FLEXI-ACCESS DRAWDOWN MEMBER S GUIDE.

Transcription

1 Personal Pension Plan No.1 (PPNo.1), Group Personal Pension Plan No.1 (GPPNo.1) and Buy Out Plan (BOP) FLEXI-ACCESS DRAWDOWN MEMBER S GUIDE. This is an important document that you should read and keep in a safe place for future reference.

2 2 FLEXI-ACCESS DRAWDOWN MEMBER S GUIDE ADMINISTRATION We will deal with the administration of Flexi-Access Drawdown under the Legal & General Personal Pension Plan No.1, the Legal & General Group Personal Pension Plan No.1 and the Legal & General Buy Out Plan. If you need to contact us you can write to us at: Legal & General City Park The Droveway Hove BN3 7PY Or call us on Call charges will vary. We may record and monitor calls. us at income.withdrawals@landg.com If you re contacting us by please remember not to send any personal, financial or banking information because is not a secure method of communication. If you would like a copy of this or any other item of our literature in large print, Braille or audio format, please contact our customer service team using the details above.

3 FLEXI-ACCESS DRAWDOWN MEMBER S GUIDE 3 FLEXI-ACCESS DRAWDOWN If you re using your pension pot for income drawdown for the first time, this is the only type of drawdown available to you. Since 6 April 2015, it is no longer possible to start Capped Income Drawdown. If you used your pension pot for Capped Income Drawdown before 6 April 2015, you can continue with it or you can move into Flexi-Access Drawdown at any time. However, once you have done this, you can t go back into Capped Income Drawdown. ABOUT THIS DOCUMENT This guide is designed to provide you with a clear explanation of the relevant terms and conditions of your plan in relation to Flexi-Access Drawdown and outlines the risks involved. There are some aspects that require technical explanations, but we have tried to make these as easy to follow as possible. There are many rules governing the operation of Flexi-Access Drawdown and our explanation of these has been kept as simple as possible. If you need any further clarification, please speak to your financial adviser. If you don t have an adviser you can find one in your local area online at This information should be read together with your Member s Booklet (if you have a Personal Pension Plan No.1 or a Group Personal Pension Plan No.1) or Policy Booklet (if you have a Buy Out Plan), which you received when your plan started, and any notifications of changes issued to you. There are a number of things to consider before you take Flexi-Access Drawdown. These are explored in further detail throughout this document. LEGISLATION The Legal & General Personal Pension Scheme No.1, under which the Personal Pension Plan No.1 and the Group Personal Pension Plan No.1 are written, and the Legal & General Buy Out Plan are registered under Part 4 of the Finance Act ABOUT YOUR PLAN Your plan will consist of one or more Arrangements (if you have a Personal Pension Plan No.1 or a Group Personal Pension Plan No.1) or Policies (if you have a Buy Out Plan) that provide benefits for you. Each will have a separate Arrangement/Policy number. When choosing to take Flexi-Access Drawdown, you are able to use one or more of these Arrangements/Policies to provide your benefits as long as the total value of the pension pot you are using meets our minimum requirements as detailed in the What is Flexi-Access Drawdown? section on page 5. You must use the whole of your pension pot under an Arrangement/Policy for income drawdown. Any Arrangements/Policies that you don t use for Flexi-Access Drawdown can be still used in the future to provide benefits. ILLUSTRATIONS Before we set up Flexi-Access Drawdown for you, we will send you an illustration(s) based on your instructions. The illustration(s) will show what your drawdown pension pot could be at age 75 (or any other age you select between 55 and 75), taking into account charges over the period. Once we have set up Flexi-Access Drawdown we will send you a personal illustration based on your chosen level of income and the value of your drawdown pension pot. The value of your drawdown pension pot will depend on a number of things including investment returns, the level of your income payments and charges. Charges can change. Please see the Charges section on page 8 for more information.

