Individual Buy Out Plan

Transcription

1 IMPORTANT INFORMATION This information may be downloaded to your PC in whole or in part provided that any reproduction or copy, or any derivative, is true to the original, and it is EITHER used for personal use OR in support of an Agreement with Legal & General. Professional advisers who are properly authorised may use it in the process of giving financial advice relating to Legal & General products. Copies or derivatives of the document may not be sold, marketed, or used for commercial gain. Notwithstanding the above, Legal & General Group Plc retains ownership of copyright in all such reproductions, copies or derivatives. Copyright Legal & General Group Plc, All rights reserved. Individual Buy Out Plan Key Features This is an important document which you should read and keep in a safe place. Authorised and regulated by the Financial Services Authority Legal & General Assurance Society Limited Registered in England No Registered office: One Coleman Street, London EC2R 5AA This is also where our head office is in the UK. A member of the Association of British Insurers W /09 Approval Number: H95029

2 Contents Page About this document 3 Helping you decide 3 Introduction 3 Its aims 3 Your commitment 3 Risks 4 How does a transfer to a Buy Out Plan work? 5 What are the tax benefits of a Buy Out Plan? 5 What are the rules? 5 How will a Buy Out Plan work for me? 5 Are my benefits guaranteed? 5 What are the charges? 6 Can I change my investments? 6 Can I cash in my plan? 6 Can I transfer the value of my plan? 6 Can I make extra contributions? 6 When can I take my benefits? 6 How are benefits from contracting-out treated? 6 What happens if I die before I take my benefits? 7 What happens if I die after I have taken my benefits? 7 Further Information 7 Glossary 9 Individual Buy Out Plan Key Features - Page 2 of 9

3 About this document The purpose of this document is to explain the aims of the Legal & General Buy Out Plan, together with your commitment, risks, the charges and other general information. We aim to use plain language that s easy to understand. To keep this document simple, we ve placed explanations of some of the technical terms in a Glossary on page 9. This document isn t intended to explain all the details of the policy. If you need more information, we can send you a copy of the Policy(ies) booklets. Helping you decide The Financial Services Authority is the independent financial services regulator. It requires us, Legal & General, to give you this important information to help you decide whether the Buy Out Plan is right for you. You should read this document carefully so that you understand what you are buying, and then keep it safe for future reference. The full Key Features comprises this document together with your personal illustration. Firms providing similar products will also have Key Features documents. This will enable you to compare different products and decide which, if any, is right for you. Introduction Your pension is likely to be one of your most valuable assets, so it s important to ensure that it s working for you. The Legal & General Buy Out Plan is used to receive a transfer value from your previous employer s pension scheme, or a Pension Credit, which has been awarded to you following a divorce or dissolution. The Buy Out Plan can accept the following types of benefits: Non Protected Rights, Protected Rights, Guaranteed Minimum Pension (GMP) liabilities, and Section 9(2B) rights (also known as post 5 April 1997 final salary contracted out benefits). The minimum transfer value is 5,000, although the minimum may be higher if the transfer includes a GMP. By transferring to a Buy Out Plan you will be able to take control of your pension fund, and make decisions that suit you. You ll have the flexibility to choose which funds you want to invest in, and you may also be able to select your own Normal Retirement Age and the way in which you take your benefits. Some restrictions may apply and your financial adviser will be able to advise you of these. Of course, transfers are not suitable for everyone and depend on individual circumstances. You should seek financial advice before proceeding. Please note that we cannot accept a transfer which includes both Protected Rights and GMP/section 9(2B) rights. Key Features of the Buy Out Plan Its aims To enable you to either: i) Invest a transfer value from your previous employer s pension scheme into your own Buy Out Plan, or ii) secure a Pension Credit awarded as a result of a pension sharing order on divorce or dissolution. To build up your fund to provide you with a pension income when you decide to take your benefits. To give you the option of taking part of your fund as a tax free amount when you take your benefits. Your commitment Once you transfer, you give up all rights in your previous employer s pension scheme. You cannot cancel or return the fund to your previous scheme once your cancellation period has ended (see the Your right to cancel section on page 7). Once your transfer value has been paid in it has to remain invested until you take your benefits. You cannot normally take your benefits until you are at least age 55 (the minimum age is 50 until 6 April 2010). To provide an income or cash sum for your spouse/registered civil partner or dependants if you die before you take your benefits. Individual Buy Out Plan Key Features - Page 3 of 9

