Pension Annuity. Key Features

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2 Helping you decide The Financial Services Authority is the independent financial services regulator. It requires us to give you this important information to help you to decide whether our Pension Annuity 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. What is the purpose of this document? This document is designed to give you a summary of information to help you decide if this product is suitable for you. We would recommend that you discuss your plans with anyone who may be affected by your financial decisions. Before you make a purchase, you should read this and all other related documents, including your quotations, and clarify any questions that you may have. The policy document containing all terms and conditions is available on request. A technical guide, including a glossary of terms can be found at the back of this document. If you are in any doubt about the suitability of this annuity you should seek advice from a financial adviser.

3 Contents Its aims 2 Your commitment 2 Risks 2 Questions and answers 3 How do I apply 6 Compensation 7 Queries and complaints 7 Technical Guide 8 Pension Annuity 01

4 Is the Partnership Annuity right for you? This product is suitable if you and/or your employer have made contributions into a pension fund during your working life and you are retiring and want to cash in this fund in return for an income for the rest of your life. The Partnership Pension Annuity is particularly suitable if your health and lifestyle may lead to a reduced life expectancy. You can buy your annuity from any provider, you don t have to buy it from the company you had your pension with. This is often referred to as the Open Market Option. Prior to exercising your Open Market Option you should fully consider any benefits that would be lost under your existing pension scheme such as Guaranteed Annuity Rates (GARS). Retail clients We categorise our clients to determine the level of protection they will receive. All clients in respect of Pension Annuities are treated as retail clients. As a retail client you receive the highest level of protection under the Financial Services Authority rules. Its aims n To allow you to exercise your open market option and transfer your pension savings to an annuity to provide a regular income for the rest of your life n To give you the option of increasing your income annually to help protect your income from the effects of inflation n To give you additional options for payments to continue after your death Your commitment n To make a single, lump sum payment from your occupational or personal pension scheme to purchase your annuity n To give complete and accurate information on your application n Buying a pension annuity is a once and for all decision, once you have bought one, you cannot change the terms of your annuity Risks n If you do not truthfully provide all of the information we request, your annuity may be lower than it could be n If you exaggerate the extent of your smoking, you could fail the smoker test and not qualify for smoker rates n Inflation will affect the buying power of the income payments you receive over time n If you choose to link your payments to inflation it will increase or decrease your payments over time. In the event of negative inflation (deflation), your income would be reduced and could be lower than it was at the outset of the annuity n Unless you have selected a guarantee period or dependant s benefit, annuity payments will cease when you die. This means that your income payments may be less than your total investment if you die within a short time from the start of your annuity n The value of your pension fund may fluctuate and the amount we receive from your pension scheme may differ from that indicated on your quotation. Partnership is not responsible for any fall in value of your pension fund that may occur before we receive the monies to purchase your annuity. If you wish to reduce this risk you should contact a financial adviser or your pension provider. 02 Pension Annuity

5 Questions and answers What is a Partnership Pension Annuity? In return for a single payment, we will pay you a regular income for the rest of your life. Details of your income are contained in your illustration or quotation. The income does not depend on the performance of any investments. When calculating the amount of income you can receive from your annuity, Partnership will take into account any medical information or details about your lifestyle (e.g. smoking) you have provided. As a result, we can often offer you a higher income than an annuity based on standard lives. There will be no return of capital to your estate from your annuity when you die, regardless of when that happens, but there are additional options you can select that allow your beneficiaries to receive an income or a lump sum payment after your death. These are explained in greater detail opposite. What is a Guaranteed Minimum Pension? A Guaranteed Minimum Pension (GMP) is the minimum pension which a UK occupational pension scheme has to provide for those employees who were contracted out of the State Earnings Related Pension Scheme (SERPS) between 6 April 1978 and 6 April The cost of providing a GMP is shown on your illustration or quote if it is applicable. This sum must be used to provide a Guaranteed Minimum Pension. A GMP annuity will automatically provide a 50% dependant s pension for male applicants and a 50% dependant s pension on the GMP accrued after 6 April 1988 for female applicants. How much income will I receive from my investment? The income you will receive is based on a number of factors, for example, the size of your investment, your state of health and/or how much you smoke at the time you apply. If you select any additional options such as escalation or any of the protection options, your initial income payments will be lower. Your income payments will commence when we have issued acceptance terms and have received your pension fund. Pension Annuity 03

