KEY FEATURES OF THE PHASED ANNUITY PLAN

Transcription

1 KEY FEATURES OF THE PHASED ANNUITY PLAN The Financial Services Authority is the independent financial services regulator. It requires us, Friends Life Company Ltd, to give you this important information to help you to decide whether our Phased Annuity Pension Plan 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. This document and the enclosed illustration outline the most important things you should know about this plan. Please read them carefully and keep them with your pension documents. More information is available on request. Your financial adviser will be pleased to answer any further questions you might have. Its aims To give you more control over your pension fund and allow you to withdraw your retirement benefits in stages as you need them. To let you keep invested that part of your pension fund which you don t need to provide your income. To use part of your fund to secure an income from a lifetime annuity. To give you more control over the benefits your wife, husband, civil partner or dependant(s) receive when you die. To let you buy a range of pension benefits to suit your personal needs. Your commitment To plan for your retirement and discuss with your financial adviser whether this plan is suitable for your needs. To give up your rights under your existing pension arrangement in respect of the funds transferred to this plan. To decide whether you want to use more money from your policy to buy further income each year. To review with your financial adviser the income you take each year to ensure that your fund does not become too small to meet your future needs. You should monitor how your investments are performing and any changes to annuity rates. To decide exactly what benefits you want each lifetime annuity to provide before you buy the annuity. Once we start paying the benefits you cannot change them. To buy a lifetime annuity with your remaining pension fund before your 75th birthday at the latest, or you may be able to continue with a restricted form of income withdrawals called an Alternatively Secured Pension with another product provider. Risk factors There is no guarantee that the phased-retirement route will provide more income than if you simply take all your pension at the retirement date under your existing pension arrangement. Your previous pension arrangement(s) may offer valuable guarantees and protections which this plan cannot match. For example, tax-free cash sum rights may be protected at a higher level than could be provided under this plan. Future income is not guaranteed and it depends upon the level of income drawdown, investment performance and future annuity rates. The benefits you receive could be less than those which you would have got if you had not taken the phased-retirment route. You may be able to buy better benefits from another insurance company.

2 Many things could happen to alter the benefits shown on the illustration enclosed with this document. For example: your plan s investment growth may be lower than the amount we have assumed. If the investment growth, less charges, is lower than any income you take, your plan s capital value will be eroded. It is possible for the capital value of the plan to fall below the amount of the initial investment. This could result in lower long-term income, or an amount less than you would receive under an existing pension arrangement; you may incur exit costs on transfer from your existing provider; the value of investments may fall as well as rise and is not guaranteed - this means that you could get back less than you invest; charges are more than illustrated; tax rules change; there is no guarantee that the plan will provide more income than if you had bought a lifetime annuity. It may provide less; if you do not regularly monitor the level of income that you take each year, you could significantly erode the value of your plan and this may limit your ability to buy a lifetime annuity or an Alternatively Secured Pension ; if you decide to wait before buying your lifetime annuity, annuity rates may not improve or may worsen; If you leave it to the last moment; the day before your 75th birthday, to convert your remaining fund into an annuity, you will have to buy a lifetime annuity at whatever rates are available at that time which may not be favourable; you may not make adequate provisions for your wife, husband, civil partner or dependant(s); the cost of buying an annuity each time you draw from your fund could be higher than if you had done so straight away; and the whole of the tax-free cash sum cannot be taken in one go. As you are taking or using part of your tax free cash sum each year you may only have a small amount left when you convert the remaining value of the plan into an annuity. Taking income drawdowns may erode the capital value of the remaining retirement fund especially if investment returns are poor and a high level of income drawdown is being taken. This could result in a lower income when the annuity is eventually purchased or an amount less than they would have received under an existing arrangement. It is possible for the capital value of the plan to fall below the amount of the initial investment. The value of the fund remaining after any income drawdown or annuity purchase can fall as well as rise and is not guaranteed. If for any reason you decide in the first 30 days that you do not want the product you have bought, we ll return your transfer payment to your existing pension scheme. However, some schemes may not be prepared to take back the payment. Also, the amount we give back will be reduced by any fall in the investment value of your transfer payment. Please see the section headed Can I change my mind? for details. Risks specific to the With Profits Funds The value of your investment will be reduced if: a market value reduction is applied on the With Profits Funds. This would mean that benefits are reduced; and the cost of meeting any guarantees and any other potential liabilities arising from this policy or any other new and existing