SHOPPING AROUND YOU SHOP AROUND FOR YOUR INSURANCE, WHY NOT YOUR INCOME IN RETIREMENT?
WHAT DOES SHOPPING AROUND MEAN? The money you ve saved in your pension, or pension pot, is intended to help support you financially in retirement. If you want some form of income in retirement you can use this pot to provide a regular, guaranteed income for life (this is called an annuity) or withdraw cash in stages from the pot and leave the rest invested (this is called income drawdown and is also known as flexible access drawdown). You don t need to take your annuity or income drawdown from the company you have saved with you can take it from any annuity or income drawdown provider, which allows you to choose the most suitable option. Shopping around like this could mean you ll get a better retirement outcome. A 2014 SURVEY* SHOWED THAT 8 OUT OF 10 PEOPLE WHO PURCHASED AN ANNUITY FROM THEIR EXISTING PROVIDER LOST OUT BY NOT SHOPPING AROUND. * Source: Financial Conduct Authority, Thematic Review of Annuities, Feb 2014
WHY IS IT IMPORTANT TO SHOP AROUND? Since pension freedoms were introduced in 2015 there are a number of options available. You no longer have to choose between taking an annuity or income drawdown, as you can now choose to take some or all of your pension pot as a pension encashment. However, if you are seriously considering an annuity or income drawdown, it s really important to shop around to make sure you get the outcome that works best for you. You d probably shop around to get the best deal if you were looking for your car or home insurance, a loan or a mortgage and you should do the same when it comes to deciding what to do with the money you have saved in your pension, as this is one of the most important financial decisions you will ever make. To make this easier for you, and if you give us your consent, we will let you know if a higher comparable income is available from an annuity with another pension provider when we provide you with our guaranteed quote. You should review this information before making your final decision. VISIT OUR DEDICATED RETIREMENT SITE: www.scottishwidows.co.uk/retirement for further information.
HOW DO I SHOP AROUND? HERE ARE SOME TIPS TO HELP YOU GET STARTED Once you have decided on the type of product you are interested in you can start to shop around. TIP 1 If you are interested in taking an annuity, you can compare annuities online: www.moneyadviceservice.org/annuities If you are interested in taking income drawdown and would like to find out more check online with other providers or call them direct. We have highlighted the key points you should know about in the section What information do I need to shop around? TIP 2 You can get free independent guidance on shopping around from the following: The Pension Advisory Service (TPAS) Tel no: 0300 123 1047 www.pensionsadvisoryservice.org.uk Pension Wise Tel no: 0800 280 8880 www.pensionwise.gov.uk TIP 3 Specialist annuity brokers can help gather quotes from different companies that provide annuities. Please note that these brokers do not offer any advice but will be able to provide details of annuity deals available on the open market. Search online to find a suitable annuity broker. For advice that will be personalised to your own circumstances, you can speak to your financial adviser. They may charge you for any financial advice they give you. If you don t already have a financial adviser, you can visit www.unbiased.co.uk to find a list of financial advisers near you. If your policy was set up by your employer they may have an adviser who can help you.
TIP 4 Make sure you check whether an enhanced annuity could give you a better income because of your health, lifestyle, occupation or where you live. For further information please refer to the next section of this guide: What information do I need to shop around?. TIP 5 If you find a new provider, they will ask for details of your current policy and usually take care of the process of moving your pension pot to their product for you. Make sure to ask them what the next steps are.