6 What can I do to help protect my income against inflation? Inflation will reduce the purchasing power of your income over time. To protect the value of your income against the effects of inflation you can choose to increase or escalate your income each year. If you choose this option the starting level of income will be reduced. The higher the level of escalation, the lower the level of starting income. If you select this option it cannot be changed once the annuity starts. Fixed rate escalation You can choose to increase your income each year by a fixed rate of between 1% and 10% per annum. Inflation linked Linking your income to inflation means that your income varies in line with the Retail Price Index (RPI). Can I protect my investment in case I die early? Guaranteed Period Selecting this option guarantees that the income will be paid for between one and ten years from the start of your annuity. This means that, should you die within this time, your beneficiaries will continue to receive a regular income at the same rate as yours. Value Protection Value Protection allows you to protect up to 100% of your initial investment for a given period of time. The amount of your investment, less gross income already paid, will be paid to your next of kin if you die before reaching age 75. It only covers you until age 75, at which point the cover will cease. Value Protection cannot be taken with a Guaranteed Period and cannot include a Guaranteed Minimum Pension. If you have a single life annuity and die before you are 75 with a Value Protected amount remaining, a lump sum will be payable. The payment is subject to a death benefit tax charge of 55% which Partnership will deduct and pay prior to paying out the lump sum. If your annuity continues to your dependant and if you die before you are 75, your income will continue to be paid to your partner and the Value Protected amount will continue to decrease in line with the gross income payments made. On the death of your dependant, regardless of when that occurs, if there is a Value Protected amount remaining it will be paid as a lump sum to your estate and taxed as above. If you are considering this option you should seek professional financial advice. 04 Pension Annuity

7 Can I provide an income for others when I die? Dependant s Benefit You can choose for up to 100% of your annuity income to be paid to your dependant, in the event of your death, for the rest of their life. Please see the technical guide for details of eligible dependants and special rates that apply to a Guaranteed Minimum Pension, linking with inflation, guaranteed periods and value protection. If you do select the guarantee period, your dependant s income will start at the end of the guarantee period. What payment options can I choose? You can choose the frequency of your payments and whether to receive them in advance or in arrear. Choose from monthly, quarterly, half-yearly or annually. The frequency of payments will affect the amount of income you receive. i.e. the more often your income is paid, the lower the payments. Payments in advance will be lower than those in arrear. If you choose to receive your income in arrear and die between payments, there will be no payment made for the period between the last payment you received and your death. Similarly, if you choose to receive your income in advance and die between payments, there will be no recovery of payments made for the period between your death and the next payment date. Payments will be made directly into your bank or building society account. What are the charges? All of our administration charges are factored into the cost of your pension annuity at the start and we will not make any additional charges. If you have received financial advice, your Financial Adviser may be receiving remuneration from Partnership. This is taken from our charges. The amount will depend on the type of annuity you choose and the amount of your investment. Your adviser will give you details of the amount of remuneration they will receive as a result of any annuity you purchase. Pension Annuity 05

8 What are the tax implications? A Pension Annuity is purchased with the proceeds of your pension fund, which has been accumulated from contributions which received tax relief whilst you ve been saving. Because of this, Income Tax is deducted at source on the whole amount of your annuity payments at your personal rate after taking into account your personal tax allowances. Please also see the Value Protection section. Taxation is a complex matter and differs from person to person, so if you have any queries about your tax liability, you should discuss them with a Financial Adviser. The rules governing taxation are subject to review and can change and will depend upon individual circumstances. What happens when I die? Unless the guaranteed period option or value protection option was selected or dependant s benefit is payable, your payments will cease. Your estate must contact us immediately either by telephone or in writing to let us know. Contact us by telephone: Or write to us at: Partnership Mowden Hall Staindrop Road Darlington DL3 9AX What happens if I change my mind? You will receive a notice telling you of your right to change your mind and how to cancel. This notice will be sent to you with your policy documents. You will then have 30 days to cancel your annuity. If you do decide to cancel within the 30 day period we will refund the money in full to your pension fund provider(s). If we ve already paid any money to you including any tax free cash and income payments, you ll need to repay it to us before we can return it to your pension fund provider(s). We cannot cancel your policy until any money that has been paid to you is returned. If we do not receive your cancellation notice together with the money that has been paid to you within the 30 day period, the cancellation period will expire and you will not then be able to change your mind. How flexible is it? Please note that, once set up, you cannot change the terms of your pension annuity. When you buy your annuity there are a number of options you can choose, such as varying income payments in line with inflation. Details of the options available with the Partnership annuity are set out in this document. Your circumstances could change after your income payments start but you won t be able to change the terms of your annuity, even if annuity rates improve. You cannot transfer your annuity to another provider after the 30 day cancellation period. How do I apply? You will need to fill out a questionnaire, which asks for information on your health and lifestyle, in order for us to accurately assess if you qualify for a higher retirement income. We may need to verify or get more information on the details you supply. To do this we may: n Contact your doctor Your doctor will be able to supply us with a General Practitioner s Report (GPR). However, we will not always apply for a GPR so it is essential that any information you provide is as accurate as possible. n Ask smokers to undergo a simple test We may ask you to undergo a simple test and require you to confirm how much you smoke. The test, which we will arrange and pay for, is carried out by a qualified nurse in your own home. If you fail the test and you want to take it again we may charge you a small fee for doing so. The nurse will also verify some of the information you provided. No matter what, you will not, at any time, be asked to undergo a medical examination. It is important that you let us have all the information relevant to your health and lifestyle as this will ensure you receive the correct level of income. If at any time there is found to be any mis/non-disclosure of your health conditions and the extent of your smoking habit, Partnership reserves the right to refuse your application or amend the terms of the annuity. 06 Pension Annuity

