The Retirement Account

Transcription

1 The Retirement Account Key Features This is an important document and you should read it before deciding whether to buy your Retirement Account from us

2 Purpose of this document This Key Features booklet gives you a summary of The Retirement Account. It will help you decide whether you want to buy your Retirement Account from us. Please read this Key Features booklet with: Your personal illustration which shows the benefits you may get from us (based on the information you have provided) Investment Fund Summary booklet and fund fact sheets for the investment funds you would like to invest in The Policy Terms and Conditions booklet The Retirement Account Technical Summary The Retirement Account gives you choice over how and when to take your retirement benefits. It also gives you the choice of the security provided through a Guaranteed Annuity with the flexibility, accessibility and growth opportunities provided through Pension Drawdown. The Financial Conduct Authority is a financial services regulator. It requires us, Retirement Advantage, to give you this important information to help you decide whether The Retirement Account 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. 2

3 Aims, your commitment and risks The Retirement Account Key Features Its aims The Retirement Account: Gives you the choice of using your pension fund to buy a guaranteed lifetime income and/or invest in our range of funds but with the freedom to access your money whenever you want Gives you the flexibility to change your investment choices, income levels and death benefits throughout your retirement and buy additional guaranteed income whenever you want Provides you with a range of death benefits to choose from for your loved ones Provides you with tax planning features to help you manage your finances efficiently in retirement Your commitment To review your Account with your adviser to ensure it continues to meet your needs in the future If you choose Pension Drawdown, to regularly review your investment strategy and income levels with your financial adviser To notify us of any relevant changes in your personal and financial circumstances To decide whether to include death benefits for your spouse, civil partner or dependant plus other beneficiaries if you wish If you choose a Guaranteed Annuity, to provide us with accurate information about your health and lifestyle so that we can offer you the best income we can 3

4 Risks With Pension Drawdown The value of your Pension Drawdown fund may fall or rise in value and the level of income you can take from the Pension Drawdown fund is not guaranteed You may run out of money earlier than expected if investment returns are poor and/or you are taking out too much money from your fund A reducing fund value could result in less money being available to purchase a Guaranteed Annuity from your Account later in life and also reduce the value of death benefits for any beneficiaries An increasing fund value could result in growth exceeding the Lifetime Allowance With a Guaranteed Annuity Annuity rates change regularly, so if you buy an annuity in the future the rates may be better or worse than at the start of your Account Over time, inflation will reduce your Guaranteed Annuity income s buying power, unless you choose an option where your annuity increases over time to help combat inflation The Guaranteed Annuity will cease when you die, unless you choose to include death benefits when you set up the annuity Other risks Future changes in legislation and taxation may affect your benefits You can choose to cancel your Retirement Account within 30 days of receiving your cancellation notice. If you do, the value of your pension fund may have fallen and you may receive less back. Also the transferring scheme may not accept the return of your pension fund. 4

5 What is The Retirement Account? The Retirement Account Key Features The Retirement Account gives you and your Adviser the freedom and flexibility to manage your pension finances in one simple plan by allowing you to: Choose a retirement income that suits you, for example a secure Guaranteed Annuity, an income from Pension Drawdown or both Leave your funds invested in Pension Drawdown if you don t want to take an income at outset Take out lump sums from your Pension Drawdown fund when you want, whether or not you are taking a regular income Take advantage of the opportunity for investment growth with your Pension Drawdown fund through a range of investment funds offering you different levels of risk Change your income levels and types of income over time to suit your personal and financial circumstances Choose death benefits including ongoing income and lump sum payments for both dependants and other beneficiaries Choose different dependants and beneficiaries for each purchase of Guaranteed Annuity Take advantage of tax planning features that can help you manage your tax and financial situation in retirement Total retirement flexibility in one simple Account. 5

