Key features of the Flexible Pension Plan

Transcription

1 Key features of the Flexible Pension Plan

2 Read on to find out the main points about your Flexible Pension Plan. You ll also get a personal illustration, so you can put figures to the benefits you may receive in the future. Please take some time to go through these documents and put them somewhere safe you may well want to look at them again. 03 Its aims 03 Your commitment 03 Risk factors 04 Questions and answers 04 What s a flexible pension plan? 04 Is this a stakeholder pension? 04 How flexible is it? 04 What might I get when I want to retire? 04 Can I contract out of the State Second Pension (S2P)? 05 What choices will I have when I retire? 06 How much can be paid into my plan each year? 06 What about tax? 07 Where are my contributions invested? 07 Who will manage self-investments? 08 What are the charges? 08 Additions to your plan? 08 Fund bonus 08 Fund value rebate 08 What other benefits can I choose? 09 What happens to the plan if I die before I retire? 09 Can I transfer my plan? 09 Can I change my mind? 09 Who will administer my plan? 09 How will I know how my plan is doing? This key features refers to our product terms as at April How to contact us 11 Other information 11 How to complain 11 AEGON Scottish Equitable 11 Special risks 11 Time limits 11 Terms and conditions 11 Law 11 Communication 11 Compensation

3 02 03 Its aims Risk factors To build up a sum of money, in a tax-efficient way, large enough to give you a pension during your retirement with the option, if you want, of a tax-free lump sum. To give you the option to self-invest (that is, to invest part of your contributions in other investments outside our pension funds). To give you a way to contract out of the State Second Pension (S2P), if that s right for you. You can find more details on this in the Questions and answers section. Your commitment You and/or your employer agree to pay regular contributions into your plan until your chosen retirement age and/or transfer your money from an existing pension plan. You may pay one-off single contributions to your plan, as long as you meet our minimum contribution levels. You ll allow the value of your plan to build up and then use it to provide a pension. You agree to tell us if you change jobs or change your employment status, for example if you go from being employed to self-employed. What you get back at retirement can t be guaranteed and will depend on: how much you pay in investment performance, which may go down as well as up plan charges interest rates when you retire When you re ready to retire, your pension may be lower than the amount shown in your personal illustration. This could happen for a number of reasons, for example if: you stop paying into your plan, reduce your contributions or take a contribution break investment growth is less than the assumed performance in your personal illustration interest rates are lower than the rates used in your personal illustration you start taking your pension earlier than your chosen retirement age tax rules change our charges increase above those detailed in your personal illustration you transfer your plan to another company we reduce the level of the fund bonus or fund value rebate to be paid You can invest in a range of investment funds that have different levels of risk. If you invest in one of our with-profits funds and you withdraw the money, we have to reduce the value of your fund by what we call a smoothing reduction. This adjustment is to make sure that investors receive a fair share if they leave with-profits funds and to protect the interests of the continuing investors. You can find more details in our brochure, A guide to investing in AEGON Scottish Equitable s with-profits funds. We ll invest your contributions straight away, in line with your instructions, but you ll still have 30 days to change your mind and cancel the plan. If you cancel, and in the time you ve been invested the value of: any single contribution you ve paid falls, you may not receive back the full amount you paid in any transfer payment you ve made falls, the full amount paid in may not be returned to the transferring scheme

4 Questions and answers What s a flexible pension plan? It s a savings plan which helps you save for retirement in a tax-efficient way and can also pay out a lump sum or provide a pension for your family if you die before you retire. It also combines the traditional elements of a personal pension with considerable investment flexibility. You can choose to invest your pension contributions or pension transfers in our pension funds (known as the insured element) or use the option to invest part of your contributions in other investments outside our pension funds (known as the self-investment option). Is this a stakeholder pension? The Government has set minimum standards that companies which provide stakeholder pensions must meet. These are to do with contribution levels, charges, and terms and conditions. This plan isn t classed as a stakeholder pension because some of our charges, minimum contribution levels and terms and conditions don t match the Government s minimum standards. For example, our Flexible Pension Plan offers you a greater choice of investment options but it doesn t provide a default investment fund, which is a minimum requirement for a stakeholder pension plan. A stakeholder plan may meet your needs at least as well as this plan and is widely available. How flexible is it? If you invest in our pension funds (the insured element), you and your employer can pay into the plan regularly every month or year. You can make one-off contributions and change regular contributions at any time, as long as you still meet our minimum contribution level. For details of our minimum contribution level please see our client guide, For people who like doing their own thing. If you choose the self-investment option, you and your employer can only make single contributions to the self-invested element. You can stop or take a break from paying contributions at any time and leave your fund in the plan to benefit from future investment growth. You might want to do this, for example, if you take a career break. However, any contribution break is likely to reduce your future pension. Please look at the section What are the charges? for more information about this. You can also transfer your pension to another registered pension scheme. The amount transferred is called a transfer value. What might I get when I want to retire? Your final fund value will depend on a number of factors: how much is paid in how long you save investment performance, which may go down as well as up plan charges Your personal illustration shows examples of what you may receive in the future. Your pension will depend what the interest rates are when you convert the plan into your pension. Can I contract out of the State Second Pension (S2P)? Yes, you can use this plan to contract out of S2P. It can also accept a transfer payment from an existing plan which includes a fund built up from previous contracted-out contributions. However, you can only invest your contracted-out contributions in the insured element of your plan, and not in the self-invested part of the plan.

