Pension Investment Plan

Transcription

1 INVESTMENTS PENSIONS INTERNATIONAL ESTATE PLANNING Pension Investment Plan Prepare for retirement, consolidate your existing pensions Client Guide Straightforward Retirement Solutions

2 Why Canada Life? Canada Life has been providing retirement solutions for our customers for a long time. We ve actually been in the UK since 1903, looking after the retirement, investment and protection needs of customers. We re here to help you get ready for your retirement with confidence, by making things clear and straightforward. Visit to find out more. What you can expect from Canada Life Great service, support and financial strength At Canada Life we believe in being here to support you through retirement, so we make it our mission to make the process of dealing with us as easy and as smooth as possible. To show our commitment to service excellence, we have introduced a Service Charter. We re also proud of our heritage and our financial strength. We ve been around for a long time. In fact, we were founded in 1847 in Canada, making us the oldest Canadian life assurance company. CANADA LIFE HAS BEEN OPERATING IN THE UK SINCE 1903 FINANCIAL STRENGTH 5-STAR AKG RATING Canada Life is part of Great-West Lifeco Inc., one of the largest Canadian life and health insurance companies. We have 769bn of assets under management as at 30 June Great-West Lifeco serves several million people worldwide, providing a wide range of retirement savings and income plans, as well as comprehensive protection contracts for individuals and families. OUR AWARD WINNING SERVICE IS BUILT ON OUR UNIQUE SERVICE CHARTERS Service Charters 769bn** GREAT-WEST LIFECO ASSETS UNDER ADMINISTRATION 30 MILLION+ 240, ,300 CUSTOMER RELATIONSHIPS * ADVISER RELATIONSHIPS * * 1 January ** 30 June EMPLOYEES WORLDWIDE * 2 Pension Investment Plan Client Guide

3 Your options in retirement With the Pension Investment Plan (PIP) you can consolidate your existing pension plans within the one plan, continue to save, and from age 55 take lump sums straight from the plan. The PIP is a personal pension that gives you a simple way to bring all your retirement savings together in one place. The plan also allows you (or your employer) to start or continue to contribute towards your retirement. Your savings will be invested tax efficiently in a range of investment funds tailored to suit you (we currently have over 150 insured funds to choose from). A professional adviser can help you choose the most suitable option and investment strategy for your circumstances. So, how does it work? Before age 55: You have the options to: Consolidate all your existing pension pots under the one plan Make contributions to the plan or get your employer to contribute to the plan (any time before you reach age 75) Choose an investment strategy that s right for you From age 55: You have additional options including: Uncrystallised Fund Pension Lump Sum (UFPLS): This is a technical term but simply means you can take lump sums directly from your plan. Each lump sum will be made up of two elements: 25% will be paid tax-free 75% will be subject to income tax at your marginal rates of tax Pension Commencement Lump Sum (PCLS): You can take up to 25% of your pension savings as a tax-free lump sum with the remainder being used to provide any of the following after a transfer to: Flexi-access drawdown: where you have complete flexibility on the amount and frequency of any income payments. Fixed term income plan: where you can receive a regular guaranteed income for a fixed term the purchase of a lifetime annuity: where you can receive a guaranteed income for the rest of your life Saving towards retirement I want to combine my various pension pots into one plan and have the flexibility to continue or start saving for my retirement Combining/ building-up benefits Pension Investment Plan All funds will stay invested Your Annual Allowance is unaffected meaning it will not be reduced by the Money Purchase Annual Allowance From age 55 I want to cash in my pension pot, or to take ad hoc amounts (if an UFPLS option selected) UFPLS Pension Investment Plan For each UFPLS, 25% of the lump sum will be tax-free, with the remaining 75% taxed at your marginal rate of income tax. Once you take an income from the PIP your annual allowance will reduce to 4,000 for contributions into a Money Purchase arrangement. This is known as the Money Purchase Annual Allowance or MPAA. For illustrative purposes only. See Glossary of Terms on Page 8. Pension Investment Plan Client Guide 3

