Guaranteed income for life

Transcription

1 For customers Aegon Secure Lifetime Income Guaranteed income for life

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3 Contents Introducing Aegon Secure Lifetime Income A quick overview of the product and what it can offer you Four things that could affect your retirement income A look at the factors that could affect your money 4 6 A guaranteed income for the rest of your life A look at the amount of guaranteed lifetime income you can receive Monthiversary feature potential for your income to increase See how this unique feature could increase your guaranteed lifetime income Guaranteed increases before taking income A look at this feature and how it provides guaranteed growth to your income base Tax-free income on your investment How your initial guaranteed lifetime income may be tax-free for life Leaving money to your loved ones Read about the guaranteed death beneit option and how it works What else is important to you? A quick look at where you can invest your money, and how you can get access to it if you need to About us and how we help to protect your investment A snapshot of the processes and controls that help us protect your money Aegon Secure Lifetime Income 3

4 Introducing Aegon Secure Lifetime Income Aegon Secure Lifetime Income is for customers aged between 45 and 79 who have between 20,000 and 1 million to invest. It s a single premium unit-linked investment plan, available on your life only, that allows you to choose between two guarantee options at the start of the plan. The options you can choose from are: Option 1 Guaranteed lifetime income with guaranteed death benefit OR Option 2 Guaranteed lifetime income with standard death benefit We ll talk about guaranteed lifetime income and the different death beneit options later in the guide. Many people worry about money and whether they ll have enough to live off in the future. Ask yourself these key questions: Do you want a guaranteed income for life? Do you want your income to have the potential to increase? Do you want tax-eficient income? Do you want to leave any money left over in your investment to your loved ones when you die? Do you want the lexibility of where to invest, but at the same time retain access to your money in case your circumstances change? If the answers to any of these questions is yes, or you can identify with any of the scenarios outlined in this guide on pages six and seven, then Aegon Secure Lifetime Income could be right for you. There s a lot to egon Secure Lifetime Income that you might ind important, so read on to ind out more. 4 Aegon Secure Lifetime Income

5 There are a few important things you need to have in mind when reading this guide: Throughout this document when we talk about original premium, we mean the amount of money we actually invest in your plan at the start. If you ask us to facilitate a payment to your adviser (we call this adviser charging) before we invest your money, the original premium is your contribution to us, less the amount paid to your adviser. For more information on adviser charging, please see the Key features of the Aegon Secure Lifetime Income plan or speak to your adviser. When we talk about a guarantee or guarantees, we mean the promise we make that the product or feature will deliver you a certain beneit. It s important to understand that any guarantee is based on the ability of the issuing insurance company in this case Aegon Ireland plc to pay it. If we were unable to meet our obligations, then the guarantee(s) would be affected. We use examples throughout the guide to show you how the product features could work. These examples aren t predictions of what we think will happen in the future, they re for illustrative purposes only. Aegon Secure Lifetime Income 5

6 Four things that could affect your retirement income 1. How long you live for We re living longer than ever before. This means the money you save for retirement will have to last longer than you might imagine. This is often referred to as longevity risk. The chances of a 60 year old living to age: in 10 3 in 5 1 in 4 9 in 10 Source: Aegon CMI Experience 3 in 4 1 in 3 Would you like to have the reassurance of an income for life no matter how long that may be? 2. Market ups and downs While markets can provide the potential growth for retirement portfolios, unpredictable conditions can seriously affect plans and impact your income. This is called volatility risk. Time Time Taking income when markets are going up means you re less likely to be eating into your original premium. This in turn means your savings will last longer. However, if you take income when markets are going down, then you could be making a big impact on your original premium amount. The concern is that your savings, and therefore your income, may run out. Would you like to protect your income from market falls, but potentially gain from market increases? 6 Aegon Secure Lifetime Income