5 04 05 Contracting out means the Revenue will pay some of your and your employer s National Insurance contributions into your plan, so giving you a pension that replaces some or all of your S2P. The amount of National Insurance contributions paid into your plan has been calculated by the Government to broadly reflect the value of the benefits that would have been built up for you under S2P if you hadn t contracted out. These contributions are paid yearly. If you re contracted out of S2P, the rules for when and how you can take your benefits, described in the next section, What choices will I have when I retire?, will also apply to the part of your fund which relates to your contracted-out contributions. You should ask your financial adviser for more information on this option. What choices will I have when I retire? Currently you can start taking a pension from your plan at any time between the ages of 50 and 75 (including while you re still working). However, the minimum age at which you can start taking a pension will change on 6 April 2010 to 55. You may be able to take your pension earlier than this (other than any pension bought with contracted-out contributions) if you re in ill health. When you retire you ll have a number of options. You can: convert all your plan value into a pension (which will be taxable) take up to 25%* of the plan value as a tax-free lump sum, and take a smaller pension transfer your fund to a more flexible retirement plan and take income withdrawals within the limit set down by the Government take up to 25% of the plan as a tax-free lump sum and transfer a smaller fund into a flexible retirement plan If you decide to go for a more flexible retirement plan and take income withdrawals, you can buy a pension from a pension company at any time. However, if you choose to leave your plan until your 75th birthday you won t be able to take any fund as a tax-free lump sum. A tax-free lump sum is only available up to and including the day before your 75th birthday. If, by the day before your 75th birthday, you haven t told us how you d like to take your pension from the plan, we ll assume that you want to take a pension bought from AEGON Scottish Equitable. If you decide to buy a pension, you can buy a pension that suits you. For example, you could choose: a pension that increases each year during retirement, or a pension which is paid for a minimum period of up to five or ten years, no matter when you die (although your pension bought with contracted-out contributions can only be paid for a minimum of five years), or a pension for your husband, wife or civil partner after you die (the part of your fund built up from contracted-out contributions must be used to buy this kind of pension), or a protected pension, which means that if you die before age 75, the pension company will pay out a lump sum equal to the amount you paid to buy your pension less any pension instalments already paid (subject to a 35% tax charge) Whichever pension you choose, you can buy it from any pension company. We ll write to you before your chosen retirement date and give you details of all your options. *There may be restrictions on the amount of tax-free lump sum you can take your financial adviser will be able to give you more details on this.

6 How much can be paid into my plan each year? Both you and your employer can pay into your plan. You ll be eligible for tax relief on any personal contributions up to the greater of 100% of your earnings and 3,600 each year (this limit applies across all pension arrangements that you make contributions to in any year). We ll refund any contribution you make to this arrangement that doesn t qualify for tax relief. If the total contributions paid by you and/or your employer to all your pension arrangements in any year are more than that year s annual allowance (for the tax year 2007/08, this is 225,000), you ll be taxed 40% of the amount paid over the annual allowance. Monthly contributions are payable by Direct Debit. Yearly contributions can be made by Direct Debit or cheque. Single contributions and transfer values are payable by telegraphic transfer or cheque. You can transfer the value of any pension plan you have with another company into this plan. There s no guarantee that doing so will increase your total pension. What about tax? Your own contributions are paid net of basic rate income tax and we collect the tax relief from the Revenue. This means that for every 100 paid into your plan you only pay 78. If you re in a higher tax band, you claim the extra relief from the Revenue on your yearly tax return. Growth in the value of the plan is free from capital gains tax and certain types of dividends paid to the plan are free from income tax. Pension income will be taxed under the PAYE system, if applicable. When you retire, as long as any cash lump sum you take is within the maximum limit, it ll be tax free. However, if any part of your fund is more than your available lifetime allowance, and you take the excess as a cash lump sum, the excess will be taxed at 55%. If you choose to take the excess as pension, the excess fund will be taxed at 25% and the pension income will be subject to income tax under the PAYE system. In some circumstances you may be entitled to take more than 25% of your fund as tax-free lump sum. Please get financial advice to see if this applies to you. The current basic rate of income tax is 22% and the higher rate is 40%. This information is based on our understanding of current taxation law and Revenue practice, which may change. We recommend you get professional advice if you need more information on tax.

