Self Directed Portfolio

Transcription

1 Self Directed Portfolio

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3 Contents 1. Introduction 4 2. Self Directed Portfolio overview 5 3. How does it work? 8 4. Technical details Questions and answers More information 44 3

4 1 Introduction The Self Directed Portfolio is an alternative to a traditional pension fund, giving you control over your investment decisions allowing you to plan for your unique personal circumstances. This method of retirement planning is suitable for individuals who wish to be personally involved in selecting the assets linked to their pension fund. Your Self Directed Portfolio gives you access to your own personalised portfolio of securities such as fixed-interest securities and listed shares. Self Directed Portfolio is suitable for the experienced investor due to the fact that the investor is responsible for selecting the assets linked to their pension fund. Self Directed Portfolio is a high-risk investment product. Self Directed Portfolio investments carry certain risks and are most suited to investors with a high tolerance for risk. In adverse conditions high-risk products can lead to you losing some or all of the money you invest. It is essential that you read the Self Directed Declaration on the application form for this product and clarify any queries with your Financial Advisor and chosen Self Directed Investment Manager. Irish Life does not give investment advice in relation to self-directed investments and will not be liable for any loss whatsoever arising from investment choice or investment performance. Warning: If you invest in this product you may lose some or all of the money you invest. Past performance is not a reliable guide to future performance. The value of your investment may go down as well as up. This product may be affected by changes in currency exchange rates. For pre-retirement plans, if you invest in this product you will not have any access to your money before you retire. Access to funds at retirement will be subject to legislation and rules laid down by the Revenue Commissioners (Revenue Rules) in force at the date you retire. Warning: For Approved Retirement Funds (ARF) and Approved Minimum Retirement Funds (AMRF), any withdrawal from the policy (including any permitted income withdrawal or payment of tax) will reduce the value of your investment. 4

5 2 Self Directed Portfolio overview Self Directed Portfolio retirement plan. Your Self Directed Portfolio can be taken on the following pre-retirement plans: Type of product personal pension plan; executive pension plan; retirement bond (also known as a buy out bond); And on the following post-retirement plans: Approved Minimum Retirement Fund (AMRF) or Approved Retirement Fund (ARF). Aim To provide you with the opportunity to be personally involved in selecting from a range of assets to be held in your pension fund. Risk Self Directed Portfolio is a high-risk investment. For more information please see Risks on page 12. Capital protected No. There are no guarantees provided in this product. Investment performance is not guaranteed and returns in respect of this product are dependent on fund performance. You may lose some or all of your original investment. You can choose from Self Directed Assets available through your chosen Self Directed Investment Manager, and Canada Life unit-linked funds. Certain restrictions apply. For more details on the range of assets available please see Choosing where to invest your money on page 11. Funds/assets available All investment options will not be available in all cases. Ask your Financial Advisor for details. For ARF plans, you may be required to invest up to 30% of your premium in a specified Canada Life unit-linked fund. 5

6 A pension plan is generally a long-term investment plan with no access to funds before retirement age (with certain exceptions - see When can I retire? on page 23). Access to funds at retirement will be subject to legislation and Revenue Rules. Time period and access Only the growth portion of your AMRF can be accessed. Once you reach age 75 or if you satisfy the minimum income requirements before then, the AMRF converts to an ARF and the rules pertaining to ARFs apply. For ARFs, you can access your fund at any time subject to any restrictions in the sale of the funds or assets and any charges that may apply. If you are invested in illiquid assets such as unlisted securities or shares, the lack of liquidity may lead to delays in the sale of your investments and restrictions on when you can access funds. Tax Tax relief for pre-retirement investment Under current tax legislation you get tax relief at your marginal rate of tax on the contributions you pay into your pension (subject to certain limits) and when you retire, you will also be able to take a tax-free lump sum from your retirement savings (subject to certain limits). Further details on tax are outlined in Taxes and Levies on page 20. Tax on post-retirement investment AMRF - Any withdrawals (restricted to the growth portion of your investment) are taxed at your marginal rate of income tax including PRSI and the Universal Social Charge (USC) where applicable. ARF Any income drawn down or deemed to be drawn down is taxed at your marginal rate of tax including PRSI and USC where applicable. ARFs are subject to Imputed Distribution. For more information please see Taxes and Levies on page 20. The Pension Levy requires Irish Life to deduct 0.6% of the market value of pension funds (excluding amounts in AMRFs and ARFs) as at 30th June for each of the years 2012 to 2014, and pay it to the Revenue Commissioners by 25th September each year. For each year the levy applies, Irish Life will deduct the levy amount from your pension fund and pay it to the Revenue Commissioners. Tax rules are subject to change. Pension Levy on pre-retirement investment In order to discharge any liability Irish Life may, at its sole discretion, instruct your Self Directed Investment Manager to divest investments from your Self Directed Assets and/or make deductions from your holdings of Canada Life unit-linked funds. Irish Life may select the individual investments that will be divested to discharge this liability. The value of your policy will be reduced to reflect any levy paid. If Irish Life cannot deduct the levy amount due to the lack of liquidity on the underlying assets Irish Life may apply a debt to your policy equal to the levy amount due to the Revenue Commissioners. The value of your policy will be reduced to reflect any debt applied. 6

