Annuity Growth Account

Transcription

1 Annuity Growth Account a flexible lifetime annuity Client guide

2 Contents About Canada Life page 3 Introduction to AGA page 4 Main features AGA may be suitable page 5 AGA will be unsuitable How does AGA work and provide an income for you? Income at the review stage page 6 How do I obtain my Pension Commencement Lump Sum (PCLS)? What happens if I die? page 7 Further information on AGA death benefits page 8 What are my options at the three-year review? page 9 Do you contact me before the three-yearly review? page 10 Where and how is my money invested? page 11 Can I phase my investments? page 12 How will I know how the investment element page 14 is performing? What is a survival bonus? What about tax? page 15 Can I change my mind? AGA product details and charges page 16 Glossary of terms page 17 2 Client guide

3 About Canada Life The Canada Life Assurance Company provides insurance and wealth management products and services through domestic operations in Canada and international operations in the Republic of Ireland, Isle of Man, Germany and the U.K. as well as branch and subsidiary operations in other countries. Canada Life is a subsidiary of The Great-West Life Assurance Company and both companies are members of the Power Financial Corporation group of companies. Strength and stability We understand that you would want to be certain that the company you invest with is strong, safe and secure. As a part of the Great-West Lifeco group, we are a constituent of the Financial Times Global 500 world s largest companies and with combined assets under administration of more than 320 billion (as at 30 June 2011) we have an even stronger platform for continued growth as a world-class financial services provider. Ratings are another reflection of our financial strength and Great-West and its subsidiaries have received strong ratings from the major ratings agencies. As they can change over time, you can view our latest ratings on the About us part of our dedicated client website Client guide 3

4 Introduction to the Annuity Growth Account With the Annuity Growth Account (AGA) you can keep control of your pension when you buy an annuity. An annuity gives you an income for life but with a conventional lifetime annuity the income amount is normally fixed for life unless you have chosen to have it increasing every year. The pension fund is used entirely to buy this income so you have no further control over how the money is invested and you have limited options as to what happens to it after you die. AGA, a flexible lifetime annuity, gives you an income for life which may be variable but lets you decide how much income (within limits) you take, and you retain control over how your money is invested. You can also provide for your dependants just as you can with a conventional annuity but with some additional options. There are all types of annuities and they all have advantages and drawbacks. This guide should answer any questions you might have about AGA so you can determine if it is a suitable annuity for you. We strongly recommend that you seek advice from your professional adviser before coming to any decision. The main features of the AGA Income control Income is flexible within set limits Income is fixed for three-year rolling periods (costing much less than a fixed income for life) Income up to 20% higher than Canada Life s conventional lifetime annuity Income levels can be reset at each three-year review Additional income options at each review fixed income for life enhanced lifetime income (if qualifying) transfer option to another provider (note; not all providers will accept transfers) A fixed lifetime income must be elected by age 85 Investment control A wide range of internal and external funds A range of internal and external model portfolios A protected investment fund Up to 12 free switches in any policy year Up to 10 funds can be selected Phasing facility (see page 12, Can I phase my investments ) Free investment reporting option Control of death benefits Joint-life annuity up to 100% of main applicant s income Income level can be changed at each review Option to remove second applicant at each review Guarantee period available Additional bonus A survival bonus may be added at each review 4 Client guide

5 AGA may be suitable If you are aged between 55 and 79. If you value flexibility over certainty. If you want control over your investment and the level of income paid. If you want the potential for income to increase over time. If you are prepared to take a risk with your future levels of income. Where the AGA forms only part of your overall retirement income. AGA will be unsuitable If you prefer certainty and a fixed level of income for life. If you want to take your Pension Commencement Lump Sum (a tax free lump sum from your pension fund before any income is taken) and no income. If you are going to be reliant on the AGA income from the outset and this is your only source of retirement income, apart from a state pension. If you are risk averse. How does the AGA work and provide an income for you? When you have decided to take your pension benefits in the form of an income, your accrued pension pot(s) is used to buy the flexible lifetime annuity. The AGA is split into two parts: An initial three-year fixed income which must be within HM Revenue and Customs prescribed limits. The maximum being 120% and the minimum 50% of a Canada Life conventional lifetime annuity. The Investment Element offering a wide range of unit-linked funds which is bought with the remaining pot of money. Your Personal Example (which should be read in conjunction with the AGA Key Features document) will provide you with details of: Your income The cost of the income The amount left for investment Your fund choice The annual growth or hurdle rate. Client guide 5

