1 PEnSIon AnnuITIES KEY FEATurES of LEGAL & GEnErAL S PEnSIon AnnuITIES. Helping you make the right decisions for your future INsuRANCe. savings. INVesTMeNT MANAGeMeNT.
2 01 Key features of Legal & General s pension annuities The Financial Services Authority is the independent financial services regulator. It requires us, Legal & General, to give you this important information to help you to decide whether our pension annuity 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. Please read this document together with the quotation. IMPORTANT INFORMATION You should have received a copy of Legal & General s An Introduction to Conventional With Profits booklet which explains the particular features of With Profits investments and describes how we manage our conventional With Profits investments. A more detailed description of With Profits is contained in a document called Principles and Practices of Financial Management (PPFM) which is available on request.
3 KeY FeATuRes OF LeGAL & GeNeRAL s PeNsION ANNuITIes 02 LEGAL & GEnErAL offers Two TYPES of PEnSIon AnnuITY: a Non Profit annuity, sometimes referred to as a conventional annuity, and a With Profits annuity, a type of investment linked annuity. A lot of the information in this document applies equally to both, but where it doesn t, it ll be made clear. ITS AIMS risks The aim of a pension annuity is straight forward. To pay you a pension income for the rest of your life. Depending on which options you choose, it may also pay a pension income to your spouse, registered civil partner or a financially dependent partner after you die. Your CoMMITMEnT Your commitment is also clear. You firstly need to decide whether you want to buy your pension annuity from us. If you decide to do so, we need a lump sum to be paid to us usually from a pension fund built up over the years by you and/or your employer(s). Buying a pension annuity is a once and for all decision: once you ve bought it, you cannot change your mind. There are certain risks attached to your decision. It is important that you understand and consider them carefully before making it. Unlike some other financial products, a pension annuity has no cash in value. You cannot sell it, or transfer it to someone else. The annuity rates available can go up and down depending on investment conditions at the time. You could find you would have done better or worse by waiting for a change in investment market conditions. Once you ve bought your annuity you can t change the options you ve chosen, for example, add a new spouse s income option if you get married after your income starts. Depending on the choices you make when your income starts, you may find that the effects of inflation over time leave you less well off than you d hoped, planned or expected. The following only applies to our With Profits annuity: Your income could go up or down, depending on a number of factors including the performance of the underlying investments. You must consider whether you can afford to take the risk that your income may go down, especially if you will rely on that income to maintain your standard of living. Past performance is no guarantee of future performance. You share in the risks of other With Profits pension annuities, which can reduce your bonuses and therefore the amount we pay you. You also share in the risks of other With Profits policies, such as bonds. We write With Profits and Non Profit policies (that is policies which are not eligible for bonuses) in our With Profits fund. We provide guarantees for both With Profits and Non Profit policies and the assets in the whole fund are ultimately available to meet them. This means that, although you may benefit from support from the assets backing Non Profit business, we could reduce the amount we pay you if we have to use the assets backing With Profits business to support Non Profit business. The following only applies to our Non Profit annuity: We may request a report from your doctor after your income starts in order to check any medical and/or lifestyle information you have given us. If we find the doctor s report does not support the information you gave us and we have paid you too much income, then it may be reduced and, at worst, you may receive our lowest standard annuity rate. We will then recover any overpayments from you. If the report suggests you would have qualified for a higher income, we will not increase your income as a result. It is therefore your responsibility to ensure that any medical and/or lifestyle information you give us is both accurate and complete so that you can obtain the maximum level of income.