7 Suitable If you want the ability to invest in a wide range of assets and want to be personally involved in selecting the assets to be held in your pension fund. If you are an experienced investor and willing to take a high amount of risk in respect of your investments. For investors with no, or limited experience of investing in assets and for investors who do not have a high tolerance for risk. Not suitable For pre-retirement products this product is not suitable if you need access to your money before you retire. For post-retirement products this product is not suitable if you need a guaranteed income in retirement. The charges on the Self Directed Portfolio are dependent upon factors including: premium size; term to retirement; fund choice; choice of Self Directed Investment Manager. More details on charges can be found in Technical Details on page 24. Your Financial Advisor will also be able to give you details on charges that apply. Charges The policy may also be subject to the Pension Levy and taxes as outlined above. The value of your policy will be reduced to reflect charges on your policy. If Irish Life cannot deduct charges due to the lack of liquidity on the underlying assets Irish Life may apply a debt to your policy equal to the charges due. The value of your policy will be reduced to reflect any debt applied. 7

8 3 How does it work? What is the Irish Life Self Directed Portfolio? With traditional pension plans you, the investor, can choose your investment funds but you have no control over the selection of the assets underlying your funds. All of the investment decisions, such as the type of assets held and buying and selling the assets, are made by a fund manager. In the Irish Life Self Directed Portfolio, you can play a more active role in investment decisions, including the option to select exactly what assets to hold (within predetermined investment mandates), allowing you to create your own personalised portfolio of securities such as fixed interest securities and listed shares which is linked to your pension plan. Any purchase and sales of assets will need to be facilitated by your Self Directed Investment Manager. There are a number of key participants involved each with specific roles to ensure your policy is best suited to you at all times. Financial Advisor Your Financial Advisor will introduce you to the Irish Life Self Directed Portfolio and once suitability is established can provide you with a list of Self Directed Investment Managers for you to choose. You will maintain a relationship with your Financial Advisor throughout the life of your policy. Self Directed Investment Manager Your Self Directed Investment Manager will be responsible for providing you with investment advice in relation to your chosen investment and if agreed will initiate trades on your behalf. In addition, your Self Directed Investment Manager will ensure your chosen investments are permitted in accordance with the relevant investment mandates and will be responsible for the valuation and the ongoing management of your investment. Irish Life Where you choose to self direct your pension investment, Irish Life is responsible solely for the establishment and administration of the related insured pension policy. Irish Life does not provide investment advice in relation to this type of investment and is not involved in the selection, assessment or ongoing management of the underlying assets of the self directed investments concerned. Irish Life does not endorse or recommend any Self Directed Investment Manager or investment. You, the Investor The ultimate decisions on how you will invest your contributions are made by you in conjunction with your Self Directed Investment Manager. You can choose to change the asset allocation and split of your self directed investment fund in consultation with your Self Directed Investment Manager. You may choose to delegate some of the decision making to your Self Directed Investment Manager, who can then decide how best to invest your contributions, subject to pre-agreed parameters. You will be responsible for the investment performance, even if you have delegated authority to your Self Directed Investment Manager. 8

9 The diagram below gives an overview of the roles and responsibilities of the key participants where Self Directed Assets have been chosen. Financial Advisor Introduces you to the Irish Life Self Directed Portfolio and you select a Self Directed Investment Manager. Irish Life The provider of the Self Directed Portfolio. Establishes and administers the pension policy. Ongoing Relationship You Make initial investment and direct how your pension fund is invested and managed. Advice Instruction Listed Shares, Fixed Interest Securities, Cash Deposit Investment Choice Self Directed Investment Manager Provides investment advice and executes all trades on your behalf. Draws up investment portfolio which is agreed by you. Investment Management - Advisory or Discretionary Service 9

10 Who is the Irish Life Self Directed Portfolio suitable for? Your Irish Life Self Directed Portfolio can be set up as: A personal pension plan suitable if you do not have a pension provided by your employer An executive pension plan suitable if you are self-employed or for a company director or employee paying tax under Schedule E A retirement bond (also known as a buy out bond ) suitable if you have a lump sum from an existing pension fund An Approved Minimum Retirement Fund (AMRF) or Approved Retirement Fund (ARF) suitable if you have chosen this as a retirement option A Irish Life Self Directed Portfolio is suitable if you want to be personally involved in selecting the assets to be held in your pension fund. However, the Self Directed Portfolio may not be suitable for investors with no, or limited, experience of investments (including investing in the stock market). See Risks on page 12. Talk to your Financial Advisor about which type of pension plan is right for you and whether this product is suitable for you. Please note that if the plan is an executive pension plan, it is set up as a retirement benefit scheme under trust and the trustee is the policy owner. Trustees have certain obligations under legislation in respect of the scheme. Please see the Pensions Board website ( for more information. The trust is subject to certain rules known as the scheme rules and a copy of these will be issued to the trustees. All instructions in relation to the policy must be from the trustees of the scheme and correspondence from Irish Life will issue to the trustees. The Self Directed Portfolio is designed as an investment for your pension fund and it does not provide any protection benefits. For extra benefits to protect you and your loved ones, you will need to set up a separate protection plan. Talk to your Financial Advisor for more information on risk and to find out more about the range of protection plans available from Irish Life. 10

