RETIREMENT ACCOUNT ONE PENSION PLAN FOR LIFE ADVISER TECHNICAL GUIDE

Transcription

1 RETIREMENT ACCOUNT ONE PENSION PLAN FOR LIFE ADVISER TECHNICAL GUIDE This information is for UK financial adviser use only and should not be distributed to or relied upon by any other person.

2

3 PAGE 4 RETIREMENT ACCOUNT OVERVIEW PAGE 6 INVESTMENT OPTIONS PAGE 10 PAYMENTS RETIREMENT PLANNING PAGE 12 PENSION ENCASHMENTS RETIREMENT PLANNING PAGE 13 PAYMENTS RETIREMENT INCOME PAGE 14 INCOME DRAWDOWN RETIREMENT INCOME PAGE 15 INCOME DRAWDOWN DRIP FEED DRAWDOWN PAGE 16 CLEAR, COMPETITIVE CHARGES SERVICE CHARGE INVESTMENT CHARGES PAGE 20 ADVISER REMUNERATION PAGE 24 CHANGE TO ADVISER REMUNERATION BASIS PAGE 25 CONTROL ACCOUNT PAGE 27 TRADING PAGE 28 DEATH BENEFITS PAGE 29 COOLING OFF PAGE 30 ONLINE FUNCTIONALITY PAGE 31 GLOSSARY For guaranteed help and support, contact our dedicated Retirement Account IFA servicing team

4 2

5 CHOOSING RETIREMENT ACCOUNT HELPING YOU MEET YOUR CLIENTS NEEDS TO AND THROUGH RETIREMENT, WITH A WIDE RANGE OF INVESTMENT OPTIONS FOR BOTH RETIREMENT PLANNING AND INCOME. Retirement has changed it doesn t necessarily mean stopping work, and can bring the opportunity to do new things. Rules around pensions have also changed and now that clients have greater freedom and flexibility with their retirement savings, they need a pension product that lets them make the most of this. Here s why Retirement Account is the right choice for you and your clients. RETIREMENT ACCOUNT FOR ADVISERS A wide range of investment options with robust governance investment solutions for a variety of clients and competitively priced core portfolio funds Clear and competitive charges that are easy to explain to your clients and can help you provide a full advice model at low cost We re easy to do business with our online services and offline support means you can get on with advising your clients One plan flexibility plans change, which is why Retirement Account offers ultimate flexibility for you and your clients Experience and expertise with over 200 years experience, you can rely on us RETIREMENT ACCOUNT FOR YOUR CLIENTS Flexible options for retirement saving Your clients can access our wide range of investment choices, including Governed Investment Strategies and Pension Portfolios, as well as shares and commercial property. From age 55, they can partially or fully encash, or move seamlessly into Retirement Income and take flexible drawdown. Flexible options for retirement income Gives your clients full pension freedom flexibility in how they take their money as much as they like, when they like keeping the rest invested in our range of investment options including our Retirement Portfolio funds, which are designed to help manage volatility and make your clients pension pots last longer. This guide should be read in conjunction with our other Retirement Account literature. If you have any further questions, please speak to your Scottish Widows Account Manager, or visit our website 3

6 RETIREMENT ACCOUNT OVERVIEW RETIREMENT ACCOUNT SINGLE PLAN RETIREMENT PLANNING RETIREMENT INCOME Scottish Widows Pension Funds Fixed Term Cash Deposits Discretionary Fund Management Commercial Property Governed Investment Strategies and Premier Governed Investment Strategies* Solution Funds Portfolio Management Service Fund Supermarket Scottish Widows Pension and Premier Pension Portfolio Funds Share Dealing Scottish Widows Retirement Portfolio Funds CONTROL ACCOUNT CONTROL ACCOUNT * Governed Investment Strategies and Premier Governed investment Strategies are available for Retirement Planning only. A LIFETIME OF FLEXIBILITY Retirement Account is designed to support clients throughout saving for their retirement AND while taking benefits. It has two distinct elements Retirement Planning (RP) holds pension savings pre-retirement and Retirement Income (RI) holds pension savings post-retirement AND allows clients to take income drawdown. It s easy to designate amounts from the Retirement Planning element to the Retirement Income element. Each element has its own Control Account which is used to administer the Retirement Account for example, certain charges and expenses are taken from the Control Account(s). Up to six payers are allowed on a Retirement Account: One customer. Two employers. Three others. Basic rate tax relief at 20% is applied immediately to your clients payments to the Retirement Planning element including any payments made on their behalf by other individuals. Clients who pay more than 20% tax on some of their income can claim additional tax relief either by contacting HMRC or via their self-assessment tax return. Transfer payments and payments made by an employer won t receive basic rate tax relief. 4

7 WIDE INVESTMENT CHOICE The investment range includes: Scottish Widows Pension Funds. Governed Investment Strategies and Premier Governed Investment Strategies (using Scottish Widows Pension Funds) for Retirement Planning only. Access to a wide range of funds via a Fund Supermarket. Any Fixed Term Cash Deposits we make available. A panel of Discretionary Fund Managers (DFM). Share Dealing. Commercial Property Portfolio Management Service. There s no requirement for a minimum investment in Scottish Widows Pension Funds. INCOME DRAWDOWN SOLUTIONS Income drawdown has become an increasingly popular retirement option as an alternative to the purchase of an annuity. It offers clients potential advantages in terms of value, flexibility and the ability to pass pension savings on after death, but also carries a number of risks. The selection of an income drawdown solution requires care, diligence and guidance. All of this creates an excellent growth opportunity for your business, and we believe Scottish Widows is ideally placed to help you provide retirement income solutions for your drawdown clients. Our Retirement Portfolio Funds are designed to manage significant volatility to help your client s pension pot last longer. ENTRY AGES There is no minimum age for Retirement Planning. Retirement Income can generally be accessed from age 55, unless the client is in serious ill-health or has a protected pension age. The maximum age at entry for Retirement Planning is 74 and 98 for Retirement Income. This must be at least one full year before your client s chosen retirement age. FLEXIBLE RETIREMENT AGES Your client must choose a retirement age at the beginning of the Retirement Account, although this can be changed at any time. The minimum retirement age is normally 55. The maximum retirement age your client can choose is 75 for Retirement Planning and 99 for Retirement Income. Please note: Scottish Widows annuities are only available to buy up to age 75, however, it may be possible to purchase an annuity after this by transferring to another provider. Pensions are a long-term investment. The retirement benefits clients receive from their pension plan will depend on a number of factors including the value of their plan when they decide to take their benefits which isn t guaranteed and can go down as well as up. The value of the plan could fall below the amount(s) paid in. The value of the tax benefits of a Retirement Account depend on a client s circumstances. Tax rules and circumstances can change in the future. CLEAR, COMPETITIVE CHARGES A simple, unbundled charging structure that separates the different types of charges, so clients can see exactly what they re paying. Comprehensive remuneration options designed to suit your business model and allow choice and flexibility. WE RE EASY TO DO BUSINESS WITH Our online service offers you access to illustrations and applications, as well as daily valuations and the ability to buy, sell and switch most investments. Your clients can also view their Retirement Account online. 5