policies in the With Profits Funds reduces potential payouts. Please see the section called The With Profits Funds if you require more details. Risks specific to the AXA Close UK Escalator 100 Fund This fund aims to provide a level of protection to your capital by locking in gains and offering a protected unit price on the next quarterly date. Please refer to the Retirement Solutions Funds Guide for more details. The value of your investment can be reduced if: a) the growth in the unit price is less than our charges as we cancel units to meet our charges over time, so you will have fewer units; or b) the growth in the underlying funds is less than the additional fund management charges and tax charges for the underlying fund. For investments in the AXA Close UK Escalator 100 Fund, the protected unit price applies on set quarterly dates (currently the third Friday in March, June, September and December). Investment or cashing in outside these dates may mean that the unit price you receive is lower than the protected unit price. Special risk factors Some funds carry particular risks because of the type of assets they invest in. The Retirement Solutions Funds Guide gives further details which should be read in conjunction with this Key Features Document. A Currency Risks Where a fund holds investments in a different currency to the fund, the value of the fund may rise and fall purely because of exchange rate fluctuations.

3 B Emerging Markets Emerging Market funds may be subject to large fluctuations in value and in our opinion such funds are high risk. Such funds can offer the potential for greater returns over the long term but this tends to be coupled with higher volatility. C Smaller Companies The price fluctuations of funds investing in smaller companies may be greater than the price fluctuations of funds investing in larger companies. D Income Funds Funds that invest in income producing assets incur the cost of re-investing the income within the fund. This cost will be higher for funds that invest more in income producing assets than those that do not. E Specialist Sector Funds Investments in specialist sector funds, such as technology or healthcare, are considered to be higher risk due to their concentrated exposure to specific areas. Such funds can offer the potential for greater returns over the long term but this tends to be coupled with higher volatility. F Property Cash in, or switches from, funds investing in property may be deferred by up to six months in exceptional circumstances. This is to enable property to be sold if necessary. The value of properties held is generally a matter of the valuer s opinion rather than fact. Valuations are carried out by independent chartered surveyors from time to time. What is the Phased Annuity Plan? The Phased Annuity Plan provides you with the means of phasing your retirement needs if you have a large pension fund and you don t want to take all your tax-free cash sum in one lump sum straightaway. (Tax-free cash sum is sometimes referred to as Pension Commencement Lump Sum.) It helps to put you in control of your pension fund, so you can take your benefits in stages and you don t have to convert all your pension fund into a lifetime annuity immediately when you retire. You must be at least 18 years of age to take out this plan. You can invest either a transfer value, or a single one-off contribution or both. The minimum retirement fund that can be applied to this plan is 100,000. Your plan can accept transfer values from registered pension schemes. We will invest each transfer value or single contribution you pay into a separate policy. Each policy is split into 1,000 arrangements. This allows you to review your situation each year and take the amount of annuity you require by cashing in the appropriate number of arrangements. The income will be partly made up of a tax-free cash sum (up to 25% of the value of the arrangements used to take the benefits). The remaining value of those arrangements provides the rest of your income through setting up a lifetime annuity. In year two and every year after that, you can do the same thing again take another tax-free cash sum and set up another lifetime annuity using arrangements remaining in your transfer value or single contribution policies (known as deferred arrangements). The amount of income your annuities provide will depend mainly on your age and the interest rates at that time. The annuities will pay you an income for the rest of your life. You can use phased retirement to draw from your pension fund until the day before your 75th birthday. Then you must use your total remaining fund to buy a lifetime annuity at whatever rates are available at that time. You may also be able to continue with a restricted form of income withdrawals called an Alternatively Secured Pension with another provider. You can cash in all or part of your remaining fund to buy a lifetime annuity at any time. If you want to, you can buy the lifetime annuity from another provider. This document summarises how the phased-annuity route might work for you. It should be read in conjunction with the following illustrations: personal pension plan for a single contribution or a transfer value or both; and phased retirement using lifetime annuities, incorporating an illustration for the first year s pension annuity. You can take your benefits at any time between the ages of 50 and 75. However, from 6 April 2010 if you have not reached age 55, you will not be able to buy any additional lifetime annuity until you reach that age. You may start taking your benefits earlier if you are unable to follow your normal occupation due to incapacity or serious ill health. When you take an annuity you have to decide the type of annuity at the outset. You may find this restrictive particularly if you are not sure what the future needs of your spouse, civil partner &/or dependants are likely to be. You can also phase in your benefits using income withdrawal policies. Please ask for the Key Features Document for Phased Income Drawdown Plan if you re interested in this option.