4 Risks The benefits you receive from the Buy Out Plan may be smaller than what you would have received from your previous employer s pension scheme. The value of your fund can go down as well as up, so the fund value is not guaranteed. It is particularly important to remember this if you are close to taking your benefits. Each of the funds you can choose from have different risks. Full details of each fund and their risks are shown in our pension fund guides, which are available on request. If you invest in a fund that invests in property, it may be necessary to delay encashment during periods when property is not easily sold. The maximum delay is six months and would only apply in the event of early retirement, transfer or fund switch. The value of property is generally a matter of the valuer s opinion rather than fact. We do not guarantee the growth rates used in the enclosed personal illustration. If the actual growth rates are lower than those shown, the fund value may also be less. What you get back is not guaranteed. It will depend on investment performance and the cost of converting the fund into an income for life. If your transfer includes a GMP, the Buy Out Plan guarantees that from age 65 (male) or 60 (female), the benefits payable will not be less than the GMP. If we agree that you can choose an earlier Normal Retirement Age than this, it may not be possible to take your benefits at the chosen Normal Retirement Age. We cannot use Additional Voluntary Contributions or section 9(2B) rights towards the cost of providing your GMP. This could mean that you may not be able to take your GMP before 65 (male) or 60 (female) if the value of your Buy Out Plan, excluding Additional Voluntary Contributions and section 9(2B) rights is insufficient to cover the cost of the GMP liability. Additional risks applicable to investments in With Profits What you receive from With Profits investments will depend on future bonus rates, which are not guaranteed and can change. Future bonus rates may be reduced if, for example, our expenses are higher than anticipated or there is an increase in the expected cost of guarantees and options for With Profits policies or investment performance is less than expected. Any investment in With Profits will share in the risks of other With Profits pension plans, which can reduce your bonuses and therefore the amount we pay you. You also share in the risks of other With Profits policies such as bonds. We write With Profits and Non Profit policies (that is, policies which are not eligible for bonuses) in our With Profits fund. We provide guarantees for both With Profits and Non Profit policies and the assets in the whole fund are ultimately available to meet them. This means that, although you may benefit from support from the assets backing Non Profit business, we could reduce the amount we pay you if we have to use the assets backing With Profits business to support Non Profit business. We may reduce the amount we pay if you take your benefits early, transfer or switch out of With Profits. This is called a Market Value Reduction (MVR). We use the MVR to ensure fairness between policyholders who leave the fund and those who remain in it. This aims to ensure that remaining policyholders are not disadvantaged. The MVR will usually be applied when investment conditions have been insufficient to support bonuses. It will also account for additional deductions that may be required to cover the cost of guarantees and options for With Profits policies. Please read the An Introduction to Unitised With Profits guide (referred to in the With Profits section on page 7) in conjunction with this Key Features document. It will give you more details on the application of the MVR and some of the technical terms we have referred to above. The value we pay on your death may be lower than what would have been paid under your previous employer s pension scheme. If you cancel within the 30 day cancellation period and the previous provider has agreed to accept a return of the transfer value (see the Your right to cancel section on page 7) the amount we return may reflect any reduction in investment value. We can increase our charges, but we will write to you before we make any change. The law and tax rates may change in the future. Past performance is not an indicator of future performance. Individual Buy Out Plan Key Features - Page 4 of 9