7 06 07 Where are my contributions invested? The amount we invest depends on the charging structure you ve chosen, so we may invest either the full amount or we may use part to cover charges. Please see your personal illustration for more details. We offer a wide range of internal funds and externally managed investment funds, all with varying investment strategies and covering different levels of risk and potential reward. Therefore you can choose the funds to suit your individual investment strategy. If you choose to invest in one of our unit-linked funds: each of our funds is made up of units we use the contributions to buy units in the funds you choose the price of one unit in each fund depends on the value of investments We work out the value of your plan based on the total number of units you have in each fund. If the unit prices rise or fall, so will your plan value. Our with-profits funds aim to smooth out the volatility normally associated with direct investment in financial markets. Our with-profits funds currently available don t offer bonuses. We change the unit prices daily to reflect smoothed investment returns. These are calculated using the actual growth on the assets in the fund and our expected growth rate for the fund. The expected growth rate isn t guaranteed and can change. Smoothing won t be able to counteract the impact of a sustained decline in investment returns. You can find more information in our brochure, A guide to investing in AEGON Scottish Equitable s with-profits funds. We may apply a smoothing increase or smoothing reduction on withdrawal from any with-profits fund. You can switch in and out of various funds to change the mix of investments. You can make up to 20 free switches in a year and any number of funds can be switched at any time. You can find full details in your policy conditions booklet. In addition, you may choose the self-investment option under your plan. This option allows you to invest direct in certain types of investments, including stocks and shares, investment trusts, open-ended investment companies (OEICs), unit trusts and fixed interest securities. We recommend you get financial advice on these options before you choose where to invest. Because of the nature of property investment, we reserve the right to delay any switch request if market conditions make it necessary. This is because investments in land and property might not sell right away, so you might not be able to sell/cash yours in when you want to. Who will administer self-investments? Capita SIP Services does the day-to-day administration of the self-investment part of your plan. You can instruct it direct or appoint an external investment manager to act on your behalf.

8 What are the charges? We charge for managing the insured element of your plan and investments. We take these charges through deductions from your plan over the years until you finally take all your benefits. We take these charges from your fund value. Your personal illustration shows the charges applicable to, and the effect they have on, your fund. We may vary the charges and our terms in the future. You can find more details in your policy conditions. If you choose the self-investment option, Capita SIP Services charges for managing this part of your plan. These charges are deducted from the value of the self-investment funds. Please ask your financial adviser for more details of these charges. Additions to your plan Depending on the charging structure you choose we ll either add a fund bonus or a fund value rebate to your plan. Fund bonus If you stay invested with us for up to 10 years, you can receive up to a maximum of 4% of the value of your fund as a bonus, as well as a further 0.5% a year after that. The bonus will depend on the original contribution level agreed at the start of the plan and assumes that all contributions are paid to the date that the bonus is payable. Any additional increases in contributions/ one-off contributions/transfers will receive a separate fund bonus. Fund value rebate Each month we calculate the total value of your plan, including any contracted-out value. If the value of your plan is 20,000 or more we ll add units to your plan. If the value is between 20,000 and 250,000 this will be equal to 0.50% of your fund value a year. If your fund value is 250,000 or more this will be equal to 0.60% of your fund value a year. Please have a look at your policy conditions for more information. What other benefits can I choose? You can choose to take waiver of contribution benefit as a separate plan set up alongside this plan. This would pay your contributions into the insured element of your plan if you become ill and are unable to contribute to your plan. You don t have to take this benefit. You can apply for this benefit on the same application form as for this plan. The cost of this benefit can vary depending on your occupation and health. It ll stop if you stop paying into your plan.