4 Your options in retirement How is the PIP taxed? Making contributions to the plan If you want to contribute 1,000 gross into the PIP, you only need to pay 800 into the plan, and we would claim 20% from HM Revenue and Customs (HMRC) making a total contribution of 1,000. If you are a higher or additional rate taxpayer then you can claim a further 20% or 25% by way of your self-assessment tax return. Taking one or more UFPLS from the plan If you choose to take one or more lump sums they will be taxed as follows: 25% of any lump sum withdrawal will be completely tax-free 75% of any lump sum withdrawal will be subject to income tax at your marginal rates of tax* Death benefits Should you die your beneficiary(ies) may have the following options available: Should you die before your 75th birthday The value of your plan can be paid as a tax-free lump sum The value of your plan can be used to provide a beneficiary s drawdown, where any withdrawals made by the beneficiary are tax-free Should you die on or after your 75th birthday The value of your plan can be paid as a lump sum, taxable at your beneficiary s marginal rate of income tax The value of your plan can be used to provide a beneficiary s drawdown, where any withdrawals by the beneficiary will be subject to income tax at their marginal rate. * You should be aware when taking one or more UFPLS unless we receive a P45 from you we initially use an emergency tax code to calculate how much tax (if any) to deduct. The taxable part of any UFPLS will be subject to income tax at your marginal rate. So if you are a basic-rate (20%) taxpayer, this would be added to any other income you receive and this could push you into the higher (40%) or even top rate (45%) income tax bracket. 4 Pension Investment Plan Client Guide

5 Case Study Meet John He is 52 years old and has worked most of his life as an electrician. Over the years he has been self-employed and employed. He has saved into a number of pension schemes and been a member of company pension schemes through at least three different firms he has worked for. As a result he has lost track of what he has saved, where it is held and how it is managed. John s objective John wants to consolidate his pension savings into one place so he can better control his pension pot and have more say in where it is invested. He is not sure when he will officially retire as he still enjoys working, although he plans to slow down and spend more time with his wife once the mortgage is paid off in five years time and his son can take over his business. His adviser manages to trace all of his pension holdings and recommends that John consolidate all of these savings into the Pension Investment Plan. This would give him a number of key benefits: Ability to see all his pension savings in one place. Invest the money in funds that are in line with John s risk appetite. Reduce the administration costs as some of his savings are in higher charging plans. Allow John to retire when he wants to. This gives John: The ability to combine all his pension plans into one easy-to-manage plan with the convenience of having everything in one place. The ability to keep his options open until he s ready to make a decision on when and how to take his pension savings. Pension Investment Plan Client Guide 5

6 Choosing where to invest Types of investment available Any investment in a Pension Investment Plan should be considered for the medium to long-term. Therefore an adaptable approach to investment is important, so you can change your investment strategy as and when your objectives change. We all have differing objectives and goals, so our fund range covers a number of different solutions including: Risk-profiled portfolios Single strategy funds Protected investments Total-return investing Multi-asset funds Multi-manager funds Risk profiled model portfolios Choosing suitable funds can be daunting. That is why we developed our model portfolio range. Our risk-profiling tool can help you and your adviser identify the level of risk you are happy to accept on your investment. This will allow you and your adviser to then select a portfolio that fits your investment profile. There are already a number of specifically designed portfolios for the most common levels of risk, and these are monitored and reviewed to ensure the risk remains consistent throughout the period of investment. The diagram below shows the asset allocation of the five Canlife Portfolio Funds. The development of these globally diversified funds of funds, each aligned to a specific risk profile, builds on Canada Life Investments proven capability. CF Canlife Portfolio III CF Canlife Portfolio IV CF Canlife Portfolio V CF Canlife Portfolio VI CF Canlife Portfolio VII Canada Life Investments Canada Life Investments is a UK-based asset manager responsible for managing more than 36bn of equities, fixed income and property (as at 31 March 2017). At the heart of the business is a range of investment solutions designed to meet investors needs through a range of funds that cover UK and international equities and bonds, UK property and multi-asset strategies. Investment partners As well as our own award-winning investment funds, you can access funds managed by some of the leading investment companies from around the world. Using long-established relationships we have built over the years, we are able to give you access to a bespoke range of competitively charged funds. High Expected Return Low Low 3 Cash 10% Fixed Income 58% Equities 24% UK Property 8% As at 6 October Cash 5% Fixed Income 46% Equities 41% UK Property 8% 5 Cash 0% Fixed Income 35% Equities 58% UK Property 7% Expected Volatility 6 Cash 0% Fixed Income 24% Equities 71% UK Property 5%.As with any investment, how a fund has performed in the past is not a guide for how it will perform in the future. Investments can fall as well as rise in value and you may not get back the original amount invested. 7 Cash 0% Fixed Income 10% Equities 85% UK Property 5% High 6 Pension Investment Plan Client Guide