11 Setting up your Self Directed Portfolio How do I set up my Irish Life Self Directed Portfolio? To set up your Self Directed Portfolio you will need to complete the relevant Irish Life application form and return this together with any other documents that we may require. On the application form you will need to select your Self Directed Investment Manager. Your Financial Advisor will provide you with a list of Self Directed Investment Managers and will guide you through the application process. How much can I invest? You can invest as much as you like in your Self Directed Portfolio, subject to limits imposed by the Revenue Commissioners and any premium limits we impose from time to time. For personal pension plans and executive pension plans, you may choose to take your Self Directed Portfolio as a single or regular contribution policy. The minimum single premium is normally E20,000. The minimum single premium may be higher for specific investments. Your Financial Advisor will be able to give you full details. The minimum regular premium is E20,000 per year. Regular premiums are allowable on a yearly premium basis only. Choosing where to invest your money You can choose to invest in a number of different assets through your Self Directed Portfolio currently Self Directed Assets and selected Canada Life unit-linked funds are available. These assets are permitted within pre-determined investment mandates and are subject to change at any time. Self Directed Assets You can choose to have your pension investment linked to a range of fixed-interest securities and listed shares or you can also choose a cash deposit account available through your chosen Self Directed Investment Manager. We refer to such assets as Self Directed Assets in this brochure. For investments in Self Directed Assets, the annual management charge can vary depending on the Self Directed Investment Manager and the investment selected. Typically this charge can range from 1% to 1.5% of the value of your fund, but it may be more depending on the nature of the asset and the amount you invest. Other charges may also be applied by your Self Directed Investment Manager, including: up-front costs; trading costs; trading commissions; dividend collection charges; foreign dealing charges; bank dealing charges. The level of these charges may depend on the amount you invest. These charges may not be applied uniformly, but may instead be applied up-front when you buy Self Directed Assets and/or when you switch between Self Directed Assets. Please note that if you withdraw from Self Directed Portfolio, the charging structure may have an impact on the amount you get back and you may not get back the full amount you invested. Your Self Directed Investment Manager or Financial Advisor will be able to give you specific details of the charges that apply to your Self Directed Assets. Other Irish Life charges may apply to each type of plan including those set out in Technical Details on page 24. Canada Life unit-linked funds Instead of you choosing Self Directed Assets to which your pension fund will be linked with your Self Directed Investment Manager, you can choose to purchase units in unit-linked funds available through Irish Life ( Canada Life unit-linked funds ). 11

12 Risks Your Self Directed Portfolio is intended to be a long-term investment giving your money time to grow in value. Although most investments involve an element of risk, over the long term they usually give you better growth than standard savings plans. However, even long-term investing involves risk as values rise and fall over time. Factors such as economic climate, currency and interest rates fluctuations, asset selection and underlying investment performance can affect the value of your investment. No guarantees are provided by any of the funds provided under the Self Directed Portfolio and fund values will change on a daily basis and can go down as well as up. In a worst case scenario you could lose all of your investment. When choosing where to invest you should always ensure that investment decisions take account of potential risk and return of the investment as a whole. A number of risks that may affect your Self Directed Portfolio investments are highlighted below but please note that this is not comprehensive. We always recommend that you consult with your Financial Advisor and your Self Directed Investment Manager before making an investment decision to ensure that you choose the right funds for you. Not all funds are suitable for all investors. Self Directed Asset risk By its very nature, investing in Self Directed Assets means that your investment will be subject to the volatility of the financial markets, as individual stocks can rise and fall on a real time basis. Most people do not have the training, experience, technology or time, to research the financial details of individual companies before making an investment so investing in Self Directed Assets may not be suitable for investors with no, or limited, experience of investments (including the stock market). Even if you have experience of investing (including in the stock market), you should always ensure that you fully understand the specific characteristics of the investment. Concentration risk If your pension fund is linked to only one asset class, such as shares or fixed-interest securities, the concentration of your investment results in higher risk. Similarly, if your pension fund is linked only to a limited number of market sectors within each asset class - for shares, this could include construction, pharmaceuticals and utilities - you are also exposed to higher risk. This exposure to risk is higher where your pension fund is linked to only one particular asset, such as shares in one company. Liquidity risk If your pension fund is linked to illiquid assets or to investments which become illiquid such as unlisted securities or equities, the lack of liquidity may lead to delays in the sale of your investments. These liquidity restrictions may impact your ability to switch investments or take withdrawals from your investments. It may be difficult to obtain reliable information about the value of illiquid investments and the risks to which they are exposed. Exchange rate risk If you are investing in assets that are denominated in currencies other than the Euro there is a risk that your investment returns may be reduced as currency values move and change over time. 12