6 Important: Annual growth or hurdle rate This is shown on your Personal Example and is the growth required from the investment element to maintain the selected level of income indicated after three years with the purchase of a lifetime income calculated using the Financial Services Authority s prescribed assumptions. This will assume a future annuity interest rate (see your Personal Example) that can not be guaranteed. If annuity interest rates are lower than that assumed in your Personal Example then the cost of buying the income will increase and the amount of income available to you will be lower. Annuity interest rates are not the only factor that affects the cost of buying your income, changes to life expectancy and legislation can also influence the total cost. The higher the income you take in the earlier years the more likely that your income will fall at future reviews. You should consider this carefully when selecting your level of income. If you are transferring to obtain a higher income level than is available under your drawdown arrangement, it is important that you are aware that the income will only be fixed for a three-year period and is likely to fall substantially at the first three-year review. Income at the review stage Every three-years (up to age 82) a review of your AGA will take place and at this stage you are given a range of options, one of which is to purchase a further three-year fixed income. A new Personal Example will be sent providing you with the level of income available. Please see the section What are my options at the three-yearly review for full details. How do I obtain my Pension Commencement Lump Sum (PCLS)? Your PCLS is normally up to 25% of the value of the pension pot or funds that you are using to buy your AGA with and this is available tax free in accordance with HM Revenue and Customs limits. There are two ways you can purchase an AGA depending on how many pension pots you are using and this will determine who pays out your PCLS. Note: If you are transferring from a drawdown arrangement then normally the PCLS would have been paid at the time the drawdown was started so no further PCLS will be available. 1. Open Market Option (OMO) If you have a single pension plan this can be used under an OMO to purchase an AGA. The provider of your pension plan will pay you any entitlement to a PCLS and send us the balance of the fund to invest into the AGA. If your pension plan includes a fund with protected rights this fund will be used to provide you a lifetime income from a Canada Life lifetime annuity. This is because the AGA cannot currently accept protected rights, however from 6 April 2012 protected rights will cease to exist. 2. Transfer-in If you have more than one pension plan you wish to use to purchase an AGA the providers will transfer all the funds to Canada Life and these will be placed initially into a Canada Life immediate vesting personal pension bond (IVPPB) until we receive all the transferring funds. We will then pay any entitlement to a PCLS and transfer the balance of the funds into the AGA. Any protected rights will be treated in the same way as described under the OMO. 6 Client guide

7 What happens if I die? Spouse/civil partner/financial dependant benefit The AGA will allow you to provide second annuitant benefits after your death for your spouse, civil partner or financial dependant. You can select 50%, 66% or 100% of your income to continue for the second annuitant in the event of your death. Important at the date of death the investment element will also be reduced to the same percentage, 50% or 66% of its previous value. But where a 100% second annuitant benefit is selected no reduction will be made. At the end of the three-year period in which death occurred the remaining value of the investment element will be used by the second annuitant to either buy a lifetime income of their own, or to buy a level three-year income and continue to invest the balance of the fund. The level of second annuitant benefit can be changed at each three-year review. At each three-yearly review, you may remove a second annuitant benefit with the second annuitant s agreement. If a second annuitant benefit was selected at outset and the second annuitant has been removed at a review, you are able to add a spouse/civil partner to the AGA at a later review. However a second annuitant benefit cannot be added if the AGA has been set-up on a single life basis at outset. A second annuitant benefit is available to unmarried and same sex couples where they are financially dependent on each other. The benefit can be removed with the second annuitant s agreement. Please note that if financial dependency does not exist at the date of death, no benefit will be payable. Guarantee A three-year guarantee can also be arranged at outset, irrespective of your marital status. If selected, the income will continue to be paid in the event of your death, until the guarantee expires. The second annuitant, if there is one, will receive the income, otherwise Canada Life will look at your nominated beneficiary when deciding who to pay. If selected at outset a further three-year guarantee can be selected at the first and second review only. Further information on AGA death benefits is continued on page 8. Client guide 7

