A Guide to Your Retirement Choices

Transcription

1 A Guide to Your Retirement Choices

2 As you are approaching retirement, there are a number of choices available to you. The choice you make should reflect your own personal circumstances and other pension policies you may have. You now have more options when shopping around for a pension, so we recommend that you seek independent financial advice. A financial adviser will inform you of the fee they charge for their service. This booklet has been put together to assist your understanding of what Equitable Life needs from you, as part of our retirement process. We also enclose the Money Advice Service booklet to help you make your decision. For ease of reference, the colours used for each section correspond with the colours used in the Retirement Options Form. Contents Your Retirement Journey Consider Your Retirement Options Section A : Small Funds and/or Triviality Section B : Open Market Option with another Provider Section C : Open Market Option with Canada Life Section D : Transfer to another Provider Section E : Ill Health / Serious Ill Health Section F : Leaving your Pension Fund invested with us Additional Information (words shown in italics are defined under this Section) Contacting us 2

3 Your Retirement Journey If you have received a letter from us confirming you are approaching your retirement date or you would like information on the retirement options available to you, the information below sets out our process. Stage 1 We will issue you with a Retirement Pack giving you details of the following retirement options: Pension Commencement Lump Sum (PCLS formerly known as Tax Free Cash) may be available under these options Section A Section B Section C Section D Section E Section F Small Funds and/or Triviality Open Market Option with another Provider Open Market Option with Canada Life Transfer to another Provider Ill Health/ Serious Ill Health Leaving your Pension Fund invested Stage 2 We will send you further paperwork to progress your chosen option Ill Health/Serious Ill Health Please contact us for specific information Payment Once we have received all the completed forms we can make payment where applicable. Missing information may result in a delay in payment. Leaving your Pension Fund invested Please contact us for specific information 3

4 Consider Your Retirement Options We recommend that you seek independent financial advice. A financial adviser will inform you of the fee that they charge for their service. There is a website you can use to find Independent Financial Advisers (IFAs) in your area at: The Pensions Advisory Service is able to provide you with free impartial information and guidance on all pension matters. It can be contacted on or visit their website at Buying a pension Pension Commencement Lump Sum (PCLS) - you can usually take up to a quarter (25%) of your pension fund tax free as a cash lump sum, using the remainder to buy a pension. If you select an Open Market Option, we will pay the PCLS to you, up to the maximum allowable (detailed in Section B and Section C). If you select a transfer, the transferring scheme will advise whether a PCLS will be paid and, if so, when (details in Section D). If you believe you are entitled to more than 25%, then please contact us for further information. An Annuity is an income payable for the rest of your life. It is the most popular way people buy a pension and, if you have built up more than one pension fund, you may be able to combine them into one annuity. There are many different types of annuity, each designed to suit different personal circumstances. It is important to note that from April 2015 the Government proposes that, whatever the size of your pension pot, it will no longer be necessary to buy an annuity, providing you are over 55. You will be able to take your savings as cash according to your choice, subject to tax at your marginal rate. This will give you greater flexibility in choosing what to do with your pension benefits. If you plan to buy an annuity you should consider the following questions:??? Are you married or do you have a partner or other dependant? Will they need an income if you die first? If so, you may wish to consider a joint-life annuity which continues to pay an income for both of your lives. This will reduce the initial amount of your annuity. Do you smoke? Are you on medication or do you have a medical condition? If so, you may be eligible for an enhanced annuity, which could pay you a much higher level of income. We enclose a leaflet describing Canada Life s enhanced annuity. Alternative options may be available from other providers. Do you want your income to increase over time to help keep up with inflation? If so, you may wish to consider an escalating annuity where the level of income starts lower than a fixed annuity but increases over time or adjusts to rise in line with inflation. Details of various types of annuities are given in the accompanying Money Advice Service booklet. At there is a free on line annuity planner which can help you answer these and other questions about which type of annuity is right for you. 4