13 Tax and legislative risk As with all investments, the Self Directed Portfolio is subject to all current tax rules and other relevant legislation. These rules may change through future legislation and this may affect your investment. You should always consult your own Tax and Financial Advisors about your individual tax status and to make sure that the Self Directed Portfolio is suitable for you. Counterparty risk Many investment funds will involve a number of parties. This means that investors can be exposed to the risk of the failure of the parties involved to adequately carry out their duties. Leverage risk The use of leverage will increase the volatility of the returns on your investment, and may result in you losing all of your investment in adverse market conditions. Self Directed Investment Manager risk Irish Life does not promote or endorse any Self Directed Investment Manager. Whether you make the investment decisions or your Self Directed Investment Manager makes decisions in relation to your investment, there is a risk that any investment decisions made will result in you losing some or all of your investment. Self Directed Assets are managed by the Self Directed Investment Manager and investors are exposed to the risk of failure of the Self Directed Investment Manager and the counterparties chosen by the Self Directed Investment Manager. Interest rate risk The performance of the fixed-income securities and cash-type instruments in this fund may be affected by fluctuations in interest rates including: fluctuations in interest rates set by banks, and fluctuations in interest rates on cash-type instruments and fixedincome securities issued by governments and corporations. Fluctuations in interest rates may cause gains or losses to be incurred by the Fund. For more information on how these and other risks might affect your pension plan, talk to your Financial Advisor and/or your Self Directed Investment Manager. 13

14 How do I choose the best investment for me? It is important to be realistic when choosing how and where to invest your money. Be clear about what your needs and investment goals are and consider how much risk you are comfortable with, what kind of return you are looking for and when you will need access to your money. If you are investing in Self Directed Assets you should consult with your Self Directed Investment Manager. Investment risk versus return Your attitude to risk is probably the most important factor affecting the investments you choose and you will need to decide how much risk you are willing to take with your money. All investments involve an element of risk. Even in investments considered low-risk there may be the potential to lose money due to fluctuations in interest rates or otherwise. The level of risk is linked to the potential level of return; usually, the higher the risk, the greater the potential for a good return on your investment. However, high-risk investments also tend to have more sudden, short-term negative changes in value, which may not suit some investors. When you invest, you want to get the best return for your chosen level of risk. If you want more modest, predictable returns, a low-risk investment may be best. If you are happy to let your investment rise and fall with the potential of higher returns in the long term, high-risk investments may suit you. The expected returns for different types of investments can also vary greatly. Investment time versus access to your investment Some investments are more suitable for the long-term, giving your money time to grow while other investments are more suited to shorter timeframes. 14

15 Canada Life unit-linked funds You can choose to invest in Canada Life unit-linked funds through your Irish Life Self Directed Portfolio. The range of unit-linked funds currently available, are shown below: Low-risk funds Canada Life Variable Deposit Fund * Canada Life/Setanta Pension Liquidity Fund Canada Life/Setanta Pension Fixed Interest Fund Canada Life/SEI MoM Opportunistic Fixed Income Fund Canada Life/SEI MoM Global Fixed Income Fund Medium-risk funds Canada Life Pension Consensus Fund Canada Life/Setanta Pension Balanced Dividend Fund Canada Life Pension Property Fund Canada Life/Setanta Pension Managed Fund Canada Life/SEI MoM Global Balanced Fund Canada Life/Merrion Managed Fund Canada Life/BlackRock Pension Managed Fund Canada Life Quadrivium Fund High-risk funds Canada Life/Setanta Pension Passive Equity Fund Canada Life/Setanta Pension Equity Dividend Fund Canada Life/Setanta Pension Equity Fund Canada Life/Setanta Pension European Equity Fund Canada Life/Setanta Pension Focus 15 Fund ** Canada Life/Setanta Pension Irish Equity Fund Canada Life/Setanta Income Opportunities Fund Canada Life/Morgan Stanley Pension European Property Fund Canada Life/SEI MoM Global Equity Fund Canada Life/SEI MoM UK Equity Fund Canada Life/SEI MoM European Equity Fund Canada Life/SEI MoM US Equity Fund Canada Life/SEI MoM Japan Equity Fund Canada Life/SEI MoM Pacific Basin Equity Fund Canada Life/SEI MoM Emerging Markets Equity Fund * The Canada Life Variable Deposit Fund is not available to all products and is not available to regular premium investments. Further information is available from your Financial Advisor. ** The minimum yearly premium payable into the Pension Focus 15 fund is E5,000 and the minimum lump sum payable into the Pension Focus 15 fund is E12,500. Irish Life retains the right to change the range of funds available from time to time. 15