8 Further information for AGA death benefits The level and timing of the payment of benefits on death during the three-year period (before having selected a lifetime income) depends on the benefits selected. The table below summarises the position: Single life or Death Three-year Benefits payable? second annuitant s occurs guarantee benefit (joint life) selected? selected? Single life Annuitant dies Yes Investment element ceases without during term value, but income continues until the end of guarantee period. Single life Annuitant dies No Investment element ceases without during term value and income payments cease immediately. Joint life Annuitant dies Yes 50%, 66% or 100% of investment during term element is available from the date of death for future income at the next review. The remaining balance ceases without value. Income payments continue until the end of the guarantee period. No survival bonus is paid. Joint life Annuitant dies No 50%, 66% or 100% of investment during term element is available from the date of death for future income at the next review, the remaining balance ceases without value. Income payments will continue at the reduced rate of 50% or 66% until the end of the three-year period, or it remains unchanged if 100% second annuitant benefit was selected. No survival bonus is paid. Joint life Second annuitant Yes or Investment element remains, but no dies during term No survival bonus added at end of period. Investment element can be used to purchase a lifetime income or new three-year income on a single life basis. Income continues. Joint life Both annuitant and Yes Investment element ceases without second annuitant value on second death. Income dies during term payments cease at the end of the guarantee period. Joint life Both annuitant and No Investment element ceases without value second annuitant on second death. Income payments cease. dies during term 8 Client guide

9 What are my options at the three-yearly review? Every three years, you have three options: Use the investment element to purchase a new three-year income within the limits available and invest the balance, Use the investment element to purchase an income for life or an enhanced annuity with us, or Transfer to another provider to continue the provision of a lifetime annuity under a new policy. Further details of these options are as follows: Selection of new three-year income This option is available provided you will not attain age 85 by the next three-year review. A new three-year income can be selected that meets your requirements, such as a different level of second annuitant benefits (subject to the AGA Policy Provisions). A new choice of funds may be selected or the existing choice may remain. The new benefits remain within the original AGA. If you selected a second annuitant benefit at outset then you can choose a single life at review. If this change is selected and the second annuitant is alive they must provide us with a written agreement to be removed from the policy. Selection of lifetime income Where the lifetime income is selected, the following provisions apply: Level or escalating The income may be level in payment, or escalate at a rate selected. The pension will be paid in advance, or in arrears, as selected at outset. Enhanced annuity This type of annuity provides a higher income for annuitants who qualify due to their medical conditions or lifestyle choices. Transfer to another provider You will be able to transfer your investment element, plus any survival bonus, to purchase a lifetime annuity with another provider (if the new provider agrees to accept this transfer). This transfer is a continuation of your annuity in payment and your new provider will need to take into consideration the income payments made and the options you have chosen, for example whether or not the AGA provided benefits for a second annuitant at issue, before setting-up the annuity for you. Client guide 9