5 Products that keep your money invested Some pension products allow you to keep your money invested and take an income. This can give the potential for your income to grow, but the income is not usually guaranteed and there is a risk that your income may go down. Equitable Life no longer offer any of these products, but other pension companies may do so. Other products available are: Flexible investment linked annuities provide an income for life but allow you to keep your money invested. Fixed term or temporary annuities use part of your pension savings to provide an income for a fixed period. You can use the remainder of your pension savings to buy an additional pension. Income Drawdown allows you to draw an income from your pension savings while keeping it invested. Getting Help We recommend that you seek independent financial advice. A financial adviser will inform you of the fee they charge for their service. Details of where to go for advice are given in the Money Advice Service booklet. The following options are explained in more detail in this booklet: Small Funds and/or Triviality SECTION A Open Market Option with another Provider SECTION B Open Market Option with Canada Life SECTION C Transfer to another Provider SECTION D Ill Health/Serious Ill Health SECTION E Leaving your Pension Fund invested with us SECTION F 5

6 Section A: Small Funds and/or Triviality If you are 60 or over and have a small pension fund, it may be possible for you to take your benefits as a cash lump sum, subject to H M Revenue & Customs (HMRC) limits. In most cases, except Managed Pension Plan Policies, a quarter of the fund will be paid tax free and the remainder subject to income tax. Section A1 Small Funds Small funds for Personal Pension, Retirement Annuity, Managed Pension Plan, and Section 32 Policies If you are 60 or over and the total of your fund is 10,000 or less, you may be able to take your benefits as a cash lump sum. All of the fund must be paid as a cash lump sum leaving no other benefits under the arrangement. You can only take a maximum of three payments from all your pension schemes in this way during your lifetime. If you have taken more than two similar payments before please provide us with the details so we can investigate if this stops you receiving payment of these benefits as a cash lump sum. Small funds for Individual Pension Plans (IPPs), Group Money Purchase Schemes and Free Standing AVCs (FSAVCs) If the total value of your benefits under this pension scheme and any other pension schemes in respect of the same employment is 10,000 or less you may be able to take your benefits as a cash lump sum. You may not qualify for this option if: 1 2 You are a controlling director 1 or connected 2 to a controlling director of the company sponsoring the pension scheme or A transfer has been paid out of this scheme or any other scheme of the employer for you in the last 3 years. you are a controlling director if you control directly or indirectly at least 20% of the ordinary share capital connected means you are a spouse, civil partner or relative of a controlling director or in any way related to a controlling director s spouse/civil partner Small Funds for Individual Pension Plans (IPPs), Group Money Purchase Schemes and Section 32 Policies with protected Pension Commencement Lump Sum (PCLS) If you are entitled to take a PCLS in excess of the standard 25%, you may be able to take the remaining fund as a cash lump sum if you meet the following criteria (income tax will be payable on all of the remaining fund): You are 60 or over and the value of benefits under the pension scheme remaining after taking the maximum PCLS is 10,000 or less, and All or part of your standard lifetime allowance, as set by HMRC, is available at the time the payment is made. 6

7 Section A2: Triviality (all pension policies) Where the total value of your pension benefits (including any funds held with other providers and any pensions already in payment) does not exceed the triviality limit set by HMRC and you are 60 or over, your benefits may be taken as a cash lump sum which may be subject to income tax. Refer to Section A in the Retirement Options Form for details of the current triviality limit. For pensions in payment (including drawdown), the value used when assessing triviality is not the actual value of the pension. Please contact us if you require further details. If you would like to take more than one pension fund as a trivial lump sum they must all be taken within one 12 month period (your Commutation Period). Your Commutation Period starts on the day you receive your first triviality payment whether this is with us or another Provider. You have up to 3 months from the nomination date to receive your first triviality payment. The following information applies to claims made under both small funds and triviality. Life cover If you decide to take your fund as a small fund or triviality lump sum any life cover benefits under the policy or scheme will cease. Declaration to HMRC If you are able to take your funds under either of these options you will need to declare the payment to HMRC so they can determine the appropriate level of tax for your circumstances. P45 (Where the Plan is held in the name of the Trustee or Employer, this note does not apply. The Trustee or Employer will issue you with a P45 where applicable). We will issue you with a P45, which will include the amount of tax deducted from your lump sum. The tax deducted may not be the right amount due, when all of your income for the year is taken into account. After the next 5 April, HMRC will check if you have paid the correct amount of tax. If you have not, they will contact you. If you think you have paid too much tax you can ask HMRC for a tax refund now you do not have to wait until 5 April. Claim a tax refund To claim a refund, call your usual tax office and ask for form P53. You can find the numbers on the Contact us pages of the HMRC website at or in the phone book. It helps if you have your National Insurance number to hand when you call. 7