5 How does a transfer to a Buy Out Plan work? A transfer value from your previous employer s pension scheme is paid into the Buy Out Plan. Pension Credits resulting from a divorce or dissolution can also be paid into the plan. Your transfer value is invested in one or more of our pension funds. We offer a wide range of unit-linked funds, a With Profits investment and a number of Lifestyle Profiles. Further information on our range of funds can be found in our pension fund guides which you can ask us for a copy of. We divide each unit-linked fund into units of equal value. We will work out the value of your Plan based on the number of units you have in your fund and the price of those units. If the unit price goes up or down so will the value of your Plan. For With Profits the price of units always stays the same. When we declare an annual bonus, we will add the appropriate number of With Profits units to your Plan. When you take your benefits, for example at retirement, we may also add a final bonus which would increase the amount paid. If you have been contracted out of the earnings related part of the State Pension Scheme, then your transfer value will include benefits in place of those you would have received if you had stayed in that part of the State Pension Scheme. These will be called GMP, section 9(2B) rights or Protected Rights and a detailed explanation of these is included in the Glossary on page 9. What are the tax benefits of a Buy Out Plan? Any growth in your pension fund is free of UK income tax and capital gains tax. However, we cannot reclaim the tax paid on dividends from UK companies. When you take your benefits, you use your fund to buy a pension and you may also be able to take part of the fund as a cash lump sum. This cash lump sum will not normally exceed 25% of the value of the fund available when you take your benefits. If you were entitled to a tax free cash sum greater than 25% of the fund as at 5 April 2006, and the amount was protected under your previous employer s scheme, this protection will be lost on a transfer to an individual Buy Out Plan. The only exception to this is if you are transferring from an existing Buy Out Plan that was set up prior to 6 April Your benefits will continue to be assessed against your Lifetime Allowance. The Standard Lifetime Allowance is 1.75 million for the tax year 2009/2010 and will apply unless you are entitled to an increased personal Lifetime Allowance. For more information please speak to your financial adviser. What are the rules? When you transfer, you select a Normal Retirement Age. This is the age at which you want to take the benefits and can normally be on any birthday between age 55 and 75. However, you can take your benefits on a different date. Please see the When can I take my benefits? section on page 6. There must normally be at least five years to run from the Plan start date to your selected Normal Retirement Age. If your transfer includes a GMP you will only be able to choose a Normal Retirement Age earlier than 65 (male) or 60 (female) with the specific agreement of Legal & General. If you are allowed to choose an earlier Normal Retirement Age, the funds available from all the policies in the Plan (excluding section 9(2B) rights and Additional Voluntary Contributions) may not be sufficient to pay the GMP from your Normal Retirement Age. In this situation it may be possible to pay a reduced benefit up to 65 (male) or 60 (female), at which time it will increase to the full level of GMP. This is however, dependant on the value of the funds available at Normal Retirement Age. In some instances it might not be possible to take any benefits at all until 65 (male) or 60 (female). If you want to take benefits earlier than your Normal Retirement Age you will not be able to do this unless the funds available from all policies within the Plan (excluding section 9(2B) rights and Additional Voluntary Contributions) is sufficient to pay the full GMP from the earlier age. A reduced benefit payment is not permitted in these situations. If your transfer includes a GMP, we will specify that a part of the transfer value must be invested, and remain invested in With Profits under a separate policy within the Plan. If, when you decide to take your benefits, the value of this policy is not sufficient to fund the GMP, we may have to use other policies within the Plan to provide the GMP. However, we will not use section 9(2B) rights or Additional Voluntary Contributions for this purpose. As an alternative to buying a pension, you may be able to take income withdrawals. This option allows you to take an income and a tax free cash sum, while the fund remains invested. You can take an income up until your 75th birthday when you must buy an annuity or take an Alternatively Secured Pension (ASP). For more information about Income Withdrawal, please speak to your financial adviser. How will a Buy Out Plan work for me? Inside this Key Features, you ll find a personal illustration which assumes certain growth rates over the period to your selected Normal Retirement Age. The illustration shows the fund that could be built up, taking into account Legal & General s own charges over the period. It also shows the level of benefits this could buy at your Normal Retirement Age. If your previous employer s scheme provided a guaranteed level of benefits, you should have a breakdown of the pension benefits to which you are currently entitled. Please speak to your financial adviser who will help you decide whether a transfer could be right for you. Are my benefits guaranteed? The level of pension is affected by a number of factors, including the size of your fund and annuity rates at the time you take your benefits. Neither of these is guaranteed. If your transfer includes a GMP, the Buy Out Plan will, as a minimum, provide you with a pension at age 65 (male) or 60 (female) that will be least equal to your GMP. This will be shown on your personal illustration and confirmed on your Plan Statement which we will issue when we accept your transfer value. Individual Buy Out Plan Key Features - Page 5 of 9