4 Lifetime annuity rates are set taking into account a cross subsidy provided from those who do not survive as long as expected to those who live longer than the average. The benefit of this is greater for lifetime annuities bought at younger ages. The longer you leave buying a lifetime annuity, the less the rate used to calculate your income will benefit from this cross subsidy. Is this a stakeholder pension? No. Stakeholder pensions have to meet certain standards and comply with certain rules. These are mainly to do with payment levels, costs, and terms and conditions. Stakeholder pensions are generally available and might meet your needs at least as well as this plan. What happens when I buy a lifetime annuity? At least once a year you should review the following with your financial adviser: how much income you want to take; and how you want it to be provided. If you choose a lifetime annuity, the amount of income each lifetime annuity provides will depend mainly on your age, the interest rates at that time, the type of annuity and the benefits you require. The lifetime annuity will be paid for the rest of your life. You decide: whether the lifetime annuity part of your income for that particular year should increase in future years, or be guaranteed for up to ten years or both; whether the fund remaining in your Personal Pension Plan is sufficient to cover the needs of your spouse, civil partner or dependant(s); whether you should take a reduced income, together with a pension for your spouse, civil partner or dependant(s), payable after your death; or whether to buy your lifetime annuity from another provider if their annuity rates are better. This is known as the Open Market Option. Can I make further contributions? You may be able to pay further transfer values or single contribution into this plan from other registered pension schemes. Can money be taken out? Your plan can only pay out benefits in the way we describe in this document. You may transfer your deferred arrangements to a registered pension scheme with either another provider or a new employer. If you decide to transfer you may have to pay charges both when you transfer your deferred arrangements out of your plan and when you invest it in the new pension arrangement. Further details about any surrender charges that may apply are shown in the Policy Booklet which you can ask for. The figures on your enclosed personal pension illustration for a single contribution or transfer value take account of all our charges. You cannot normally cash in or transfer out of a lifetime annuity. You should seek financial advice before considering any transfer. What if I was contracted out of the State Second Pension (sometimes referred to as S2P )? Any protected rights benefits will be invested in a separate policy under your Personal Pension Plan, and cannot be phased as described in this document. Please ask your financial adviser for more information. What happens on my death? Your deferred arrangements We will pay the full value of your deferred arrangements as a lump sum. You may choose how this lump sum is paid, either: to the trustees of an individual trust you have set up for the benefit of your family members or anyone else selected by the trustees. The trustees will pay the money to the trust s beneficiaries; or at Friends Life s discretion, to your family members or any others we select in accordance with the rules of the Personal Pension Scheme. In either case you may nominate those whom you would like to benefit. Although your wishes will usually be followed there is no guarantee as such a nomination is not legally binding and only indicates your wishes which may not be followed. If on your death the combined value of all your pension funds is more than a certain limit known as the lifetime allowance the excess may be subject to a tax charge (please see the enclosed illustration for details). There may be a liability to inheritance tax. Your financial adviser can provide information.

