Guaranteed Drawdown. Giving you confidence about your retirement income

Transcription

1 Guaranteed Drawdown Giving you confidence about your retirement income

2 1 The new retirement landscape As you approach retirement, it s time to make those important financial decisions that will see you through the rest of your life. And with such crucial choices to make, getting the right guidance can help you understand the options available to you. The good news is that you now have even greater freedom and flexibility when it comes to how you use your savings in retirement. However, making the choice that s right for you can be complicated. As the flexible retirement income specialists, we offer solutions that balance your need for certainty with the peace of mind that, if your circumstances change, your finances will adapt to suit your needs. Change on the horizon Everyone aged 55 and over now has the freedom to withdraw the money they have invested in their pension in the way they see fit. Although the majority of this money will be subject to income tax, the first 25% of any pension fund can be taken as a tax-free cash lump sum. New rules guaranteeing free and impartial advice from independent groups, such as The Pensions Advisory Service and Citizens Advice, are giving 18 million people access to the information they need to make the right choices in retirement. But if you want certainty, you need a more personalised solution. A more personalised approach Although many aspects of retirement are changing, the need for the best, specialist advice remains the same. If you are looking for guidance on the best pensions solution for you, talking to a Financial Adviser can help you make a well-informed choice. Our Retirement Portfolio with Guaranteed Drawdown combines the certainty that your income is protected, with the potential for growth. And you also have the flexibility to change your income when it suits you. This guide will help you understand more about Guaranteed Drawdown and also explain the other options available for your savings in retirement.

3 2 What is an Annuity? An annuity has typically been the most common way to get a guaranteed income for life. A traditional annuity is a one-off binding agreement where you exchange your pension fund for a fixed income. Your income is calculated using your age and life expectancy. Depending on factors including your long-term health and appetite for investment risk, there are different types of annuity available. An enhanced annuity offers a higher income if you have health or lifestyle concerns that affect your life expectancy. Investment-linked or with-profits annuities are based on an underlying investment fund and offer the potential for growth. With some annuities, you can choose an increasing income, build in a minimum payment period and add a death benefit for your partner. The key thing to remember is that whichever annuity you choose, all features are decided up front and cannot typically be changed later down the line. Risks of annuities By deciding your income up front, you may be locked in to a rate you can t change in the future Your income may fall short of your lifestyle demands if your health worsens Committing to a standard annuity excludes you from an enhanced annuity, even if you qualify in the future If you add a death benefit for your partner and they pass away before you do, you cannot re-allocate those funds to your own income If you include a ten-year guaranteed income period but die soon after, the rest of your fund could be lost and you will not be able to leave a legacy A fixed income doesn t cover the risk of inflation. Advantages of annuities Increased rates may be available if you have health or lifestyle concerns If you live longer than predicted, you may get back more than your initial purchase price They are relatively simple and rarely involve ongoing planning and costs.

4 3 What is Drawdown? Drawdown is a flexible way to take your pension and also offers the potential for future growth. However, as your money remains fully invested in the stock market, there is also a significant risk that you may lose some or all of the savings you have spent a lifetime earning. You choose the amount you take from your fund and can tailor your investments based on your appetite for growth and attitude to risk. When you pass away, any remaining drawdown pension fund can be used to provide death benefits, either as a lump sum or as income, to any beneficiary. If you die before the age of 75 the death benefits are tax-free in most cases. Risks of drawdown If your fund performs worse than predicted, you could find it runs out before the end of your lifetime If you continue to withdraw large amounts in times of poor performance this risk is even greater Even with careful fund management and a cautious approach to the amount of income you take, there is still the risk that you will live longer than expected and end up running out of money If your fund runs out, you may find yourself relying on the state pension as your only source of income. Advantages of drawdown You can retain full control of your fund You have the ability to change income levels and take payments when needed As it is fully invested in a tax-efficient environment, your money has more potential for future growth Any unused funds can be passed to beneficiaries on death and are not usually subject to inheritance tax You have the flexibility to keep your options open and indefinitely put off making any final decision.

5 4 What is Guaranteed Drawdown? In later life, when looking at retirement income you may value both certainty and flexibility. But until recently, if you were approaching retirement, you had to choose a retirement income product that offered either one or the other. We understand that life is complicated, and what you need today may not be the same as what you need tomorrow. So we offer you the best of both worlds. That s why our Retirement Portfolio comes with a Guaranteed Drawdown option. This innovative feature takes the security of an annuity and combines it with the flexibility offered by drawdown. This gives you both the certainty of a guaranteed income for life, and the flexibility to adapt your arrangements to suit your financial circumstances. Your money will remain invested and has the potential to grow, and you can still leave it to the people you care about when you pass away. How does Guaranteed Drawdown compare to annuities and conventional drawdown pensions? Annuity Guaranteed Drawdown Drawdown A type of insurance policy that provides an income in exchange for a lump sum from your pension fund Provides a guaranteed income that you cannot outlive with all the flexibility of drawdown* Drawdown allows you to take income directly from your pension fund Guaranteed income for life 3 3 Income protected from market falls 3 3 Fund remains invested benefits from growth 3 3 Guaranteed lockins of growth 3 Income flexibility Limited 3 3 Death benefits Limited 3 3 * If you take more, this will reduce your future guaranteed income proportionately.

