KEY FEATURES OF THE INCOME DRAWDOWN PLAN. Important information you need to read

Transcription

1 KEY FEATURES OF THE INCOME DRAWDOWN PLAN Important information you need to read

2 THE FINANCIAL CONDUCT AUTHORITY (FCA) IS A FINANCIAL SERVICES REGULATOR. IT REQUIRES US, SCOTTISH WIDOWS, TO GIVE YOU THIS IMPORTANT INFORMATION TO HELP YOU TO DECIDE WHETHER OUR INCOME DRAWDOWN 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. THESE KEY FEATURES SHOULD BE READ WITH THE ENCLOSED ILLUSTRATION. ITS AIMS To support you financially in retirement in a taxefficient way. To let you take a flexible taxable income and any taxfree cash entitlement from the value of your plan. To allow you to keep your pension fund invested. YOUR COMMITMENT To transfer the value of your existing pension into this plan. To use all of your remaining plan value, to buy one or more annuities or transfer to another income drawdown plan by age 75 at the latest. RISKS The value of your plan can go down as well as up, and could fall below the amount(s) paid in. The final value available to buy annuities isn t guaranteed. It would be lower than illustrated if, for example: investment performance is lower; you take a higher level of income; the charges are higher; tax rules change. If any income and the charges deducted from your plan are more than any investment growth, the value of your plan will go down. This could reduce the amount of income that you can take in the future and the income from any annuity bought later. High levels of income may not be sustainable and in some cases could reduce the value to zero. You should consider the impact this might have on your income in retirement. If your plan is on a capped drawdown basis, the income you can take is limited and, when your income is reviewed, the maximum income you can take may reduce. Please see the Taking income section for further information. The income from your plan and any annuity bought later may be less than you could have received if you had bought an annuity at the start. The cost of buying annuities can change significantly over time. If the cost increases, the annuity income you can buy with the final value of your plan will be lower than illustrated. When people buy an annuity, those who live longer gain at the expense of those who die early. If you delay buying your annuity and live longer, you ll not gain to the same extent. Your plan can invest in a range of investment funds which carry different levels of risk. For details of the specific risks that apply to each investment fund, please see our Pension Funds Investor Guide. You should read this guide before making any investment decisions. In certain circumstances, there may be a delay if you transfer the value of your plan or switch between investment funds. If you change your mind within 30 days of receiving your cancellation notice, the amount returned may be less than was invested. If you transfer from another pension plan, you could lose any guaranteed benefits and may not be able to return to it. 1

3 QUESTIONS & ANSWERS HOW WILL MY FUND BE INVESTED? The transfer payment(s), less any tax-free cash and any initial charge, is used to buy units in the investment funds you choose. We work out the value of your plan based on the total number of units you have in each fund. The value of your plan can fall as well as rise. We offer a wide range of unit-linked investment funds. You can find details of the aims, investments and risks of each fund in our Pension Funds Investor Guide. You can invest in up to 10 funds at any one time. You can switch in and out of the funds to change the mix of investments, though there may be a delay in certain circumstances. Conditions and a charge for doing this may apply. We may change the selection of funds that we make available and restrictions can apply. JARGON BUSTER Units Units are like shares of the fund. The price of each unit depends on the value of the investments held by the fund, and the number of units in it. WHAT CAN I GET BACK FROM MY PLAN? From age 55 you can start taking income from the value of your plan, or use the value to buy one or more annuities. In certain circumstances, you may be able to do so earlier, for example if you re in ill health. If you are entitled to take a tax-free cash sum, you must take it at the time of the transfer payment being made to us. The age from which you can start taking benefits from your pension may change. TAKING INCOME If you choose to take income from the value of your plan, you can decide how much to take each year, up to the full value of your plan (Flexible Access Drawdown). The income you can take will depend on a number of things, for example How well the investments perform The charges and expenses that are deducted Your age. You should bear in mind that if you take any income from this plan, you will be subject to the money purchase annual allowance (see What about tax? for further details). You can specify the income you want as a monetary amount or as an annual percentage of the value of your plan. Once set up, and provided you have sufficient funds, we will continue to make income payments in line with your current instructions. You can vary your income payments at any time, and can make extra one-off withdrawals whenever you like. If you ask for your income as an annual percentage of the value of your plan, you can ask us to change the amount at any time by specifying a different percentage. Otherwise, the amount will only change on the anniversary of the date you started your plan, when we will recalculate the amount payable. You can choose to have your income paid monthly or yearly. You should speak to your adviser to help you decide how much to take. 2