4 03 Key features of Legal & General s pension annuities Your questions answered. In this section, we will try to answer any questions you may have, and give you a bit more information about our pension annuities and how they work. This is an important, once and for all, decision. It will largely determine your financial circumstances for the rest of your life and possibly of your husband, wife or partner if they outlive you. We want you to be confident that you have all the information you need, to ensure that the decision you make is the right one for you. A copy of the terms and conditions is enclosed. If you haven t received it, please contact us. Needless to say, if there s anything you re still unsure of, we will be very happy to answer any questions you might have. You may also like to talk to other companies and/or an independent financial adviser if you haven t already done so. THE BASICS What is a pension annuity? A pension annuity is a way of turning the pension fund you have built up over the course of your working life into a regular income. Basically, your pension provider gives us the fund, as a lump sum. In return, we commit to pay you a regular income for as long as you live. Can I take a cash lump sum? Yes. The rules governing how much you can take vary from time to time, but currently the rule is that you can take up to 25% of your pension fund as a cash lump sum. What s left of your fund will then be used to buy your annuity. Can I use a one-off payment to buy a pension annuity? Yes. If you use a lump sum rather than the proceeds of a pension scheme, we then claim tax relief from HM Revenue & Customs (HMRC) at the basic rate, add it to your lump sum, then use the total amount to pay for your annuity. If you pay higher rate tax, you ll be entitled to extra tax relief, but you ll need to claim it yourself through your tax office. Your employer can also make a one-off payment. How much regular income will I receive? The income you receive will depend on the size of the fund you have accumulated over the years and market conditions at the time you buy your annuity. It will also depend on your age and sex, and, to at least some degree, on how and when you choose to receive it. It will also depend on various choices you make when you buy it see the section Your payment options for more details. The income from a With Profits annuity will also be affected by the Anticipated Bonus Rate (ABR) you choose and the bonuses we declare (see What is a With Profits annuity? ). The income from a Non Profit annuity could be affected by your postcode and certain medical and/or lifestyle conditions. How will I receive my income? Your payments are made directly into your bank or building society account. What happens when I die? Unless you have made certain choices, which we will cover shortly, your income will stop. This could mean that the total amount of income paid from your annuity may be less than the value of the pension fund used to buy it. When can I buy a pension annuity? You can buy a pension annuity as long as you will be aged 55 or over and under 75 when the annuity starts. If you buy it before you d originally planned to, your income might be smaller than you expected, since your pension fund will have had less time to grow, and the income will be paid to you for longer. SHOULD I BE WORRIED ABOUT INFLATION? The rate of inflation will vary but for example, if inflation averaged 2.5%, after 10 years the value of 100 in terms of today s prices would be only 78; and after 25 years, just 54.
5 Key features of Legal & General s pension annuities 04 WITH PROFITS ANNUITY What is a With Profits annuity? A With Profits annuity will pay you an income for the rest of your life. The level of income can go up and down. This is because a With Profits annuity allows you to invest in a broad spread of assets. These include stocks and shares, fixed interest securities (a fixed interest security is a way of lending money to a Government, or to a company, in return for a fixed rate of interest over a fixed period), UK property and cash. Returns are credited in the form of bonuses which we declare each year. The level of bonus is not guaranteed and will depend on a number of factors, including investment performance, our mortality experience and expenses. There are two types of bonus: Annual Bonus, which, once added, cannot be withdrawn (other than by the effect of the Anticipated Bonus Rate (ABR)), and Temporary Bonus, which is payable for one year and can be changed or withdrawn at any time. The ABR allows you to exercise your own judgement on what future bonus levels are likely to be. You can select a rate from outset of between 0% and 5% in increments of 0.1%. The lower the ABR you choose, the lower your starting level of income will be, but there s a greater likelihood it will increase over time as bonuses are added. On the other hand, the higher the ABR you choose, the higher your starting level of income will be, but there is a higher chance that your income will fall over time. This is because the level of bonuses will need to be higher to match or exceed the ABR. We will send a full statement each year with details of the bonuses that will be added to your With Profits annuity. Can I change my ABR in the future? You may be able to vary your ABR provided you are under the age of 75. Any request to do so must be received by us in writing four weeks prior to your policy alteration date (normally your policy anniversary). We may ask for medical evidence before we can provide you with a quotation based on the revised ABR. We use the medical evidence to estimate your life expectancy which is then used in the calculation of the revised annuity. There will be a charge for making the change. Your revised quotation will take account of this charge. Do note that changing your ABR can significantly affect your future income, and may leave you worse off than if you had not made the change. We would recommend taking financial advice before you request a change. What is the guaranteed minimum annuity? Whilst the level of income we pay you from a With Profits annuity can go down, it will never fall below a minimum level (the guaranteed minimum annuity). The guaranteed minimum annuity will depend on the ABR you choose and will be based on a percentage of your starting level of income. The table below shows the percentages: ABR SELECTED (%) GUARANTEED MINIMUM ANNUITY AS A % OF STARTING INCOME We suggest you consider quotations with different ABRs before making a decision. Can I change a With Profits annuity to a Non Profit annuity? Our With Profits annuity can be converted to a Non Profit annuity at any time after the first policy anniversary date, but before doing so we may have to ask for medical evidence. We use the medical evidence to estimate your life expectancy which is then used in the calculation of the revised annuity. There will be a charge for making the change. Your revised quotation will take account of this charge. Once you have converted to a Non Profit annuity you can t revert back to a With Profits annuity at a later date.