7 3. Low interest rates Interest rates normally vary over time and depending on their level and whether they re rising or falling, they may impact you in different ways. They can have an impact on how your savings might grow. This is interest rate risk. Interest rates have been low for a continuous period of time. An example of how low interest rates can impact on savings: 100k in the bank at age % gross interest rate 3,650 income per year 20% basic rate tax the time you reach age 90 (one 0by in two chance for a man and woman). This isn t intended to be a like for like comparison of a standard savings account with Aegon Secure Lifetime Income. This is to show how your income is guaranteed for life with Aegon Secure Lifetime Income but isn t with a standard savings account. If you re not sure the savings you use for an income in retirement will last as long as you need them, could a product that pays an income for life help? 4. Inflation and your buying power It can be hard to appreciate the effect inflation can have on retirement income plans, as it happens gradually over a number of years. However, it can have a serious impact on your buying power. This is inflation risk. 100,000 to spend now Would be worth in 30 years time? 55,207 if the inlation rate was an average of 2% 30,832 if the inlation rate was an average of 4% You could offset some inflation if some of your retirement income would definitely increase if you defer when you start taking it. Is this something you d be interested in? Aegon Secure Lifetime Income gives you a minimum guaranteed income for life. But that s not all, there are other features that may help towards alleviating the risks above. Read on to nd out how it may be the solution you re looking for. Aegon Secure Lifetime Income 7

8 Would you like the money you ve saved to give you an income that will last for the rest of your life and won t go down? 8 Aegon Secure Lifetime Income

9 A guaranteed income for the rest of your life Aegon Secure Lifetime Income gives you a minimum guaranteed income for the rest of your life no matter how long that is even if your original premium runs out. Stop and think about that for a minute... you ll never run out of income with this plan. It can last for 30, 40 or even 50 years however long you live for. Here s how we work out the yearly guaranteed lifetime income amount At the start of your plan, your original premium is called your income base. To calculate the amount of guaranteed lifetime income you get, we multiply your income base with the relevant age-related income percentage, corresponding to the age at which you start taking guaranteed lifetime income. We calculate and set our age-related income percentages to achieve the best balance for you between guarantee beneits and costs. The table below sets out the age-related income percentages: % % % % % % % % % % % % % % % % % % % % % % % % % Guaranteed income can start at any time from age 55 If you invest 100,000 at age 65 Take income immediately Age 65 = 4.00% x 100,000 Yearly income for life = 4,000 The guaranteed lifetime income percentage doesn t increase each year as you get older. For example, if you start taking guaranteed lifetime income at age 65 your income rate is set at 4.00% of your original premium each year. It doesn t go up to 4.10% when you turn 66. When you take guaranteed lifetime income from your plan, it will reduce the fund value by the amount of guaranteed lifetime income taken out. If there s no remaining fund value your guaranteed lifetime income will still be paid. Your guaranteed lifetime income won t go down unless you take additional withdrawals. Aegon Secure Lifetime Income 9

10 Would you like the opportunity for your guaranteed lifetime income to increase? 10 Aegon Secure Lifetime Income

11 Monthiversary feature potential for your income to increase Would you like the opportunity for your guaranteed lifetime income to increase? Well it can with our unique monthiversary feature. The income you receive has the potential to go up automatically if you lock in a higher income base due to investment growth of your fund value. Here s how the monthiversary feature works At the end of every year after you take out your plan, we look back to see what the fund value was on the plan anniversary and each of the corresponding monthly anniversaries we call these dates the monthiversaries. This gives you 12 opportunities every year you have your plan to lock in investment growth. Let s say at age 65 you invest 100,000 at the start of your plan in April. You would receive 4,000 guaranteed lifetime income (see page 9). After reviewing the 12 monthiversary values on your plan anniversary, we see that the highest value was in month eight (November) the value was 105,000 on that date. We ll lock this value in as your new income base, and this growth is locked in for life. Stop and think about that for a minute... your guaranteed income for life can go up and you re less likely to miss out on any of your plan s investment growth. Fund value 100, ,000 Apr May June July Aug Sept Oct Nov Dec Jan Feb Mar 105,000 locked in income base From the start of year two, 105,000 would be your new locked in income base and this is the amount we use to calculate your guaranteed lifetime income in year two: 105,000 x 4.00% = 4,200 new guaranteed lifetime income. When we lock in a new income base it won t go down in the future unless you make any additional withdrawals but it could go up again. Every year on the plan anniversary we review your income base, so you could lock in a higher income base year on year. We don t limit the amount your guaranteed lifetime income could increase by. Aegon Secure Lifetime Income 11

