Synergy Buy Out Bond Financial adviser guide

Transcription

1 Synergy Buy Out Bond Financial adviser guide

2 Contents 03 Help your clients keep track of their pension investments 04 What is a buy out bond? 05 What the rules say Key reasons to recommend a Synergy Buy Out Bond 07 Investment options 09 When and how can your clients access their pension benefits? 11 Retirement options 13 More product information for you

3 Help your clients keep track of their pension investments It s not unusual for us to change jobs during our careers, which means we could lose track of our pension. You can help your clients dust off their old work pension and get it working for them with the Synergy Buy Out Bond. Synergy Buy Out Bond 03/16

4 What is a buy out bond? The Revenue says a buy out bond is an insurance policy purchased in the name of the beneficiary by the trustees of a scheme in lieu of the beneficiary s entitlement to claim benefits under the scheme. Put simply, a buy out bond is a pension product that is used as a new home for certain types of old pensions. How it works Your client can transfer their pension from a previous employer s pension scheme or an old buy out bond Your client can transfer benefits from a previous spouse's pension under a pension adjustment order Synergy Buy Out Bond Your client can transfer their pension from their current employer s scheme if it is being wound up Your client can transfer a UK pension if they're now living in Ireland You ll find further information in our Guide to UK Pension Transfers (SYUKPT1) One buy out bond must be set up for each type of old pension. Did you know? There is no difference between a buy out bond and a personal retirement bond. The Revenue use the term buy out bond so this is the name we ve adopted too. 04/16 Synergy Buy Out Bond

5 What the rules say Taking benefits 1. Your client can take benefits from their buy out bond from age 50 (only if they ve left the employment from which the transfer value came from). 2. Benefits from a buy out bond don t have to be drawn down on the normal retirement date of the original scheme and can be postponed to age Your client could also split a transfer value from an old pension into two or more buy out bonds. However, each new buy out bond must then be drawn down at the same time. Transferring a buy out bond 6. Your client can transfer their buy out bond from one provider to another. 7. A buy out bond can be transferred to a new employer s scheme but can t be transferred to a PRSA. 8. If your client has more than one pension scheme related to the same employment, the total value can be transferred to one buy out bond. 9. Where your client has transfer values related to more than one employment, separate buy out bonds need to be arranged for each previous employment. Transfer Value Lump sum buy out bond Annuity/ ARF buy out bond 4. If your client has two buy out bonds where one holds the lump sum and the other holds the annuity/arf, then at retirement the total value of that buy out bond can be paid as a lump sum even if its value on the retirement date is more than the maximum allowed under Revenue rules. 5. On death 100% of the value of a buy out bond will be paid to the estate. The death benefit is not limited to 4 times salary. Synergy Buy Out Bond 05/16

6 Key reasons to recommend a Synergy Buy Out Bond Control Moving to a Synergy Buy Out Bond lets you help your clients keep track of their pension investments and give them more control. In a Synergy Buy Out Bond If it s left in an old pension scheme You and your client Who chooses the provider? Who chooses what to invest in? Who controls the investment? Who controls when your client can access the benefit? Someone else does Access to a range of investment options Your clients will have access to a choice of Synergy funds, deposits, direct property or execution-only stockbroking. Trusted company Standard Life is a leading provider of long term savings and investments. Headquartered in Edinburgh and operating internationally, we ve been in Ireland since 1834 and have helped generations of Irish customers plan for their future. Your client s policy is protected Your client s policy is covered by the UK s Financial Services Compensation Scheme +. This covers 90% of the value of the claim with no upper limit. There s no equivalent Irish compensation scheme. + See page 14 06/16 Synergy Buy Out Bond

7 Investment options Synergy funds The table below lets you see at a glance the range of funds available. MyFolio MyFolio I MyFolio II MyFolio III MyFolio IV MyFolio V Annual management charge 1.15% 1.2% 1.25% 1.3% 1.35% Fund Cautious Managed China Equity Corporate Bond Euro Global Liquidity Global Inflation Linked Bond European Equity European Ethical Equity European Smaller Companies Fixed Interest Global Absolute Return Strategies Global REIT Global Selector India Equity Irish Equity Japanese Equity Managed North American Equity Pacific Basin Equity Property Standard Life Barclays Multi-Asset Protected 85* UK Equity Annual management charge 1.5% 1.3% 1.5% 1.35% 1.45% 1.5% 1.2% 1.95% * See explanation of price protection on page 14. Before your client chooses a fund they should read its latest fastsheet. They can find them on our website at Synergy Buy Out Bond 07/16