8 If you believe that you meet the criteria for small funds or triviality and wish to make a claim, this is what you need to complete on the Retirement Options Form. (Please note, where the Plan is held in the name of the Trustee or Employer, they must complete the relevant Sections on the Retirement Options Form). Tick box A of the Options Section. Complete either Section A 1.1, 1.2 ( if requested 1.3) for payment of small funds and/or Section 2 Triviality. Complete Section G Other Pension Benefits (if applicable). Complete the Payment Details Section. Complete the Declaration Section. Upon receipt we will assess your eligibility for a lump sum payment. We can only proceed to the payment stage when this form has been returned fully completed and we have established your eligibility. 8

9 Section B: Open Market Option with another Provider An Open Market Option (OMO) is where you use your pension fund with us to buy an annuity from another Provider. This option is usually available from age 55 but not available until age 60 for Retirement Annuity Contracts (except where benefits are being taken due to ill health). Please refer to the covering letter accompanying this booklet for details of the minimum retirement age for your specific policy type. The enclosed Statement of Value shows the fund available if you were to use the OMO. This statement is just an indication of your fund value. The actual amount when you take your benefits may be different and will depend on market conditions at that time. Equitable Life will pay any Pension Commencement Lump Sum (PCLS), if available, in accordance with your instructions and pay the remaining fund to your chosen Provider. If you are taking an OMO from a Managed Pension policy or other Income Drawdown policy, you will not be able to take a PCLS from this policy as this option was only available to you when you first purchased this policy. If you attained age 75 prior to 6 April 2011 you have now lost your entitlement to a PCLS. If you have with-profits protected rights benefits and are under age 60, the value of your with-profits protected rights benefits will be reduced by any financial adjustment. If you have a Free Standing AVC, Individual Pension Plan (IPP) or are a member of a Group Scheme, please refer to the Retirement Options Form to find out when a financial adjustment applies. If you have any life cover under the scheme this will cease if you take an OMO. If you have decided to select this option, having made your final choice of annuity and Provider, this is what you need to complete on the Retirement Options Form: (Please note, where the Plan is held in the name of the Trustee or Employer, they must complete the relevant Sections on the Retirement Options Form). Tick box B of the Options Section. Complete Section B Open Market Option with another Provider. You should state how much PCLS you would like to take, if available. Complete Other Pension Benefit Information in Section B and Section G (if applicable). Complete the Payment Details Section. Complete the Declaration Section. Please return the following items to enable us to proceed: The completed Retirement Options Form. Confirmation in writing from the receiving Provider that they will accept the funds. Please note that we will not be able to make payment until we receive this written confirmation. We can only proceed to the payment stage when this form has been returned fully completed and written confirmation has been received from your Provider(s). Your annuity income from your pension fund may be affected in the meantime if there is a change in annuity rates, any change in the value of your pension fund, or if there is any change in pension legislation. 9

10 Section C: Open Market Option with Canada Life An Open Market Option (OMO) is where you use your pension fund with us to buy an annuity from another Provider. This option is usually available from age 55 but not available until age 60 for Retirement Annuity Contracts (except where benefits are being taken due to ill health). Please refer to the covering letter accompanying this booklet for details of the minimum retirement age for your specific policy type. To help you select your pension, we have teamed up with Canada Life. You can use the OMO to choose from Canada Life s range of pension options. If you requested a Canada Life illustration, it will be enclosed and this can be compared with the income that may be provided by other pension providers. The enclosed Statement of Value shows the fund available if you were to use the OMO. This statement is just an indication of your fund value. The actual amount when you take your benefits may be different and will depend on market conditions at that time. Pension Commencement Lump Sum (PCLS) If you choose a PCLS up to the maximum allowable this will be paid by Equitable Life and the remaining fund paid to Canada Life to purchase the annuity. If you are a Managed Pension policyholder you will not be entitled to a PCLS as this option was only available to you when you purchased the Managed Pension policy. If you attained age 75 prior to 6 April 2011 you have now lost your entitlement to a PCLS. Protected Rights If you have with-profits protected rights benefits and are aged under 60, the value of your with-profits protected rights benefits will be reduced by any financial adjustment. Members of a Free Standing AVC, Individual Pension Plan (IPP) or a Group Scheme Please refer to the Retirement Options Form to find out when a financial adjustment applies. If you have any life cover under the scheme, this will cease if you select this option. Requesting a Canada Life illustration If you have not requested an illustration but would like to consider this option, please complete Section C3 of the Retirement Options Form and return to us. (Please note, where the Plan is held in the name of the Trustee or Employer, they must complete the relevant Sections on the Retirement Options Form). In order to provide a pension illustration from Canada Life, we will securely transfer some of your personal information including name, date of birth and postcode to Canada Life. Canada Life will only use your personal information for the purpose of providing a pension illustration for you. Canada Life will not pass on your personal information to any other organisation unless required to do so by law or a regulatory body. 10

