Drawdown Key Features: The Xafinity SIPP and SimplySIPP If you require this document in another format for ease of reading, please let us know. Making Sense of Pensions
Key Features of the Xafinity SIPP and SimplySIPP The Financial Conduct Authority (FCA) is the independent financial services regulator. It requires us, Xafinity, to give you this important information to help you to decide whether drawdown under our SIPP 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. This document applies to both the Xafinity SIPP and SimplySIPP. Differences between the two are highlighted in this coloured text. Its aims The plan is designed to: Provide you with regular and flexible income from your pension fund. Provide you with up to 25% of your pension fund as a tax-free cash lump sum. Give you a choice over when, if at all, to buy a pension. your SIPP and those made by investment providers and your adviser will reduce what you get back. Make sure the investment will support all of these charges. You can find details of our charges in our Fees Schedules and Terms and Conditions. Investment risk You must be prepared to manage your SIPP assets (or appoint someone to do it for you). Enable you to provide benefits on your death for your nominated beneficiaries. Continue investing your fund while you re taking drawdown. Your commitments To keep within the rules of both our SIPP and those set by Her Majesty s Revenue and Customs (HMRC). To ensure that any drawdown where applicable is within HMRC limits. To take responsibility for the management of the investments in your fund. You can manage them yourself or use an adviser. Risk factors Charges A stakeholder or other type of pension may offer similar options as a SIPP at a lower cost. Our charges for running A number of things could reduce the size of your fund and affect drawdown (e.g. if the income you take is more than the growth on your investments). Also, the higher your drawdown, the smaller the fund available for future drawdown or pension purchases. Investment performance or charges may be better or worse than expected and the value of the plan could be less than shown in your illustration. Nothing is guaranteed. Different investments have different risks. Their value can go up or down. In some cases, you could lose all of your investment. If flexi-access drawdown is taken the fund could be exhausted and the plan will cease. Withdrawals could lead to you paying more income tax if you exceed your current tax band threshold. The value of some investments, e.g. property, will need to be determined by a valuer. The SimplySIPP, with its simpler investment choices, has less exposure to this risk. Making Sense of Pensions 2
Whilst the plan can accept transfers from other pension schemes, not all transfers are suitable. You must seek professional advice before proceeding with a transfer. Unless you ve obtained advice we won t be able to accept a transfer. Access to funds Once you ve started drawdown, that part of your fund can t be transferred out, other than to another plan offering drawdown, or to buy a pension. There may be a delay in receiving benefits if some of your investments can t be sold quickly (e.g. there could be a delay in selling a property). The SimplySIPP, with its simpler investment choices, has less exposure to this risk. Risk factors Buying pensions While you re taking drawdown, market conditions and pension rates may change. These changes could reduce the value of your fund and/or the pension you can buy. You should only use drawdown if you re prepared to risk that your pension could be lower in the future. Your final benefits aren t guaranteed. They depend on how the investments in your fund perform and interest rates when you take benefits. Your pension may be lower if the rates used to convert fund to pension decrease. Pension providers may set minimum purchase amounts, which could limit your choices if you buy a pension. About the Xafinity SIPP When you start taking drawdown we don t set up a new plan as your SIPP continues under its existing Terms and Conditions. When you first set up your SIPP, you ll have received a New Member Key Features document which explains all about your SIPP. You also have your SIPP Handbook which tells you about the SIPP in more detail. If you have any questions you can also call your Xafinity SIPP Consultant. This document covers the things you need to think about when starting drawdown. We ll provide you with an illustration giving details of the potential benefits and costs. What s drawdown? Drawdown (also called income withdrawal ) is a way of taking income from your fund without having to convert your fund into a pension (i.e. an annuity ). It lets you delay buying a pension in the hope that the rate used to convert fund into pension will improve in future. Payments are either capped or flexi-access drawdown. Drawdown isn t suitable for small funds. Whilst we don t apply a minimum fund size, it s generally thought that funds of less than 100,000 aren t suitable for drawdown. Your SIPP Handbook explains drawdown in detail, as well as giving you information about the death benefits payable if you die whilst taking drawdown. What s the difference between capped and flexi-access drawdown? Capped drawdown is limited by an annual maximum amount of income that can be taken. This is set by the Government Actuary. This is reviewed every three years (and yearly after age 75). Capped drawdown ceased from 6th April 2015, but you may be able to continue with it or take further payments in you were in capped drawdown before then. Please speak to your Xafinity SIPP Consultant to see if this is available to you. Flexi-acess drawdown isn t subject to minimum or maximum limits. Making Sense of Pensions 3