8 INVESTMENT OPTIONS TO AND THROUGH RETIREMENT, WE OFFER A RANGE OF INVESTMENT SOLUTIONS FOR YOUR CLIENTS. INCLUDING OUR CORE PENSION AND RETIREMENT PORTFOLIO FUNDS. Retirement Account Retirement Planning Retirement Income Premier Governed Investment Strategies Scottish Widows Pension Funds Pension Portfolio Funds 0.1%* Fund Supermarket Discretionary Fund Management Governed Investment Strategies Retirement Portfolio Funds 0.2%* Fixed Term Cash Deposit Share Dealing Premier Pension Portfolio Funds 0.4%* Commercial Property Portfolio Management Service * Total Annual Fund Charges, correct as at August 2018 and may change in the future. Simple personal pension Personal pension with extended choice Personal pension with self investment 6

9 SCOTTISH WIDOWS PENSION FUNDS Over 100 funds covering a wide range of asset classes, geographical locations, sectors and management styles. No minimum investment required. Currently no charge for switching between our Pension Funds. Investments to help your clients achieve their goals, and help your business thrive, including our multi-asset fund ranges tailored to meet different needs: Pension Portfolio Funds multi-asset solutions at passive fund prices Premier Pension Portfolios more asset classes with specialist fund managers, including absolute return strategies, providing wider choice and diversification. Our Premier and original Pension Portfolios are also core components of our Governed and Premier Governed Investment Strategies lifestyling options. Our Governed Investment Strategies gradually move the Retirement Account into lower risk investments as clients approach their selected retirement date. At five years from this date, the chosen strategy will automatically adjust so that the Account is invested in one of three ways, depending on whether clients want to purchase an annuity, keep their funds invested (including income drawdown), or take a cash lump sum. Our Premier Governed Investment Strategies are slightly more expensive but aim to provide better potential returns for broadly the same level of volatility. Governed Investment Strategies and Premier Governed Investment Strategies are available for Retirement Planning only. For more details, please see The Retirement Account Scottish Widows Pension Fund Charges (45422) Governed Investment Strategy Adviser Guide (49970) Premier Lifestyling Options Guide (55117) Core Portfolio Funds (56436) FUND SUPERMARKET Offers a range of funds from a variety of fund management groups, with different fund services, sizes and costs. Access to approximately 2,900 funds. There s the potential to benefit from lower charges on some funds than if they were to be bought direct. No initial charge. For more details, please see the Retirement Account Fund Supermarket List and Charges (19145) Fund Supermarket Investor s Guide (48432) Our Portfolio Management Service enables you to construct and store investment portfolios made up from Scottish Widows Pension Funds and the Fund Supermarket funds, with scheduled rebalancing if required. For more details, see the Advisers Guide to the Portfolio Management Service (24917). 7

10 INCOME DRAWDOWN SOLUTIONS To help you address the challenges of investing for retirement income, our Retirement Portfolio funds are multi-asset funds which use our innovative Dynamic Volatility Management process to automatically reduce the risk of capital loss during significantly volatile markets. We also offer a wide range of other funds. For more details, please see Retirement Portfolio Funds Adviser Guide (56357) Retirement Portfolio Funds Customer Guide (56358) Core Portfolio Funds (56436) FIXED TERM CASH DEPOSIT (SUBJECT TO AVAILABILITY) Aims to provide an alternative to cash funds and may be suitable for those who are risk-averse or wish to avoid short term market volatility. Allows clients to benefit from competitive terms negotiated with deposit-takers. Each Fixed Term Cash Deposit will be available for investment during its Offer Period, at a fixed level of interest, payable at the end of the term. For more details, please see the Retirement Account Fixed Term Cash Deposit Guide (48856) DISCRETIONARY FUND MANAGEMENT We offer access to a panel of Discretionary Fund Managers, who will construct an investment portfolio specific to your client s requirements from a range of permitted investments Brewin Dolphin Securities Brooks Macdonald Cazenove Capital Management Charles Stanley Tilney Investment Management Investec Wealth & Investment Quilter Cheviot Rathbone Investment Management. More than one manager can be selected if required. Investments are made via a privately managed fund. For more details, please see the Discretionary Fund Managers Guide to services and charges (25361) 8

11 SHARE DEALING The share dealing facility allows your clients to invest in securities traded on an HM Revenue & Customs recognised stock exchange. These include Company shares and bonds Government, public and local authority bonds Exchange traded funds listed on the London Stock Exchange, or on the official list of a competent authority in another European Economic Area state Investment trusts including Real Estate Investment Trusts. For more details, please see the Retirement Account Share Dealing Guide (47937) COMMERCIAL PROPERTY Clients can invest in their existing business premises or other property, subject to our approval, with consolidated valuations available online. For more details, please see the Retirement Account Commercial Property Administration Guide (22926) The range of investments available can change. Where investments are held on deposit, such as a Control Account or Fixed Term Cash Deposit, there is a possibility that the provider(s) of those deposits may fail to meet their obligations. However, we believe there is only a small risk that some or all of the value of that investment would be lost. 9