4 4 FLEXI-ACCESS DRAWDOWN MEMBER S GUIDE IMPORTANT INFORMATION. RISKS The following are the main risks associated with taking Flexi-Access Drawdown under the Legal & General Personal Pension Plan No.1, the Legal & General Group Personal Pension Plan No.1 and the Legal & General Buy Out Plan. If you take income drawdown your pension pot will remain invested. Its value is not guaranteed and can go down as well as up. Your actual drawdown pension pot could be less than shown in the illustrations issued to you from time to time because: investment growth could be lower than is assumed; the deductions could be more than is assumed; and the amounts you take through income drawdown may be more than is assumed. If you take Flexi-Access Drawdown income from your pension pot, this could affect your tax position. For more details see the Taxation section on page 6. If you choose to take a high level of income directly from your drawdown pension pot, its capital value could be eroded and the level of income may not be sustainable, particularly if investment returns are poor. If you buy an annuity, the amount of income that you can buy will depend on the size of your pension pot and the annuity rates available at the time. Annuity rates can change significantly over short periods of time, both up and down. If annuity rates worsen in the future this could result in your pension pot providing you with a lower level of income than you expected. If you re invested in the With Profits Fund, you will need to switch your investment into another fund(s). We may apply a Market Value Reduction (MVR) when you switch out of the With Profits Fund. We use the MVR to ensure fairness between policyholders who leave the fund and those who remain in it. For more information on With Profits please see our An Introduction to Unitised With Profits brochure, which is available on request. By taking Flexi-Access Drawdown your pension pot will remain invested, and its value can go down as well as up. For more details see the How your money is invested section on page 7. If you take your benefits as an annuity, your income will normally be fixed for life.

5 FLEXI-ACCESS DRAWDOWN MEMBER S GUIDE 5 ABOUT FLEXI-ACCESS DRAWDOWN. WHAT IS FLEXI-ACCESS DRAWDOWN? Flexi-Access Drawdown allows you to use your pension pot to provide a flexible income. You can take your tax-free cash lump sum, with or without a regular income, and ad hoc income payments directly from your drawdown pension pot. Flexi-Access Drawdown is available on the Legal & General Personal Pension Plan No.1, the Legal & General Group Personal Pension Plan No.1 and the Legal & General Buy Out Plan (subject to the restrictions shown in the Buy Out Plan section below) between ages 55 and 75. You must have a pension pot of at least 50,000 to be able to start Flexi-Access Drawdown. The minimum regular withdrawals are 100 monthly, 300 quarterly, 600 half-yearly or 1,200 yearly. The minimum ad hoc income payment is 1,200 each. You can take a maximum of two ad hoc income payments each income year. Other than the minimum amounts shown above, the amount of income you can withdraw is not restricted. However, if you want to stop or start taking a regular income, or take an ad hoc income payment, you must have at least 5,000 remaining in your drawdown pension pot. If you re taking regular income payments you can continue to do so, even if the value of your drawdown pension pot drops below this amount, but if you wish to stop you will need to cash in the whole drawdown pension pot. You should think carefully about the level of income that you take and whether there will be enough money to provide for your spouse/registered civil partner, dependants or other beneficiary, should you die before them. The benefits payable on your death under Flexi- Access Drawdown differ from those payable from an annuity. You should therefore take into account both your own health and that of your nominated beneficiary before you decide whether Flexi-Access Drawdown is suitable for you. Please see the Payments on Death section on page 10 for more information. BUY OUT PLAN RESTRICTIONS For Buy Out Plans there are some restrictions on Flexi-Access Drawdown, which are as follows: Flexi-Access Drawdown is not available if any policy in your plan is invested in Conventional With Profits. Policies invested in Conventional With Profits will start with the letter G. For more information on With Profits, please see our An Introduction to Conventional With Profits brochure, which is available on request. If your Buy Out Plan contains Section 9(2b) rights, these must be used to purchase an annuity. Flexi-Access Drawdown will only be available if your remaining pension pot after the annuity purchase is at least 50,000. Further details about Guaranteed Minimum Pension and Section 9(2b) rights can be found in your Policy Booklet. TAX-FREE CASH LUMP SUM When you first use your pension pot under an Arrangement/Policy for Flexi-Access Drawdown, 25% of the value of that Arrangement/Policy can normally be paid as a tax-free cash lump sum. It can only be taken from that Arrangement/Policy at the time that you first use it for Flexi-Access Drawdown and not at a later date. PAYMENTS In order to pay your income, we will automatically cash in sufficient units in your selected fund(s) to provide the amount of income (before deduction of tax) that you have chosen. We can only make payments by direct credit to your bank account. We can make payments monthly, quarterly, half-yearly or yearly and either at the start of the period (in advance) or at the end of the period (in arrear). You can vary the amount or frequency of your regular income by giving at least one month s written notice before the due date of your next payment. All variations are subject to the minimum income and investment levels as detailed on this page under What is Flexi-Access Drawdown? You can also request ad hoc income payments. You can only do this twice in an income year. The income year runs for a period of 12 months starting from the date you take income drawdown, including when you only take your tax-free cash lump sum. It applies separately to each Arrangement/Policy if you have used more than one for income drawdown. CONTRIBUTIONS If you have a Personal Pension Plan No.1 or a Group Personal Pension Plan No.1, you re not allowed to make further contributions or transfer any money in once you have used the Arrangement for Flexi-Access Drawdown, even if the income is nil. You can continue to contribute to any Arrangement not used for Flexi-Access Drawdown. If your Buy Out Plan contains a Guaranteed Minimum Pension (GMP), this must be secured at the same time you use your pension pot for Flexi-Access Drawdown. Flexi-Access Drawdown will only be available if your remaining pension pot after securing GMP is at least 50,000.

