Your options at retirement

Transcription

1 Your options at retirement How you can take your pension with us B&CE pension schemes include: The People s Pension EasyBuild Stakeholder Pension & EasyBuild S2P TUTMAN B&CE Contracted-out Pension Scheme Lump Sum Retirement Benefit (LSRB) Additional Voluntary Contributions (AVCs, EAVCs) Quick guide For people, not profit

2 How you can take your pension with us Your quick guide on how you can take your pension savings with us from age Cash page 4 You can normally cash in a pension pot of any size. Or you may be able to take smaller cash sums in stages. But be careful you could get a large tax bill or run out of money later in your retirement. 2. Income page 6 You can use your pension pot to buy a regular income often for life. This is known as an annuity. You can shop around different providers to get the deal that suits you best. 3. Investment page 8 You don t have to decide what you d like to do with your pension savings now. You can leave them invested and give your pension pot the chance to grow further, tax-free. 4. Mix and match your options Cash and investment page 5 If you have over 10,000 in your pension pot, you may be able to take one or several flexible lump sums in stages, while leaving the rest of your pension savings invested. Cash and income page 6 You can cash in some of your pension pot and use the rest to buy a regular income known as an annuity. How much you take as cash affects the amount of income you get. You can shop around different providers to get the deal that suits you best. Income and investment page 7 You can get a variable income called flexi-access drawdown, while leaving the rest of your pension savings invested, so you can use them later in your retirement. Please note The information in this booklet isn t advice or guidance, and mustn t be taken as an authoritative statement of the law, or the basis for retirement planning. Different providers offer different options, which vary in features, rates of payment, tax implications and charges. Any charges can affect the money you receive, so check whether providers make ongoing charges or other reductions to your pension pot while you re deciding what to do with your pension savings. Page 2 Your options at retirement

3 More information 7. Have you worked in the construction industry? page 9 You may get Lump Sum Retirement Benefit cash when you re over Our jargon buster page 10 More information on the key terms you may be unsure of. You should also read Your pension: it s time to choose in-depth information on the full range of options the law allows, written by the Money Advice Service. Scamproof your savings a leaflet on avoiding pension scams, from The Pensions Regulator. How to claim Over the years we ve offered a few different pension schemes. The enclosed letter will let you know which pension benefits you have with us. Wherever your pension savings are, usually you should be able to access the option you want. HMRC has certain restrictions, though. And for some options you may need to transfer your pension pot to one of our more recent schemes or another provider. For each option we ll let you know what s possible. Countdown to your retirement 1. Find statements for all your pensions. We ll need details of each one to process claims. 2. More than one pension? Call to see if you can combine them. 3. How much will you get? Get valuations from any providers you re with. 4. Checked your State Pension? Go to 5. Chosen a beneficiary in case you die? Find out more on page Get free impartial guidance from Pension Wise at 7. If you d like advice on what s best for your specific circumstances, you could get financial advice from a professional adviser. They might charge for their time though. Go to Your options at retirement Page 3

4 How to take cash with us If you have 10,000 or less in a pension pot, it s a small pot lump sum. If you have more than 10,000, it s a flexible lump sum (page 5). How to take a pension pot of 10,000 or less as cash Taking a small pot lump sum with B&CE You may be able to take your whole pension pot as a cash lump sum. You can take any number of occupational pension pots, like The People s Pension. You can take up to three personal pension pots in your lifetime. (EasyBuild and EasyBuild S2P count as separate pots.) How to claim For EasyBuild or The People s Pension savings of 10,000 or less, you can claim online at (this will take around 10 minutes) or if you d rather claim over the phone you can call (this will take around 15 minutes) for both you ll need your NI number and bank details. How you ll be taxed The first 25% is tax-free, with 75% taxable at the highest rate you pay. If you have other income as well as the amount you cash in, this could push you into a higher tax band with a higher tax charge. It could also affect any means-tested state benefits you receive. Are you suffering from ill health? Under 55s if you re retiring due to ill health, you may be able to access your savings early. Life expectancy less than a year if you re under 75, you may be able to take all your pension savings tax-free. Over 75s are taxed at 45%. Call us on to check HMRC conditions for these options and how to claim. Is a small pot lump sum right for you? We may not be able to pay you a small pot lump sum in all cases. HMRC rules on payment are complex, but we ll let you know if we can t pay you a small pot lump sum for any reason. Remember, your pension pots are meant to give you an income during your retirement. Cashing them in could leave you with a hefty tax bill and only the State Pension to live on. Cashing in a pension pot may mean you can t pay into that pension scheme any more. If you pay your lump sum back into a registered pension scheme, there may be tax and other charges to consider. Page 4 Your options at retirement