12 PAYMENTS RETIREMENT PLANNING MINIMUM PAYMENTS (AFTER TAX RELIEF HAS BEEN ADDED) NEW RETIREMENT ACCOUNTS Payment Frequency Monthly Yearly Single Transfer Minimum Payment (Gross) 200 2,400 10,000 10,000 Each minimum applies to the total payments from all payers who are making payments at the same time. Please see page 4 for the number of payers allowed. If there is more than one payer, each payer must pay a minimum of 10 per month, 120 per year, or 2,000 for single payments and transfers. For example, if three monthly payments are being made in respect of one client, each payer must pay at least 10 and the total of all three payments must be at least 200. Where a single payment and transfer payment are being made at the same time the minimum payment is a total of 10,000. Each payment must be at least 2,000. For example, if a client wants to make a single payment and transfer 9,000 from another pension policy, the minimum single payment would be 2,000. However, if the transfer payment was less, e.g. 5,000, then the minimum single payment would need to be 5,000. If the minimum for one payment type is met, a client need only meet the additional payment amount for other payment types. For example, if there is a transfer of 10,000, the client need only pay a regular payment of 50 per month. 10

13 ADDITIONAL PAYMENTS (AFTER TAX RELIEF HAS BEEN ADDED) TO EXISTING RETIREMENT ACCOUNTS Payment Frequency Monthly Yearly Single Transfer Minimum Payment (Gross) ,000 2,000 Clients can ask us to automatically increase their payments each year there is no minimum limit for automatic increases to monthly or yearly payments. MAXIMUM PAYMENTS There is no maximum limit on the amount that can be invested in a Retirement Account. However, limits do apply to the amount of tax relief that your client can receive on payments into the Retirement Planning element. This is the greater of 100% of their relevant UK earnings or 3,600 (gross) each year. We will refund payments made by a client, or by another individual on behalf of a client, which do not qualify for tax relief. You should ensure that your clients do not exceed their Annual Allowance for pension payments in any one year. (The annual allowance is reduced for higher earners this is called the Tapered Annual Allowance). If your client has taken a pension encashment (Uncrystallised Funds Pension Lump Sum) from any pension, or income from Flexible Access Drawdown, they will be subject to the Money Purchase Annual Allowance. This means that your client will only be entitled to obtain tax relief on contributions to all money purchase pensions up to 4,000, after which they will be subject to a tax charge. A Lifetime Allowance, set by the Government, will apply to the total value of pension benefits that your clients can receive from all of their pension arrangements. Tax charges may apply if the Government s Annual Allowance, Tapered Annual Allowance, Money Purchase Annual Allowance or Lifetime Allowance is exceeded. 11

14 PENSION ENCASHMENTS RETIREMENT PLANNING Your client can take one or more pension encashments (Uncrystallised Funds Pension Lump Sums) from the Retirement Planning element of their Account, subject to the following conditions: normally they must be age 55 or over, and they must have sufficient Lifetime Allowance. Your clients cannot take pension encashments if they have: either primary or enhanced protection with protected lump sum rights greater than 375,000, or a lifetime allowance enhancement factor and the available portion of their lump sum allowance is less than 25% of the proposed encashment. It isn t possible to give up primary protection but your clients can contact HMRC about giving up enhanced protection. PENSION ENCASHMENT OPTIONS There are two options for taking pension encashments: Partial Pension Encashment where part of the value of the Retirement Planning element is taken as a cash lump sum; PAYMENT OF PENSION ENCASHMENTS TAX Payments are made from the Retirement Planning Control Account(s) via BACs. You will need to ensure there is sufficient balance in each relevant Control Account or no payment will be made. Please see Control Account(s) on page 25 for details. For all pension encashments, 25% of the value will be tax-free. The remainder of the value will be taxable as income in the tax year of payment. We will deduct tax using your client s PAYE tax code (or the PAYE Emergency Tax Code if HMRC has not told us your client s tax code). The tax deducted may not be the right amount due, when all of your client s income for the year is taken into account. After the following 5th April, HMRC will deal with any additional tax or refund due. If your client thinks they have paid too much tax, they can ask HMRC for a tax refund. Full Pension Encashment where the full value of the Retirement Planning element is taken as a cash lump sum. 25% of each encashment will be tax-free (regardless of whether your client has protected tax-free cash) and the remainder taxable. Following a full pension encashment we will close your client s Retirement Account if there is no remaining value. Partial pension encashments must be at least 5,

15 PAYMENTS RETIREMENT INCOME MOVING AMOUNTS INTO RETIREMENT INCOME Amounts can be moved into Retirement Income by: Designating funds from the Retirement Planning element(s) of a Retirement Account when required. Making a drawdown to drawdown transfer from some existing income drawdown arrangements. Drip Feed Drawdown (see page 15). Single contributions and transfer payments into Retirement Planning can also be immediately vested to Retirement Income MINIMUM PAYMENTS NEW RETIREMENT ACCOUNTS AND FIRST DESIGNATION The minimum initial payment from Retirement Planning to Retirement Income is 10,000, provided that there is at least 30,000 in the Retirement Planning element before monies are designated to Retirement Income (before any tax-free lump sum). The 30,000 fund can be made up of: Funds built up in Retirement Planning, before being moved across to Retirement Income. Funds transferred, or single premium contributions into Retirement Planning, for partial or full immediate vesting to Retirement Income. For drawdown to drawdown transfers, the minimum payment to Retirement Income is 22,500. ADDITIONAL PAYMENTS OR DESIGNATIONS TO EXISTING RETIREMENT ACCOUNTS The minimum additional payment into the Retirement Income element is 2,000 (before any tax-free lump sum). This allows your client to phase their money into Retirement Income. Even if they end up with a lower remaining balance in the Retirement Planning element, they can move the balance into Retirement Income. 13