11 This is a two stage retirement illustration process. In order to ensure policyholders are given time to consider their retirement options, our retirement process is in two stages. At the first stage, we enclose an illustration of the benefits that may be available from Canada Life. At the second stage, on receipt of your instructions, we will issue an updated illustration, together with the application forms required by Canada Life to set up your annuity. We will wait until we are within 2 weeks of your selected retirement date to issue further illustrations and forms. This will ensure that the illustrations are not affected if there is a change in annuity rates. Stage 1 If you have received a Canada Life illustration and wish to explore this option, you need to complete the Retirement Options Form:(Please note, where the Plan is held in the name of the Trustee or Employer, they must complete the relevant Sections on the Retirement Options Form). Tick box C of the Options Section. Complete Section C Open Market Option with Canada Life. Complete Section G Other Pension Benefits (if applicable). Complete the Payment Details Section. Complete the Declaration Section. Please return the following items to enable us to proceed to Stage 2: The completed Retirement Options Form (as above). The completed Canada Life Comparative Annuity Quotation, if applicable. Please note the start date shown on the Canada Life Lifetime Annuity Personal Example is for illustrative purposes only. The annuity will start from the date Canada Life receive all the paperwork and funds necessary to set up the annuity. The actual income you receive may differ from the income shown. Stage 2 When we have received the information requested in stage 1, we will move to stage 2 and send you (or where the Plan is held in the name of the Trustee or Employer, we will send them the forms): A Canada Life application form Open Market Option Application Form. An up-to-date Canada Life annuity illustration (please note that annuity rates are variable and the level of income may have changed). A copy of your Retirement Options Form (if you have missed any information). If you are unsure about taking an annuity with Canada Life and wish to request further illustrations showing different types of benefits, you can still do so at this stage. Please contact us. The Money Advice Service booklet enclosed provides more detailed information about the type of annuity you may be able to purchase. 11

12 Stage 2 continued... If you wish to proceed with a Canada Life annuity you (or the Trustee or Employer if the Plan is held in their name) will then need to send us: A completed Canada Life application form Open Market Option Application Form. The Canada Life Lifetime annuity illustration that you wish to accept. Original Birth and, where applicable, Marriage (or Civil Partnership) Certificates (and proof of any other change of name) or valid photocard driving licence or passport. The Retirement Options Form (if you have changed your mind). You do not have to buy an annuity from Canada Life. Please refer to the enclosed Money Advice Service booklet for details of how to shop around to buy the right annuity. We can only proceed to the payment stage when these forms have been returned fully completed and you are within 2 weeks of your selected retirement date. Your income from your annuity may be affected in the meantime if there is a change in Canada Life annuity rates or a change in pension legislation. Canada Life illustrations If you have selected the Canada Life illustration to show annuity payments in arrears, the illustration includes the option of a proportional payment on death. If the annuitant dies after any guaranteed payments have ceased and the payment basis is "in arrears with proportional payment on death", Canada Life will make an additional payment in respect of the number of days between the last full payment of the annuity and the date of death. If you would like revised illustrations that do not include this option, please let us know. If your fund is insufficient to provide an annuity with Canada Life at the frequency you have requested, we may illustrate an annuity payable at a different frequency. Enhanced annuity If you smoke, are on medication or have a medical condition, you may be eligible for an enhanced annuity, which could pay you a much higher level of income. We enclose a leaflet describing Canada Life s enhanced annuity, which provides a number to contact them directly for further details. Alternative options may be available from other providers. 12