6 What are the charges? Monthly plan charge There is currently no plan charge. Bid/offer spread There is a bid/offer spread of 5% of the offer price. The bid/offer spread is the difference between the bid and offer price of the units. Units are bought by the Plan at the offer price and sold at the bid price. Initial charge The enclosed illustration shows the percentage of your transfer value which will be used to buy units. If this shows an allocation rate of less than 100%, an initial charge has been made. Here is an example of this: Example: Your transfer value of 10,000 is invested with an allocation rate of 99%. This means that 9,900 (99% x 10,000) = 9,900 will be used to buy units. So in this example, the initial charge is 100 (1% of 10,000). Annual management charge If you invest in a unit-linked fund, we have an annual management charge of 0.5%. Our unit-linked funds also have additional expenses that are not included in the annual management charge. These expenses vary and will depend on the fund(s) you choose. We make an appropriate allowance for these expenses when calculating the benefits shown in your personal illustration. The annual management charge and additional expenses are taken into account when we calculate the unit prices. If you invest in With Profits, there isn t an annual management charge. The following deductions are taken into account when we set bonus rates. a) The various costs and expenses involved when setting up and managing your plan, such as: - investment management - administration - commission payments to financial advisers, and b) the cost of providing the guarantees and options and other expenses of With Profits, such as the value on normal retirement or death, and c) the payments we make to our shareholders. The effect of deductions on your pension plan is shown in your personal illustration. The type and level of all of our charges can be revised from time to time. However, we will write to you before we make any change. Can I change my investments? You can switch your fund(s) into a different fund or funds, or Lifestyle Profile at any time (except the amount which must be invested in With Profits to cover the cost of any GMP). The first switch you make in any 12 month period is currently free. However, money switched out of With Profits may be subject to an MVR. Any subsequent switches within the same 12 month period are currently chargeable. The charges, which are in addition to any MVR, are 0.5% of the bid value of the units being switched, currently subject to a maximum of 25 and a minimum of 10. Further information about how and when we can apply an MVR can be found in the An Introduction to Unitised With Profits guide. Our pension fund guides give you full details of all the funds, and some of the risks involved, and are available on request. Can I cash in my plan? No, once the transfer value has been paid in, it has to remain invested until you take your benefits. Can I transfer the value of my plan? You can transfer the value of your plan to another Registered Pension Scheme at any time. However, if you are invested in With Profits, an MVR may apply. Can I make extra contributions? No, the only payments that can be made into this Buy Out Plan are a single transfer value or a Pension Credit from a Registered Pension Scheme. When can I take my benefits? Usually you will take your benefits at your selected Normal Retirement Age. However, benefits can be taken any time between the ages of 55 and 75, although the minimum age is 50 if benefits are taken before 6 April If you are invested in With Profits, an MVR may apply if you take benefits before your Normal Retirement Age. There are, however, circumstances which restrict the age from when benefits can be taken. The statutory age from which GMP is payable is 65 (male) and 60 (female) and certain conditions apply if benefits are to be taken before or after those ages. In some instances it may not be possible to take benefits at another age and you should read the What are the rules? section on page 5 for more information on the restrictions relating to GMP. How are benefits from contracting-out treated? If your pension fund includes benefits arising from contracting-out of the earnings related part of the State Pension Scheme, your benefits will normally contain either GMP/section 9(2B) rights or Protected Rights benefits. Certain restrictions currently apply to the way these benefits are paid. You cannot normally take a cash lump sum from a GMP. Your income may have to increase by a set percentage. If you have Protected Rights or section 9(2B) rights and you are married/in a registered civil partnership at the time you take your benefits you will have to provide an income for your spouse/registered civil partner in case you should die first. If you have a GMP, you may have to provide an income for your spouse/registered civil partner when you take your benefits regardless of whether you are married/in a registered civil partnership at that time. Individual Buy Out Plan Key Features - Page 6 of 9

