Guaranteed Annuity An income for life that will never fall 1
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A guide to our Guaranteed Annuity Introducing Retirement Advantage Previously known as MGM Advantage and Stonehaven, we are a wellestablished company that can trace its roots back over 150 years. In 2015 we changed our name to Retirement Advantage merging our retirement income and equity release divisions, to help us provide those who are in, at or approaching retirement with a range of simple, secure and flexible products to suit their needs. As retirement specialists we believe we understand the needs of our customers better. And with over 2.1 billion of funds under management and thousands of retirees relying on us for their income, you can trust us to keep your money safe. But, to be absolutely certain you re making decisions that are right for you, we only sell our products through financial advisers. 3
What is an annuity? When you retire, you need to make sure you have enough money to last you for the rest of your life. So, in return for some or all of your pension savings, an annuity provider will agree to pay you a regular amount, commonly each month, until you die. At Retirement Advantage we want to make sure you maximise your income throughout retirement and get the best deal to suit your needs. We have a range of solutions that can help you achieve this: Our Guaranteed Annuity will pay you a guaranteed income throughout retirement that can never fall. Many of our customers now buy a guaranteed annuity from us within The Retirement Account. The Retirement Account can pay you a guaranteed income together with growth opportunities and access to your money through Pension Drawdown. Because of its unique structure the annuity option provides income flexibility and tax planning opportunities not available in a traditional annuity. Your financial adviser will be able to provide you with detail of The Retirement Account and advise whether it is suitable for you. This brochure explains how our Guaranteed Annuity will give you a regular income for life, meaning that, in an age where people are living longer, you can sleep easy. 4
A guide to our Guaranteed Annuity What are pension freedoms? The 2014 budget announced the introduction of wide-ranging new pension freedoms. Now, whatever the size of your defined contribution pension pot, from age 55 you ll be able to take it how you want, subject to your marginal rate of income tax in that year 25% of your total pension pot is available tax-free. While the freedoms are to be welcomed, many people are still keen to secure a guaranteed income for life. An annuity is still the only way to be certain you don t outlive your savings. No matter how long you live. 5
How does our Guaranteed Annuity work? To make sure your lifestyle needs are comfortably met throughout your retirement, it s important to secure a regular income, in addition to your state pension. There are a number of ways we can help you achieve this all of which start with an assessment of your health and lifestyle. Whether you re currently healthy, have a medical condition, or lead a lifestyle that means your life expectancy may be shorter than average, we can help you. Our Guaranteed Annuity offers you the best possible income for your circumstances and make you better equipped for retirement. 6
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A guide to our Guaranteed Annuity How is your income amount decided? If you choose a Retirement Advantage Guaranteed Annuity, the amount of income you will receive depends on a number of factors: The size of your pension fund used to buy the annuity. Your personal circumstances (for example where you live, your lifestyle or medical history). Annuity rates we use a rate to calculate the annuity on your personal illustration, which we guarantee for a certain period of time. The income options you select (see page 10) If your fund value is lower than 500,000 and we receive a fully completed application, fund(s) from your existing pension provider(s) and supporting information within the quote guarantee period, this is the same rate we use to pay you income. If your policy has a fund value above 500,000, we will also need a Doctor s report within the quote guarantee period. If we do not receive all we need within the quote guarantee period, or the amount we receive is 10% higher or lower than we assumed in the quote, we will recalculate your income based on current annuity rates, which may be higher or lower. If the income calculated is significantly lower we will ask your financial adviser for confirmation that the policy is still to proceed. 9
Your income options Once you ve chosen a Retirement Advantage Guaranteed Annuity, you ll need to decide how you want to receive your income, and whether you d like it to stay the same or rise in line with inflation. Here are the two options: Level-income option With this option your income payments will always be the same throughout your life they ll never go up (though they ll never go down either). This means you ll have no protection against inflation, but you will have a higher starting income than if you choose the escalation option. Escalating-income option With this option, your starting income will be lower, but your payments should go up each year. You have a choice of fixed increases from 0.1%-10% that apply every policy anniversary, or increases linked to inflation by the Retail Prices Index (RPI) or Limited Price Indexation. You can choose how often your income is paid monthly, quarterly, half yearly or yearly. There is a minimum payment of 50. If the monthly payment is less than 50, the income will be made at the next available frequency, e.g. quarterly. You can choose when we pay your income: In advance we ll pay you at the start of your chosen period. In arrears we ll pay you at the end of your chosen period. Once your annuity has started, you won t be able to make any changes to your income, payment frequency or benefits. RPI is the index of the average change in the prices of the goods and services in the UK. You can choose to have the increase capped at 5%, referred to as Limited Price Indexation. 10
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Is a guaranteed annuity right for you? To help you decide if a guaranteed annuity is right for you, you should discuss your options one-to-one with your financial adviser. You might also find it useful to ask yourself the following questions: Would you like a guaranteed income for life in retirement? Is your pension(s) your only savings? Is it important that your retirement income doesn t fall in value? Do you want the highest level of income in retirement? Are you suffering from any medical or health conditions? Are you worried about outliving your savings? If you answered yes to at least four out of the six questions above, a guaranteed annuity could be right for you. 12