WHAT INFORMATION DO I NEED TO SHOP AROUND? IF YOU ARE THINKING ABOUT AN ANNUITY 25% WHEN YOU ARE SHOPPING AROUND FOR AN ANNUITY YOU LL NEED TO UNDERSTAND THE FOLLOWING: The value of your pension pot. TAKE UP TO 25% TAX-FREE Whether you have any benefits or guarantees such as a guaranteed annuity rate or a guaranteed conversion option which may be of considerable value if you do it s likely this will provide a higher annuity than you will find elsewhere, however it may still be worth checking with other providers. Please note that such guarantees will be lost if you move to another provider. As these guarantees are potentially very valuable, before giving them up, you may want to consider taking financial advice, for which you may be charged. Whether you ll be taking a tax free cash lump sum (normally up to 25% of the value of your pension pot). This will reduce the amount available to purchase an annuity. Tax rules can change. Whether you are concerned or not about your income losing its worth over time because of inflation. You can choose to have your income increase over time by a fixed percentage or vary in line with inflation. Please note that if you choose either of these options your starting income will be lower than an annuity where your payments cannot increase over time and remain level. Under current legislation, once set up, you can t cash in an annuity or change the basis of your income, even if your circumstances USE THE REST FOR A GUARANTEED INCOME change. Please also note that the total amount you receive as income may be less than the amount that was originally used to purchase the annuity. As we mentioned earlier, if you give us your consent, we ll search on the open market and let you know if a higher comparable income is available elsewhere when we provide you with our guaranteed quote. You should review this information before making your final decision. Your personal circumstances: Do you have a spouse, civil partner or a dependant? You might be thinking about providing for them when you die. For instance, you could choose an income which will continue to be paid for a minimum period of time (a guaranteed period) even if you were to die during that period. We can currently only provide annuities to a spouse, civil partner or dependant who is under 75 at the time of purchase, but other providers may be able to provide annuities for other beneficiaries. These options can give you peace of mind but please note that your income will be lower as a result. If you have a medical condition or lifestyle factor, such as smoking or being overweight, which could reduce your life expectancy, you may be entitled to a higher income, normally referred to as an enhanced annuity. For further information, even if you are not sure this will apply to you, please read the enclosed Enhanced Annuity guide. We recommend taking financial advice if you are considering shopping around for an annuity.
IF YOU ARE THINKING ABOUT INCOME DRAWDOWN 25% TAKE UP TO 25% TAX-FREE LEAVE THE REST INVESTED TAKE BITS WHEN YOU NEED IT WHEN YOU ARE SHOPPING AROUND FOR INCOME DRAWDOWN YOU LL NEED TO UNDERSTAND THE FOLLOWING: The value of your pension pot. If there are any guarantees or benefits that may be lost when you transfer to another product or provider. As these guarantees are potentially very valuable, before giving them up, you may be required to take financial advice, for which you may be charged. Whether you ll be taking a tax free cash lump sum (normally up to 25% of the value of your pension pot). This will reduce the size of the pot available to provide income drawdown. Tax rules can change. What the charges are for the income drawdown products you are considering the charges of many income drawdown products may be higher than your existing policy, and will vary between providers, so it s important to understand how the charges work when you shop around. A financial adviser may be able to help with this, but may charge you for the advice. Unlike an annuity, no guarantees apply to the income available from drawdown. If the amount of income and charges taken out of the plan are higher than any investment growth, the value of the plan will go down, which may restrict your options in future. How will you invest your plan? Unlike most annuities, your pot will remain invested if you choose income drawdown. You need to consider what kind of investment suits your circumstances and your attitude to investment risk. You also need to select investments that aim to provide enough growth to support any income you might want to take from your plan if you take an income that exceeds the level of growth your investments achieve, the value of your plan will go down. We recommend that you consider taking financial advice if you need help deciding how you should invest your plan. Income drawdown providers normally offer varying features to suit customer needs such as: Taking regular income or ad-hoc payments as and when you need to Allowing you to continue paying into your pension pot.
Different providers will offer different features and benefits so you should check the full range of options available when speaking to other providers. To find out more about the Scottish Widows Retirement Account which offers income drawdown options please refer to the enclosed Retirement Account customer guide. If you are thinking about or currently paying in contributions to any other pension plan(s), and access your benefits by taking income from an income drawdown plan or a pension encashment, the amount of future contributions you can make and receive tax relief on will be restricted to the Money Purchase Annual Allowance, which is currently 4,000 per year. If you contribute more than this, the excess amount will be subject to a tax charge based on your highest rate of income tax. Pensions are a long-term investment. The retirement benefits you receive from your pension plan will depend on a number of factors including the value of your plan when you decide to take your benefits which isn t guaranteed, and can go down as well as up. The value of your plan could fall below the amount(s) paid in. High levels of income may not be sustainable and in some cases could reduce the value of your plan to zero. This could mean that you are not able to provide an income for all of your retirement needs. Tax treatment depends on your individual circumstances. Your circumstances and tax rules may change in the future. Scottish Widows Limited. Registered in England and Wales No. 3196171. 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 181655. 55198 03/18