10 Do you contact me before the three-yearly review? Six months before the three-yearly review, a letter will be sent to you reminding you that the review is approaching and explaining what information will be sent to you and when. Six weeks before the three-yearly review, you will be sent a pack confirming: the current value of the investment element; the options available; that the income payments from the three-year income will cease in six weeks: and you can elect to have your investments switched into the Canlife Money fund which is managed to provide security of capital. This could be of benefit if you want to know in advance and in the run-up to your review an accurate value of your fund to base the next three year income, lifetime income, lifetime enhanced income or a transfer to another provider. Two weeks before the three-yearly review, a new Personal Example will be issued, showing the amount of income that you can expect by either purchasing a lifetime income or purchasing another three-year income, within the AGA. You will also have the option to request an enhanced annuity illustration or a transfer to another annuity provider at this time. A selection form will also be sent for completion and return with a pre-paid envelope, once a decision has been made. If a reply is not received, the investment element will remain invested until you notify us of what action to take. In the meantime, income payments will be suspended. If no decision has been notified to us 60 days after the three-yearly review, we reserve the right to convert the AGA into a conventional lifetime income on the same basis as the three-year income (subject to the AGA Policy Provisions). 10 Client guide

11 Where and how is my money invested? Fund choice When making an investment, having a choice which covers the wide range of asset classes and fund types available in the market today is essential. With a comprehensive range of professionally-managed internal and external investment funds to choose from, you can construct a portfolio with investment funds from Canada Life or from carefully selected funds managed by some of the UK s major investment groups. Our range aims to provide choice across all fund types: from funds that invest in just one of the main asset classes of cash, fixed interest, property and equities, through to funds holding a mixture of some or all of them, from specialist managers to Multi-Managers and fund-of-funds, from funds investing into a single geographic region to funds spanning the whole globe. Whatever your investment needs, our carefully selected range of funds is designed to offer the solution you seek. Detailed information on our fund range including fact sheets can be found on our website at Past performance is not a guide for the future. The value of units can fall as well as rise. Currency fluctuations can also affect performance. The value of the investment element of the AGA is not guaranteed and depends upon the performance of the selected funds. At each subsequent three-year anniversary of the AGA, annuity rates may be lower than at the start. If so, when securing another three-year income or lifetime income using the value of the investment element, the annuity rate may give a smaller income than you could have received at outset (depending on the level and type of income selected). Fund switching At any time while the AGA has an investment element running, you can switch the funds selected. Currently the minimum switch amount is 500 and the minimum balance remaining in any fund is also 500. If you decide to switch between funds, the first 12 switches in any policy year are free of charge. Thereafter, a charge currently of 50 will be made per switch, by deduction of units. Client guide 11

12 Can I phase my investments? The phased investment service, which is free of charge, is used to automatically move money gradually from one group of funds to another over a defined period of time. This could appeal when markets are volatile or if you are uncomfortable with the idea of investing your money all at once. Phased investment could help as it allows you to spread risk by moving from one group of less volatile funds, such as the money and government bond funds, into a group of more volatile funds, such as equity funds, gradually over a set period of time. You can choose up to nine nominated funds to switch out of and up to nine selected funds to switch into, but the combined total of funds must not be more than 10. For instance, you can switch from one nominated fund into nine selected funds (a total of 10) or switch from five nominated funds into five selected funds (a total of 10). You can choose the frequency that you want us to move your money from the nominated funds to the selected funds; the phasing can take place every month or every three months (quarterly). You can also choose the timescale over which you would like us to move your money; the phasing can take place over 6, 12 or 24 months. There are three options for how you want to move your money; 1. Full option Under this option we will switch 100% from all of your nominated funds. We will divide the amount across the frequency and timescale you select. You can vary the percentages that each selected fund receives. Example Nominated funds to switch out of Percentage Selected funds to switch into Percentage Canlife Corporate Bond 100% Investec Cautious Managed 20% BlackRock Global Bond 100% JPM Asia 10% Canlife Money 100% Threadneedle American Select 20% Neptune Balanced 15% SVM UK Opportunities 5% M&G Optimal Income 15% Canlife International 15% Total (must equal 100%) 100% 2. Partial option Under this option we will switch the percentage you specify from the funds you nominate. There is no minimum so you can switch any percentage you choose and you can switch different percentages from different funds. We will divide the amount chosen across the frequency and timescale you select. Example Nominated funds to switch out of Percentage Selected funds to switch into Percentage Investec Cautious Managed 20.0% Canlife Corporate Bond 40% JPM Asia 50.0% BlackRock Global Bond 30% Threadneedle American Select 45.8% Canlife Money 30% Neptune Balanced 10.3% SVM UK Opportunities 5.5% M&G Optimal Income 30.0% Canlife International 32.5% Total (must equal 100%) 100% 12 Client guide