16 Choosing which Canada Life unit-linked funds to invest in Some funds invest in a single asset class while others are more diversified and invest in multiple asset classes. Canada Life unit-linked funds invest in a range of asset types including equities, property, fixed-interest, cash-type instruments and commodities, each offering a different investment approach and level of risk. The major asset types in which the Canada Life unit-linked funds invest are as follows. Cash-type instruments Cash-type instruments have a lower risk than other asset types but also tend to have smaller returns. They are often compared to leaving money on deposit at a bank and are best suited to cautious investors who do not want too much risk. Even in cashtype instruments there may be potential to lose money and the return on the investment may not keep pace with inflation so the inflation-adjusted value of the investment may drop. Fixed-income Fixed-income securities or bonds as they are also known are essentially loans issued by governments or corporations to investors. Investors lend money to governments or large companies, who issue a bond in return promising to pay interest on the loan at regular intervals and pay back the full amount at an agreed future date. Fixed-income securities or bonds are usually seen as a low-risk investment, though there is still the potential to lose money. Property Investing in property as an asset class usually refers to investing in commercial office, retail or industrial property, allowing investors to benefit from the potential returns available without having to invest the large amounts of money and time needed to buy a commercial property. However as property is less liquid than other asset types, there may be limits to when investors can switch or cash in their investment. Property funds are usually considered medium-risk investments. Equities (or stocks) Equities, or stocks as they are also known, represent units of ownership in a company that are traded on stock markets around the world. Stock prices are volatile which means they can go up and down on a daily basis, but equities tend to have better positive long-term returns than many other types of funds. Equities are usually considered high-risk investments and are not suitable for short-term investment. Commodities Commodities are basic goods and raw materials, such as grains, gold, beef or oil that are traded in markets or exchanges around the world, often through futures contracts. Commodity prices are determined by supply and demand, so values can change daily. They are viewed as a high-risk investment but can offer higher returns and can be a good way to add diversity to an investment portfolio but are not suitable for short-term investment. 16

17 Can I switch investments? Switching funds lets you change your investment choices as your circumstances change. If you have chosen to invest in Self Directed Assets, you can only make a fund switch when the underlying assets have been sold. If the investments linked to your pension plan are illiquid, the lack of liquidity may lead to delays in the sale of your investments. These liquidity restrictions may impact your ability to switch investments. If you have chosen to invest in Canada Life unit-linked funds, your Self Directed Portfolio gives you the flexibility to switch unitlinked funds at any time. Please note, in certain circumstances there may be restrictions on when you can switch Canada Life unit-linked funds and in particular this can apply to investments in property funds. See Canada Life unit-linked funds on page 15. Switching charges or exit charges may apply to switches of Self Directed Assets and Canada Life unit-linked funds. Please see Technical details on page 24 for further details of the switching or exit charges that apply to your plan. If you have chosen to invest in Self Directed Assets, your Self Directed Investment Manager may apply additional charges when switching between assets. Further information is available from your Self Directed Investment Manager. The value of your policy may be affected by the costs associated with buying and selling the assets underlying your policy. When applicable, these costs will reduce the value of your fund. We recommend that you talk to your Financial Advisor before you switch funds to make sure that you choose the best funds for you. 17

18 Managing your Self Directed Portfolio How will my Irish Life Self Directed Portfolio be managed? Self Directed Assets If you are invested in Self Directed Assets, you and your Self Directed Investment Manager are responsible for managing your Irish Life Self Directed Portfolio once it has been set up. How you choose to manage your policy may depend on how much experience you have of dealing with investments (including the stock markets) and your appetite for risk. You can choose to manage your portfolio in a number of ways. Your Self Directed Investment Manager can provide you with investment advice and recommendations for the options that suit you best and you can choose to make the final decision regarding each investment. You can also choose to delegate some investment decisions to your Self Directed Investment Manager, by agreeing the investment parameters at the start of your policy. Your Self Directed Investment Manager will then select the assets, make purchases and sales of securities, and manage your portfolio without you having to make decisions on individual investments. You will still be responsible for the performance of the investments. Canada Life unit-linked funds If you choose to invest in Canada Life unit-linked funds, the fund investment manager will depend on your choice of funds. Setanta Asset Management Limited ( Setanta ) was established in Ireland in 1998 and has grown steadily since then. With a Dublin-based team, Setanta is focused exclusively on the business of asset management. Setanta provides clients with a full range of investment options that covers the entire risk and reward spectrum, from liquidity and fixed-interest funds, to equity based funds. As well as Setanta Asset Management, Irish Life offers access to a range of additional investment managers to offer an even broader level of choice. Our other investment partners include but are not limited to; SEI Investments, Merrion Investment Managers and Morgan Stanley. SEI Investments (SEI) is a global leader in Manager-of-Managers (MOM). The MOM concept is a sophisticated investment approach, which builds up a portfolio of specialist investment managers around the world rather than a portfolio of individual stocks and bonds. BlackRock is one of the world s pre-eminent asset management firms and a premier provider of global investment management, risk management and advisory services to institutional, intermediary and individual investors around the world. Merrion Investment Managers has built a reputation upon a proven approach to investment management that has delivered consistently strong performance not only in years when markets have risen but also during periods when markets have fallen. Merrion Investment Managers focuses on controlling risks, while obtaining the maximum return available within the market. Morgan Stanley Investment Management (MSIM) is a client-centric organisation dedicated to providing investment and riskmanagement solutions to investors worldwide. 18