4 Plans started before 6 April 2015 (Capped drawdown) If you started your plan before 6 April 2015, your income is subject to limits set by the Government. You can only specify the income you want as a monetary amount. The maximum income depends on a number of things, for example: how well the investments perform, the charges and expenses that are deducted, interest rates, and your age. We recalculate the maximum income you can take at least every three years, and write to you after each review to let you know how much you can take for each of the following years until the next review. You can ask us to review the maximum annual level of income more regularly than this, but we can only do this once a year, on the anniversary of the date you designated your pension fund for income drawdown. Following a review, if the yearly income we are currently paying is more than the new maximum level, we will reduce the payments we make so your income is paid evenly at a level within the new maximum. If you pay in an additional transfer at a later date, we ll recalculate the maximum income you can take this can mean the maximum is less than it was before. You can choose to move to the Flexible Access Drawdown basis outlined earlier in this section at any time, but you cannot change your mind. If you ask to withdraw more than the maximum income, we will move you to the new Flexible Access Drawdown basis you cannot then move back to the Capped Drawdown basis. In either case, if you move to the Flexible Access Drawdown basis and take any income, you will be subject to the money purchase annual allowance which will restrict the amount you can contribute if you want to continue pension saving. For more information, see What about tax? or speak to your financial adviser. BUYING AN ANNUITY You can choose to use some or all of the value of your plan to buy an annuity. JARGON BUSTER Annuity This provides an income for life, the amount of which depends on circumstances when it s bought including: interest rates your age how long people are expected to live. You can choose from different types of annuities. You can buy your annuity from Scottish Widows or another provider. Your illustration will give you an idea of the annuity you could buy with the final value of your plan. Remember that the effect of inflation will reduce the future buying power of what you get back. JARGON BUSTER Inflation The effect of inflation reduces the value of money over time, as the following example illustrates: Today 1,000 After 10 years 744 After 20 years 553 The future value of 1,000, assuming inflation is 3% each year Once you ve bought an annuity, its terms can t be changed. For more details of all your options, please speak to your financial adviser. 3