6 Questions and answers These are a selection of popular questions about The Retirement Account which you should read to help you understand how your Account works. If you have any queries you should contact your financial adviser. Q1 What is The Retirement Account? The Retirement Account is a registered pension scheme established under income drawdown regulations. It has been designed to provide you with considerable flexibility and choice over how you manage pension investments and benefits over the span of your retirement. Q2 What choices will I have with The Retirement Account? The Retirement Account enables you to access your retirement benefits, normally from age 55. You can immediately receive a tax-free lump sum of up to 25% of your pension fund and you have complete freedom to do what you want with the rest, for example: Leave your money invested in Pension Drawdown to provide: An opportunity for investment growth An income Lump sum payments as and when you need the money Purchase a Guaranteed Annuity to provide a secure lifetime income (you decide how much, if any, of your money you use this way) Or you can have a mixture of Pension Drawdown and a Guaranteed Annuity. The Retirement Account gives you the flexibility of dividing your funds between Guaranteed Annuity and Pension Drawdown. This means you can balance the security of a Guaranteed Annuity with the opportunity and access of Pension Drawdown. You can also adjust how much income you receive and how much income tax you pay. You may find a Guaranteed Annuity is a sensible way of covering your fixed day to day living expenses in retirement, alongside the state pension scheme and any other pensions you may have. Pension Drawdown funds can be invested for growth opportunities or for additional spending in the early years of your retirement when you are most likely to be active. Guaranteed Annuity Provides the security of a guaranteed income Increasing income options including inflation linking Death benefit options for loved ones Pension Drawdown Can be used as a nest egg or for providing regular or ad-hoc income Opportunities for your investment to grow Full access to your money Remaining fund available to beneficiaries after death The value of investments may go down as well as up. 6

7 Q3 Q5 The Retirement Account Key Features What can you tell me about Pension Drawdown? With Pension Drawdown you can take as little or as much of your money as you want while it remains invested. So you can take no money out initially and just leave your funds invested, or you can take a regular income and/or just withdraw money from your fund when you want. You have the choice of investing in one or more of our thoroughly researched range of funds. Each fund comes with a different risk profile, which means, with the help of your financial adviser, you can match your choice to the amount of risk you feel comfortable taking. If your fund choice changes over time you can switch between the different funds at any time. The funds are invested in a range of different types of assets and are made up of units, which you buy. The price of these units depends directly on the performance and value of the investments in the fund. We work out the value of your investment in each unit-linked fund based on the total number of units you have in the fund and the unit price (the price at which we buy and sell units). If the unit price rises or falls, so will the value of your Pension Drawdown funds. Q4 What options and choices do I have for Pension Drawdown? As Pension Drawdown gives you complete access to your money, the main choices you have are to do with the funds that you want to invest in. Details of the range of funds available can be found in the Investment Fund Summary booklet. In the event of your death, any remaining Pension Drawdown funds will be made available to your beneficiary(ies), after the payment of any outstanding plan charges and adviser fees, and the recovery of any overpaid income. What can you tell me about a Guaranteed Annuity? A Guaranteed Annuity will provide you with a secure income for the rest of your life. You can also choose for this income to be paid to your spouse, partner or dependant upon your death. You can buy a Guaranteed Annuity using the funds in your Account at any time, which could be at outset or later on in your retirement. At any time you can also increase your Guaranteed Annuity by purchasing additional amounts with any remaining Pension Drawdown funds you have (see example 1 overleaf). The income you receive will depend on how much money you allocate to the Guaranteed Annuity. It also depends on your age, lifestyle, state of health and other factors including annuity rates at the time, and any optional benefits you choose (see question 6). Q6 What options and choices do I have for a Guaranteed Annuity? Money back guarantee - you can choose to provide a lump sum in the event of your death. The amount payable can be up to 100% of the amount you originally used to purchase your Guaranteed Annuity, less all the Guaranteed Annuity payments made to you up to the date of your death. Income Guarantee - you can choose to guarantee your annuity payments for up to 30 years. This means in the event of your death the income continues to be paid for the remainder of the guarantee period. At the point there is a claim for this benefit, your beneficiary(ies) can choose to exchange outstanding Income Guarantee instalments for a lump sum which we calculate at that time. You can t choose an Income Guarantee and a Money Back Guarantee together. Dependant s Income - you can ensure that a dependant (spouse, partner or other dependant) receives a proportion of your income for the rest of their life should you die before them. Questions and answers 7