6 05 Key features of Legal & General s pension annuities NON PROFIT ANNUITY What is a Non Profit annuity? A Non Profit annuity will pay you an income for the rest of your life. A fixed income You can choose from outset to be paid a fixed income, set at a defined level. With this option, you know where you stand. But there is the danger that your pension income won t buy as much over time due to inflation. An income that increases You can choose an income which increases year on year, either by: a fixed percentage anything up to and including 10%, or in line with the Retail Prices Index (RPI). RPI is the index of the average change in the prices of goods and services in the UK. You can choose to have the increase capped at 5%, referred to as Limited Price Indexation. RPI increases are not available on our Non Profit annuity where enhanced rates have been applied. The trade off for choosing an income that increases over time is that it starts out at a lower level than a fixed income. Either way, once in payment, that s it. Unlike some other types of annuity, our Non Profit annuity will not be affected by what happens for example to the stock market or by changes in the housing market. Can my income go down over time? No. The level of income we pay you cannot ever actually go down - although inflation can reduce how much you can buy with the money you receive. Can I change a Non Profit annuity to a With Profits annuity? No. The option to convert from a Non Profit annuity to a With Profits annuity is not available.
7 Key features of Legal & General s pension annuities 06 YOUR PAYMENT OPTIONS How can I adapt my pension income to my needs? There are a number of options you ll need to consider carefully before you buy your annuity. It s important to realise that the options you choose cannot be changed or added to after your income has started. Not all of them may be available to you due to restrictions imposed by the pension fund you have. But normally, you can choose from any of the following: An income for your dependant You can choose for an income to be paid to your surviving spouse or registered civil partner if you die before they do. Or, if you re not married or in a registered civil partnership, then you can choose for an income to be paid to a financially dependent partner. This income would be paid to them for the rest of their life. The amount they ll get can be set at any level you want up to a maximum of your own income. Choosing this option will reduce your starting level of income. If you want an income to be paid to your surviving spouse or registered civil partner, you can choose for it to be paid to: the person you re married to or in a registered civil partnership with when you buy your annuity. If you later remarry or enter into a registered civil partnership with someone else, they will not be entitled to your income. This is known as named basis; or the person you re married to or in a registered civil partnership with when you die, even if they re not the same person you were with when you bought your annuity. This is known as any basis. The option you choose will affect the amount of income you get. If you want an income to be paid to a financially dependent partner then they must be named before your annuity starts. When you die, they will need to be able to prove they were financially dependent on you at the time of your death. We will not pay an income to any type of dependant other than those described above. A guaranteed payment period Your income is guaranteed to be paid for as long as you live. However, you can choose to have it paid for a guaranteed period of up to 10 years, to your estate or any other person you specify, if you die within that period. Again, if you choose this option your income will start at a lower level. You could combine an income which has a guaranteed payment period with an income payable to your dependant on your death. In this case, you need to choose whether their income starts when you die (known as with overlap ), or when the guaranteed payment period ends (known as without overlap ). Can I combine other options? Yes. Please ask us for a quotation showing the options that you want. Do bear in mind that any option(s) you choose will affect the size of the income you receive. Some types of pension funds must have certain options by law. If yours is one of them, your quotation will reflect this. How often will I receive my pension income? When you buy your pension annuity, you must specify how frequently your income payments are to be made monthly, quarterly, half yearly or yearly, in advance (at the start of the payment period) or in arrears (at the end of the payment period). If you choose to have your payments made in arrears, you may decide that you would like a final payment to be made to cover the period between your last payment and your death. This is called a proportionate payment. Once again, the choices you make will affect the starting level of your income. For instance, an income payable yearly in arrears will be greater than one payable yearly in advance.