A guide to our Guaranteed Annuity Are you eligible? To qualify for our Guaranteed Annuity you must be at least 55 and no older than 80. You may have to provide us with some information about your health, lifestyle and demographic as part of the application or we can call you to collect the relevant information. We can then provide you with your individually tailored quote. You ll need to have at least 5,000 in pension fund(s) after any tax-free cash and any adviser charges have been taken, and you must be a resident in the UK when you apply, and when the policy starts. 13
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A guide to our Guaranteed Annuity What happens after you die? The annuity will stop unless you have chosen benefits that continue on after your death. There are three ways you can protect your annuity: 1. The joint-life option. This means that on your death, we ll pay up to 100% of your income (depending on the percentage you choose) to your spouse or partner. If you die before age 75 any income payments made to your dependant will be tax-free. If you die from age 75 onwards any income payments made to your dependant will be taxed at their marginal rate of income tax. 2. The guarantee period option. This means that we pay your income for a guaranteed length of time, even if you die before the guarantee period ends. You can choose to have a guarantee period of between one and thirty years. So, for example, if you choose to guarantee your annuity income for ten years but die three years after, we will continue the annuity payments for the remaining seven years. If you die before age 75 the income payments will be made to beneficiary(s) tax-free until the end of the guarantee period. If you die from age 75 onwards the income payments made to beneficiary(s) will be taxed at their marginal rate. 3. Value protection. If you choose this option, the money you paid for your annuity, less payments made to the date of your death, will be paid to your beneficiaries. If you die before age 75, the payment will be made tax-free to your beneficiary. If you die from age 75 onwards the payment will be taxed at their marginal rate. 15
Case Studies Meet Jenna Jenna, 57, has raised blood pressure, which she controls with Atenolol and Ramipril. She also has slightly raised cholesterol and takes one Simvastatin tablet daily. She d heard that there are annuities that pay more if you re in poor health, but didn t imagine that her raised blood pressure and slightly elevated cholesterol would qualify. After all, she feels fine and has never experienced any symptoms whatsoever. She was surprised to discover from her adviser that she could receive an increased income because of her blood pressure and cholesterol levels. She is aware that it s now possible to take all her pension savings as cash, but this doesn t appeal to her. She s worried about what she d do with it and how she would manage her income without running out of money. (Someone had also told her that only 25% is tax free.) Consequently, she would prefer the reassurance of knowing that she has a guaranteed income for the rest of her life and the discovery that she will receive a higher income because of her health will help make her retirement a little more comfortable financially. 16
A guide to our Guaranteed Annuity Meet Rick Rick, 66, is single and lives on his own. He s a keen cyclist, swimmer and keeps himself in good shape generally. He s never smoked and, while he enjoys a glass of wine from time to time, he is conscious of what he eats and drinks. Rick s parent are still alive and in their 90s. Rick has a fund of 90,000 and is also receiving 12,000 a year in pensions from the State (along with some small pensions from companies he worked for early in his career). He s heard that he can take his pension benefits entirely as cash and, like many people, is interested in this. His adviser, Brian, points out that the tax would be substantial if Rick takes all the money in one go. Rick could take the money out gradually, but Brian suggests Rick might be better off with an annuity. Rick hadn t really considered an annuity as he d heard they weren t good value, but Brian explains that when people assess the value of annuities, they tend to assume someone will die around 20 years after they retire. Rick s adviser suggested that Rick could well spend 30 years in retirement, maybe even longer. He points out that there are currently over 13,000 people living in the UK who are aged 100 or more! Although Rick was initially tempted to take the cash, Brian s comments made him think twice and he decided to buy an annuity. As he continues to take good care of himself, he finds it reassuring to know that however long he lives he won t have to worry about an income for life. 17
Help with decision making in retirement Your finances are going to play a substantial role in your retirement. That s why we insist that if you haven t done so already you enlist a financial adviser to take a good look at your circumstances and long-term expectations. Retirement has been a long time coming, so don t feel rushed into making any decisions. By acting on the impartial advice of an expert you re likely to benefit for many years to come. To find a retirement specialist, there are directories that are free to use and will display a list of firms that can help you. Our website will show you a number of these organisations including Pick-A, Pension Wise, Equity Release Council and Unbiased. Visit retirementadvantage.com/find-an-adviser 18
A guide to our Guaranteed Annuity How to apply/ what to do next Your financial adviser will help you choose options that meet your needs. They can also help you complete the application form, and give us any other information we need. Once we have accepted your application we will deal directly with your existing pension scheme(s) and your financial adviser to finalise the arrangements. 19
The information in this document is based on our understanding as at June 2017 of current taxation, legislation and HM Revenue and Customs practice. All of these are liable to change without notice. The impact of taxation (and any tax reliefs) depends on individual circumstances. Telephone calls may be recorded for training and quality monitoring purposes. Retirement Advantage is a trading name of MGM Advantage Life Limited. Registered no. 08395855. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Retirement Advantage and the Retirement Advantage logo are trademarks of MGM Advantage Holdings Limited. Registered in England and Wales. Registered office 110 Cannon Street, London EC4N 6EU. 21-100 07/17