5 WHAT HAPPENS IF I DIE? The value of your plan will be used to provide benefits to your dependants or beneficiaries. Some or all of the value can be used to: Provide a tax free lump sum payment. Buy annuities for one or more nominated beneficiaries. The income taken will be tax-free. Provide an income for one or more nominated beneficiaries using income drawdown. The income taken will be tax-free. If you ve arranged your plan under trust, we ll pay any lump sum to the trustees. If it s not arranged under trust, we ll decide who to pay the lump sum to. WHAT ARE THE CHARGES? We charge for managing and investing your plan. We take our charges partly from the transfer payment and partly out of the value of your plan. Your illustration shows our current charges, and how they could affect what you might get back. We can increase most of the charges we make if: a tax rule or law change significantly increases our costs or significantly decreases our income from charges; or there are exceptional circumstances which we could not reasonably have foreseen resulting in either our costs being significantly more, or our income from charges being significantly less, than we anticipated. We will give you three months notice if we increase our charges. If you ve invested in fund(s) managed by other fund managers, they have the power to change any charges they make. WHAT ABOUT TAX? There s no tax relief on transfer payments. If you decide to take a cash sum at the time you transfer your existing pension plan to us, it s normally tax-free. The income you buy from the remaining value of your plan will be taxed in payment. If you die before you are age 75, any lump sum or income paid to a dependant or beneficiary will not normally be subject to tax. Although the value of pension funds is not generally subject to Inheritance Tax, in certain circumstances the value of death benefits may be subject to tax charges. As this is a complex area you should contact your adviser or tax office for further guidance. Our pension investment funds are generally free of UK income and capital gains tax. Tax charges will normally apply if the Lifetime Allowance is exceeded. Please see the enclosed illustration for further details. If you take a pension encashment or flexibly access your benefits, tax relief will only be available on contributions up to the Money Purchase Annual Allowance. This is 4,000 for the 2017/2018 tax year. If you pay in more than this to any money purchase pensions you will be subject to an annual allowance charge. Please see your financial adviser for further details. The value of tax benefits of your plan depend on your individual circumstances. Your circumstances and tax rules may change in the future. For more information, please speak to your financial adviser. CAN I TRANSFER MY PLAN? You can transfer the remaining plan value to an income drawdown plan with another company. In certain circumstances, there may be a delay. No charges apply. Your illustration gives examples of possible transfer values. CAN I CHANGE MY MIND? You can change your mind within 30 days of receiving your cancellation notice. You must return any tax-free cash sum and income payments you ve received from the value of the plan. We ll return the transfer payment less any fall in its value. However, it may not be possible to return the value of any transfer payment to your previous pension plan and you may have to take out a new plan. If you don t cancel your plan, it will continue on the agreed basis. HOW WILL I KNOW HOW MY PLAN IS DOING? We ll send you a statement and an updated illustration each year. You should regularly review your plan to check if it remains on track for your needs. You can check the unit prices of our funds on our website as detailed on page 5 or get an up-to-date valuation of the plan by contacting us. 4

6 HOW TO CONTACT US OTHER INFORMATION Your financial adviser will normally be your first point of contact. If you ve any questions about your plan, or any changes you want to make to it, please contact us. You can phone us, send us a fax, or write to us. Call us on during the following times: Monday to Friday 8am 6pm We may record and monitor calls to help us to improve our service. Fax number Website Office address Scottish Widows Limited, 15 Dalkeith Road Edinburgh EH16 5BU We ll communicate with you in English. HOW TO COMPLAIN If you ever need to complain please contact us. If you re not satisfied with our response, you can complain to: The Financial Ombudsman Service Exchange Tower London E14 9SR Tel complaint.info@financial-ombudsman.org.uk Website Complaining to the Ombudsman won t affect your legal rights. TERMS AND CONDITIONS These Key Features give a summary of the Scottish Widows Income Drawdown Plan. Further details of the benefits, charges and conditions are given in product literature, Scheme Rules and Policy Provisions, which are available from us. We may change some of the terms and conditions at any time. We ll write and explain if this affects your plan. LAW For legal purposes the law of England & Wales will apply. This information represents Scottish Widows interpretation of the law and HM Revenue and Customs practices as at date of publication. Changes to tax rules and other laws may affect your contract terms. 5

7 SOLVENCY II RETURNS Our Solvency and Financial Condition Report (SFCR) and associated solvency reporting templates can be found via our website at: us/financial_information/solvency-2-returns.html The SFCR is produced annually to help you understand the management and performance of our business, and the strength of our solvency position. For the Scottish Widows Insurance Group, including its three main insurance companies, the report covers key aspects of our: business and performance system of governance risk profile valuation for solvency purposes capital management FINANCIAL SERVICES COMPENSATION SCHEME (FSCS) Your plan with Scottish Widows is fully covered by the Financial Services Compensation Scheme. More information about compensation arrangements is available from the Financial Services Compensation Scheme, who can be contacted on or or via their website at 6

8 Scottish Widows Limited. Registered in England and Wales No Registered office in the United Kingdom at 25 Gresham Street, London EC2V 7HN. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Financial Services Register number /17