8 The amount paid could be up to 100% of your income. Should you outlive your dependant, income will cease on your death. Pension increases - to help protect your income against inflation you can choose to increase your income payments each year. Increases can either be a fixed amount of up to 10% each year, or linked to the Retail Prices Index (RPI). Q7 How are these benefits paid for? These options are paid for by a reduction in the Guaranteed Annuity income we offer you. Q8 What are my options if I decide to purchase more Guaranteed Annuity later on in life? The Retirement Account is structured so that you can buy more Guaranteed Annuity whenever you want using any Pension Drawdown funds you have. Moreover, you can choose different options including different dependants for each purchase (see example 2). The amount of income you get will also depend on how much money you allocate to the Guaranteed Annuity, your age, lifestyle, state of health and other factors including annuity rates at the time of purchase. Q9 Do I have any choice about when my income payments are made? You can choose to have your Guaranteed Annuity and Pension Drawdown income paid to you monthly, quarterly or yearly. You can choose to have your payments made to you on the 12th, 20th or 28th of the month, although you may receive your payments earlier than your chosen date. For example if your payment falls over a weekend or bank holiday. Example 1: Buying additional Guaranteed Annuity with your Pension Drawdown funds Lock in extra income from Drawdown funds Guaranteed Annuity Income based on: Lifestyle Postcode Health Occupation Age Pension Drawdown Fund Active investment Passive investment Protected investment Example 2: Different dependants for each purchase of Guaranteed Annuity Annuity purchase 1 at age 65 Annuity purchase 3 at age 75 Annuity purchase 2 at age 70 Dependant 3 Dependant 2 Dependant 1 Guaranteed Annuity income 8

9 Q10 What happens on death? If you have chosen not to include death benefits under your Guaranteed Annuity and you have no Pension Drawdown fund then your Account will cease. Any Dependant s Income you have chosen to include under a Guaranteed Annuity will be payable to the spouse, partner or other dependant named in your policy document. This person will also receive the balance of any Income Guarantee payments. Where you have opted for both an Income Guarantee and a Dependant s Income, the income payable for any residual Income Guarantee period is the level of income you would have received, had it continued for the remainder of the Income Guarantee period. When the Income Guarantee period ends, the income from that point will be the level of the chosen Dependant s Income. Where you have opted for both a Money Back Guarantee and a Dependant s Income, a lump sum may be payable on the second of your death and the dependant s death. The lump sum will be your chosen Money Back Guarantee percentage, multiplied by the original purchase price, less the total gross income payments, including any Dependant s Income, to date. For lump sum payments including: Money Back Guarantee Remaining Pension Drawdown funds Retirement Advantage has discretion over the exact form of benefits and the recipients. You can let us know who you would like to receive benefits following your death by instructing us in writing. Any nomination you make this way is not binding on us at the time but will be considered carefully. The beneficiaries will have three options: Establish their own Retirement Account, leave the money invested and draw an income as and when they wish Purchase a Guaranteed Annuity Take the remaining value of the Account as a lump sum The Retirement Account Key Features If your beneficiaries would prefer to take an income instead of a lump sum we will set up their own Retirement Account for this purpose. We will make this option available to them at the appropriate time, provided there is a minimum value left in Pension Drawdown Funds (the current minimum value can be found on our website). Otherwise any remaining funds will be paid to them as a lump sum. When we receive formal notification of your death, payment of any adviser charges from your Account will stop. Any outstanding payments that are due to your financial adviser may still need to be settled. Your personal representatives will be able to authorise a one off adviser charge to be paid from your Account by writing to us. Q11 Are there any tax planning features for death benefits? If you die on or after age 75 any lump sum payments can be distributed to your beneficiaries as a series of payments as opposed to a single lump sum (see example 3). This could be useful as the payments are liable to income tax in the hands of your beneficiaries and by structuring payments in this way it could minimise the amount of tax they pay. Q12 What about Tax? Tax on income If you take an income from your Account though a Guaranteed Annuity and/or from your Pension Drawdown you will normally pay tax in the same way as you pay tax on earned income, through the PAYE system. This would also apply to any lump sum payments you decide to take from your Pension Drawdown fund. Questions and answers 9