8 Self-Directed options With our self-directed options you can offer your client deposits, direct property and execution-only stockbroking. Deposits You can offer your client a choice of demand and fixed rate deposits. For more information go to the deposits page on Direct property Your client can buy residential or commercial property in Ireland or the UK through their Synergy Buy Out Bond. Execution-only stockbroking You can offer your client a choice of quoted shares, government bonds, exchange traded funds (ETFs) or other securities. For more information refer to the Self-Directed options guide (SYSDO1) and Direct Property guide (SYDPG) 08/16 Synergy Buy Out Bond

9 When and how can your clients access their pension benefits? Buy out bonds (BOBs) can be made complicated by Revenue rules. To make your life easier we've created this decision tree to help you ask your clients the right questions when assessing if they can access their benefits. Step 1: Can your clients access their pension benefits? Is your client over age 50? Yes No Have they left the employment the BOB related to? No Yes Your client can access their pension benefits Yes Are they seriously ill that they cannot work? No Your client is unable to access their pension benefits at the moment Synergy Buy Out Bond 09/16

10 When and how can your clients access their pension benefits? Step 2: How can your clients access their pension benefits? Your client can access their pension benefits Has the BOB transfer come from a defined benefit scheme? No Did the BOB start before 6 February 2011? Yes Yes No Your client is restricted to taking their pension benefits under the old rules. See Retirement options on page 11 for more information No Did your client hold more than 5% of the shares of the company? Yes No Were the rules of the scheme changed to allow ARF options before the transfer to BOB? Yes Your client can access their pension benefits under the old rules (i.e. rules which applied before 6 February 2011) or the new rules (i.e. rules which apply after 6 February 2011). See Retirement options on page 12 for more information 10/16 Synergy Buy Out Bond

11 Retirement options Taking their benefits under the old rules For example, Frank worked for a company for 10 years earning 40,000 annually until age 40 when he changed career. Frank s previous employer had contributed to a pension fund that Frank transferred to a buy out bond when he left. Now at age 60, Frank s buy out bond fund has grown to 50,000. There are two options available to him. Frank s fund 50,000 Option 1 Frank can give his whole fund to a pension provider like Standard Life who will then pay him an income for the rest of this life this is called an annuity Option 2 Frank can take a cash lump sum and give the reduced balance to a pension provider like Standard Life who will then pay him an income for the rest of this life this is called an annuity This could provide Frank an income of 2,240.66* per year. The maximum cash lump sum allowed is 3/80ths of your salary for each year that Frank worked there. So: 30/80 x 40,000 = 15,000 cash lump sum and 35,000 balance can be used to purchase a reduced annuity. Cash lump sum of 15,000 plus an income of 1,568.46* per year. * The annuity amounts shown are payable monthly in advance, would escalate at 2% each year, have a guaranteed period of 5 years and are based on an interest rate of 4% each year. The annuity rate used to calculate the projected pension is a long-term average rate and may differ from the actual annuity rate on offer at the customer's retirement date. This is a simple example. For more information speak to our Pension Solutions Team. Synergy Buy Out Bond 11/16

12 Retirement options Taking their benefits under the new rules Take a cash lump sum Your client can take a cash lump sum of up to 25% of their pension fund and with the balance If your client is being paid a pension of 12,700 or more every year They can buy a guaranteed pension income for life (an annuity) Or they can invest in an Approved Retirement Fund (ARF) Or they can draw down the entire fund as taxable cash Or they can choose a combination of these options If your client is being paid a pension of less than 12,700 every year They can buy a guaranteed pension income for life (an annuity) Or they can invest 63,500 in a Approved Minimum Retirement Fund (AMRF). Any funds over this amount can be invested in an Approved Retirement Fund (ARF) Or they can buy an extra guaranteed pension income to bring your total up 12,700. You can invest the rest in an Approved retirement fund There's a lifetime limit to the amount of tax free cash lump sum your client can take from all pensions (from 7 December 2005). The first 200,000 will be tax free, the next 375,000 will be taxed at 20% and anything more than 575,000 will be treated as income and taxed under the PAYE system. 12/16 Synergy Buy Out Bond