9 Other important information Law Your annuity will be governed by the law of England and Wales and your contract will be written in English. We ll always write and speak to you in English. Compensation The Financial Services Compensation Scheme will prevent a customer losing money because the insurer is unable to pay them what they owe due to financial reasons. In this event, they will arrange to transfer your annuity to another insurer, provide a new annuity or, if this is not possible, provide compensation. The scheme will ensure you will continue to receive at least 90% of your annuity payments. Further information about compensation arrangements is available from The Financial Services Compensation Scheme, who can be contacted at: The Financial Services Compensation Scheme 7th Floor Lloyds Chambers Portsoken Street London E1 8BN Telephone: or enquiries@fscs.org.uk Website: Queries and complaints If you received financial advice, you should contact your adviser in the first instance. If you would like further information, or have any queries or complaints about any aspect of our service please contact Complaints Team, Partnership, 1-3 Queensway, Redhill, Surrey RH1 1QT. If you are not satisfied with the way a complaint is handled, you can contact: Financial Ombudsman Service South Quay Plaza 183 Marsh Wall London E14 9SR Telephone: (for fixed line telephones) (for mobile telephones) complaint.info@financial-ombudsman.org.uk Website: Making a complaint does not affect your right to take legal action. Full written details are available on request. How to contact us You can find more information about Partnership at: You can contact us by phone, fax, or in writing using the details on the back page of this brochure. This document does not include all definitions, exclusions or terms and conditions and it should be read with your illustration/quotation and/or your policy document. All details are correct at the time of going to press (April 2012). Pension Annuity 07

10 Technical Guide The following pages are designed to help explain aspects of the Partnership Annuity in more detail, particularly the rules surrounding qualification for certain options. Glossary of Terms Annuitant Is the person who receives the income from an annuity. Contracted out benefits These are pension rights you will have if you opted out of the State Second Pension (S2P formally known as the State Earnings Related Pension Scheme (SERPS)). If your pension fund relates to a period of employment when you were contracted out you would have had a Protected Rights Fund or a Guaranteed Minimum Pension (GMP), which would be shown on your illustration. Protected Rights no longer exist post 5 April 2012 and the fund will now be treated as ordinary rights. The only contracted out benefit that remains is GMP. Dependant s annuity An annuity that continues to pay income to a dependant after the death of the main annuitant. This is issued as a joint lives last survivor annuity. Guaranteed Annuity Rates This refers to a pre-determined level of income as a percentage of your pension fund. Guaranteed Minimum Pension If you were a member of a contracted out final salary pension scheme between 6 April 1978 and 6 April 1997, your pension fund may include a Guaranteed Minimum Pension. This is the minimum pension which the pension scheme has to provide for those people who contracted out during this time. The amount is broadly equivalent to the amount the employee would have received in State benefits if not contracted out. Lifetime Annuity Pension annuity held by the annuitant or employer to provide retirement income for the life of the annuitant. Limited price indexation (LPI x%) Applying limited price indexation to your annuity increases your pension in line with inflation but limiting the maximum increase in any one year to the amount shown. For example, LPI3% would increase your income each year by the lesser of the rate of inflation or 3%. Pension fund The proceeds of a pension savings plan or occupational pension scheme. Pension Sharing Order This is a Court Order issued to distribute pension assets between parties following a divorce or dissolution of a registered civil partnership. Retail Price Index (RPI) The measure of inflation in the UK economy as compiled by the Office of National Statistics. The Index tracks the prices of a representative basket of retail goods on a monthly basis. Scheme Pension A retirement income provided by a pension scheme to a scheme member (this is usually a pension provided by an employer). 08 Pension Annuity Technical Guide