10 Tax on Death If you die before your 75th birthday any death benefits you have chosen under a Guaranteed Annuity Dependant s Income, Money Back Guarantee or Income Guarantee, plus any Pension Drawdown funds will be tax free when paid to your beneficiaries. If you die from age 75 onwards then income payments made to your beneficiary(ies) will be taxed at their marginal rate of income tax while lump sums will be taxed at 45%. This tax rate will change to the beneficiary s own marginal rate of tax with effect from 2016/17. There is normally no inheritance tax payable on the value of your Account. Lifetime Allowance HMRC sets out a limit for the total amount of pension benefits you can take called the Lifetime Allowance (LTA). A check is made to ensure that your benefits do not exceed the LTA at the commencement of your Account and when you reach age 75. If you exceed it you will have to pay a tax charge on the excess over the LTA limit. Please also note Tax rules depend on individual circumstances and may change. We recommend you get professional advice if you need more information on tax. Q13 Are there any other planning features that I should be aware of? Redirection of Guaranteed Annuity payments into Pension Drawdown At any time you can ask for all or a proportion of your Guaranteed Annuity payments to be paid into your Pension Drawdown fund instead of being paid to you. If you do this, at that point, you will not be liable for income tax on the payments and the gross amount would instead be available to buy units in your chosen funds. This could be a useful tool for planning how much tax you pay and it also means that you accumulate a larger Pension Drawdown fund which you can withdraw in the future or leave to your beneficiaries. Q14 Can I transfer the value of my Account to another provider s product? You can transfer your Pension Drawdown funds to another pension provider at any time. If you decide to transfer these funds, we may take a charge that will include any outstanding adviser charges. You can t transfer the value of any Guaranteed Annuity. Example 3: Payment of lump sum death benefits Liable to Higher Rate Tax Option 1 Option 2 taxed as series of lump sums to avoid higher rate tax Higher Rate Tax Threshold Take as single payment Payment 1 Payment 2 Payment 3 Tax year end Tax year end Taxed income 10

11 Q15 How will I know how my Account is doing? We will send you a yearly statement to show you how your Account is doing. You should review your Account on a regular basis to ensure it continues to meet your needs. Your financial adviser can help you with this. You can check the prices of the funds you are invested in online. You can find out your Account value by phoning our customer services helpline. Our contact details can be found in the About us section. Q16 What are the charges? All of the charges outlined below are detailed in your personal illustration. Adviser Fees Adviser fees are charges for the financial advice you have received. You can pay for the advice by agreeing to have it deducted from the fund we receive from the transferring scheme(s). This will reduce the amount available to buy benefits in your Account. If you are investing in Pension Drawdown you may also agree a regular ongoing fee and there may be other one-off fees that you ll need to agree with your adviser. These fees will be paid for by deductions from your Pension Drawdown account which will affect the value of the fund in the future. Product Charges There is an initial charge for establishing your Retirement Account. This charge is deducted from the fund we receive from the transferring scheme(s), and will reduce the amount available to buy benefits in your Account. If you are investing in Pension Drawdown there is also an annual charge, which is deducted monthly and is taken from the Pension Drawdown part of your Account. Both charges are outlined in your personal illustration and The Retirement Account Technical Summary. The Retirement Account We may change our Key Features charges in line with the policy terms and conditions and will let you know before we do. Annual Fund Management Charge (AMC) There are different annual management charges depending on the fund(s) you choose for investment. These charges are reflected in the unit prices of each fund. Additional expenses over and above the AMC may be charged to the funds that you have invested in, to cover the costs incurred by the investment management company, and are deducted from the value of the fund. The level of these expenses is not within Retirement Advantage s control, and may vary from year to year. The annual management charges for your chosen funds are shown in your personal illustration and our document Retirement Account Technical Summary which is available from our website: Q17 What if I change my mind? You have the right to cancel within 30 days of your contract being set up. We will write to you and provide a notice about your right to cancel. You need only return this cancellation notice if you wish to cancel your Retirement Account. If you decide to cancel your Retirement Account, you must return the cancellation notice within 30 days. You must also return any money received, including any tax-free cash payments. Cancellation notices must be returned to: Retirement Advantage Customer Centre MGM House Heene Road Worthing West Sussex BN11 3AT Questions and answers 11