7 Discover our full range of retirement solutions You can find out more about Canada Life and your retirement options at You can also talk to your professional adviser or contact Canada Life directly to request a personalised illustration. Your professional adviser can give you help and guidance. Retirement Income Planning maximise your pension and invest for your future Lifetime Annuities & Scheme Pensions guaranteed annuities for personal pension and occupational pension scheme members. We also provide enhanced rates based on some medical conditions. Trustee Investment Plan a single and/or regular premium trustee investment for either small self-administered schemes, self-invested personal pensions (SIPP) or final salary occupational pension schemes. Pension Investment Plan a plan that allows you to save for retirement, consolidate existing pension plans and from age 55 take lump sums direct from the plan (known as UFPLS). Flexible Drawdown Plan a plan which gives flexibility to keep your income options open, while allowing you to access all tax-free cash at the start of the plan. Fixed Term Income Plan - provides any combination of a guaranteed income payable for a fixed term and a guaranteed lump sum payable at the end of the fixed term. Pension Wise Before you make any decisions, why not take advantage of the government s Free Guidance Guarantee. You can access free guidance face-to-face from the Citizens Advice Bureau and online or over the phone from the Pension Advisory Service. Find out more from pensionwise Some changes you should be aware of In the 2014 March Budget, the Chancellor announced radical changes to pension regulations with the freedom to choose how to receive retirement income from your pension savings plans. It is important to understand these changes when considering your options. Any withdrawals taken in excess of the Pension Commencement Lump Sum (PCLS) will be subject to tax at your marginal rate. PCLS is the amount HM Revenue and Customs allows you to take tax-free normally 25% of your uncrystallised pension savings. There are a number of events that can trigger a reduction in how much you or your employer can contribute to a defined contribution pension plan. This is currently set at a maximum of 4,000 per tax year (from 6 April 2017) and is known as the Money Purchase Annual Allowance (MPAA). Pension Investment Plan Client Guide 7

8 Glossary of Terms Annual allowance The maximum amount of tax relievable pension savings you can make, including any third party on your behalf, such as your employer, within a tax year. Beneficiary An individual chosen by you to receive a benefit on your death. Expression of wish form (also known as a nomination of beneficiary form) An indication by you to let us know how and to whom you would like any death benefit to be paid. Fixed Term Annuity These products can provide an income for a fixed number of years and can also have a lump sum paid at the end of the term. They do not pay an income for life. Flexi-access drawdown (FAD) These products can provide complete flexibility and access to your pension savings. Guaranteed Maturity Value (GMV) This refers to the amount that Canada Life will pay you on the maturity date of the Fixed Term Income Plan, where this option has been selected. Lifetime annuity These products provide an income for your lifetime. They can also be set up to provide an income for a chosen beneficiary for a guaranteed period, for their lifetime or a combination of the two. Money Purchase Annual Allowance (MPAA) A reduced annual allowance (set at 4,000 from 6 April 2017) which applies to defined contribution schemes, where benefits have been flexibly accessed from 6 April Pension Commencement Lump Sum (PCLS) The official term used to describe tax-free lump sum (see tax-free cash). Tax-free cash A sum of money, normally 25% of your pension fund, that is available completely free of tax. Uncrystallised Fund Funds that have not yet been drawn upon to provide pension benefits. Uncrystallised Fund Pension Lump Sum (UFPLS) This is a way of drawing monies directly from your pension, where up to 25% of each payment will be tax-free and the remaining 75% will be taxable at your marginal rates of tax. Lifetime allowance This is the overall limit on how much tax-privileged pension savings a member can draw without facing a lifetime allowance charge. Getting in Touch Your professional adviser will be able to answer any questions you may have about saving for your retirement, and your retirement options with Canada Life. You can also contact us in the following ways: customer.services@canadalife.co.uk Customer Services Team Canada Life Limited, Canada Life Place, Potters Bar, Herts EN6 5BA Canada Life Limited, registered in England no Registered office: Canada Life Place, Potters Bar, Hertfordshire EN6 5BA. Member of the Association of British Insurers. Canada Life Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. MAR R