13 3. Fixed amount option Under this option we will switch a fixed monetary amount, as selected by you, from the funds you nominate. There is no minimum so you can move any amount and you can switch different amounts from different funds. You then need to select the funds you want to switch into and specify the percentage of the total switch out amount that you want each fund to receive. The amount you specify is the total amount you wish to move from the nominated fund. We will divide the amount chosen across the frequency and timescale you select. Example Nominated funds to switch out of Amount Selected funds to switch into Percentage Investec Cautious Managed 5,000 Canlife Corporate Bond 50% JPM Asia 10,500 BlackRock Global Bond 10% Threadneedle American Select 250 Canlife Money 40% Neptune Balanced 3,200 SVM UK Opportunities 750 Total 19,700 Total (must equal 100%) 100% Phased investment can only be applied at the start of the policy and at the three-yearly reviews. Once started, the frequency, timescale and funds chosen for your phased investment cannot be changed, but if you do not want the phased investment to continue you can cancel it. You will be able to set-up a new phased investment at the next three-yearly review. Phased investment does not stop you from being able to request immediate fund switches from one fund to another as explained in the Fund switching section earlier. If one of your nominated funds runs out during the phased investment, we will write to let you know and continue to move the amounts you specified from the remaining funds. We will automatically stop the phased investment if one of the following events happens: the selected timescale ends; the annuitant dies; the second annuitant dies after the first annuitant; the units of all the nominated funds are exhausted; a valid power of attorney document is accepted by us; or one of the funds used for phased investment is closed, suspended or combined with another fund. Client guide 13

14 How will I know how the investment element is performing? There is an option at the application stage for you to pre-select an upper and/or lower value for the investment element. This means if the value of the investment element achieves either of the amounts specified, a letter will automatically be sent to both you and your adviser confirming the level of the investment element at that time. This notification could assist you (and your professional adviser) to rebalance your AGA investment portfolio to more closely match your objectives at the next review. For example, if the investment element from commencement (after the three-year income has been secured) is 100,000, you could specify a lower level of say 90,000 and an upper level of 130,000. There is no set formula for determining the upper and lower limits, although the upper limit could be set at a fund size in line with the projected amount required to maintain the income in three-years time. If the investment element falls or rises to either of these levels, a letter will be sent advising you and your adviser of this fact. Please note that we will not switch funds automatically, we will only act on your instruction. Visit our website at to see the prices of each fund we offer. You can also ask for the prices by calling our New Business Investment Team on Every year we will send you a statement showing you the value of your investment. What is a survival bonus? If you (or where a second annuitant has been selected you both) survive to the threeyear review, we will add a survival bonus to the investment element by way of additional units. Further bonuses will be added at each three-year review should you continue to survive. The amount of survival bonus will depend on your age, sex and whether the AGA has been arranged with or without a second annuitant benefit. Your estimated survival bonus is shown on your Personal Example. 14 Client guide

15 What about tax? The income payments we pay to you will be treated as earned income and will be paid after the deduction of tax through the Pay As You Earn system. Pension funds do not pay UK tax on capital gains and income, with the exception of the dividend income on equities. A P60 and a lifetime allowance statement is sent at the end of each tax year to help you with your tax assessment. Payments made following your death when a guarantee period has been selected When you apply for an annuity with us you can choose to tell us who you would like to receive any payments. If an amount is to be paid we will look at your nomination before we decide who should receive the payments. We do this so that the payments do not fall within your estate for inheritance tax purposes. You should ask your professional adviser for more details about tax. The information regarding taxation is based on our understanding of current law, the law may change and depends on your individual financial circumstances. Can I change my mind? You have the right to change your mind and cancel the AGA, under the Financial Services Cancellation Rules, within 30 days of receiving the document Your right to think over your options from us. We will refund any money received in full back to your pension scheme(s), subject to their acceptance. Client guide 15