16 INCOME DRAWDOWN RETIREMENT INCOME TAX-FREE LUMP SUM For designations and immediate vesting, clients can normally choose to take up to 25% of the value as a taxfree lump sum. A higher amount may be available if your client has a protected tax-free cash entitlement. CONTROL ACCOUNT Where funds are being designated, there must be sufficient in the Control Account to cover the tax-free lump sum and any Initial Adviser Charge. If there isn t enough, and your client hasn t provided us with a disinvestment instruction, and they are invested in Scottish Widows Pension Funds, then we ll disinvest proportionately from those funds to cover the tax-free lump sum and any Initial Adviser Charge. (Your client should also let us know which assets should be re-registered from Retirement Planning to Retirement Income to cover the balance of the designation amount (75%)). MINIMUM WITHDRAWAL No minimum limit tax-free cash can be taken and a zero income selected. You can ask us to change your client s level of income at any time. INCOME WITHDRAWAL BASIS Retirement Income elements set up before 6th April 2015 will be on a Capped Drawdown basis and Retirement Income elements set up on or after 6th April 2015 will be on a Flexible Access Drawdown basis. If your client is on Capped Drawdown, they can stay on this basis or choose to switch to Flexible Access Drawdown, but will not be able to switch back to Capped Drawdown at a later date. If your client asks to take an income higher than the maximum allowed under Capped Drawdown, they will switch to a Flexible Access Drawdown basis, but will not be able to switch back to Capped Drawdown at a later date. Transfers in on a Capped Drawdown basis can stay on Capped Drawdown. CAPPED DRAWDOWN Maximum yearly income limit of 150% of the basis amount determined by reference to Government Actuary s Department (GAD) tables. Income limits applicable for three years (or one year after age 75), or until a review is triggered if earlier. Certain events, such as an additional designation or an annuity purchase, will trigger a recalculation of the basis amount. FLEXIBLE ACCESS DRAWDOWN There is no restriction on the amount that your client can withdraw as income each year, up to the full value of the Retirement Income element of their Account. Income can be set up either as a percentage of fund value or as a fixed monetary amount. If income is based on a percentage of the fund value, the monetary amount quoted will only be valid until the next anniversary of the date the Income element of the Account was set up. At this point it will be recalculated on the Retirement Income fund value at that time, so the amount could change. If the Retirement Income element of your client s Retirement Account reduces to zero (and there is no remaining value in Retirement Planning and no regular contributions are being paid), we will close the Account. The value of the Retirement Income element of the Account will change: each time an amount is moved into the Retirement Income element when an amount is used to buy an annuity when income is taken as the value of investments rise and fall when charges are deducted. PAYMENT OF INCOME Income can be paid on a monthly, quarterly, half-yearly or yearly basis. Ad hoc payments can also be made. The frequency and amount of income payments can be varied at any time. Payments are made from the Retirement Income Control Account(s) via BACS, net of tax using PAYE. There must be sufficient balance in each relevant Control Account or sufficient units in Scottish Widows Pension Funds to cover the income payments due. If not, a partial payment or no payment will be made. See Control Account(s) section on page 25 for more details. 14

17 INCOME DRAWDOWN DRIP FEED DRAWDOWN In addition to ad hoc designations, we also offer Drip Feed Drawdown, an automated phased drawdown option. Drip Feed Drawdown allows customers to designate regular amounts on a monthly, quarterly half yearly or yearly basis, and each payment will be a crystallisation event. They can take just the tax-free cash entitlement or a combination of their tax-free cash and taxable income to give control over the level of income they receive and the amount of tax they pay. This facility is only available to customers on a flexible access drawdown basis. INVESTMENTS Assets to be crystallised must be held within the Retirement Planning Control Account or within Scottish Widows Pension Funds, from where our system will automatically designate benefits. This option is not available to customers who are invested in Commercial Property. MINIMUM PAYMENTS There is no minimum designation amount, and the amount of Drip Feed Drawdown can be varied upon request. DESIGNATION AND PAYMENT OF DRIP FEED DRAWDOWN The tax-free cash element of any Drip Feed Drawdown payment will be paid from the Retirement Planning part of the Retirement Account. The residual designated amount will be re-registered into Retirement Income, either into the Retirement Income Control Account, or into Scottish Widows Pension Funds in the same proportion that they were disinvested from Retirement Planning. Any income payment required as part of the Drip Feed Drawdown designation will be paid from the Retirement Income element of the Retirement Account, either from the Retirement Income Control Account or if there insufficient funds held in the Control Account, proportionately from any Scottish Widows Pension Funds held in Retirement Income. As with the standard Income Drawdown functionality, payments will be made via BACS, net of any tax using PAYE. Note, when setting up Drip Feed Drawdown at new business stage we do not offer the ability for advisers to take a charge on a fixed monetary amount basis. This can be added at a later stage if necessary. All other remuneration options are available. For full details of the eligibility criteria and how the process works, please see the Adviser Guide to Accessing Income with the Drip Feed Drawdown Option (27253) and the Customer Guide to Accessing Income with the Drip Feed Drawdown Option (27254). 15

18 CLEAR, COMPETITIVE CHARGES OUR COMPETITIVE CHARGES ARE BROKEN DOWN INTO THEIR COMPONENT PARTS, GIVING A CLEAR PICTURE OF THE COSTS THAT S EASY TO EXPLAIN TO YOUR CLIENTS. Charges under Retirement Planning Charges under Retirement Income There are three charges which will apply to the Retirement Account: Investment Charges Service Charge Adviser Remuneration There s no additional charge for drawdown and with one Service Charge, we won t charge you for additional transactions so you can service your clients needs without worrying about additional costs. MONTHLY CHARGING DATE There is a Monthly Charging Date on which we will deduct charges from the Control Account(s). The first charging date will be one month after the Start Date of the Retirement Account. The Start Date is: For single or transfer payments the date the payment is received. For regular payments (Retirement Planning only) the date we process all the relevant paperwork. Where more than one type of payment is being made, for example a single payment and a regular payment at the same time, the Start Date will be the earliest of the dates described above. There is no change to the Monthly Charging Date on designating existing assets. 16

