If you choose the option to protect some or all of the income in your Guaranteed Annuity, that can be passed on too. Tax planning features that can help you and your beneficiaries manage how much income you receive and how much income tax you pay throughout your retirement. 9

10 Pension Savings: How it works Pension Savings allow you to phase taking your retirement benefits. You can choose at any time to move some of these funds into Pension Drawdown or Guaranteed Annuity to provide retirement benefits (including up to 25% tax-free lump sum). You invest your money which provides you with the opportunity for growth. You can t take regular income or withdraw money directly from Pension Savings. Pension Drawdown: How it works With Pension Drawdown you can take as much or as little of your money as you want while it remains invested. So you can take no money out and leave your funds invested, or you can take a regular income and/or withdraw money from your fund when you want. 10

11 Guaranteed Annuity: How it works If you choose to purchase a Guaranteed Annuity within your Retirement Account, the income you receive will depend on a number of things including: The size of your pension fund used to buy the Guaranteed Annuity Your age and personal circumstances (for example where you live, your lifestyle or medical history) You ll need to choose how you d like to receive your income, for example whether you want it to stay the same (level) or rise in line with inflation. You ll also need to decide if you wish to make provision for loved ones in the event of your death. This provision could be in the form of an ongoing income for the rest of their life or a lump sum or both. You can also select how often income is paid monthly, quarterly or yearly. Income will be paid in arrears which means we ll pay you at the end of your chosen period. Once a Guaranteed Annuity has started, you won t be able to change the amount of income, payment frequency or benefits. The Retirement Account allows you to buy more Guaranteed Annuity whenever you want using any Pension Drawdown funds. You can also reinvest your Guaranteed Annuity payments into your Pension Drawdown fund. You may do this for tax planning purposes. 11

12 ADVENTUROUS Choosing investment funds What we offer: The Retirement Account offers a range of investment choices, including an option of both passive and actively managed funds. These funds may invest your money in shares, bonds, property and other financial investments. The mix of assets in the fund will determine the balance between the potential risk and reward. The same range of funds are available to both Pension Drawdown and Pension Savings options but you can choose to invest in different funds for each part if you wish. If at a later stage you decide to move some of your money from Pension Savings to Pension Drawdown then the funds you selected for Pension Savings will continue to be used unless you instruct us otherwise. Your financial adviser will discuss your investment preferences with you and select funds that match the type of investor you are. CAUTIOUS BALANCED Past performance is not a reliable indicator of future results. The value of investments may go down as well as up. Taking income or withdrawals in excess of fund growth may result in the fund running out quicker than expected. Inflation will reduce how much the fund is worth in real terms and inflation will reduce how much your income is worth over the years. 12

13 Passive funds Passive funds aim to follow the value of a stock market index or group of indexes. This tracking is largely automated, so it s less expensive and passive funds tend to charge less than actively managed funds. Active funds Active funds are managed by a specialist investment manager, or team of specialists who have a certain amount of freedom over the specific investments they make. They use their knowledge and experience to try and beat the returns you could get by investing in passive funds. Protected funds Protected funds invest in assets that have the potential to grow your money over the long term. But they also come with another valuable feature, a degree of protection from the ups and downs of the stockmarket. Making your choice You can find details of the investment funds available with The Retirement Account in the Investment Fund Summary Guide. All of our documents are available on our website along with daily unit prices and fund fact sheets. Monitoring performance You can check how your chosen funds are performing on our website. Also, each year, we ll send you a statement showing the value of your funds. All of The Retirement Account funds have been thoroughly researched and have been carefully selected by Retirement Advantage, and an independent investment research business. Our investment specialists monitor the funds on a monthly basis so you can relax, knowing that your investments have the best opportunity to grow. PROTECTED 13

14 Providing for loved ones on your death The Retirement Account can help you pass money on to your loved ones. Pension Drawdown / Pension Savings In the event of your death, any remaining Pension Drawdown or Pension Savings funds will be made available to your loved ones. Because of the way The Retirement Account is structured your loved ones will have a great deal of flexibility in how they receive death benefits. This may prove useful if you die after the age of 75 in which case the benefits they receive are taxable. 14

15 Guaranteed Annuity The Guaranteed Annuity offers different ways to pass money on to your loved ones when you die. With the help of your adviser, you will usually select one or more of the following options (although it is not possible to choose both the Money-back guarantee and the Income Guarantee). Money-back guarantee This provides a lump sum on your death. The amount payable can be up to 100% of the amount you originally used to buy the Guaranteed Annuity, less all of the pension payments made to you at your date of death. Income guarantee You can choose to guarantee your annuity payments for up to 30 years. This means that in the event of your death, the annuity continues to be paid in full for the remainder of the Income Guarantee period. Dependant s income You can ensure that a dependant (spouse, partner or other dependant) receives a proportion of your income for the rest of their life should you die before them. The amount paid could be up to 100% of your income. 15