6 6 FLEXI-ACCESS DRAWDOWN MEMBER S GUIDE TAXATION. ANNUAL ALLOWANCE The Annual Allowance for the 2017/2018 tax year is 40,000. If the total gross contributions paid by you, your employer or a third party, into any UK Registered Pension Scheme you ve taken out are over the Annual Allowance, you ll be subject to a tax charge. If you re also in a final salary pension scheme (defined benefit), your gross contributions for that scheme will be based on the increase in the value of your benefits during the tax year. In some circumstances a reduced Annual Allowance may apply: A Money Purchase Annual Allowance (MPAA) ( 4,000 gross for the 2017/2018 tax year) will apply each tax year once you take money directly out of any money purchase (defined contribution) pension pot you have, unless you: only take your tax-free cash lump sum, or take all of it under the small pension pot rules, or continue taking Capped Income Drawdown. Not all of these options will be available from every pension pot. Taking a Flexi-Access Drawdown income payment will trigger the MPAA. Your Annual Allowance may also be reduced if your income (including the value of any pension contributions) is over 150,000 and your income (excluding the value of any pension contributions) is over 110,000. The Annual Allowance will not apply in the tax year in which you die or if you access your pension pot because of serious ill health. More information is also available at: You should contact your adviser if: You expect your total gross contributions into all pension schemes to exceed the Annual Allowance in any tax year as unused allowances may be available from previous tax years; You have any additional questions, including whether your Annual Allowance will be reduced. INCOME Any income payments you take from your pension pot will be taxed under the Pay As You Earn (PAYE) system. LIFETIME ALLOWANCE There are no restrictions on the value of the total benefits payable from all your Registered Pension Schemes. However, anything over a certain level, called the Lifetime Allowance, will be subject to a tax charge of up to 55% on the excess. Using your pension pot for Flexi-Access Drawdown may give rise to a Lifetime Allowance tax charge. For most people their Lifetime Allowance will be the standard Lifetime Allowance. The standard Lifetime Allowance for the tax year 2017/2018 is 1 million. Certain circumstances may mean you have a different personal Lifetime Allowance - for example, if you ve registered with HMRC for protection. Depending on the type of protection you have, any contribution to a plan may mean you lose your protection. If your pension pot has been subject to a Lifetime Allowance tax charge, you will receive a notification from us providing details of the tax charge that has been deducted. The information in this document is based on our understanding of current law relating to pensions. The law and tax rates may change in the future. REVIEWS. The whole of your pension pot (including any Arrangements/Policies not being used for income drawdown) will be valued at least once a year and you ll receive a statement each year. For any Arrangement/Policy in Flexi-Access Drawdown this will show the amount of income (if any) you have taken in the last year. Your annual review will give you an estimate of when your drawdown pension pot will run out based on your current level of regular income. We can t tell you the exact level of benefits your plan will provide you with in the future. This is because the amounts available will depend on any income you take and how well your investments perform. You should monitor the value of your pension pot and the amounts you withdraw as the levels you take may not be sustainable. If you would like to check the value of your pension pot or need further details please contact us.