12 Guaranteed increases before taking income If you don t want to take income straight away you don t have to. On each plan anniversary before you start taking guaranteed lifetime income we ll automatically increase your income base by at least 2.75% of your original premium we call this guaranteed pre-income increases. However, as if that s not good enough, here s the best bit. Our monthiversary feature locks in your highest monthiversary value over the year if it s higher than the current income base plus 2.75% of your original premium. Stop and think about that for a minute... your income base is guaranteed to go up by a minimum amount each year. The amount your income base will increase by depends on how your fund value performs. It will increase to the higher of: the current income base plus the monthiversary lock-in value 2.75% of your original premium OR proportionately reduced for any additional withdrawals Growing your income base 2.75% deferral story Let s say you invest 100,000 at the start of your plan at age 65, and don t take income immediately. The following graph shows how our guaranteed pre-income increases of 2.75% can grow your income base. Original premium 2.75% guaranteed pre-income increase New locked-in income base Total value 100, , , , , , ,000 Original premium End of year 1 End of year 2 End of year 3 End of year 4 End of year 5 With our guaranteed pre-income increases, the income base has grown from 100,000 to 113,750, and we lock this value in for life as your new income base. If you then decide to take income, your guaranteed lifetime income amount would be based on 113,750. But it could be more, read the Monthiversary deferral story to see how. 12 Aegon Secure Lifetime Income

13 Monthiversary deferral story Let s say you invest 100,000 at the start of your plan at age 65, and don t take income immediately. The following graph shows how our guaranteed pre-income increases of 2.75% work with our monthiversary feature to grow your income base in a varying market. Original premium 2.75% guaranteed pre-income increase Monthiversary increase New locked-in income base Monthiversary value locked in 2.75% guaranteed pre-income increase value locked in Monthiversary value locked in 112, , % guaranteed pre-income increase value locked in 114,750 Monthiversary value locked in 119,250 Total value 100, , ,000 Original premium End of year 1 End of year 2 End of year 3 End of year 4 End of year 5 As you can see, at the end of years one and two the monthiversary feature locks in the highest value as your new income base and this is what we would base your guaranteed lifetime income on if you decided to take income at this stage. In years three and four the 2.75% pre-income increases are higher than the highest monthiversary igure so we lock in the guaranteed pre-income increase value as your new income base and this is what we would base your guaranteed lifetime income on if you decide to take income at this stage. Finally, at the end of year ive, the monthiversary value is again the highest value and so our monthiversary feature has grown your income base to 119,250, and this is the value we would base your guaranteed lifetime income on if you decided to take income at this stage. If you invest 100,000 at age 65 And decide to take income at age 70 Age 70 = 4.40% New income base = 119,250 Yearly income for life = 5,247 (4.40% x 119,250) And remember, once we ve locked in the higher value, we lock it in for life, and it will never go down unless you take additional withdrawals. Plus, don t forget, you can opt to start taking income at anytime. Aegon Secure Lifetime Income 13

14 How would you like to receive a guaranteed lifetime income that could be tax-free for the rest of your life? 14 Aegon Secure Lifetime Income