19 SERVICE CHARGE SERVICE CHARGE We deduct a Service Charge from the Retirement Account for setting up and managing your client s Retirement Account. The charge is calculated as a percentage of the total value of all assets (Retirement Planning and Retirement Income) and the percentage can reduce as this value increases and increase if the value reduces*. Please see the table for more details. The Service Charge will be split proportionally between each Control Account, and will be deducted on the Monthly Charging Date. The first Service Charge will be deducted one month after the Retirement Account Start Date. Service Charge rate table The table directly below shows the standard rates that apply for new Retirement Account applications. Total value of Retirement Account 0k - < 30k 30k - < 50k 50k - < 250k k 500-1m 1m and above Service Charge (per year) 0.90% 0.40% 0.30% 0.25% 0.20% 0.10% If the total value of a client s Retirement Account moves from one tier to another, so will the rate of the Service Charge. For example, if the value of a Retirement Account increases from 29,000 to 31,000, the rate of the Service Charge will decrease from 0.90% to 0.40%. However, if the value of the Retirement Account decreases from 510,000 to 490,000, the rate of the Service Charge will increase from 0.20% to 0.25%. * Please note, mortgage amounts in respect of Commercial Property are excluded from the calculations to determine the Service Charge. 17

20 INVESTMENT CHARGES Investment charges depend on the type of investments chosen, and can include charges made by fund managers, Discretionary Fund Managers, the share dealing provider, and the Property Management Charge. Other charges and expenses can apply for example, professional fees and certain third party administration costs. SCOTTISH WIDOWS PENSION FUNDS There s no initial charge under the Scottish Widows Pension Funds. A Fund Management Charge, which comprises the annual management charge (including any external fund management charge and any multimanager fund management charge) and, if applicable, an allowance (which can change on a regular basis) for any other expenses such as trustees fees, auditor s fees and regulator s fees) is taken directly from the funds selected. The annual management charge is allowed for in the fund pricing. Core Portfolio Funds 0.1%* Pension Portfolio Funds multi-asset solutions at passive fund prices 0.2%* Retirement Portfolio Funds designed to help your drawdown clients pension pots last longer, with our innovative Dynamic Volatility Management process which aims to reduce sequence of return risk during periods of significant volatility 0.4%* Premier Pension Portfolio Funds more asset classes with specialist fund managers Governed Investment Strategies 0.1%*^ original Governed Investment Strategies 0.4%* Premier Governed Investment Strategies which aim to provide better potential returns for broadly the same level of volatility *Total Annual Fund Charges: correct as at September 2018, and may change in future. ^A Total Annual Fund Charge (TAFC) of 0.1% normally applies when your client is fully invested in the Pension Portfolios. If your client has selected the Targeting Annuity retirement outcome, in the last five years before their selected retirement date they will gradually be moved into the Pension Protector and Cash funds, and a 0.2% TAFC would apply to that proportion of their investment. For more details, please see The Retirement Account Scottish Widows Pension Fund Charges (45422) Governed Investment Strategy Adviser Guide (49970) Core Portfolio Funds Sales Aid (56436) Premier Lifestyling Options Guide (55117) 18

21 FUND SUPERMARKET No initial charges apply to the selection of funds available. A Fund Management Charge, which comprises - the annual management charge (including any external fund management charge and any multimanager fund management charge) and, if applicable, an allowance (which can change on a regular basis) for any other expenses such as trustees fees, auditor s fees and regulator s fees) is taken directly from the funds selected. The annual management charge is allowed for in the fund pricing. There is also a Fund Supermarket Platform Charge, which is deducted monthly by cancelling units or shares and is based on the total value your client s Account holds in those funds. If the Account is invested in more than one Supermarket fund, this Charge will be deducted from the fund in which your client has the highest value at the charge date. There s the potential to benefit from lower charges on some funds than if they were to be bought direct. Please refer to the Retirement Account Fund Supermarket List and Charges (19145) for the charges that apply to funds currently available FIXED TERM CASH DEPOSIT (SUBJECT TO AVAILABILITY) For more details of the charges that can apply, please see the Retirement Account Fixed Term Cash Deposit Guide (48856) DISCRETIONARY FUND MANAGEMENT Charges will be taken by the Discretionary Fund Manager from the sums and assets they hold this will be allowed for in the valuation of your client s DFM portfolio. For details of the charges that can apply, please see the Discretionary Fund Managers Guide to services and charges (25361) SHARE DEALING Please refer to the Retirement Account Share Dealing Guide (47937) for details of the charges that can apply COMMERCIAL PROPERTY Please refer to the Retirement Account Commercial Property Administration Guide (22926) for details of the charges that can apply The range of investments available and investment charges can change. A personal illustration will provide an indication of the investment charges that can apply to your client s Retirement Account. Scottish Widows will not normally make any charge for changing investments, whether switching between investment funds, or moving between different asset classes. Costs may, however, be incurred in the sale or purchase of certain investments. 19