7 FLEXI-ACCESS DRAWDOWN MEMBER S GUIDE 7 HOW YOUR MONEY IS INVESTED. INVESTMENT FUNDS Your drawdown pension pot will remain invested, and with the exception of the With Profits Fund and lifestyle profiles, the full range of investment funds remains available to you. The value of your pension pot can go down as well as up. To start Flexi-Access Drawdown you ll need to switch all of your investment in With Profits or a lifestyle profile within any Arrangements/Policies being used to one or more of our other available funds. We may apply a Market Value Reduction to any money switched out of the With Profits Fund (see page 4 for more details). Our Investment Options brochure contains details of all funds available that you could switch into. The funds you choose to invest in have specific risks which are also described in this brochure, which is available on request. The facility to switch investment funds continues to be available whilst you are taking Flexi-Access Drawdown. The normal terms for switches will continue to apply. For more information on switching please see your Member s/policy Booklet. Income drawdown payments will be cashed in from accumulation units from all funds under your Arrangement/Policy in proportion to the value of each fund holding at the time of the payment, unless you instruct us otherwise. If you have a Personal Pension Plan No.1 or a Group Personal Pension Plan No.1 which started before October 1995 and you paid in regular contributions, some of the units held will usually be initial units (please see your Member s Booklet for more information). If you elect to take Flexi-Access Drawdown from your plan before your selected retirement date any initial units will be converted to accumulation units, on the terms applicable at that time. This will include the application of a reduction factor (in accordance with your Member s Booklet and any modification to its terms). Any reduction factor will be no more than 1% of the value of the Arrangement being used for Flexi-Access Drawdown. If you select the funds from which units for income drawdown are cashed in and one of those funds is exhausted, then units will continue to be cashed in from the remaining selected funds in proportion to the value of each fund holding at that time. For example: You choose to have your income drawdown taken: 50% from the Managed Fund 25% from the Distribution Fund 25% from the Equity Fund If the units in the Managed Fund are exhausted and, at that time, the value of your Distribution Fund units is 30,000 and the value of your Equity Fund units is 70,000, unless you specify otherwise, then your income will be taken 30% from the Distribution Fund and 70% from the Equity Fund. If all of your selected funds have been exhausted, units will be cashed in from any remaining funds in proportion to the value of each fund holding at the time of the payment. You can change your instructions regarding which funds are to be encashed, subject to one month s notice.

8 8 FLEXI-ACCESS DRAWDOWN MEMBER S GUIDE CHARGES. The charges that apply at the time of printing are set out below. SET-UP FEE A set-up fee of 50 will be charged from the first Arrangement/Policy used for Flexi-Access Drawdown where the income taken is greater than nil. This is a one-off fee and won t be applied again even if you take an income from further Arrangements/Policies. MONTHLY PLAN CHARGE If you have a Personal Pension Plan No.1 or a Group Personal Pension Plan No.1, a monthly plan charge is deducted by cashing in units. This will be at the rate applicable when the plan started. Please refer to your Member s/policy Booklet and any notifications of changes issued to you. ANNUAL MANAGEMENT CHARGE (AMC) The Annual Management Charge is taken into account when calculating unit prices. The AMC will be at the rates applicable when the plan started. Please refer to your Member s/policy Booklet and any notifications of changes issued to you. If you have a Personal Pension Plan No.1 or a Group Personal Pension Plan No.1, please also see the Stakeholder Charge Cap section on this page. The funds also bear additional expenses which are not included in the AMC. These expenses vary depending on the investment fund chosen and they are taken into account when calculating the unit prices. An appropriate allowance for these expenses is made when calculating the assumed benefits shown in your personal illustration(s). We show the possible effect of these deductions in all your personal illustration(s). STAKEHOLDER CHARGE CAP If you have a Personal Pension Plan No.1 or a Group Personal Pension Plan No.1, once you use an Arrangement for income drawdown, any Stakeholder Charge Cap that applied to that Arrangement will cease immediately. SWITCHING The first fund switch in any 12 months is currently free of charge. Any subsequent switch within the same 12 month period is currently chargeable at 0.5% of the bid value of the units being sold, subject to a maximum of 25 and a minimum of 10. OTHER CHARGES In certain circumstances there may be other charges. If these apply they will be specified in your personal illustration(s), which will be sent to you showing the amount of income you could receive at the date you have chosen. We may make fair and reasonable changes to charges at any time. We will give you at least 30 days prior written notice before we introduce, change the type of, or increase a charge. Please contact us for details of the reasons why we may make changes, if they are not listed in your Member s/policy Booklet.