5 Your existing lifetime annuities A pension will continue to be paid to your spouse, civil partner or dependant(s) following your death if the lifetime annuity(ies) you elected for your income provided for this. If you have set up a lifetime annuity that is guaranteed for up to ten years and you die in that period, the pension you have been receiving will continue to the end of that period. There may be a liability to inheritance tax. Your financial adviser can provide information. What about tax? These are the current rules but remember all the tax rules mentioned here could change in the future and their value depends upon your individual circumstances. The tax information is based on our understanding of current legislation. Any one-off single contributions will normally receive tax relief subject to Revenue limits in place from time to time. You make your own payments after taking off relief at the basic rate of income tax (20% in the tax year 2008/9). However, we invest the total amount of your payment including the tax relief. For example, (based on the tax year 2008/9) if you pay 80, we will invest 100. If you pay higher rate tax, you need to claim any extra tax relief through your self-assessment tax return. If you are an employee and your employer makes a one-off single contribution into the plan, the payments will normally be an allowable deduction from their profits for tax purposes. If you and/or your employer pay more than a certain amount known as the annual allowance into your pension(s) in any tax year, the excess will normally be subject to a tax charge. This includes contributions to all your registered pension schemes. Any transfer payment into your plan will not form part of your annual allowance for previous contributions paid into your plan. (Please see the enclosed illustration for details.) The growth in the value of the money in the investment funds you choose is currently free of UK taxes on capital gains and investment income. However, the funds cannot claim back tax credits on dividends received from any investments they make in UK shares or any withholding tax paid in respect of non-uk equity held. Any investments the fund holds in overseas assets will be subject to the tax rules applicable in that country. When you take the benefits from each arrangement, you can normally take up to 25% of the fund being used to provide those benefits at that time as a tax-free cash sum. If you do this, you will get a smaller pension. Your pension will be taxed through PAYE as pension income. The tax paid on the pension income will depend on your income tax rate at the time the pension is paid. If, at any time, the combined value of all the pension funds you have taken is more than a certain limit known as the lifetime allowance the excess may be subject to a tax charge (please see the enclosed illustration for details). There may be a liability to inheritance tax on the payment of any lump sum death benefit. Your financial adviser can provide information. Where will my deferred arrangements be invested? You can choose from a range of our pension investment funds made available from time to time. You can invest in up to ten funds at any time. The funds invest in stocks and shares, and other assets at home and abroad. Fund charges may vary depending on the fund chosen. Funds will normally hold an element of cash investment. This is so that the fund manager is able to take advantage of investment opportunities as they arise. The amount of cash is at the fund manager s discretion and will vary from fund to fund. This means that not all of the fund is fully invested at any one time and this could affect potential growth. The aims and objectives of the funds are described in the Retirement Solutions Funds Guide. A copy is available from your financial adviser. You can normally switch your investment between funds at any time. There is currently no additional charge for the first 12 switches in any plan year. Friends Life reserves the right to charge for further fund switches in accordance with the Terms and Conditions. A one-off charge may apply when switching into some funds, further details are available upon request. You should also note that we reserve the right to delay the switching of funds for up to one month (for example when dealings on a stock exchange are suspended) and six months for funds that invest in property (to allow property to be sold if necessary).