5 How to take a pension pot worth over 10,000 Taking a flexible lump sum with B&CE (known by HMRC as uncrystallised funds pension lump sums, or UFPLS) You can take your whole pension pot in one go, but there could be big tax implications. It may be more tax efficient to take the money in stages, leaving the rest invested. Each cash sum has to be 2,000 or more. At least 10,000 has to remain in your pension pot. You can only take one flexible lump sum each tax month eg 6 May to 5 June. It may be more tax efficient to take flexible lump sums in different tax years. It s currently free to take flexible lump sums from us, but this may change in the future. How to claim Call to discuss your options. You can take a flexible lump sum with B&CE through The People s Pension or EasyBuild. If you have savings in a different scheme, you have the option to transfer your pension savings to either an existing account with The People s Pension or to a new or existing EasyBuild account. Alternatively, you have the option to transfer to another provider who offers flexible lump sums. How you ll be taxed The first 25% of each flexible lump sum you take is tax-free. The remaining 75% of each amount is taxable, as if it were income, at the highest rate you pay. Taking large cash sums could move you into a higher tax band and give you a large tax bill especially if you have other income on top. It s likely the cash you get will be much lower than the amount you take from your savings. Example Say you take 30,000 as a flexible lump sum but you get emergency taxed. (You d have to claim back the extra tax from HMRC.) 22,500 is taxable, meaning you pay 8, in tax. So you d get 21, Are you suffering from ill health? For life expectancy less than a year, if you re under 75, you may be able to take all your pension savings tax-free. Over 75s are taxed at 45%. Call us on to check HMRC conditions for this option and how to claim. Are flexible lump sums right for you? Your annual allowance for further saving into a defined contribution pension will reduce page 10. We may not be able to pay flexible lump sums in all cases. HMRC has various rules, including that you have enough lifetime allowance available page 11. Consider your personal tax circumstances and how much you ll pay on flexible lump sums. Cashing in a pension pot may mean you can t pay into that pension scheme any more. If you pay your lump sum back into a registered pension scheme, there may be tax and other charges to consider. Your options at retirement Page 5

6 How to get a retirement income An annuity There are many kinds of annuity that pay you a guaranteed income. You can shop around to find one that s right for you. This is known as using the open market option. Ask annuity providers for illustrations of how much income you ll get. What income you ll get depends on your circumstances, your pension savings, annuity rates and the kind of annuity you want. Features include inflation proofing, lifelong income and income for partners. You can get up to 25% of your pension pot as tax-free cash. How to claim We don t offer an annuity option, but we can help you transfer to a provider that does. For The People s Pension or EasyBuild, you can start your transfer at Otherwise call us on for your paperwork. How you ll be taxed You can normally take up to 25% of your pension pot as a one-off tax-free lump sum, known as a pension commencement lump sum. You use the rest to buy an annuity income. Income from an annuity will be taxable at the highest rate you pay. Example If you take a 20,000 pension pot, you could get 5,000 as a tax-free lump sum. That leaves 15,000 to buy your annuity income. You get, say, 600 a year taxed at 20%. That leaves you 480 a year. Use the Money Advice Service tool to get an example of the amount you could get as an annuity org.uk/en/tools/annuities. Are you suffering from ill health? If you smoke or you re in poor health, make sure you tell the annuity provider, as you may get an enhanced annuity. Is an annuity right for you? Once you buy an annuity, you normally can t change your mind, so take your time and shop around to find one that s right for you. A small pension pot may not be enough to buy an annuity although you may be able to merge different pension pots to buy an annuity. Page 6 Your options at retirement

7 How to get an income and leave the rest of your pension invested Flexi-access drawdown You can take a variable income from your pension pot and leave the rest of your pot invested. This is called flexi-access drawdown. There are different kinds of flexiaccess drawdown, so take your time to shop around for the best deal. You can decide where to invest and how often you wish to take your money. You can take any income you like, within the limits of the plan, and vary when you receive the income, which can help with tax planning. The amount of income available to you may rise or fall depending on how your investments perform. How to claim We don t offer flexi-access drawdown, but we can help you transfer to a provider that does. For The People s Pension or EasyBuild, you can start your transfer at Otherwise call us on for your paperwork. How you ll be taxed You can take up to 25% of your pension pot as a tax free lump sum when you first set up your flexi-access drawdown plan. The rest of your pension pot remains invested allowing you to take your money when it suits you. Any income you take will be taxed at the highest rate you pay. Is flexi-access drawdown right for you? Once you start taking an income under flexi-access drawdown, your annual allowance will reduce page 10. Taking lump sums and income now reduces how much you ll have in the future. Keep an eye on your investments to make sure they ll still meet your needs for the future. Your options at retirement Page 7