19 How can I keep up to date with my investment performance? As the value of your investment may go down as well as up, we strongly recommend that you review your Self Directed Portfolio investment with your Self Directed Investment Manager and Financial Advisor on a regular basis. Self Directed Assets Your Self Directed Investment Manager is responsible for valuing Self Directed Assets and any valuation statement provided in respect of Self Directed Assets by Irish Life will be based on information provided by your Self Directed Investment Manager. Contact your Self Directed Investment Manager to keep up to date with your Self Directed investment performance. Canada Life unit-linked funds You can access daily fund price and fund performance information for a select range of Irish Life funds through the daily price and fund performance update available on Policy statements on paper can also be provided on request. If you request this statement it will include information such as the value of your policy. Please talk to your Financial Advisor for further information. 19

20 Taxes and Levies Tax pre-retirement This section relates to tax applicable to an individual. Tax rules are subject to change. For more information on the current limits on maximum earnings for personal contributions, limits to employer contributions and limits on tax-free lump sums, please visit the Revenue Commissioner s website at You should talk to your Tax Advisor about the tax efficiency of a pension for your particular circumstances. A pension is a tax-efficient way of saving money. Under current tax rules, your pension allows you to benefit from the tax breaks available for pension plans: Tax-relief For executive and personal pension plans, you can get income tax relief on contributions paid by you into your pension at your marginal rate of tax subject to certain limits. The marginal rate of tax is 20% or 41% depending on your income. These tax rates are correct at the time of going to print. Relief is not available on PRSI or the Universal Social Charge ( Income Levies ). Tax-efficient growth on your money - You don t have to pay exit tax or capital gains tax on any growth in your fund, which means that you get the maximum benefit from increases in the value of your investment funds. The current rate of exit tax is 36% and the current rate of capital gains tax is 33% for individuals. These tax rates are correct at the time of going to print. Please note that unrecoverable withholding tax may be applied to investment income in certain jurisdictions. Tax-free lump sum when you retire - You can take part of your pension fund as a tax-free lump sum when you retire (subject to the limits in force under legislation and Revenue Rules at that time). Any income drawn down or deemed to be drawn down in retirement will be subject to tax (and other Income Levies if applicable based on Revenue Rules at that time). You are responsible for claiming tax relief. Tax relief may be claimed from your local tax office. Pension Levy The Pension Levy requires Irish Life to deduct 0.6% of the market value of pension funds (excluding amounts in AMRFs and ARFs) as at 30th June for each of the years 2012 to 2014, and pay it to the Revenue Commissioners by 25th September each year. For each year the levy applies, Irish Life will deduct the levy amount from your pension fund and pay it to the Revenue Commissioners. In order to discharge any liability Irish Life may, at its sole discretion, instruct your Self Directed Investment Manager to divest investments from your Self Directed Assets and/or make deductions from your holdings of Canada Life unitlinked funds. Irish Life may select the individual investments that will be divested to discharge this liability. The value of your policy will be reduced to reflect any levy paid. If Irish Life cannot deduct the levy amount due to the lack of liquidity on the underlying assets, Irish Life may apply a debt to your policy equal to the levy amount due to the Revenue Commissioners. The value of your policy will be reduced to reflect any debt applied. 20

21 Tax post-retirement You should talk to your Tax Advisor about the tax efficiency of a Self Directed AMRF or ARF, for your particular circumstances. Any investment growth on your AMRF and ARF funds will grow free of exit tax or capital gains tax throughout the lifetime of the policy. The current rate of exit tax is 36% and the current rate of capital gains tax is 33% for individuals. These tax rates are correct at the time of going to print. Please note that unrecoverable withholding tax may be applied to investment income in certain jurisdictions. Any income payments, partial surrenders, and surrenders from your AMRF/ARF are taxed as income at your marginal rate of tax including PRSI and USC where applicable. The marginal rate of tax is currently 20% or 41% depending on your income. These tax rates are correct at the time of going to print. Based on information provided to Irish Life by the Revenue Commissioners, we will deduct any tax, PRSI and USC due and remit it directly to the Revenue Commissioners on your behalf. For ARFs, Irish Life may also be required to deduct tax on the basis of an Imputed Distribution. 21