6 Unit-linked funds Each unit-linked fund is divided into units. The units in your plan are used to work out the plan s value. Unit prices are not guaranteed. They go up and down in line with fluctuations in the value of the funds investments. As unit prices go up and down so does the value of your plan. As some of the funds holdings may not be held in sterling, unit prices may rise and fall purely because of changes in exchange rates. Units in unit-linked funds are notional and the planholder has no right to the underlying assets. The With Profits Funds If you invest in the With Profits Funds, you are entitled to bonuses arising from a share of the profits of Friends Life Company Ltd. You receive your share of profits as bonuses that are added to your plan. The amount available for bonuses depends on: the performance of the investments held by the With Profits Funds; the level of charges (including the cost of any life cover) in the With Profits Funds; and the cost of meeting any guarantees and any other potential liabilities arising from this policy or any new and existing policies in the With Profits Funds. These include, but are not limited to: guaranteed maturity values; guaranteed cash values; guaranteed annuity rates; and costs arising from providing compensation and meeting certain regulatory requirements. If payable, we add regular bonuses to your plan at least monthly by increasing the unit price. The regular bonus reflects the returns we expect to receive from the relevant assets of the With Profits Funds, while smoothing any rise and fall in those returns. Please remember that future bonuses cannot be guaranteed as they come from profits we have not yet earned. When benefits are paid, we may also add an additional bonus called a terminal bonus. We may pay a terminal bonus when: you retire (whether normal, early or late); you die; you surrender or transfer; or you switch out of the With Profits Funds. Again, when benefits are paid an additional bonus, called a reorganisation bonus may be paid in the same circumstances as the terminal bonus stated above if your plan started before April We regularly review our bonus rates and may change them at any time. If the investment performance of the With Profits Funds is lower than reflected in the bonuses we have already added to your plan we are likely to reduce the value of units if you: decide to cash in part or all of your plan to buy a lifetime annuity before your 75th birthday; move the value of your plan to another pension plan; or switch out of the With Profits Funds. This is called a Market Value Reduction (MVR). We make this reduction to protect other planholders so they do not lose out financially as a result of your actions. If we apply an MVR, you can normally choose to delay the action to a later date, although an MVR may still apply. We will not apply an MVR when you die or where units are cashed in to provide income payments. Also, it does not apply at your 75th birthday except for switches you have made into the With Profits Funds in the previous five years. If you would like more information please ask for a copy of our guide to how we manage our with profits business.

7 What are the charges? The charges we make cover the cost of setting up your plan and any advice provided (unless you are paying a fee to your adviser). They also include the cost of administering your plan and the cost of professionally investing your money. We take a yearly management charge from your retirement fund. Some funds may incur additional costs and these are reflected in the unit price. An establishment charge and other charges may also apply. There are a number of circumstances that could lead to an increase in the charges, such as tax rule or legislation or regulatory changes, staff or overhead costs (which are reasonable in amount and reasonably incurred) being higher than we expect or that the costs of using third parties are more than we expect. A third party is any party which is not Friends Life. If this happens, we will write to you and tell you of the change. The enclosed illustration shows the charges for your plan. The charges will be higher than for a conventional annuity. It may be possible to invest in funds from other related specialist fund managers from outside of the Friends Life group. These funds may have higher management charges than funds managed by AXA Investment Managers UK Ltd. The performance and unit price of the mirror version(s) of the external partner fund(s) will not exactly match the underlying external partner fund(s). This is because the mirror fund may not be wholly invested in the partner s fund. In particular the mirror fund may hold a greater amount in cash investments for certain periods of time. This may reduce the potential for growth. In addition, the unit price will not be the same, in part because of the time taken to buy or sell holdings in such investment funds which are managed externally. Please see the Retirement Solutions Funds Guide for details of any additional charges. Can I change my mind? If your transfer value is from a money purchase company pension scheme, buy-out contract, personal pension scheme or retirement annuity contract, you can change your mind within 30 days from when we inform you the plan has been concluded and you receive the Your right to change your mind form. The same applies if you make a single contribution. If for any reason you decide that you do not want to take out this plan, just return the form, together with a cheque for any tax-free cash sum and income payment received within 30 days to the address detailed below. You should be aware that your previous pension