13 Section D: Transfer to another Provider You may want to transfer your pension funds to another registered pension scheme with a different Provider. By transferring you can choose from the options available under the receiving scheme, which may include leaving your funds invested, taking some of the fund as income via an income drawdown policy or, once you have transferred to the registered pension scheme, purchasing an annuity. Pension Commencement Lump Sum (PCLS) If you are transferring to another registered pension scheme to go into a drawdown policy or to take benefits immediately, all of your fund will be transferred to the other Provider and they will be responsible for paying any PCLS you require. Please note that if you have an entitlement to a PCLS of more than 25%, this will be lost on transfer and you will be restricted to 25%. If you reached age 75 before 6 April 2011, you no longer have the option to transfer to another registered pension scheme to leave your funds invested. You may only transfer to go into income drawdown or to purchase an annuity. If you attained age 75 prior to 6 April 2011 you have now lost your entitlement to a PCLS. If your benefits are in a Managed Pension policy you will not be entitled to a PCLS as this option was only available to you when you purchased the policy. If you are considering transferring to an overseas pension scheme, please contact us for further details. If you have a Free Standing AVC, Individual Pension Plan (IPP) or are a member of a Group Scheme, any life cover under the scheme will cease if you select this option. If you wish to transfer your funds please complete the following on the Retirement Options Form (where the Plan is held in the name of the Trustee or Employer, they must complete the relevant Sections, unless otherwise stated on the Retirement Options Form): Tick box D of the Options Section. Complete Section D Transfer to another Provider. Complete the Payment Details Section for details of receiving arrangement. Provide confirmation in writing from the receiving Provider, that they will accept the funds (please note that we will not be able to make payment until this written confirmation is received). Complete the Declaration Section. We can only proceed to the payment stage when the form has been returned fully completed and written confirmation obtained from the receiving Provider. 13

14 Section E: Ill Health / Serious Ill Health Special conditions may apply if you are suffering from ill health: Ill Health You may be able to take benefits from your pension fund before age 55 (or 60 if you have a Retirement Annuity Contract) if you can no longer pursue your occupation because of physical or mental impairment. You must have ceased carrying out your occupation. We will need the relevant form to be signed by a registered medical practitioner confirming that you meet the conditions for an ill health early retirement pension before we can make payment. Serious Ill Health life expectancy less than one year If you have a life expectancy of less than one year and have benefits that have not already been put into payment, these can be taken as a lump sum. If you are aged under 75, the lump sum will be tax free up to the amount of your remaining lifetime allowance. For all lump sum payments from age 75 the total amount paid is subject to a 55% tax charge. We will need the relevant form to be signed by a registered medical practitioner confirming that you meet the conditions for a serious ill health lump sum before we can make payment. If you wish to consider either of these options above, please contact us (where the Plan is held in the name of the Trustee or Employer, they must contact us) and we will send you the appropriate form, which will need to be signed by a registered medical practitioner. On receipt of the completed form, we will assess if benefits can be paid on this basis. 14

15 Section F: Leaving your Pension Fund invested with us You may decide that having considered all the options available to you, you do not want to take your benefits or transfer them to another Provider now. There is no longer a requirement to take your benefits by a certain age. On reaching age 75, we will contact you again to request information about your other pension benefits to assess them against the Lifetime Allowance at that time and in accordance with HMRC requirements. This does not apply to a Managed Pension policy. If you die before age 75 and have not taken benefits, any lump sum payable will be tax free up to the amount of your remaining lifetime allowance (there will be a tax charge of 55% of any amount over your lifetime allowance). If you die after age 75 and have not taken benefits, any lump sum payable will be subject to a 55% tax charge. Where your benefits are in a Managed Pension policy, any death lump sum, regardless of age, is subject to a 55% tax charge. Please complete Section F of the Retirement Options Form. You can contact us at anytime to exercise your retirement benefit options. 15