9 08 09 What happens to the plan if I die before I retire? We ll pay the value of your fund as a cash lump sum. If you ve arranged your plan under trust, we ll pay the lump sum to the trustees. If it s not arranged under trust, we ll decide who to pay the lump sum to. We take into account your circumstances when you die and anyone you ve previously stated you want the money to go to. This lump sum will be checked against your available lifetime allowance, and any amount over the allowance amount will be taxed at 55%. You can opt to have this lump sum paid as a pension to your husband, wife, civil partner or dependants. If paid as a pension, it wouldn t be checked against the lifetime allowance and there would be no tax charge (although the pension would be taxable as income under PAYE). The fund built up from contracted-out contributions must normally be used to provide a pension for your husband, wife or civil partner. If you re not married or don t have a civil partner, it can be paid as a lump sum to your dependant(s). Can I transfer my plan? You can transfer your plan to another registered pension scheme with another company at any time before you start taking a pension. Your personal illustration gives examples of how much you could transfer to another plan depending on when you transfer. Can I change my mind? After you ve invested, we ll send you a notice telling you of your right to change your mind and how to cancel. You ll then have 30 days in which to cancel. If you decide to cancel, let us know within the 30-day cancellation period we ll cancel the entire plan and give you your money back. This may be less than you paid in if the value of your investment has fallen during this time. It might not be possible to cancel all your investments, for example property. If this happens, there might be a delay in cashing in your investment and the value could fall during this time. You might still be charged certain fees with some investments, for example solicitors fees for a property purchase. If you decide to cancel and have made a transfer payment, we may not be able to return the full amount paid back to the transferring scheme if the value of your investment has fallen during this time. Who will administer my plan? AEGON Scottish Equitable provides the pension vehicle and administers the investment of the insured element of your pension contributions in our funds. Capita SIP Services administers the self-investment part of your plan. How will I know how my plan is doing? We ll send you a statement each year, telling you how your plan is performing and its current value. To find out how our funds are performing, you can check our prices on our website at

10 How to contact us If you have any general questions at any time, you can phone us, write to us or us. Telephone: Monday to Friday, 8.30am to 5.30pm AEGON Scottish Equitable Edinburgh Park Edinburgh EH12 9SE We may record and monitor calls for security purposes, to help improve our service and to resolve any complaints. If you want to make additional contributions or switch funds, you should first of all speak to your financial adviser. We re not allowed to give any financial advice. If you ve any doubts over whether this contract is suitable for you, you should seek advice from your financial adviser.

11 10 11 Other information How to complain If you d like a copy of our internal complaint handling procedures, please ask us. If you ever need to complain, first write to us at the address shown above. If you re not satisfied with our response, you can complain to: The Financial Ombudsman Service South Quay Plaza 183 Marsh Wall London E14 9SR Telephone: Website: enquiries@financial-ombudsman.org.uk Complaining won t affect your right to take legal action later on. AEGON Scottish Equitable Scottish Equitable plc (now known as AEGON Scottish Equitable) was established over 170 years ago. As part of the AEGON Group, we benefit from the financial strength of one of the largest life insurance companies in the world, which has assets under administration of around 250 billion (this includes all revenue-generating investments). Our main areas of business are life (for example life cover and critical illness cover) and pensions (for example personal pensions, group personal pensions, stakeholder pensions, group stakeholder pensions, self-invested personal pensions and company pension schemes). The services we provide include processing your application and administering your plan, trust, scheme or arrangement. We re the scheme administrator for the Scottish Equitable Personal Pension Scheme and Stakeholder Pension Scheme, and trustee and scheme administrator for the Scottish Equitable Self-administered Personal Pension Scheme. We provide technical support and information to financial advisers and planholders. Special risks In this document we ve clearly highlighted any risks associated with taking out this AEGON Scottish Equitable product. Time limits We ll let you know of any time limits that may apply and that aren t covered here or in your personal illustration. Once you ve completed the relevant application forms you must let us know if there are any changes in your circumstances between then and the date your plan starts. Terms and conditions This document only gives you a summary of the features of our Flexible Pension Plan. You can find full details in your policy conditions booklet. We ll write and let you know if there are any changes to the terms and conditions of your plan. Law If, when the contract starts, you reside in the UK, then the applicable law is the law of that part of the UK where you reside. Otherwise Scots law will apply. The applicable law can only be changed if both you and AEGON Scottish Equitable agree. Communication Our contract with you is in English and any communications about it will also be in English. Compensation If this product was recommended to you by a financial adviser, you may have a legal right to compensation if it s established that the recommendation was unsuitable when it was made. The Financial Services and Markets Act 2000 covers your plan. You can get information on compensation arrangements from AEGON Scottish Equitable on request. If you need any further information, you can get it from the Financial Services Authority or the Financial Services Compensation Scheme. Scottish Equitable plc is on the Financial Services Authority (FSA) register (No ).

12 We re determined to treat you fairly and communicate clearly with you at all times. As well as following the Financial Services Authority s Treating Customers Fairly principles, we re fully signed up to the Association of British Insurers Customer Impact scheme. Both of these cover how products are designed and marketed, and ensure we deal fairly with all claims and payments. As part of the Customer Impact scheme, we publicly commit to putting customers at the core of our business and must show how we re achieving this. For more information visit: Scottish Equitable plc, Registered Office: Edinburgh Park, Edinburgh EH12 9SE. Registered in Scotland (No ). Authorised and regulated by the Financial Services Authority. Member of the AEGON Group. C IND /07