16 Meet Rebecca Rebecca s aged 65, married, with a 150,000 personal pension fund. Rebecca receives pension income of around 17,500 from the State Pension and an exemployer s final salary scheme. She would like 2,500 a year guaranteed income ( 20,000 in total) to pay for life s essentials and an extra 3,000 income on top to help with holidays and nice to haves. Her financial adviser suggests that Rebecca takes out a Retirement Account and using her 150,000 investment she: buys a Guaranteed Annuity with 55,000 of her investment. This provides her with the extra 2,500 a year of secure lifetime income. uses the remaining 95,000 to invest in Pension Drawdown taking 3,000 income. With her adviser she chooses an investment fund that suits her conservative attitude to risk. She hopes that her Pension Drawdown funds will grow over time. Her adviser explains that The Retirement Account is flexible enough to deal with changing circumstances in retirement. Her husband will give up work in the next few years and has very little in the way of pension savings so she may want to consider using more of her Pension Drawdown fund to secure additional Guaranteed income at that point. Finally she agreed to set up death benefits which would provide an income guarantee should she die earlier than she hopes! Guaranteed Annuity 55,000 2,500 a year Cash Account Pension Drawdown 95,000 To use as a regular income ( 3,000 per year) or as a nest egg 5,500 to Rebecca 16

17 Meet Jeremy Jeremy s 65-years-old and has built up a 90,000 pension fund (after tax-free cash of 25%). He s had issues with his health over the last few years, so is keen to retire. He picks up a State Pension but aside from that this is his only source of income. His number one objective is to ensure that he generates enough regular income to see him through his retirement. In addition he would like a small amount of his savings to be accessible and would like to make sure his children end up with something should he die. His financial adviser suggests that Jeremy takes out a Retirement Account and using his 90,000 investment he: uses the remaining 15,000 to invest in Pension Drawdown. His adviser helps him select a balanced fund, which invests in equities and other financial investments. He has complete freedom to dip into this investment whenever he wants. Jeremy sets up a 30-year guarantee on his Guaranteed Annuity. This would pay his beneficiaries an ongoing income after his death. So for example if he died after receiving 5 years of payments then the income would continue for another 25 years, or a lump sum could be paid immediately. The money in Pension Drawdown could be paid as a lump sum on his death. buys a Guaranteed Annuity with 75,000 of his investment. This provides him with just over 4,500 a year of secure lifetime income. The income provided was improved as a result of his health problems. Guaranteed Annuity 75,000 4,500 a year Cash Account Pension Drawdown 15,000 To use as a regular income or as a nest egg Jeremy Both of these examples are for illustrative purposes only. 17

18 Are you eligible? To qualify for The Retirement Account you must be at least 55 and no older than 85 (there is no maximum if you choose the Pension Drawdown or Pension Savings options only). You and your financial adviser may need to provide us with some information about your health and lifestyle as part of your application, or we can call you to collect the relevant information. We will then provide you with a personally tailored quote, to get you the highest level of guaranteed income. To invest in the Retirement Account you need a minimum of 20,000 in pension funds after any tax-free cash has been paid to you and any initial fee has been paid to your financial adviser. You must also be a resident in the UK when you apply, and when the policy starts. For full details of The Retirement Account, and other important information, please refer to The Retirement Account Key Features booklet. 18

19 Help with decision making in retirement Your finances are going to play a substantial role in your retirement. That s why we insist that if you haven t done so already you enlist a financial adviser to take a good look at your circumstances and long-term expectations. Retirement has been a long time coming, so don t feel rushed into making any decisions. By acting on the impartial advice of an expert you re likely to benefit for many years to come. To find a retirement specialist, there are directories that are free to use and will display a list of firms that can help you. Our website will show you a number of these organisations including Pick-A, Pension Wise, Equity Release Council and Unbiased. Visit retirementadvantage.com/find-an-adviser 19

20 If you would like a Braille, large print or audio version of this document please call us on The information in this document is based on our understanding as at July 2017 of current taxation, legislation and HM Revenue and Customs practice. All of these are liable to change without notice. The impact of taxation (and any tax reliefs) depends on individual circumstances. Telephone calls may be recorded for training and quality monitoring purposes. Retirement Advantage is a trading name of MGM Advantage Life Limited. Registered no Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Retirement Advantage and the Retirement Advantage logo are trademarks of MGM Advantage Life Limited. Registered in England and Wales. Registered office 110 Cannon Street, London EC4N 6EU /18