22 ADVISER REMUNERATION Adviser remuneration is intended to cover the cost of any advice and/or services that you provide to your client in relation to their Retirement Account. In line with the Retail Distribution Review, whether we deduct Adviser Charges or Commission will depend on when your client s Retirement Account was set up and whether advice was given. Each of the two Retirement Account elements (Retirement Planning and Retirement Income) is independent and can be set-up on a different basis (e.g. Retirement Planning could be on a Commission basis and Retirement Income on Adviser Charges). Please see page 24 for details on changing the remuneration basis. ADVISER CHARGE(S) Adviser Charge(s) can be paid when you have given your client either independent or restricted advice, and must be agreed between you and your client. Illustrations will be required for any new Adviser Charge(s) or increases to existing Adviser Charge(s) so that your client can see the impact on their projected Retirement Account value. Once we have received your client s signed consent to the Adviser Charge(s) on the appropriate form, we can facilitate the payment. Adviser Charge options Initial Adviser Charge Ongoing Adviser Charge(s) (at element level) Percentage of Account Fixed Monetary Amount One-off Adviser Charge Initial Adviser Charge For single contributions and transfer payments, the charge is deducted immediately from contributions made to the Retirement Account. For regular contributions, the charge will be taken either monthly or yearly, to match the contribution frequency. We will spread the Initial Adviser Charge by paying you up to 50% of each regular contribution, until the charge is paid in full. This limit allows us to deduct any Fixed Monetary Amount Ongoing Adviser Charges, from the Control Account(s), that you may have agreed with your client at the same time (please see page 21, example 1). Where the illustration shows multiple payers of the same contribution type, any Initial Adviser Charge will be apportioned across that contribution type (please see page 21, example 2). If any of these contributions are not received, we will not facilitate payment for that part of the Initial Charge. For payments designated to Retirement Income, any Initial Adviser Charge(s) are deducted from the designated amount after the payment of any tax-free lump sum. Ongoing Adviser Charge(s) These can be added, removed or changed at any time during the term of the Account. Remember, that when moving from Retirement Planning to Retirement Income you will need to give us a new instruction for Ongoing Adviser Charging - it won t automatically carry over into the Retirement Income element. Percentage of Account This is taken as a percentage of the total value of all the assets held within an element of your client s Retirement Account (different percentages can apply to each element). It can be deducted monthly or yearly in arrears. It will be deducted on the charging date, for the lifetime of the Account. Fixed Monetary Amount This can be set up for a fixed number of payments or for the lifetime of the Account. It can be paid monthly or yearly in arrears. It is possible to have multiple Fixed Monetary Amount charges on the same element (for example, you can have 5 per month for the lifetime of the Account plus 100 per year for the first five years). If multiple yearly charges exist, each charge can have its own anniversary when the charge is deducted. One-off (Ad hoc) Adviser Charge You might agree a One-off Adviser Charge with your client for additional advice that falls outside the services that you have already agreed in respect of the Retirement Account. You should request an illustration from us so that your client can see the impact of the additional charge and they must sign and return the consent form. 20

23 ADVISER CHARGE EXAMPLES Example 1 Regular contributions with an Initial Adviser Charge and a Fixed Monetary Amount Ongoing Adviser Charge You set up a Retirement Account for your client with a 500 per month gross ( 400 per month net) regular premium. You agree to an Initial Adviser Charge of 1,100 for setting up the Retirement Account and a 20 per month Fixed Monetary Amount Ongoing Adviser Charge for ongoing services. 500 per month is paid into your client s Control Account, 250 of which is deducted and paid to you as an Initial Adviser Charge. The remaining 250 is invested according to your client s investment instructions. At the end of the month, on the charging date, 20 will be deducted from the Control Account to pay you the first Fixed Monetary Amount Ongoing Adviser Charge. Each following month, 250 will be deducted from the regular payment(s) until the Initial Adviser Charge is paid in full. An additional 20 will also be deducted from the Control Account on each monthly charging date to cover the Fixed Monetary Amount Ongoing Adviser Charge. Month Amount paid in by client Tax relief Total paid in Initial Adviser Charge amount paid to adviser Fixed Monetary Amount Ongoing Adviser Charge paid to adviser Example 2 Initial Adviser Charge where there are multiple payers of the same contribution type John is setting-up and paying a single contribution of 8,000 and a regular contribution of 200 per month into his new Retirement Account. His employer has also agreed to pay a 4,000 single contribution, and his wife another 4,000 single contribution into the same Retirement Account at the same time. John agreed with his adviser to pay an Initial Adviser Charge of 2,000, split 1,000 from the regular contributions and 1,000 from the singles. We will therefore apportion 1,000 of the Initial Adviser Charge across the three single premiums, taking 500 from John s single contribution, 250 from his employer s contribution and 250 from his wife s contribution. 21

24 Example 3 Drawdown transfer with Initial Adviser Charge and Ongoing Adviser Charges (Percentage of Account and Fixed Monetary Amount) You transfer your client s existing drawdown plan with a value of 150,000 into a new Retirement Account. You agree to take an Initial Adviser Charge of 3,000 for the initial advice. For ongoing services you also agree to take a 50 per month Fixed Monetary Amount Ongoing Adviser Charge for 24 months, and a 0.5% (per year) Percentage of Account Ongoing Adviser Charge to be paid monthly for the lifetime of the Account. 150,000 is transferred into the Retirement Income Control Account. 3,000 is deducted from the Retirement Income Control Account and paid to you as an Initial Adviser Charge. 147,000 is invested according to your client s investment instructions. Assuming the value remains the same, a Percentage of Account Ongoing Adviser Charge of ( 147,000 x 0.5%/12) and a Fixed Monetary Amount Ongoing Adviser Charge of 50 are deducted from the Control Account and paid to you at the first Monthly Charging Date. The Percentage of Account Ongoing Adviser Charge will continue to be deducted from the Control Account and paid to you for the lifetime of the Account. The Fixed Monetary Amount Ongoing Adviser Charge of 50 will stop after 24 months. COMMISSION Commission can be paid when you have provided a service to your client but have not given them advice. Please note that our personalised correspondence will refer to Commission as an Adviser Payment Charge. However, the term Adviser Payment Charge is also used in the policy provisions, schedules, and endorsements to cover both Adviser Charges and Commission. Commission options OR Scaled Commission Fund Based Commission Commission details Scaled Commission regular payments to Retirement Planning Scaled Commission single and transfer payments to Retirement Planning and payments to Retirement Income Fund-based Commission Commission limits 0 50% (in steps of 0.01%) of the regular payments made in the first year 0 8% (in steps of 0.01%) 0 1% pa paid monthly or yearly Claw-back Term Between 1 and 5 years (in whole years), chosen by adviser Between 1 and 5 years (in whole years), chosen by adviser Not applicable Scaled Commission This is paid to you immediately and then recovered each month from your client s Retirement Account, over an agreed period known as the Claw-back Term (please see example 2). Claw-back Term for Scaled Commission The Claw-back Term can be any number of whole years between one and five. This will be reduced where the term to the chosen retirement age is less than five years, subject to a minimum term of one year. 22