6 1. A guaranteed income for life If you want the confidence that the lifestyle you enjoy is protected, a guaranteed income for life offers the peace of mind that the money you rely on will never run out. How much do you need to guarantee? You can choose to guarantee all or part of your pension pot. For example, you may calculate that to cover your essential living expenses, you need a minimum income of 5,000 a year for the rest of your life. However, looking at your pension fund, you realise it could provide an annual income of as much as 10,000. You decide to put half of your pot in a guarantee, securing an income that covers your living costs. The other half you could choose to invest in higher-risk funds, with a greater chance for growth but with greater risk and no guarantee. Funding a longer life As the quality of medical treatment continues to improve, we are enjoying longer, healthier lives. But as life expectancy increases, we need to plan for the extra years we spend in retirement. Recent figures prove that having the security and peace of mind of an income you can t outlive, has never been more important.

7 2. The flexibility to get an income that suits you By using our Guaranteed Drawdown feature, you have the flexibility to choose when and how you take your income. When? You have the flexibility to stop and restart payments in the future. For example, if you decide to re-enter employment, you can choose to stop your payments, restarting them at a later date. How often? Choose the payment schedule that suits your lifestyle needs, including monthly, quarterly, termly (every four months), half-yearly or yearly payments. Plus, if you need a top-up to your income, you can always access further funds as a one-off. Flexibility Remember, you have the flexibility to change your income at any time. This means you can increase or decrease the amount you take and the frequency with which you take it. You can take advantage of the increased pension flexibility with the option to take as much of your pension pot as you like as a taxed lump sum but this will reduce your future guaranteed benefit proportionately. How much? When you set up your guarantee, you can choose to take a level of guaranteed income. However, you have the flexibility to take less or more of this guaranteed income depending on your needs, now and in the future. If you take less, this helps to preserve your fund and gives you an increased opportunity to grow the size of your fund. If you take more, this will reduce your future guaranteed income proportionately.

8 3. The ability to enjoy any growth in your investments We carry out an annual review of your investment. If the value of your fund has grown, we lock in this higher figure. This means your guaranteed income increases. Using guarantees means that you can be safe in the knowledge that your investment is protected. However, it s important that we also offer you the potential for investment growth. That s why we offer a range of funds to invest in, suited to the amount of risk you feel comfortable taking. 4. the peace of mind of a guaranteed death benefit Your pension not only supports you, it can be tailored to protect the well-being of those you care about. With a guaranteed death benefit or by adding joint life, you can ensure that your partner enjoys a comfortable lifestyle, even when you aren t there to share it. A guaranteed death benefit One of the advantages of using the Guaranteed Drawdown feature is that it gives you an automatic death benefit. This means that your partner and beneficiaries can still rely on the safety net your guarantee provides and won t suffer if the value of your investment suddenly drops. Joint life By choosing joint life, your income will cover you for your lifetime and your partner after you pass away.

9 5 Is Guaranteed Drawdown right for me? If you are about to retire and want both the certainty of a guaranteed income for life and the flexibility to change your financial arrangements to suit your lifestyle, using our Guaranteed Drawdown feature is the perfect solution. Guaranteed Drawdown is right for you if: You are aged 55 or over You are at retirement and want an income you can rely on You are continuing to work full time or part time but want to start using your pension fund to supplement income You are in retirement and are worried about the performance of your existing drawdown plan. You are cautious and cannot afford for your income to drop, but are prepared to invest in equities for growth potential You don t want to give up access to your fund and want your unused pension fund to provide a legacy.

10 6 Why Guaranteed Drawdown from MetLife? At MetLife, we are committed to giving you the best of both worlds: a guaranteed income for life and the potential for market growth. With the certainty and flexibility of our Retirement Portfolio with Guaranteed Drawdown, we can offer you: A guaranteed level of income that won t run out Phased Guaranteed Drawdown, allowing you to take what you need tax-efficiently and benefit from MetLife s guaranteed deferral increases The flexibility to stop, restart and change your income whenever you want The option to withdraw taxed lump sums A range of investment options from leading fund manager BlackRock that reduce the effect of market volatility. Up to 50% exposure to equities, increasing the potential to grow your investments Annual lock-ins of performance that can increase your guaranteed income Single or joint life options so your spouse or partner can also benefit from guaranteed income Guaranteed death benefit. Any of your beneficiaries can use this to provide income or take a lump sum The ability to make further pension contributions, helping you benefit from valuable tax relief and increase your guaranteed income.

11 Why MetLife? With MetLife, you can be certain that your future is in the safest hands possible. Our history, reach and devotion to eliminating uncertainty, all help to give your money the best possible chance to grow. As the UK s leading provider of flexible retirement income, we ve been proudly offering peace of mind to people like you since As a MetLife client, you ll benefit from the certainty that your investments are expertly managed by market-leading retirement specialists. We work with over 5,000 advisers We have written over 40,000 policies We provide award-winning product innovation and 5-star service. For more information on our Retirement Portfolio with Guaranteed Drawdown solutions, speak to your Financial Adviser. To discover more about MetLife and the exceptional products and services we have to offer, visit

12 Want to know more? Speak to your Financial Adviser to learn how our Retirement Portfolio could benefit you. If you are looking for a Financial Adviser, you can find one in your local area at Visit for more information. Products and services are offered by MetLife Europe Limited which is an affiliate of MetLife, Inc. and operates under the MetLife brand. MetLife Europe Limited is authorised by the Central Bank of Ireland and subject to limited regulation by the Financial Conduct Authority. Details about the extent of our regulation by the Financial Conduct Authority are available from us on request. Registered address: 20 on Hatch, Lower Hatch Street, Dublin 2, Ireland. Registration number UK branch address: One Canada Square, Canary Wharf, London E14 5AA. Branch registration number BR PNTS WM l ENTER a more certain world