16 1. Pension Commencement Lump Sum (PCLS) You can usually take up to a quarter (25%) of your pension fund tax free as a cash lump sum, using the remainder to buy a pension. This is called a Pension Commencement Lump Sum (PCLS), formerly known as Tax Free Cash. If you believe you are entitled to more than 25%, then please contact us for further information. 2. Financial adjustment Any current financial adjustment is applied to the with-profits benefits if those benefits are taken at a time not permitted under the policy. From 1 April 2014 the financial adjustment is 0%. The financial adjustment may change without notice at any time. 3. Protected rights and when the financial adjustment is applied. (a) If you are under age 60 Additional Information Guaranteed terms do not apply to the value of any with-profits protected rights benefits taken before age 60. Please refer to your policy documentation for details of the circumstances in which guaranteed terms apply. The value of your with-profits protected rights benefits is determined by adding together the protected rights Policy Value and any capital distribution, then reducing the total by any financial adjustment. This value may be significantly less than your protected rights guaranteed benefits. (b) If you are under age 60 and have protected and non-protected rights (PPP only) We enclose two Statements of Value. Your protected rights fund is shown on one Statement of Value on the basis described in 3(a) above. Your remaining fund, the non-protected rights fund, is shown on the other Statement of Value as if guaranteed terms apply. The values illustrated are not guaranteed to apply at any time in the future. You may have the option to take benefits from the non-protected rights benefits now and to leave the protected rights benefits invested with us until at least age 60 when guaranteed terms will apply. (c) If you are under age 60 and have protected rights only We enclose a Statement of Value. Your protected rights fund is shown on the Statement of Value on the basis described in 3(a) above. The value illustrated is not guaranteed to apply at any time in the future. You may choose to leave the protected rights benefits invested with us until at least age 60 when guaranteed terms will apply. (d) If you are age 60 or over All benefits can be taken on guaranteed terms if you are taking immediate benefits or if you have reached age 75. The value of with-profits benefits on guaranteed terms is determined as the total of the Policy Value and any capital distribution or, if greater, the value of guaranteed benefits. If you are transferring for deferred benefits and you are under age 75, the value of your with-profits protected rights benefits is determined on the basis described in 3(a) above. 16

17 Additional Information continued Lifetime Allowance The Lifetime Allowance is a limit on the value of benefits from all of your pension schemes, including lump sums or pension income, that can be paid out without incurring an extra tax charge. The limit is set by the Government and can be found in the Retirement Options Form or further details can be found on the HMRC website: 5. Current law in force This guide summarises the legislation in force on 1 May 2013 which is relevant to your benefits. This summary is intended to assist you in understanding your benefits under your policy with Equitable Life, but please be aware that the relevant legislation and the way in which it affects your benefits (including the tax payable on your benefits) might change in the future. 6. Nomination Date If you would like to take a cash lump sum as a triviality payment, you must nominate a date on which all of your benefits are valued (this will include pensions already in payment). This date may have already been set if you have previously taken a triviality payment. This value is used to ensure you are not exceeding the triviality limit set by HMRC. Refer to Section A in the Retirement Options Form for details of the current triviality limit. You have up to 3 months from the nomination date to receive your first trivial lump sum. This date cannot be earlier than 3 months before your 60 th birthday. If you wish to take other benefits as a trivial lump sum, you must do so within 12 months of the first triviality payment being made. 17

18 Contacting us If there is anything you do not understand, please contact us on the number below. Where the Plan is held in the name of the Trustee or Employer, we usually deal directly with them. Contact details Our website is: For IPPs, PPPs, RAs, FSAVCs and MPN plan holders Equitable Life Walton Street Aylesbury Bucks HP21 7QW For Group Money Purchase Trustees or Employers Equitable Life Walton Street Aylesbury Bucks HP21 7QW Telephone: Fax: Opening times: 09:00 until 17:30 Monday to Friday Telephone: Fax: Opening times: 09:00 until 17:00 Monday to Friday Our address is: Our address is: Please note, we may not be able to respond by . You should be aware that If you live abroad: Telephone: Fax: sending information by is not always secure We are unable to provide financial advice, so you should contact a financial adviser to help you consider your options. A financial adviser will inform you of the fee that they charge for this service. There is a website you can use to find Independent Financial Advisers (IFAs) in your area at: The Pensions Advisory Service is able to provide free impartial information and guidance on all pension matters. It can be contacted on or visit their website at 18

19 For security purposes and training purposes, telephone calls may be recorded. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The Equitable Life Assurance Society is a mutual society registered in England No Registered Office: Bedford Row, London WC1R 4JS, United Kingdom. 45H