15 Tax-free income on your investment With Aegon Secure Lifetime Income, you don t pay income tax on your guaranteed lifetime income unless it increases above the HM Revenue & Customs (HMRC) tax-free allowance for this type of product. Stop and think about that for a minute... your guaranteed lifetime income could be tax-free for the rest of your life. You may not pay any tax when you start taking guaranteed lifetime income from your plan because HMRC sets a tax-free amount for this type of product based on your age when you start to take your guaranteed lifetime income. We ve positioned our guaranteed lifetime income rates to be within the amount HMRC sets. You may only pay tax on your income when you start to take it if: you ve delayed taking income and the guaranteed lifetime income amount you receive has increased above the tax-free amount; or you decided to pay your adviser an adviser charge through your plan before you started taking income. Adviser charging payments count as income for tax purposes so this means your tax-free amount allowance is lower because it starts at an earlier age. If your guaranteed lifetime income is tax-free to begin with, some of it could become taxable if it increases. How this works is that you can carry over any unused tax-free amount from year to year. If your guaranteed lifetime income does increase above the tax-free amount, then tax will only be payable on the amount that s above the carried over total you ve built up. To qualify for the tax treatment above, you will be required to complete an HMRC PLA6 form. We part complete this and send instructions on to you once income or your adviser s ongoing adviser charge commences. For more information please see our Key features of the Aegon Secure Lifetime Income plan guide. Your inancial adviser will be able to tell you more about how this works, as tax can be a complex subject. You can also read our Tax-free guaranteed lifetime income lealet for more information. Any reference to tax is based on our understanding of current taxation law and practice in the UK and Republic of Ireland, which may change. The amount of any tax payable will depend on your individual circumstances. Would you like to receive tax-free income on your original investment? If your income increases, would a tax-efficient income stream make you happy? The graph on the next page shows the concept of how carrying over unused capital content works. Aegon Secure Lifetime Income 15

16 In the example you can see that in years one, two and three there s no tax to pay as the income received is below the tax-free amount. In years four and ive, your income has increased above the tax-free amount, due to increases from our monthiversary feature, however, there s still no tax to pay as the carried over tax-free amount offsets this. In year six, you ve used up all the tax-free amount and tax would be payable for the remaining years. Guaranteed lifetime income Tax-free amount Tax to pay Carried forward unused tax-free amount Fixed tax-free amount End of year 1 End of year 2 End of year 3 End of year 4 End of year 5 End of year 6 End of year 7 End of year 8 16 Aegon Secure Lifetime Income

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18 Leaving money to your loved ones Having worked hard for many years to build your retirement portfolio, you want the value of it to go to your loved ones if you die. There are two death benefit options available to you: Guaranteed death benefit OR Standard death benefit Guaranteed death benefit With our guaranteed death beneit option, you ll have the reassurance from knowing that we ll pass on any money left in your plan to your loved ones. If you select the guaranteed death beneit option, when you die we guarantee to pay your estate the higher of: 100.1% of the fund value OR the original premium less any guaranteed lifetime income paid from the plan proportionately reduced for any additional withdrawals For example, if you originally invested 100,000 and then some years later died after receiving income of 16,000, this would mean we d pay out 84,000 or 100.1% of the fund value. For illustrative purposes, let s say at the point you died 100.1% of the fund value was 80,000 in this scenario we d pay out death beneit of 84,000. It s also important to remember, if we ve paid more in guaranteed lifetime income payments than the original premium and there s no fund value, then there won t be any money to pass on. Standard death benefit You don t need to select the guaranteed death beneit. If you decide not to choose it, then you ll receive the standard death beneit option which is 100.1% of the fund value throughout the whole term of the plan. It s also important to remember if there s no fund value, then there won t be any money to pass on. 18 Aegon Secure Lifetime Income

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20 What else is important to you? Choice over where your money is invested We select our range of portfolios carefully and review them regularly to make sure that along with your guarantees you also have potential for investment growth. And remember, you can lock in any investment growth on a yearly basis with our unique monthiversary feature. The funds you can choose from are: Managed Risk Portfolios; Core Portfolios; and UK Cash fund. Managed Risk Portfolios invest in a mix of ixed interest, equities and sometimes cash in order to manage the risk levels within the fund. Volatility is a measure of how much the returns of an asset or portfolio luctuate over time. Core Portfolios are a mix of ixed interest and equities with a target ixed interest/equity allocation. 80/20 Core Portfolio 70/30 Core Portfolio 60/40 Core Portfolio Managed Risk Portfolios Target volatility level Average expected equity exposure Defensive 5% 30-35% Cautious 7% 45-50% Fixed interest Equities Balanced 9% 60-65% UK Cash fund Our UK Cash fund, is a lower-risk investment than other assets such as equities and ixed interest and therefore has lower expected returns. Our lealet Your investment choice gives you more information on the choices available. Your inancial adviser can also give you our Product charges lealet that shows the charges depending on the guarantee(s) and fund(s) you choose. 20 Aegon Secure Lifetime Income

