Using your DC Account to target cash

Transcription

1 BASF UK Group Pension Scheme Group & BPP DC Section (the Scheme ) Using your DC Account to target cash Why should I read this factsheet? After age 55, you broadly have three different choices for how you use your defined contribution (DC) Account: Secure a guaranteed income (annuity) Take a cash lump sum Take a flexible income (also known as an adjustable income, drawdown or flexi-access drawdown ) You can choose any combination of these options and can usually take up to 25% of your DC Account as a tax-free lump sum. This factsheet explains the process if you want to take your DC Account as cash. What is this option? You can take all of your DC Account as a single cash lump sum (the first 25% tax-free, the rest subject to income tax). If your DC Account is worth more than 5,000, you can choose to take it as two cash lump sums over two consecutive tax years (provided you have at least 1,500 left for the second payment. 25% of each payment tax-free, the rest subject to income tax). This applies to your DC Account in the Scheme and any Scheme Additional Voluntary Contributions (AVCs) invested with one of our external providers, e.g. Prudential. Note: This factsheet only applies to your DC Account invested within the BASF Scheme. If you have AVCs invested with an external provider, they will have different investment options that apply. Note: Where you see a word in italics this term is explained in your DC Booklet. Factsheet 7 Aug updated Jan 2018

2 Below is a list of advantages and disadvantages to taking cash - it is not exhaustive. You can find more information at the money advice website, visit: Advantages Taking a cash lump sum could be more appropriate due to the cost associated with setting up other benefits if you have a very small DC Account. Taking your pension savings out of the Scheme may give you more flexibility; you can invest it yourself - although if this is of interest you might also want to think about a Flexible income approach (see Flexible Retirement Factsheet 19). If you are in poor health, taking a cash lump sum can make more financial sense. Taking a cash lump sum may be beneficial if you have a specific purpose for it (e.g. you want to pay off your mortgage or gift the money to your family). Disadvantages 75% of the amount you withdraw is taxable, and your income tax rate could go up when your DC Account is added to your other income. You should consider your tax circumstances, and the impact of taking a lump sum on the tax you pay - including the possibility that you may have to pay a higher rate of tax than normal. You will be responsible for managing your income and if you don t budget properly, or if you live for much longer than you might expect to, your savings could run out. If you receive any means-tested benefits and / or have debts, increasing your income with money from your DC Account may affect the benefits you receive. If you are concerned, you can contact Pension wise, the Citizens Advice Bureau or the Money Advice Service. If you take your cash in two parts, for the part of your DC Account left invested there s the risk that the value of your DC Account can go down as well as up (as with every investment). There will also be ongoing investment charges (as there is before retirement) for the part of your DC Account that is left invested. If you do draw out all of your funds in lump sum form and put them in a cash account (e.g. in a bank account), your savings are less likely to keep up with inflation. How much tax will I pay? The first 25% of any payment will be tax free and the rest will be subject to income tax. When you take a taxable lump sum from your pension savings the tax authority or HMRC assume you will get that amount of taxable income each month and tax you accordingly. This may mean that you initially pay tax at 45%. However, you can reclaim any overpaid tax. Visit: Tax is a very complex topic but, to help, the Government s Pension wise service provides information about the things to consider. Visit: Some tax issues to be aware of include: Considering your own personal tax circumstances, and the impact of taking a taxable lump sum on the tax you pay - including the possibility that you may have to pay a higher rate of tax than normal. Different Annual Allowance* arrangements apply to individuals with earnings above 110,000 a year. If you take your DC Account as cash and if it is not a small lump sum or trivial commutation lump sum, the amount of further pension savings on which you get tax relief each year is reduced from the usual Annual Allowance ( 40,000 in the 2018/19 tax year) to (the Money Purchase Annual Allowance ( 4,000 in the 2018/19 tax year). If you want to carry on building up your DC pensions savings, this may influence when you want to take cash from your DC Account. You may be liable for additional tax charges when you retire if you exceed the Lifetime Allowance* (i.e. the allowance set by the Government for the value of your total lifetime pension savings that you may draw in a tax efficient way). For more information visit the website: - look under Pension & Taxation from 2016 or What happens when I die? If you die before reaching age 75 with cash remaining in your DC Account, any payments to beneficiaries will normally be tax free if they are paid within two years of the date of death. You will have to take your benefits before age 75 if you choose this option. Once you ve taken all the cash from your DC Account, no further benefit will be payable from the Scheme to your beneficiaries. *These allowances are set by the Government and subject to change.