arrangement is not obliged to take back the transfer payment. Some pension arrangements will not be prepared to do so. In these circumstances, we will pass on the transfer payment value to another company s registered pension scheme of your choice. If the value of your investment falls before your cancellation form is received, an amount equal to the fall in value will be deducted from your transfer value or single contribution. Each time you purchase a lifetime annuity you will receive further cancellation rights, giving you 30 days to change your mind. If you decide to cancel you will need to return the cancellation notice to Friends Life, together with a cheque for any tax-free cash sum and income payment received under the relevant arrangement(s). If you do not exercise your right to cancel within this period your plan will continue in accordance with the plan s terms and conditions, and any decision to cancel at a later date will be subject to any charges shown in your illustration. If you have invested all or part of your investment in the With Profits Fund a market value reduction may apply see the section headed The With Profits Funds for details. If you have not received information or advice on a face-to-face basis before applying for this plan and you have invested in unit linked funds, you do not have a statutory right to cancel, but Friends Life has decided to extend these provisions voluntarily to all customers as part of our commitment to treating customers fairly. The address to which the cancellation notice should be sent: Friends Life (SCE Department) PO Box 64 Bristol BS99 3EG United Kingdom

8 Further information How to contact us Your financial adviser will normally be your first point of contact. If you have any questions, you can phone us, or write to us. Call us on at the following times: Monday to Friday between 8am and 6pm. As part of our commitment to quality service, telephone calls may be recorded. Write to us at: Friends Life (SCE Department), PO Box 64, Bristol BS99 3EG, United Kingdom. Customer Status Friends Life will treat you as a retail client. This means as a retail client you have protection available under the Financial Services Authority rules. However, unless you have received advice from a financial adviser in choosing this product, you are not protected on the basis of its suitability for your needs. How to complain If you would like further information then please contact us at: Friends Life (Post Retirement Products - DDU), PO Box 1810, Bristol, BS99 5SN. United Kingdom. If you are not satisfied with any aspect of the service that you have received from us, then we have a formal complaints procedure, a copy of which is available on request. Complaints we cannot settle may be referred to the Financial Ombudsman Service at: South Quay Plaza, 183 Marsh Wall, London E14 9SR. Phone: [email protected] Website: Making a complaint will not prejudice your right to take legal proceedings. Terms and conditions The Key Features give a summary of the Phased Annuity Plan. They don t include all the definitions, exclusions, and terms and conditions. These are shown in the Plan Booklet. If you would like a copy please ask your financial adviser or contact us direct. We have the right to change some of the terms and conditions. In particular, we can change the yearly management charge. Compensation Your plan is covered by the Financial Services Compensation Scheme. This means that if we become insolvent you would be covered for at least 90% of the value of the plan. Further information is available to you in a leaflet that we will send to you on request. You can also obtain information from the Financial Services Authority and the Financial Services Compensation Scheme. Financial Services Authority: Financial Services Compensation Scheme: Main business & FSA Register details Friends Life Company Ltd is entered on the Financial Services Authority (FSA) Register. FSA Registration number: You can look up our FSA Register details through the FSA website: Financial advisers Where you have received information or advice in connection with this contract, the adviser will provide you with information regarding their identity, the capacity in which they are acting and their address for future communications. Law and language Friends Life and you have a free choice about law that can apply to a plan. Friends Life proposes to choose the law of England and Wales, and by entering this plan, you agree that the law of England and Wales applies. Your contract documents will be supplied to you in English and any subsequent correspondence with you regarding your contract will be in English. English and Welsh courts shall have exclusive jurisdiction over any disputes that may arise. Key Features Document information If the illustration supplied to you contains an expiry date and you wish to make an application after this date, you should ask for a further illustration and Key Features Document from your financial adviser. The date when the Key Features Document was produced is shown at the end of the document. If you are not sure if you have the most up-to-date version you should ask your financial adviser. PPP/KFDPAP/T/NC 23/03/11 (32175) The address for written communication is Friends Life, PO Box 1810, Bristol, BS99 5SN. The telephone number of Friends Life is Friends Life Company Ltd, the provider of this plan, is authorised and regulated by the Financial Services Authority, register No ( A company limited by shares, registered in England No , registered office: Pixham End, Dorking, Surrey, RH4 1QA. As part of our commitment to quality service, telephone calls may be recorded.