8 How to keep your pension savings invested for longer Move your retirement date back If you don t want to take your pension savings yet, you can leave them invested by moving your retirement age back, free of charge. That way they ll have the chance to grow further. But the value could go down as well as up. How to move your retirement age back For The People s Pension or EasyBuild, log in at Otherwise call us on How you ll be taxed It s still tax-free to keep your pension savings invested for longer. Investment choices The People s Pension and EasyBuild have a range of investment options you can choose from. If you haven t made an investment choice, you ll be invested in the balanced investment profile. Then as you approach retirement, we ll gradually move your pension savings into more secure investments. You can make you own investment choices in your Online Account at Is continued investment right for you? Make sure you ll have enough money to live on until your new retirement date. Check you have enough lifetime allowance available if you re continuing to pay into your pension page 11. Page 8 Your options at retirement

9 Have you worked in the construction industry? Lump Sum Retirement Benefit (LSRB) LSRB is an old pension scheme set up for people who worked in the construction industry. It s not open any more, but still pays out to anyone who built up an entitlement in the scheme. The enclosed letter will let you know if you have LSRB. It s normally paid as a tax-free lump sum when you re 65. Additional contributions It was possible for you or your employer to add extra contributions to your LSRB pension pot. These are known as: LSRB Additional Voluntary Contributions (AVCs) LSRB Employer s Additional Voluntary Contributions (EAVCs) and are normally taken together with your LSRB. EAVCs are normally paid as a tax-free lump sum when you re 65. You may be able to include AVCs in your tax-free lump sum (subject to HMRC rules), if you started paying them before 8 April Or you can transfer the total of your AVCs and EAVCs to another pension scheme or provider to choose one of the other options in this booklet including The People s Pension or EasyBuild. How to claim If you re eligible to claim LSRB or additional contributions, or you d like to use the additional contributions in another way, get in touch to ask us for a claim form. Or if you have any other pension schemes with us, you may be able to claim LSRB at the same time. Call us on , or claim online alongside The People s Pension or EasyBuild Early retirement If you retire aged 60-65, you can claim your LSRB early, but at a reduced rate. Are you suffering from ill health? If you retire aged due to ill health, you may be able to claim your LSRB early at a reduced rate if you retire on acceptable medical grounds. If you retire at any age because you re permanently incapable of working, your LSRB will not be reduced for early payment. Call us on if you think you re eligible to claim LSRB or additional contributions early on ill health grounds. Satisfactory medical evidence will need to be provided. Your options at retirement Page 9

10 Jargon buster annual allowance The amount you save into your pension pot can benefit from tax relief, as long as that amount doesn t exceed the annual allowance in any tax year. If your taxable earnings in the year are below the annual allowance, then you can receive tax relief on 100% of your earnings (up to the annual allowance), or 3,600 gross, whichever is higher. The annual allowance limit for the current tax year is 40,000. This limit includes all your contributions, tax relief and employer contributions across all your pension arrangements. Contributions over this limit will result in a tax charge, known as the annual allowance charge. If you have an income of over 150,000 in a tax year, then your annual allowance for that tax year will reduce on a tapered basis. For every 2 of adjusted income above 150,000, your annual allowance will reduce by 1. The maximum reduction is 30,000 so anyone with an income of 210,000 or more will have an annual allowance of 10,000. If you take flexible lump sums from your pension savings or start taking an income from flexi-access drawdown, you ll be subject to a reduced money purchase annual allowance of 10,000 for future savings made into defined contribution pension schemes, like The People s Pension or EasyBuild. Your pension provider will let you know if this applies to you. Within 91 days of this notification, you ll have to tell any other pension providers you re with that you ve flexibly accessed your pension pot, and on what date you did so. If you have to pay an annual allowance charge, you may be able to reduce the charge by using any leftover annual allowance from the three previous tax years (but this does not apply to the money purchase annual allowance). You can also ask your pension provider to use some of your pension savings to pay the charge. annuity page 6 A guaranteed regular income you can buy with your pension savings. It usually pays you an income for the rest of your life, although some pay for a shorter period. There s a wide range of annuities available. You can shop around, using what s known as the open market option meaning you can contact different annuity providers for illustrations of how much income you could get. Each annuity has different rates and features, like inflation proofing or covering your partner. If your health or lifestyle is expected to reduce your life expectancy, you could qualify for an enhanced annuity and receive a better income than someone without health problems. beneficiary Someone you nominate to receive a lump sum if you die before you get your pension. You can have more than one and you can request what percentage goes to whom. The lump sum is a discretionary payment, so usually isn t subject to inheritance tax. If you die before you re 75, your beneficiaries can receive your remaining pension pot as tax-free cash or income as long as your total pension savings are less than the lifetime allowance (currently 1 million). If you die after you re 75, your beneficiaries will have to pay tax on any cash sums paid. defined contribution pension A pension that you and/or your employer contribute to like The People s Pension and EasyBuild. This money is invested to build up a pension pot you can use to get a retirement income. How much you get depends on factors like the amount paid in, charges, Page 10 Your options at retirement