3 How and when can I take my DC Account as cash? If you want to take advantage of this option, contact Willis Towers Watson (WTW) for further information. If you have more than 5,000 in your DC Account and would like to take it as two cash lump sums over two consecutive tax years, you can select any amount for the first payment, provided you have at least 1,500 left for the second payment. All relevant details for your second payment would need to be provided to WTW at the time of arranging your first payment. WTW will send you a payslip at the time of each payment. Please note: The minimum retirement age is currently from age 55 but it is expected to increase to age 57 by You don t have to take your benefits from age 55; you can take them at any time after this, but no later than age 75 from the Scheme. Restrictions may apply to your benefit options if you have an entitlement to a Guaranteed Minimum Pension. All benefit options are subject to changes in legislation and the tax status currently afforded to pensions savings. Once all of the money in your DC Account has been paid to you, you will stop being a member of the Scheme and you and your prospective/nominated beneficiaries will then have no further legal connection with or entitlement under the BASF UK Group Pension Scheme in respect of your DC Account. The process will automatically begin around seven months before your Normal Pension Age (NRA) or, if you have one, your Target Pension Date (TPD), WTW will automatically send you a retirement pack. If you wish to take your benefits earlier or later you can request a retirement pack from WTW on: +44 (0) Your retirement pack will contain: A fund value statement, telling you the value of your DC Account, how much you could take as a tax-free cash lump sum and the various benefit options you have. Contact details for an independent financial adviser (currently Origen Financial Services), who can help you consider your options; and All relevant forms you will need to complete. Are you scammable or scamproof? Scam: Pension access offered Scamproof: Arming yourself with the before age 55 and you are facts at not in ill health Scamproof: Scam: Offers of a free pension review, a one-off investment opportunity, the chance to cash in or release your pension early, pension loans or upfront pension cash F R E E! Taking advantage of free support and guidance offered by The Pensions Advisory Service Scam: Unsolicited contact via call, text, or in person claiming to be from The Pensions Advisory Service, Pension Wise or governmentendorsed. Such contact would always be initiated by you first, never by those organisations. and Pension Wise Scamproof: Seeking professional independent financial advice Scamproof: Checking a financial adviser is personally authorised by the FCA at Scamproof: Check the list of known! Scammers may operate in pension markets. You can find out more about how to avoid scams at: investment scams at scamsmart Scam: Convincing marketing materials that promise you guaranteed high returns on your investment Scamproof: Not allowing yourself to be rushed into a decision by time Scam: Overseas investment opportunities in limited offers or delivery of previously unseen paperwork by courier property, green energy plantations, scratchcards where all your money is in one place Scamproof: Not signing anything you don t completely understand Don t get stung.

4 Investing your DC Account to target cash Where you invest your DC pension savings can have a material impact on the benefits you receive at retirement. As you get closer to retirement you may wish to change where you are invested to reduce risk and protect the value of your pension savings. If you take your DC Account as Cash, there are three LifePlan options available to help you do this - the Adventurous Cash LifePlan, Moderate Cash LifePlan and Cautious Cash LifePlan. Please refer to the Investment Guide for full details and if you wish to change your investment choices, you can do so by logging on to epa (see overleaf). Note: If you have AVCs invested with one of our external providers, they will have different investment options that apply. You can contact Willis Towers Watson for further details on: +44 (0) BASF@towerswatson.com Choosing your investment route in the BASF Scheme If you are planning ahead (for example, more than 5-10 years from retirement) If you are getting ready to retire (less than 5-10 years from retirement) Log on to your epa account and take a look at your investment choices Log on to your epa account and use the Retirement Planner to consider the type of benefits you d like to take Check and update your Target Pension Age if necessary Update your investment choices to suit the type of benefits you want to take at retirement Keep your investment choices under regular review Check and update your Target Pension Age if necessary Consider using the Pension wise service from age 50, for tailored guidance on your options. Willis Towers Watson will contact you seven months before your Target Pension Age to start your retirement planning