Is drawdown taxed? Yes, drawdown payments are taxed as earned income. We ll deduct income tax from your payments. Any lump sums paid within the 25% tax free cash limit aren t taxed. When can I take drawdown? You can take drawdown on a one-off basis or regularly (e.g. monthly, quarterly etc). How do I keep track of my plan? We ll send you an annual statement so you can see how drawdown affects your fund. What are the alternatives? You can buy an annuity with your pension fund and this can be payable for life or for a fixed term. You could also take an Uncrystallised Pension Funds Lump Sum ( UFPLS ). This is a payment from your fund of which up to 25% is tax free and the remainder is taxed at your normal rate of income tax. Your SIPP Handbook explains these in more detail. Can I cancel drawdown? When you start drawdown we ll send you a cancellation notice which gives you 30 days in which to change your mind. If you do change your mind, you should return the cancellation notice. If you ve received any payments, you ll have to pay these back, including any tax free lump sums. Once the 30 days have elapsed you will not be able to cancel. Do I have to buy a pension? No but you can buy one whenever you wish. Can I transfer out? Yes, but only if you transfer all your drawdown funds to another plan offering drawdown or to buy a pension. Does the Lifetime Allowance still apply? allocate funds for drawdown, some of your Lifetime Allowance is used up. We also check the Lifetime Allowance when you decide to buy a pension and at age 75. You can find out more about Lifetime Allowance in your SIPP Handbook and the amounts for this and other tax years can be found on our website. Can I still pay contributions? Yes. However, if you ve taken an income payment from flexi-access drawdown you will be subject to the Money Purchase Annual Allowance Rules. These reduce the Annual Allowance available to you for savings under money purchase pensions (but not final salary pensions). The amount of the reduced Annual Allowance is subject to change by HMT and you can find out the current figures by visiting our website which also explains the reduced Annual Allowance applicable to high earners. Your contributions can still earn tax relief until age 75. Are my investment choices the same? Yes, your investment choices are the same as shown in the Key Features document we gave you when you took out the SIPP. However, remember you might need to access certain investments to provide drawdown. Are the charges the same? Yes, and you can remind yourself of these by referring to our Fees Schedules. Don t forget that there will also be charges payable for any assets you invest in. Making Sense of Pensions 4
What will the death benefits be? If you die after commencing drawdown your nominated beneficiaries can continue taking drawdown or can purchase an annuity. They can also take a lump sum. (which will be tax free if you haven t reached age 75). If you have no dependants the lump sum can be paid to your chosen charity. Drawdown and pension payments will be tax free if you haven t reached age 75. Other information You can find details about the law applying to your SIPP, how to complain and details of compensation in the New Member Key Features which you were given when you took out your SIPP. Your SIPP Handbook also explains these in more detail. You must also read your SIPP Terms and Conditions. Our SIPP is subject to the law of England and Wales and this law will apply to any disputes. Our SIPP is also subject to HMRC regulations. Both the law and HMRC regulations change. We make every effort to ensure information is helpful and accurate but it may not be relevant to your personal circumstances. We always recommend that you speak to an adviser if you re in any doubt. Making Sense of Pensions 5
SIPP trustee Xafinity Pension Trustees Ltd SIPP administrator Xafinity SIPP Services Ltd www.xafinitysipp.com SIPPTeam@xafinity.com Phone: 01786 237 013 SIPP Department Xafinity SIPP Services Ltd Scotia House Castle Business Park Stirling FK9 4TZ Xafinity SIPP Services Ltd is authorised and regulated by the Financial Conduct Authority. Our FCA Registration Number is 461791. You can check this on the FCA s website at www.fca.org.uk/register. Xafinity Pension Trustees Ltd (1450089) is registered in England at Phoenix House, 1 Station Hill, Reading, RG1 1NB. Xafinity SIPP Services Ltd is registered in Scotland (No 69096) and its registered office is at Scotia House, Castle Business Park, Stirling FK9 4TZ. 144XSP(m) (02/18) Making Sense of Pensions