11 investment performance and what you choose to do with your pension savings when you retire. flexi-access drawdown page 7 A variable income you can choose to take from some pension providers, leaving the rest of your pension pot invested. As your pension pot remains invested, the amount of income may rise and fall, depending on how your investments perform. There s also a risk you ll run out of money. But you could buy an annuity later for a guaranteed regular income. flexible lump sums page 5 You may be able to cash in your whole pension pot as a flexible lump sum, or take several part-payments and leave the rest invested. 25% of each lump sum is tax-free, with the other 75% taxed at the highest rate you pay. HMRC HM Revenue & Customs. ill health You can claim your pension savings earlier than age 55 if you ve become physically or mentally incapable of continuing your occupation, and have stopped working. If you have Lump Sum Retirement Benefit savings, different criteria apply (see page 9). If you are suffering from serious ill health (a life expectancy of less than 12 months), it may be possible for you to receive your entire pension pot in the form of a lump sum. Satisfactory medical evidence will need to be provided. illustration An estimate of how much income you could get if you use your pension savings to buy an annuity. lifetime allowance The total amount of all your pension savings that can be built up over your entire working life without triggering an extra tax charge. The current lifetime allowance is 1 million. Some people may have registered for tax protection with HMRC in the past; but otherwise, you may be charged if you go over this limit. If you think this may apply to you, you should get financial advice. open market option page 6 This describes the freedom you have to shop around for a retirement income that suits you. You can get a guaranteed regular income by using your pension savings to buy an annuity. Or if you d like an income at the same time as leaving some of your pension pot invested, you can do so with flexi-access drawdown. Different providers offer different rates, so you can shop around to find the one that s right for you like you do for your car or home insurance. pension commencement lump sum The tax-free lump sum of up to 25% you can normally take from your pension pot if you use the rest of your pension savings to buy a retirement income (an annuity or flexi-access drawdown). If you were entitled to more than 25% as of 5 April 2006, and registered this right with HMRC, this may still be true now. Pension Wise A free impartial service backed by the government, offering guidance about what to do with your pension savings when you re 50 or older small pot lump sum page 4 A pension pot of 10,000 or less you can take as a single cash lump sum without affecting your annual allowance. You can take up to three personal pension pots as small pot lump sum payments in your lifetime. There s no limit on the number of occupational pension scheme pots you can take. uncrystallised funds pension lump sum (UFPLS) This is HMRC s technical term for flexible lump sums, as explained above. Your options at retirement Page 11

12 For people, not profit Do we have your latest details? Make sure we have your and phone number so we can update you about your pension savings. You can log in to your Online Account at to provide your details, add or update your beneficiaries and change your retirement age. Want help with your choices? Pension Wise is a free, impartial service that can give you guidance on the options. Find out more at or call to book a telephone or face-to-face appointment. Need to contact us? We re here 8.30am to 8pm Monday to Friday, and 9am to 1pm on Saturdays. We re closed Sundays and bank holidays. Get in touch on The information in this Your options at retirement booklet is correct as at April 2016 and may be subject to change. B&CE Financial Services Limited Manor Royal, Crawley, West Sussex, RH10 9QP. Tel Fax Registered in England and Wales No To help us improve our service, we may record your call. B&CE Financial Services Limited is authorised and regulated by the Financial Conduct Authority. Ref: It is the administrator for the B&CE EasyBuild Stakeholder Pension which is a personal pension scheme. The company is also a distributor of, and an administrator for, The People s Pension Scheme and the Employee Life Cover from B&CE which are occupational pension schemes to which different law and regulation applies. Further details can be found on our website BR RE