22 What is Imputed Distribution? Under section 14 of the Finance Act 2006 (as amended), if you are over 60 and invested in an ARF, income tax must be deducted from your ARF policy every calendar year on the basis that you have taken a minimum withdrawal amount from your fund in that year. If the minimum withdrawal amount is not actually taken in that year, tax is still payable on the basis that the minimum withdrawal was taken; an Imputed Distribution. The Imputed Distribution rate is either 5% or 6% depending on your retirement savings and income tax, PRSI and USC where applicable will apply to any Imputed Distribution. If your plan is linked solely to Self Directed Assets, you cannot set up a regular income but if there are sufficient liquid assets linked to your policy, you can request in writing a partial surrender to meet the minimum withdrawal amount and it is important that you consider doing so each year. If your ARF is also invested in Canada Life unit-linked funds, you may be able to set up an annual regular income by written request subject to certain conditions. Please see Technical Details on page 24. Any increases to the minimum withdrawal amount in the future may mean that you will have to make additional partial surrenders or increase your regular income amount to meet this requirement. Partial surrender charges and exit charges may apply. Further information is available from your Financial Advisor. Please note that tax rules are subject to change. Talk to your Tax Advisor for more information on the taxes, payments and charges that apply to you. More information on tax is also available from the Revenue website at Any income payments, partial surrenders, and surrenders from your ARF are taxed as income at your marginal rate of tax including PRSI and USC where applicable. The value of your policy will be reduced to reflect any withdrawal, tax liability, partial surrender charges and any exit charges. In the event that you have not taken an income equal to the minimum withdrawal amount, Irish Life may, at its sole discretion, discharge any liability by instructing your Self Directed Investment Manager to divest investments from your Self Directed Assets and/or by making deductions from your holdings of Canada Life unit-linked funds. Irish Life may select the individual investments that will be divested to discharge this liability. If Irish Life cannot deduct these amounts due to the lack of liquidity on the underlying assets, Irish Life reserves the right to apply a debt to your policy equal to the withdrawal and tax amounts. The value of your policy will be reduced to reflect any debt applied. Access to my funds Please note that for pre-retirement products, there is generally no access to funds before your retirement age (with certain exceptions see Retirement options for pre-retirement plans on page 23. For AMRFs, you only access the growth portion of your fund. For ARFs, you may access your fund subject to any restrictions that apply to the underlying assets or funds. If your plan is linked to illiquid assets, the lack of liquidity may lead to delays in the sale of your investments. These liquidity restrictions may impact your ability to take withdrawals from your investments which may result in debts being applied to your policy. Any withdrawals from the policy (including any permitted income withdrawal or payment of tax) will reduce the value of your investment. Partial surrender charges and exit charges may apply and withdrawals are subject to tax, PRSI and USC if applicable. See Technical Details on page 24 for details of partial surrender and exit charges. The underlying assets linked to your policy must be sold before you can access funds, transfer to another provider (if permitted) or before we can pay a death claim and, in the event that your plan is linked to illiquid assets, this may delay any payments or transfers from the policy. 22

23 Retirement options for pre-retirement plans Early access to Additional Voluntary Contributions (AVCs) An interim provision to access 30% of the AVC fund on a once off basis is available up to the end of The drawdown is taxable at 41% unless a Certificate of Tax Credits and Cut Off Point is provided allowing for the deduction of the lower rate of tax. When can I retire? For pre-retirement plans, your plan must be established with a normal retirement age (NRA). For personal pension plans, you can access your benefits at your NRA which must be between age 60 and 75 (except in cases of certain occupations and ill health early retirement which must be approved by the Revenue Commissioners). For executive pension plans, you can access your savings when you reach the scheme s designated NRA which must be between age 60 and 70 but, subject to compliance with Revenue Rules and the scheme s rules, early retirement may be allowed from age 50 with the consent of the trustees and ill-health early retirement may be allowed from any age. For retirement bonds, the NRA is set under the rules of your original occupational pension scheme. Access to funds at retirement will be subject to legislation and Revenue Rules. For more information, talk to your Financial Advisor or visit the Revenue website at What happens when I retire? When you retire, there are a number of options available to you. Current tax legislation generally allows you to take part of your pension fund as a tax-free lump sum (subject to certain limits). Any amount of your pension fund not taken as a lump sum can then be used to: Invest in an annuity to provide you with a guaranteed regular income for the rest of your life. Subject to eligibility, invest in an ARF or an AMRF. This is a personal investment fund that allows you to control your own retirement fund after you retire. Subject to certain conditions, take another cash lump sum, which will be subject to income tax, PRSI, and USC where applicable. The options available to you when you retire will depend on the tax legislation and Revenue Rules in force at the date you decide to retire. Any income drawn down or deemed to be drawn down in retirement will be subject to tax, PRSI and USC where applicable, based on Revenue Rules at that time. Please remember, the actual amount of income available to you when you retire will depend on a number of factors, including investment returns and annuity rates when you retire. Talk to your Financial Advisor for more information on the options available for your retirement and any restrictions and conditions that apply. 23