5 Oct 12- updated Jan 18 Factsheet 2 Get support with your decisions We know that choosing your benefits is a really important decision. We want to make sure you are provided with the right level of support, from sources that you can trust. Use your epa account - A simple way to manage your DC Account Your epa (electronic Pensions Administration) account allows you to view and change a number of details about your DC Account. There is a Retirement Planner (under the Quotations tab), which shows how much your DC Account might provide as a guaranteed income (annuity), cash lump sum or flexible income. There s also an Annuity Quotation Tool that will give you an indication of how much guaranteed income you could secure with different providers. Visit: If you need help loggin in, contact WTW on: +44 (0) Use the Scheme website The BASF UK Group Pension Scheme website is dedicated to our members and gives you a central place to go when managing your Scheme benefits. Visit: Pre-retirement Workshop If you are still working for BASF, you can attend a Pre-retirement Workshop. Full details are available on the Planning for Retirement factsheet which can be found on the Scheme website under Getting ready for Retirement. BASF UK Group Pension Scheme ( the Scheme ) Planning for Retirement Pre-retirement Workshops Retirement is a time of change and sometimes uncertainty or even worry. Appropriate education and counselling are essential. For most of us retirement involves a major adjustment in lifestyle and a significant alteration in financial circumstances. Increasing life expectancy is making retirement planning an essential aspect of lifetime financial planning for all of us. The Company and Trustee recognise this and want to help you understand your needs, the opportunities available and any inherent pitfalls in planning for your retirement. They therefore give you the opportunity to attend a pre-retirement workshop paid for by your employer. The best time to attend is 2-5 years before you plan to access your pension savings and/or stop working. Who can attend? What do the workshops cover? All Active members of the BASF UK Group Pension Typically each workshop will last for 2 days and will cover Scheme who are considering retirement have the all aspects of planning for retirement, ranging from health opportunity to attend one pre-retirement workshop. and lifestyle, to financial planning and taxation. They are As retirement affects spouses and partners they are a great opportunity to discuss concerns with a pensions also encouraged to attend. expert and get support from other members. When do the workshops take place? Workshops will be held periodically dependent upon demand. Workshop dates are arranged in advance and published on the pension website basf.co.uk. Employees are invited with priority given to those closest to their Normal Retirement Date. However, you can also ask for a place on a workshop by ing Sharon Bedford at sharon.bedford@basf.com or contacting your local HR Department. Pension wise - free Guidance There is a lot of information available about options at retirement and it s important that you only rely on reputable sources of information to avoid being targeted by scammers. To help, the Government has launched a new Pension wise service to give free impartial guidance to anyone with a DC Account, aimed at anyone aged 50 or over. We reccomend that you get guidance to help with your retirement planning decisions. The website offers you guidance on your pension options, or if you d prefer to talk to a specialist, you can arrange a telephone or face-to-face appointment. If you are interested in this service visit: Pre-retirement Workshop attendees said... An excellent course, hard to improve on. Speakers really knew their stuff and how to relay to the group. Presenters are well read in their subjects and delivered it in understandable terms. Very informative, I was unaware of many issues discussed by the speakers. I can now review my future plans and make decisions more confidently. Made us think about things we hadn t previously considered for us.

6 Get support with your decisions Origen Financial Services The BASF Scheme has appointed an independent company to help you with your retirement choices and to help you maximise your retirement income. Contact Origen on or Willis Towers Watson (WTW) If you are approaching retirement and want to discuss your options, contact WTW who will be able to explain your options in more detail and provide a retirement benefit estimate. Please note that WTW can only provide information on your retirement options they cannot give individual advice. Call +44 (0) or basf@willistowerswatson.com Independent Financial Advice In addition to or instead of Origen, you can use an Independent Financial Adviser (IFA). They will be able to give you advice in relation to your personal circumstances, but please be aware that you may be charged for this advice. To find details of a local IFA visit or unbiased.co.uk This factsheet provides a brief overview of your benefit options available from the Scheme. Details of how the Scheme benefits are calculated and paid are set out in the Trust Deed and Rules, which take precedence over the content of this factsheet should there be any discrepancies. Neither the Trustee nor the Company can provide financial advice to you and nothing in this factsheet should be treated as such advice.