21 Access to your money just in case As your circumstances could change, plans you put in place now may not still meet your needs in the future. For that reason, you can take additional withdrawals these are withdrawals over and above the guaranteed lifetime income payments at any time. You can take as much or as little as you want, as long as you have enough money in the plan to cover them. It s important to know that taking additional withdrawals from your plan will reduce your future guaranteed lifetime income, guaranteed pre-income increases and guaranteed death beneit proportionately. Your inancial adviser will be able to provide details of this. When we say taking additional withdrawals will proportionately reduce the guarantees on your plan we mean, for example, if you take an additional withdrawal that is equal to 10% of the fund value, the guarantees will reduce by 10%. You can also cash in your whole plan at any time. If you do this, you may get back less than your original premium amount and any guaranteed lifetime income payments and beneits will stop. You should also know that cashing in part of your plan or your whole plan may result in a tax liability. Any tax payable depends on your own personal circumstances. Aegon Secure Lifetime Income 21

22 About us and how we help to protect your investment We first opened our doors in 2002 and have been helping people prepare for their financial future ever since, with a wide range of innovative investment solutions including the manufacture of guaranteed propositions in the UK, Germany and France as well as traditional offshore bonds. Today, we manage approximately 4 billion of funds for nearly 20,000 customers. We re part of the Aegon Group, an international provider of life insurance, pensions and asset management. Aegon has businesses in over 20 countries around the world and around two million customers in the UK alone. Working directly with these customers, employers and advisers, Aegon s proud to be helping people take responsibility for their inancial future. We run a sophisticated, prudent risk management programme that aims to allow us to honour the guarantees we make you. Your financial adviser will be able to give you the details of how we do this. As well as having strong internal controls, as an Irish life company, we operate within both the Irish and European regulatory framework. You can ind more details on this in our lealet Helping to protect your investments. If we become unable to meet our liabilities and if you re habitually UK resident when the contract started you ll be covered by the provisions of the Financial Services Compensation Scheme (FSCS). Insurance business of this type is generally covered for 100% of the value of the whole claim, without limit. You can get more information about compensation arrangements from the FSCS at 22 Aegon Secure Lifetime Income

23 Aegon Secure Lifetime Income Here s a quick recap of Aegon Secure Lifetime Income. It could be suitable for you if: you re aged between 45 and 79; you live in the UK and are UK tax resident; you have at least 20,000 to invest but you can invest up to 1 million; you want a guaranteed lifetime income from age 55 or older; you want a tax-eficient income; you don t want your guaranteed lifetime income to go down, but would like it to have the potential to increase; you want a guaranteed increase in your income base if you defer taking guaranteed lifetime income; you want to be able to pass on any money left in your plan to your loved ones; you want a choice of where you can invest your money; and you want to keep access to your capital just in case. If you don t meet the eligibility criteria, or the different guarantees don t appeal to you, then it s unlikely this product is for you. We hope you ve found this guide a useful introduction to Aegon Secure Lifetime Income, but we understand there s a lot to take in. It s important you speak to your inancial adviser so they can help you decide if it can help meet your needs. They can also give you a key features document, which clearly sets out the product s aims and risks and provides more details on how it works and what you can expect from us. Aegon Secure Lifetime Income 23

24 As Lead Partner of British Tennis, we re helping the sport to build a brighter future. Our sponsorship is helping to grow grass-roots tennis, develop Britain s future champions and support tennis tournaments across the UK, including the Aegon Championships at The Queen s Club. Find out more at aegontennis.co.uk Stay in touch: Aegon UK Aegon UK Aegon UK egon is a brand name of egon Ireland plc. egon Ireland plc, registered ofice: 2nd Floor, IFSC House, Custom House Quay, Dublin 1, D01 R2P9. Registered in Ireland (No ). 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. An Aegon company Aegon Ireland plc DUB /16