8 07 Key features of Legal & General s pension annuities RULES, TAXES AND CHARGES How are any benefits from contracting-out treated? If your pension fund includes benefits arising from contracting-out of the earnings related part of the State Pension, your income may be subject to certain restrictions as to how it can be paid. Any such restrictions, if applicable, will be shown on your quotation. Is my income subject to tax? Yes. And if you have chosen a surviving dependant s income option, any payments to them will also be subject to income tax. We will send a P60 each year confirming the total amount of any tax we have deducted. The amount of tax you pay on your income can change from time to time with changes in your circumstances, tax rates and other factors. When these changes happen, the level of income that you receive from us will also change in line with the instructions that we are given by HMRC. The basic rate of tax for the tax year 2010/2011 is 20%, but the rate you pay may be different. How much commission is paid to my financial adviser? We may pay commission to your financial adviser for arranging your plan. Any such commission would depend on the size of the pension fund, and be paid for out of the charges, with details provided in your quotation. Are there maximum limits on how much income I can receive? There are no restrictions on how much income you can receive, but payments above a certain level are subject to a higher rate of tax. If the total value of your pension savings exceeds your Lifetime Allowance, as set by the Government, the excess will be subject to tax at up to 55%. The level set, however million for tax year 2010/ means relatively few people will be affected. The Lifetime Allowance is expected to remain at this level until tax year 2015/2016. YOUR QUOTATION How long is my quotation guaranteed for? The annuity rate used in your quotation is guaranteed for a limited period. For this rate to apply, we must receive all funds from your pension scheme(s) before the date shown in the Important information section in your quotation. If the funds are received after this date then the rate available at that time will apply. What should I do if I want to accept this quotation? Simply complete the application form, and any other accompanying documentation, and return it to your financial adviser. What if the quotation has expired? We will send you a final quotation before your pension annuity is set up. If our rates have changed since your last quotation, the figures will reflect this. What should I do if I want to see other quotations? If you would like us to give you new quotations based on any other options outlined, we will be happy to provide them. You can of course also ask any other life insurance company for a quotation, either through an independent financial adviser or some may deal with you directly. It s worth shopping around (also known as taking the Open Market Option), as different providers offer different rates. If you do get quotations from other providers, do make sure to specify the same options, to ensure that you re comparing like with like. You should also be careful to check for any guaranteed pension benefits you might lose if you were to change provider. They may have guaranteed annuity rates or charges for switching providers. Make sure you understand the implications fully before you make any decisions.
9 Key features of Legal & General s pension annuities 08 Further Information. ABOUT LEGAL & GENERAL The Legal & General Group, established in 1836, is one of the UK s leading financial services companies. Over 6.5 million people rely on us for life assurance, pensions, investments and general insurance plans. The Legal & General Group is responsible for investing 287 billion worldwide (as at 30 June 2009) on behalf of investors, policyholders and shareholders. Legal & General is a UK based insurer. QUERIES OR COMPLAINTS If you need any further information, please contact us at: Legal & General Assurance Society Limited Legal & General Annuities Department PO Box 809 Cardiff CF24 0YL If you wish to complain about any aspect of the service you have received, please ask for a leaflet setting out our internal complaint handling procedure. Please contact us at: Legal & General Assurance Society Limited Legal & General Annuities Department PO Box 809 Cardiff CF24 0YL Telephone: Calls to this number will not exceed your fixed line or mobile phone provider s national rate and will be included in any inclusive free minute plan or discount scheme you may have with your telephone provider. Call charges will vary between telephone providers. We may record and monitor calls. Complaints regarding our administration that we cannot settle can initially be referred to: The Pensions Advisory Service 11 Belgrave Road London SW1V 1RB Telephone: Website: and may then be referred to: The Pensions Ombudsman 11 Belgrave Road London SW1V 1RB Telephone: Website:
10 09 Key features of Legal & General s pension annuities QUERIES OR COMPLAINTS (continued) Compensation scheme Client categorisation Conflicts of interest Our Regulator Sales-related complaints that we cannot settle can be referred to the: Financial Ombudsman Service South Quay Plaza 183 Marsh Wall London E14 9SR Telephone: Website: Making a complaint to The Pensions Advisory Service or the Financial Ombudsman will not prejudice your right to take legal proceedings. The Financial Services Compensation Scheme (FSCS) is designed to pay customers compensation if they lose money because a firm is unable to pay them what they owe for any reason. Your ability to claim from the scheme and the amount you may be entitled to will depend on the specific circumstances of your claim. You can find out more about the FSCS (including amounts and eligibility to claim) by visiting its website or calling The FSCS may arrange to transfer your policy to another insurer, provide a new policy or if these are not possible, provide compensation. FSCS compensation covers payments up to 90% of the value of the claim per firm. There is no upper financial limit on the claim. However, the rules of the FSCS may change and the FSCS may take a different approach on the application of these rules to a firm depending on the circumstances of the failure of that firm. If you buy this Legal & General product, we will treat you as a retail client. There are various categories of client set out in the financial regulations. Being a retail client gives you the greatest level of protection under the regulations and ensures you get full information about any products you buy. If, under the regulations, you are a professional client or eligible counterparty, we will still treat you as a retail client, although this would not necessarily mean that you would be eligible to refer any complaints to the Financial Ombudsman Service or to make a claim under the Financial Services Compensation Scheme. During the term of your policy, conflicts of interest may arise between you and us, our employees, our associated companies or our representatives. A conflict of interest is where our duties to you as a customer may conflict with what is best for ourselves. To ensure we treat customers consistently and fairly, we have a policy on how to identify and manage these conflicts. A copy of the full policy is available on request by writing to us at the address detailed above in the section Queries or complaints or from our website at We are authorised and regulated by the Financial Services Authority, and appear on their register under number You can check this at: Or by telephone on: You can write to them at: Financial Services Authority 25 The North Colonnade Canary Wharf London E14 5HS
11 Key features of Legal & General s pension annuities 10 TAX Cancellation rights Law and language With Profits This information reflects our understanding of the current law relating to pensions. If you apply for a Legal & General pension annuity, you have 30 days from the date of your quotation to change your mind. If you return the completed application form before the 30 days have passed, the annuity will not commence until at least 14 days of the 30 days have passed. You will then have the unexpired balance of the 30 days cancellation period to cancel the contract. The following applies to a personal pension contribution for immediate retirement only: When we receive your application and cheque we will, in accordance with the law, send you a notice of your right to cancel. You then have 30 days in which to change your mind. For all other plans: If you wish to cancel your application you must write to us at: Legal & General Assurance Society Limited Legal & General Annuities Department PO Box 809 Cardiff CF24 0YL We will then cancel the plan. If you do not take this opportunity to cancel, your annuity will continue and your benefits will continue to be paid. If you decide to cancel we will make every effort to return the original payment to the original source. They may not be obliged to accept the return of this payment. If they will not accept the return of the payment you can either arrange for your annuity to be purchased with another provider and we will forward the monies to them, or your annuity with us will continue. If you have received any benefits from the annuity, you must return this money to Legal & General within 30 days of notifying us. English law governs this contract. We will communicate in English throughout its course. If we need to contact you, we will normally do this by letter or by telephone. Our regulator, the Financial Services Authority (FSA), requires us to publish a document called Principles and Practices of Financial Management (PPFM) which is a detailed description of our approach to managing With Profits investments. In addition to this, the FSA also requires us to produce a guide which summarises the main points of the PPFM. This is called An Introduction to Conventional With Profits and you can ask us or your adviser for a copy of both of these documents.
12 ConTACT us Call charges will vary. We may record and monitor calls. Authorised and regulated by the Financial Services Authority Legal & General Assurance Society Limited. Registered in England N registered office: One Coleman Street, London EC2R 5AA This is also our head office in the United Kingdom. A member of the Association of British Insurers. W /10 H110745