16 AGA product details and charges Annuitant age limits Minimum age at entry 55 attained. Maximum age at entry 79 next birthday. Spouse/civil partner/financial dependant benefits are allowable within current tax rules. Term The AGA three-yearly fixed income can continue until your 85th birthday, after which a lifetime income must be taken. This is also available for your spouse/civil partner/financial dependant if selected. Minimum purchase premium The minimum purchase premium is 35,000. That can be combined transfers in from UK registered pension schemes, and is net after any pension commencement lump sum (PCLS) has been deducted. For multiple transfers in, there is a minimum of 5,000 per transfer. Once an AGA has commenced, any further transfers would be applied to a new AGA. Maximum purchase premium There is no maximum other than restrictions imposed by the Lifetime Allowance rules. For details see the glossary on page 17. Charges The unit allocation percentage is variable. The actual percentage is shown in your Personal Example given at the outset and at each three-year review. The allocation percentage refers to units purchased at the bid price. We regularly review these charges. The current ones are shown in your Personal Example. Please ask your professional adviser for an illustration. Units will have an annual management charge of 1%. In addition, an investment management charge is levied. This charge varies according to funds selected and details of the charges are available on request or by going to our website Next steps This document has been designed to give you information on the features of the Annuity Growth Account in some detail. However, additional important information is also contained in the AGA Key Features document and your Personal Example. If you have further questions, please speak to your professional adviser. 16 Client guide

17 Glossary of terms Annual growth / hurdle rate The estimated annual rate at which the investment element must grow in value to provide an identical three-year income at the next three- and six-year periods. Annuity rate The rate used to calculate the income. Annuitant / you / your Means the main recipient of the income. Canada Life / provider / the Company / we / us / our All these words mean Canada Life Limited. Existing accumulated pension scheme benefits The benefits held within an existing pension scheme. HM Revenue and Customs The body that sets the income limits and rules of the annuity. Income An amount of money that is paid each year to you. It can be paid at monthly, quarterly, half-yearly or yearly intervals. Investment element The balance of your pension fund that has not been used to secure a three-year income. This will be invested in one or more of our pension funds chosen by you. Lifetime allowance This is an overall upper limit on the amount of pension savings that any one person can draw. The value of any benefits paid out in excess of this allowance is subject to a tax charge. Lifetime income The amount of money that will be paid for the rest of your life. Client guide 17

18 Pension commencement lump sum (PCLS) This is a tax free one off payment that you can take from your pension fund before taking any income. Personal Example Your personalised quotation includes important information about your AGA, such as your three-year income, your investment element, your chosen funds, potential survival bonus and annual growth rate. Second annuitant A person who you have chosen to receive an income from your AGA in the event of your death. This could be your spouse, civil partner or another person who is financially dependent on you. There is a cost associated with providing an income for a second annuitant. Survival bonus This is an amount of money that is added to your investment element every three years if you (and a second annuitant) are still alive. The bonus will be a percentage of your investment element and will depend on your sex and age(s). Three-year income A fixed amount of money that we will pay to you for a three-year period. Three-year review After each three-year period you will be given the opportunity to review certain elements of your AGA such as your level of income, until you take a lifetime income. 18 Client guide

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20 Canada Life Limited, registered in England no Registered office: Canada Life Place, Potters Bar, Hertfordshire EN6 5BA Telephone Facsimile Canada Life group consists of Canada Life Limited, Canada Life Asset Management Limited (both authorised and regulated by the Financial Services Authority), Canada Life International Limited and CLI Institutional Limited (Isle of Man registered companies authorised and regulated by the Isle of Man Insurance and Pensions Authority). All promotional material produced is approved by Canada Life Limited R