24 4 Technical details AMRF - Policy details Term limits Minimum entry age Maximum entry age Until age 75, or earlier subject to Revenue Commissioner s rules 50 (51 next birthday) 74 (75 next birthday) Minimum amount The minimum single premium is normally E20,000. The minimum single premium may be higher for specific investments. Your Financial Advisor will be able to give you full details. The minimum additional lump sum contribution is E20,000. In some cases it may not be possible to make additional single premium top-ups. Your Financial Advisor will be able to give you full details. Maximum amount E63,500. No Partial Surrenders can be made from an AMRF, except for the growth portion of the fund. The minimum amount that can be part surrendered is E650. Your policy value must be at least the original policy value after each surrender. Partial surrenders Partial surrenders made in the first seven years of any investment may be subject to exit charges. Please see below for more information. If your plan is linked to illiquid assets, the lack of liquidity may lead to delays in the sale of your investments and restrictions on when you can access funds. If you die during the life of your policy and you are invested in Canada Life unit-linked funds the benefit amount will be calculated using the unit price on the day following the receipt by Irish Life, at its head office in Dublin, of all requirements following written notification of your death. Death benefit If you are invested in Self Directed Assets, the value paid on death will equal the amount returned from your Self Directed Investment Manager on the sale of the underlying asset(s). Payment of death benefits will be delayed where assets cannot be sold immediately and such delay may be significant depending on the nature and structure of the investment. 24

25 ARF - Policy details Term limits Minimum entry age Maximum entry age There is no maximum term on this contract. 50 (51 next birthday) 74 (75 next birthday) Minimum amount The minimum single premium is normally E20,000. The minimum single premium may be higher for specific investments. Your Financial Advisor will be able to give you full details. The minimum additional lump sum contribution is E20,000. In some cases it may not be possible to make additional single premium top-ups. Your Financial Advisor will be able to give you full details. Maximum amount None If you are invested in Canada Life unit-linked funds, you may be able to set up an annual regular income by written request subject to certain conditions. Please talk to your Financial Advisor for further details. Regular income option The minimum income you can request is 5% of the value of your initial investment, and the maximum income you can request is 10% of the value of your initial investment. The amount of each regular income payment must be at least E125. The minimum residual value of your policy after each payment must be E1,250. Limits for regular income payments are subject to change from time to time. No surrender penalties apply to any regular income payments made under your policy. If you supplement your regular income payments with partial surrenders, partial surrender charges and exit charges may apply. Please see below for details of these charges. 25

26 The minimum amount that can be part surrendered is E650. Your policy value must be at least E1,250 after each surrender. Partial surrenders Partial surrenders made in the first seven years of any investment may be subject to exit charges. Please see below for more information. If your plan is linked to illiquid assets, the lack of liquidity may lead to delays in the sale of your investments and restrictions on when you can access funds. If you die during the life of your policy and you are invested in Canada Life unit-linked funds the benefit amount will be calculated using the unit price on the day following the receipt by Irish Life, at its head office in Dublin, of all requirements following written notification of your death. Death benefit If you are invested in Self Directed Assets, the value paid on death will equal the amount returned from your Self Directed Investment Manager on the sale of the underlying asset(s). Payment of death benefits will be delayed where assets cannot be sold immediately and such delay may be significant depending on the nature and structure of the investment. Other requirements You may be required to invest up to 30% of your premium in a specified Canada Life unit-linked fund. 26

27 ARF/AMRF - Charges The following charges apply to AMRF and ARF. Allocation rate Your allocation rate depends on the product structure. If your allocation rate is less than 100% then a charge is being made on your premium. The minimum allocation rate is 92.50%. Your actual allocation rate may be different. Please talk to your Financial Advisor on the allocation rate that will apply to your plan. Policy fee Establishment fee Bid offer spread There is no policy fee. There is no establishment fee. No bid offer spread will be applied to your plan. The management fee applicable to your policy will depend on the investment options you have chosen. There will be an annual management charge expressed as a percentage of your fund and deducted on a regular basis. Annual management charge Where you invest in Self Directed Assets, the annual management charge can vary depending on the Self Directed Investment Manager and the investment selected but typically this charge can range from 1% to 1.5% per annum of the value of your fund but may be more depending on the nature of the asset and the amount you invest. Your Financial Advisor will be able to give you specific details of the management charge that applies to the investment you select. For certain investments, other charges may apply (including, up front costs, trading costs etc.) and details of these charges are available from your chosen Self Directed Investment Manager or your Financial Advisor. These charges may not be applied uniformly, but may instead be applied up-front when you buy Self Directed Assets and/or when you switch between Self Directed Assets. Please note that if you withdraw from Self Directed Portfolio, the charging structure may have an impact on the amount you get back and you may not get back the full amount you invested. 27