13 More product information for you Allocation rates until 31 December 2013 For a transfer payment where the term to normal retirement age (NRA) is greater than or equal to ten complete years the allocation rates will be as follows Transfer payment Full commission allocation rate, if term to NRA is greater than or equal to 10 complete years Nil commission allocation rate, if term to NRA is greater than or equal to 10 complete years < 25,000 95% 100% 25,000 and < 30, % 104.5% 30, % 104.5% 75, % 104.5% The maximum entry age to avail of these terms is 60. For a transfer payment where the term to normal retirement age (NRA) is greater than five complete years, the allocation rate will be as follows Transfer payment Full commission allocation rate, if term to NRA is greater than 5 complete years Nil commission allocation rate, if term to NRA is greater than 5 complete years < 30,000 95% 100% 30,000 96% 10 75,000 97% 102% The maximum entry age to avail of these terms is 70. For a transfer payment where the term to NRA is less than or equal to five complete years the allocation rate will be 100% less commission taken. For terms of less than one year, the allocation rate will be 100% and no commission is payable. Term is defined as retirement age specified at outset minus age attained on the allocation date of the transfer payment. Early encashment charge An early encashment charge does not apply if a claim is made on the death of a policyholder or on the selected retirement age chosen at the outset of the Synergy Buy Out Bond. Where a policyholder takes benefits or transfers out for any other reason within five years of the investment date of a transfer payment, the following encashment charge applies: Early encashment within Year 1 Year 2 Year 3 Year 4 Year 5 Charge as a % of the value cashed in 5% 4% 3% 2% Fee and switch charge Policy fee Fund switches Pensions Levy 5.42 per month (increases each year in line with CPI) Free for the first 12 per year. Subsequent switches 60 each. 0.6% of the value of the policy on 30 June in 2011,2012,2013 and Synergy Buy Out Bond 13/16

14 Commission Contribution Transfer payment Initial (% contribution) Up to 5% FBRC* (% of fund) Up to of fund to be paid on the policy anniversary * Fund Based Renewal Commission (FBRC) is paid for by an explicit renewal charge on the policy anniversary. This is only a summary of the product terms and charges. For further details see the Guide to Products (SYAPS). 14/16 Synergy Buy Out Bond

15 Important information The Standard Life Barclays Multi-Asset Protected 85 fund invests 100% in an externally managed fund, the Multi-Asset Protected 85 Fund, managed by Barclays Bank PLC acting through Funds and Advisory, an asset management business within the Investment Banking division of Barclays Bank PLC. The price protection offered by the Multi-Asset Protected 85 Fund, the externally managed fund, is not guaranteed and is provided by Barclays Bank PLC. In certain circumstances, the protection could be reduced or even removed. Please refer to the customer brochure (BMAP85) for more information on these circumstances. The Synergy products are not sponsored, endorsed, sold or promoted by Barclays Bank PLC. Bank PLC. Your client's policy is protected Standard Life in Ireland operates as a branch of our UK parent company. This means that any policies taken out since 1 December 2001 are covered by the UK's Financial Services Compensation Scheme (FSCS) in the event that Standard Life is in default. So if you invest in a Standard Life pension or investment policy, 90% of the claim is covered, without any upper limit. You can find out more about the Financial Services Compensation Scheme at There is no equivalent Irish compensation scheme. For information on FSCS cover see Your policy is protected (FSCSFAQ). Important things to consider Laws and tax rules may change in the future. The information here is based on our understanding of the situation in April Pension Solutions team Jim Connolly (01) (085) jim_connolly@standardlife.ie John McInerney (091) (086) john_mcinerney@standardlife.ie Brian Hanna (01) brian_hanna@standardlife.ie Synergy Buy Out Bond 15/16

16 Pensions Savings Investments Find out more (01) Mon-Fri, 9am to 5pm. Call may be monitored and/or recorded to protect both you and us and help with our training. Call charges will vary. Standard Life Assurance Limited is authorised by the Prudential Regulation Authority in the UK and is regulated by the Central Bank of Ireland for conduct of business rules. Standard Life Assurance Limited is registered in Dublin, Ireland (905495) at 90 St Stephen s Green, Dublin 2 and Edinburgh, Scotland (SC286833) at Standard Life House, 30 Lothian Road, Edinburgh EH1 2DH. SYBOBADG V Standard Life, images reproduced under licence