25 Claw-back will be triggered in the following circumstances: Any transfer to another pension provider before the end of the Claw-back Term. Any transfer to another Scottish Widows pension policy before the end of the Claw-back Term. Any reduction in regular payments to the client s Retirement Planning element of the Retirement Account during the Claw-back Term. Any pension benefits being taken before the end of the Claw-back Term. Designation (either full or partial) of funds to Retirement Income. This triggers claw-back on the Retirement Planning element, if the designation takes place within the Claw-back Term. Claw-back is applied to each payment made to the Retirement Account that is still within the Claw-back Term. Claw-back will not be triggered on death of the Retirement Account holder, or a change of chosen retirement date (except where pension benefits are taken, or designated at a date which falls within the Claw-back Term). Adviser payments will be clawed-back from the adviser to whom the original Scaled Commission was paid. For part claims, claw-back will apply pro rata across all payments to the Retirement Account still within their Claw-back Term. For regular payment reductions, claw-back will apply first to the latest payments to the Retirement Account in their Claw- back Term. The Claw-back Term will cease on funds that are fully designated. If benefits are partially designated, the Claw-back Term will continue for the balance of the original period. The Scaled Commission will be reduced accordingly. There are a number of factors which can change the claw-back calculation. Please contact your Scottish Widows Account Manager for further details. COMMISSION EXAMPLES Example 1 Scaled Commission A client wants to make regular payments of 1,000 a month. The client agrees to the adviser receiving 6,000 Commission for the services they ve provided in setting up the Retirement Account (equivalent to 50% of first year s payments). The adviser chooses a Claw-back Term of four years (48 months). 1,000 is placed in the Retirement Planning Control Account each month awaiting investment instructions. 6,000 is paid to the adviser by Scottish Widows on commencement. The deduction to cover the Commission payment will be 6,000/4/12 = per month per month starts to be deducted from the Retirement Planning Control Account with effect from the next Charging Date for four years. Example 2 Claw-back A client wants to take pension benefits from part of their Retirement Account. The total value of their Retirement Account is 250, ,500 is settled to provide pension benefits. At the time of taking their pension benefits, a single payment of 25,000 is within its Claw-back Term of three years (36 months). The adviser received a payment of 1,250 for that single payment. There are eight monthly Commission payments remaining. Claw-back will be 1,250 x 8/36 x 62,500/ 250,000 x 1 = Fund Based Commission This is taken as a percentage of the total value of all the assets held within an element of your client s Retirement Account (different percentages can apply to each element). It can be deducted monthly or yearly in arrears. It will be deducted on the charging date, for the lifetime of the Account. Once chosen, the Fund Based Commission percentage cannot be increased but it is possible to decrease and remove it. Please speak to your Scottish Widows Account Manager for further details. Pensions Advice Allowance You can take a Pensions Advice Allowance for giving your client advice on retirement planning. The maximum amount allowed is 500 a year across all your client s pension plans (up to three times over their lifetime). You should request an illustration from us so that your client can see the impact of the charge, and they must sign and return the consent form before the charge can be taken. 23

26 CHANGE TO ADVISER REMUNERATION BASIS EACH RETIREMENT ACCOUNT ELEMENT CAN BE SET UP ON A DIFFERENT BASIS (E.G. RETIREMENT PLANNING COULD BE PAYING COMMISSION AND RETIREMENT INCOME COULD BE PAYING ADVISER CHARGES). With client consent, however, it is possible to convert a Commission-paying element to an Adviser Charge-paying one if you want to be remunerated for any advice you have given on, for example, an increment. This consent will be requested on the increment application or charge change form. It is not possible to convert an Adviser Charge-paying element to a Commissionpaying one, and any new Adviser Charge(s) can only be deducted with client consent, and if advice has been given, or ongoing services are to be provided. Where Fund Based Commission is currently being paid, we will require specific consent to convert this to a Percentage of Account Ongoing Adviser Charge. Once this conversion has taken place no further Commission can be paid for services in relation to that element. 24

27 CONTROL ACCOUNT THE CONTROL ACCOUNT ACTS AS A CLEARING AND TRANSACTIONAL ACCOUNT FOR ALL PAYMENTS MADE TO AND FROM A RETIREMENT ACCOUNT. Adviser, service and other charges RETIREMENT ACCOUNT CONTROL ACCOUNT Tax-free cash Income payments Regular, single or transfer payments Tax relief If a Control Account has a positive balance it can receive positive balance adjustments. You can contact us for the current rate or go to adjustmentrates The Service Charge(s), Adviser Charge(s) or Commission, and certain investment-related charges and expenses are deducted from the Control Account(s). Please refer to pages for further details on charges. If the Control Account balance is insufficient and the Retirement Account is invested in any Scottish Widows Pension Funds (even if the Account holds other investments), we ll automatically sell units proportionately from the Scottish Widows Pension Funds held to cover the charges and/or income. Alternatively, to ensure that a sufficient balance in the Control Account is maintained, you can contact us to arrange a regular disinvestment from specified Scottish Widows Pension Funds. We will not automatically sell other types of investments to cover charges and/or income. If, at any time, the balance of a Control Account and the units available in Scottish Widows Pension Funds are insufficient to meet the Service Charge(s), any Commission, and any investment-related charges, these charges will become a Deferred Charge. Please see the Deferred Charge section on the next page for more details. Please note that a Deferred Charge will not be applied to cover Adviser Charges. If your client wishes to make a pension encashment, you need to ensure that there is a sufficient balance in the relevant Retirement Planning Control Account to cover this in full. We will not automatically sell units from any Scottish Widows Pension Funds held or make any payment and a Deferred Charge will not be applied, and this may result in a partial or non payment. If your client wishes to take a regular income or an ad hoc income payment, a sufficient balance in each Retirement Income Control Account or sufficient units in Scottish Widows Pension Funds will need to be maintained in Retirement Income to meet the value of the payments due. If there s insufficient balance in the Control Account to cover the income payment, and no disinvestment instruction has been provided, and there s an element of Scottish Widows Pension Funds, then we ll disinvest proportionately across these funds from the Retirement Income element to cover the income payment. A Deferred Charge will not be applied to cover income payments and this may result in a partial or non-payment. 25