9 FLEXI-ACCESS DRAWDOWN MEMBER S GUIDE 9 AFTER STARTING FLEXI-ACCESS DRAWDOWN. Your circumstances might change after you start Flexi-Access Drawdown, so you should review your situation regularly with your financial adviser. If investment returns are poor and/or you take a high level of income, the value of your drawdown pension pot may be exhausted. At any time after starting Flexi-Access Drawdown you can: Buy an annuity Transfer your pension pot Take a lump sum Other options may become available in the future. BUYING AN ANNUITY You can use your pension pot to buy an annuity with us, or you can shop around and buy an annuity from another provider. This is known as the Open Market Option. Once you have bought an annuity, usually you cannot change your mind and you will be paid an income for the rest of your life. If you choose to buy an annuity, the rates available at the time and the options that you select will affect your benefits considerably. The annuity rates can change significantly over short periods of time, both up and down. TRANSFERRING YOUR PENSION POT You can transfer your pension pot to another Registered Pension Scheme at any time. Other providers and products may offer other options for taking your benefits. You must continue to take income drawdown with the new provider. TAKING A LUMP SUM You can, at any time, withdraw the whole amount remaining in an Arrangement/Policy as a cash lump sum. If the Arrangement/Policy has already been used for income drawdown, the full payment will be subject to income tax. If you ve not used an Arrangement/Policy for income drawdown, a further tax-free cash lump sum may be available. AT AGE 75 At age 75, the plan will close. Any income payments will stop and you will have to decide what you want to do with any remaining pension pot.

10 10 FLEXI-ACCESS DRAWDOWN MEMBER S GUIDE PAYMENTS ON DEATH. PAYMENT OF DEATH BENEFITS If you have a Personal Pension Plan No.1 or a Group Personal Pension Plan No.1, we will pay any death benefits at our discretion, taking into account a range of potential beneficiaries. If you make a nomination, we will not be bound by it but will take it into account when we pay the benefits. If you have a Buy Out Plan and have made a nomination, this is binding to Legal & General and we will pay the benefit to your nominated beneficiaries. If your pension pot is payable to your nominated beneficiary, they will have the following options: To buy an annuity. To take the pension pot as a lump sum. To continue to take Flexi-Access Drawdown. (This option is not available for Buy Out Plans). It is only possible to continue Flexi-Access Drawdown with Legal & General if the beneficiary is between age 35 and 73 when you die. IF YOU ARE UNDER 75 WHEN YOU DIE AND THE BENEFICIARY CONTINUES FLEXI-ACCESS DRAWDOWN: They will only be able to take ad hoc income payments. They will not be able to take regular income. They may transfer the pension pot to another pension provider and continue Flexi-Access Drawdown. If the beneficiary dies whilst taking Flexi-Access Drawdown, the remaining pension pot will be paid as a lump sum to the beneficiary s estate or to a nominated beneficiary of their choice. At age 75, the beneficiary will need to decide what to do with any remaining pension pot as the plan will close. ADDITIONAL INFORMATION If you re under age 75 when you die, payment to your beneficiary will normally be tax free as long as it s made within two years of Legal & General being notified of your death. For income drawdown, this will be the date Flexi-Access Drawdown is set up for the beneficiary, even if no income is taken at that time. If the payment is made or income drawdown set up after the two year period, payments will be taxed in the same way as earned income. If you re aged 75 or over when you die, any death benefits paid from your pension pot to a beneficiary will normally be taxed in the same way as earned income. In some circumstances there may be an additional inheritance tax liability. If your nominated beneficiary dies before you, you should provide us with a new nominated beneficiary.

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12 Legal & General Assurance Society Limited Registered in England and Wales No Registered office: One Coleman Street, London EC2R 5AA Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. W /17 NON ASD