12 Further information What to do if you re unhappy We hope you will be delighted with our service, but if we fall short, we want to know. Please contact our Customer Centre using the details shown in the About us section on page 14. If you are not satisfied with the outcome, you can contact the Financial Ombudsman Service Address Financial Ombudsman Service Exchange Tower London E14 9SR Tel Web These are free services. Using them will not affect your legal rights or your right to take legal action. Terms and Conditions This Key Features document gives you a summary of the plan. Full details are set out in The Retirement Account Terms and Conditions. For a copy, please contact our Customer Centre or ask your intermediary. If we need to make any significant changes to the terms and conditions of your Retirement Account, we ll write to you. Law Your Retirement Account policy is subject to the law of England, which will be used to resolve any dispute. Language All information and communications about this plan will be in English. Conflict of interest Retirement Advantage has built a reputation for conducting business in an honest manner. That s why we have a policy to deal with any conflicts of interest. You can request a copy by calling The legal contract The Retirement Account is a contract of insurance between you and us, formed by: your signed application the Policy Terms and Conditions, and the Policy Schedule Proof Before we pay any money to you (or any other person entitled to receive benefits from us) we must have proof of entitlement. This may include proof of identity, address and age, and evidence that you (or your dependant if appropriate) are still alive. We may use electronic means (this may include credit reference agencies) to obtain this proof. If we do not have enough proof of identity and entitlement, we may be unable to make payments. Compensation The Financial Services Compensation Scheme (FSCS) was established under the Financial Services and Markets Act 2000 and was set up to provide protection to customers if authorised financial services firms are unable to meet claims against them. This plan is classed as a long-term contract of insurance and you will be eligible for compensation under the FSCS if Retirement Advantage becomes unable to meet its claims. The cover is currently 100% of the value of your claim. Your client category Our regulator, the Financial Conduct Authority, asks us to classify our clients based on their familiarity with financial services. You are a retail client which means you get the highest level of protection by getting the clearest explanation of what you re buying and more detail about the risks. 12

13 The Retirement Account Key Features However, if you have unit-linked investments, in the unlikely circumstances where the underlying fund manager is unable to meet its obligations, you would not be eligible to make a claim for compensation under the FSCS. Retirement Advantage is not eligible to make a claim so the unit price of our fund will depend on the amount that we recover from the firm. Address Financial Services Compensation Scheme 10th Floor Beaufort House 15 St Botolph Street London EC3A 7QU Tel or enquiries@fscs.org.uk 13

14 About us Previously known as MGM Advantage and Stonehaven, we are a well-established company that can trace its roots back to 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. Every year our retirees rely on us for their income, and with almost 1.8 billion of funds under our management, and a heritage dating back over 150 years, you can trust us to keep your money safe and secure. As a company that specialises in retirement, we believe that we know the needs of our customers better. Our award-winning expertise has allowed us to create products that can help you live well in retirement, using the money in your pension and/or the value of your property. You can find out more about us on our website at Retirement Advantage is a trading name of MGM Advantage Life Limited. Retirement Advantage is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority, registration number You can check these details at or by calling the FCA consumer helpline on

15 Contact us The Retirement Account Key Features Here are our contact details in case you have any questions or want to tell us about any changes to your personal details: Address Retirement Advantage Customer Centre MGM House Heene Road Worthing West Sussex BN11 3AT Web us Phone am to 6pm Monday to Friday You can download all of our documents from our website: Braille, large-print and audio formats are available on request. All calls may be monitored or recorded to help with staff training and quality control. 15

16 Telephone calls may be recorded for training and quality monitoring purposes. Retirement Advantage is a trading name of MGM Advantage Life Limited. Registered no 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 MGM House, Heene Road, Worthing, West Sussex, BN11 3AT /15