7 However, these restrictions do not apply to any benefits arising from a transfer value for a Pension Credit awarded following divorce or dissolution. For more information on how contracting-out benefits are currently treated you should speak to your financial adviser. What happens if I die before I take my benefits? Certain restrictions may apply to the way the benefits are paid, depending on your circumstances at the time of your death and the benefits to which the transfer relates. If you die before you take your benefits, the value of your fund will be paid to the person(s) of your choice as a lump sum, or as a pension, or to your estate if you do not choose anyone. However, if the benefits transferred into your plan include benefits built up while you were contracted out of the earnings related part of the State Pension Scheme and you are married/in a registered civil partnership at the date of death, then a pension may have to be paid to your spouse/registered civil partner. If you have a GMP, provision may need to be made for a spouse s/registered civil partner's pension regardless of your marital status. If your benefit is a Pension Credit, 25% of your fund can be paid as a lump sum as above and the balance used to provide a pension for your dependant(s). What happens if I die after I have taken my benefits? This depends on the pension options* you select when you take your benefits. You can opt for your spouse/registered civil partner to continue to benefit from a regular income after your death. Choosing this option would reduce the pension you receive at outset. If your pension contains benefits in respect of contractingout then your spouse/registered civil partner would normally continue to receive a proportion of those benefits. *The options available from Legal & General may vary from time to time. However, an Open Market Option is available which will allow you to buy a pension from another provider. Details of the options we can provide at any given time are available on request. Further information About Legal & General The Legal & General Group, established in 1836, is one of the UK s leading financial services companies. Over 5.8 million people rely on us for life assurance, pensions, investments and general insurance plans. The Legal & General Group is responsible for investing over 304 billion worldwide (as at 30 June 2008) on behalf of investors, policyholders and institutions. Your right to cancel After we have accepted your application we will send you a notice of your right to cancel. If you decide to cancel, complete the form within 30 days of receiving it and send it back to the address shown in the How to contact us section on page 8. We will then cancel the plan subject to the paragraphs below. If you decide to cancel the transfer we will make every effort to return the money to the previous provider. They do not have to accept this back. If they will not accept the return of the transfer value, your Plan with us will continue and the money will remain invested in the fund(s) you have chosen. If there has been a fall in the investment value of the Plan during the period prior to receipt of your instructions to cancel, the amount returned may reflect any reduction in the investment value. If you don t take this opportunity to cancel and you want to do so at a later date you cannot get back any money until you start to take your benefits. Tax This information is based on our understanding of the current law relating to pensions. Valuation of funds We value investment funds frequently to enable us to treat all policyholders fairly. The Policy(ies) contains further details about how funds are valued. You can request a copy of the Policy(ies) at any time, but we will send this to you after we have accepted your application. With Profits You should have received a copy of Legal & General s An Introduction to Unitised With Profits guide which gives more information on how we manage unitised With Profits investments. If you have not received this document please ask your financial adviser for one. A more detailed description of how we manage our With Profits business is contained in a document called Principles and Practices of Financial Management (PPFM) and is available on request. Both of the above documents can also be found at Law and language This contract is governed by English law. All communications will only be available in English and will normally be by letter or telephone. Individual Buy Out Plan Key Features - Page 7 of 9