28 ADVISER CHARGES AND THE CONTROL ACCOUNT Where former Protected Rights and non Protected Rights Control Accounts exist within the element, any Ongoing Adviser Charge will be automatically taken across the two Control Accounts, provided there is sufficient balance. Where possible, this will be taken proportionally, depending on the relative balances of each Control Account. Where we are unable to deduct an Adviser Charge in full, that instance of the charge won t be paid, not even in part. If an Adviser Charge fails, a letter will be sent to you and your client explaining this. The failed charge will not be carried forward to the next charging date. DEFERRED CHARGE Each day a Deferred Charge cannot be collected, we will increase its amount by a percentage of the Deferred Charge. You can contact us for the current rate or go to A Deferred Charge can be settled by selling investments held under the relevant Retirement Account element, with the proceeds paid to the relevant Control Account. Alternatively, where possible, a single payment or transfer payment may be paid to the Control Account to settle a Deferred Charge. Regular payments, in respect of Retirement Planning, will not be automatically used to settle a Deferred Charge, but can be redirected by your client to the Control Account for this purpose. If a part or total claim is requested, any Deferred Charge will be settled from the proceeds of disinvestments before any benefits or income payments are paid out. We will write to you and your client if a Deferred Charge occurs. 26

29 TRADING SCOTTISH WIDOWS PENSION FUNDS If a request to buy or sell units is received by us before midday, the trade will normally be subject to the following day s unit prices. Requests received after midday will normally be subject to the unit prices applying two days in the future. Switches between Scottish Widows Pension Funds are carried out as simultaneous transactions, involving both sell and buy trades. The trades are subject to the pricing rules described above. FUND SUPERMARKET If a trade request is received online, the request will normally be passed to the Fund Supermarket provider in real-time, who will aim to have the trade completed at the price determined at the next available pricing point. Where a request is submitted on paper, we will try to pass the request to the Fund Supermarket provider in time for the next available pricing point. On receipt of the request, the Fund Supermarket provider will aim to complete the trade at the price determined at the next pricing point. Switches involve both a sell and a buy trade. The sell trade will be priced as described above. The buy trade will normally be priced at the next available pricing point following the completion of the sell trade. Switches between Fidelity Onshore Funds will be processed simultaneously. Please note that pricing points may vary according to the funds being traded. FIXED TERM CASH DEPOSITS Each Fixed Term Cash Deposit that we make available will have an Offer Period during which your client can ask you to invest. There must be sufficient funds available in the relevant Control Account on the day the request is made. At the Investment Start Date, provided there are still sufficient funds available in the Control Account, we ll invest the requested amount in the Fixed Term Cash Deposit. At the Investment End Date, we ll arrange to switch the value of your Fixed Term Cash Deposit investment, including the interest earned, back to the Control Account. The proceeds will be available in the Control Account on the working day following the Investment End Date. DISCRETIONARY FUND MANAGEMENT We will aim to transfer money to the Discretionary Fund Manager on the date of receipt of an instruction. The timing of disinvestments from DFM assets to the Control Account(s) will generally be dependent on the liquidity of the DFM portfolio. SHARE DEALING Before trading can commence, you must move sufficient funds into the Share dealing account. Trading is available both online and by telephone. You will be quoted a price for the transaction, which can then be agreed and carried out in real time. Processed trades will be confirmed and contract notes issued subsequently. There is more information about Share dealing in The Retirement Account Share Dealing Guide (47937). COMMERCIAL PROPERTY We will aim to transfer money to the third party administrator, Curtis Banks, on the date of receipt of an instruction. Typically, a property purchase can take anything from 8 12 weeks to complete. However, there is no guarantee a purchase will take place in these timescales. The timing of disinvestments to the Control Account(s) depends on the nature and size of the request, the amount of available cash and, if necessary, the time taken to sell the property. Any payments received for which we have not received an investment instruction will be held in the relevant Control Account(s). 27

30 DEATH BENEFITS If your client dies, the value of their Retirement Account can be used to provide benefits, as follows: If they die before age 75: Lump sum any beneficiary can take the value of the fund as a tax-free lump sum. Income Drawdown any beneficiary can take the value of the fund through income drawdown. The income will be tax-free. Annuity any beneficiary can use the value of the Retirement Account to buy an annuity. Please note, however, that Scottish Widows can only currently provide an annuity for a spouse or any other dependant who must be under 75 at the time of purchase. Income from any annuity will be tax free. If they die on or after age 75: Lump sum any beneficiary can take the value of the fund as a lump sum. This will normally be taxed at their marginal rate of income tax. Income Drawdown any beneficiary can take the value of the fund through income drawdown. The income will normally be taxed at their marginal rate of income tax. Annuity any beneficiary can use the value of the Retirement Account to buy an annuity. Please note, however, that Scottish Widows can only currently provide an annuity for a spouse or any other dependant who must be under 75 at the time of purchase. The income will normally be taxed at their marginal rate of income tax. A beneficiary could be a dependant, a nominee or a successor. A dependant is someone who is a spouse, civil partner, or financially dependent on your client. A nominee can be any other person that your client chooses to nominate, even if they are not dependant on them, and can also be a charity. The beneficiary can pass on any unused drawdown funds on their death to their own beneficiary, known as a successor. Where the lump sum option is applicable, there is no tax charge if it is paid to a charity nominated by a client. If a Retirement Account is arranged under an individual trust, we will pay any lump sum death benefit to the trustees. Some investments may take longer to sell than others, and we may therefore pay the death benefits in stages. No inheritance tax will normally be payable on the value of the Account because we will choose the beneficiary, taking into account any nomination your client makes. Where your client has not made a nomination and there are no dependants, then we can nominate a beneficiary. ACCIDENTAL DEATH BENEFIT RETIREMENT PLANNING ONLY If your client dies as a direct result of an accident before their Retirement Account has been running for five years, the amount we will pay will be the greater of 120% of the total payments received, or the value of the investments within Retirement Planning on the date that we receive notification of death. Please note that Accidental Death Benefit does not apply to Retirement Income. No charge is made for the Accidental Death Benefit. 28

31 COOLING OFF Your client can change their mind within 30 days of receiving their cancellation notice. For elements on an Adviser Charge basis, we ll return all payments less any Initial Adviser Charges already paid to you and, for single and transfer payments, any fall in their value. For elements set up on a Commission basis, we ll return all payments less, for single and transfer payments, any fall in their value. 29