8 Our Regulator We re authorised and regulated by the Financial Services Authority. We re entered on their register under number You can check this at or telephone them on How to complain If you d like to complain about any aspect of our service, or would like us to send you a copy of our internal complaint handling process, please contact us using the details in the How to contact us section opposite. Complaints regarding our administration that we cannot settle can initially be referred to: The Pensions Advisory Service 11 Belgrave Road London SW1V 1RB Telephone: enquiries@pensionsadvisoryservice.org.uk Website: and then may be referred to: The Pensions Ombudsman 11 Belgrave Road London SW1V 1RB Telephone: enquiries@pensions-ombudsman.org.uk Website: Sales related complaints that we cannot settle can be referred to: The Financial Ombudsman Service South Quay Plaza 183 Marsh Wall London E14 9SR Telephone: complaint.info@financial-ombudsman.org.uk Website: Making a complaint to The Pensions Advisory Service or The Financial Ombudsman Service will not affect your legal rights. Compensation Scheme How to contact us You can write to us at: Legal & General Assurance Society Limited Transfer In Unit PO Box 186 Tadworth Surrey KT20 6WS Or call us on We may record and monitor calls. Customer categorisation The financial services regulator require us to put our customers into groups so that we can treat them according to their level of knowledge about investments. These groups are: Retail client; Professional client; or Eligible counterparty. We treat all customers who invest in our pensions as retail clients. This gives you the greatest level of protection under the regulations and ensures you get full information about any products you buy. If you know a lot about investments, maybe because you work in the industry, you can be treated as professional client or eligible counterparty under the regulations. This won t affect the way we deal with you but it may affect your ability to refer complaints to the Financial Ombudsman Service or to make a claim under the Financial Services Compensation Scheme. Conflicts of interest During the term of your investment, conflicts of interest may arise between you and us, our employees, our associated companies or our representatives. A conflict of interest is where our duties to you as a customer may conflict with what s best for ourselves. To ensure we treat customers consistently and fairly, we have a policy on how to identify and manage these conflicts. A copy of the policy is available on request from the address shown in the 'How to contact us' section above, or from our website at The Financial Services Compensation Scheme ('the scheme') covers us. You may be entitled to compensation from the scheme if we cannot meet our obligations. This depends on the type of business and the circumstances of the claim. Currently the first 2,000 of a claim is protected in full. Above this amount, the Scheme covers payment to 90% of the value of a policy. You can get more information from the Financial Services Compensation Scheme (website: Individual Buy Out Plan Key Features - Page 8 of 9

9 Glossary An explanation of some of the terms used in this Key Features. Guaranteed Minimum Pension (GMP) - This is what you may have built up as a result of being a member of a final salary scheme which was contracted out of the State Second Pension Scheme (or the State Earnings Related Pension Scheme) between 6 April 1978 and 5 April The amount of GMP you receive from the Buy Out Plan at 65 (male) or 60 (female) will not be less than what you would have received from your previous final salary scheme. Protected Rights - These represent what you gave up by contracting out of the State Second Pension Scheme, whilst you were a member of an Occupational Money Purchase Scheme or a Personal Pension Plan. They are called Protected Rights as the way they have to be paid is set out in legislation. For example, if you are married when you take your Protected Rights benefits, your annuity must include a widow(er)'s/surviving registered civil partner's pension. Non Protected Rights - Non Protected Rights are benefits that have been built up by contributions paid by you or your employer. Unlike Protected Rights, the pension bought by your Non Protected Rights gives you more flexibility about the options available to you. Section 9(2B) rights - Benefits that you have built up as a result of contracting out of the State Second Pension Scheme (or the State Earnings Related Pension Scheme since 6 April 1997). Unlike pre 6 April 1997 contracted out benefits (GMP), section 9(2B) rights do not provide a guaranteed minimum pension. Policies - Your transfer could be invested in up to two policies; one for your Non Protected Rights and another for your Protected Rights/GMP/section 9(2B) rights. Each policy has its own unique number. As a group, the policies make up the Plan. Income Withdrawal - A facility that allows you to take an income from your pension fund without having to buy a pension (an annuity) from an insurance company. An income is drawn from the fund, and the rest of the fund remains invested. There is no minimum level of income, but there is a maximum which is set by HM Revenue & Customs. Income withdrawals can be taken up until your 75th birthday. Individual Buy Out Plan Key Features - Page 9 of 9