11 Technical Guide Further Information Escalation Options Increases to inflation linked annuities are determined with reference to the change to the Retail Price Index (RPI) over the 12 month period ending 3 months prior to your annuity s anniversary date, with the increase coming into effect on the anniversary date. Where Guaranteed Minimum Pension is shown as escalating with Limited Price Indexation, the measure of inflation will be determined by reference to the prevailing tax regulations. Eligibility for a dependant s pension Eligibility for a dependant s pension will depend on meeting the HMRC criteria and will be assessed at the start of the annuity. It may also be confirmed before payment of a dependant s pension can begin. HMRC eligibility is likely to be met if the dependant is a spouse or legal partner of the annuitant or is financially dependent on the annuitant or there is mutual financial dependence. In the event that a named dependant is eligible at the commencement of the annuity but no longer eligible at the date of death, the pension will cease and no dependant s pension will be payable. See special rules applicable to Guaranteed Minimum Pensions. Guaranteed Minimum Pension (GMP) Your quote and policy schedule will show the amount of GMP, if any, to be provided by your annuity. GMP is payable from age 65 for males and 60 for females, or later if deferred. An annuity which includes GMP can commence at an earlier age so that it subsequently provides the GMP at these ages. A GMP annuity for male annuitants will include a dependant s pension of 50% of your own income on your death. This amount will be paid to your wife if you are married at your date of death, or to a dependant named at the commencement of the policy if you are not married. If you are in a registered civil partnership at the date of your death, 50% of the GMP accrued after 6 April 1988 will be payable to your legal partner. For female annuitants, a dependant s pension of 50% of the GMP accrued after 6 April 1988 will be included, payable to a husband or registered civil partner under the same terms as a male annuitant s GMP. Any income arising from GMP (excluding a dependant s pension paid to a dependant that is not a married spouse or registered civil partner) will increase annually in line with prices as defined by the prevailing legislation. For GMP accrued prior to 5 April 1988, the amount of annual increase will be paid in full by the State in addition to your State pension(s). For GMP accrued after 6 April 1988, the annuity will provide the first 3% of the required increase in any one year. If the total declared increase exceeds 3%, the additional increase will be paid by the State. If you have started your annuity before attaining age 65 for males or 60 for females, the increases to your pension in the years before 65/60 will be notified on your annuity quotation. Lifetime Annuity or Scheme Pension The Partnership Pension Annuity can be a Lifetime Annuity or a Scheme Pension. If the annuity is bought by an individual using their Open Market Option the annuity will be a Lifetime Annuity held by the annuitant. If it is bought by the trustees or administrators of a pension scheme to provide income on behalf of a scheme member the annuity could be a scheme pension or lifetime annuity. Pension Sharing Order (PSO) The Partnership Pension Annuity can accept funds from a PSO for the purchase of a new annuity for a former spouse. If a PSO is applied to an annuity which is already being paid a value of the annuity will be calculated and quoted as a Cash Equivalent Transfer Value (CETV). The PSO will define the proportion of the CETV to be credited to the former legal partner and the existing annuity income will be reduced in direct proportion. The former partner is required to purchase an annuity from Partnership in their own name at the annuity rates available at that time. Proof of existence For all our annuities, Partnership will confirm your status from time to time and we may ask you or your dependants to provide proof of identity and entitlement to continue benefit. Because of this we require you to inform us of any changes to your contact details. Pension Annuity Technical Guide 09

12 Partnership Regent House, 1-3 Queensway, Redhill, Surrey RH1 1QT General Enquiries Telephone calls may be recorded for training and monitoring purposes. If you require this document in an alternative format please contact us. Partnership is a trading style of The Partnership Group of Companies, which includes: Partnership Life Assurance Company Limited (registered in England and Wales No ) and Partnership Home Loans Limited (registered in England and Wales No ). This product is provided to you by Partnership Life Assurance Company Limited. Both companies are authorised and regulated by the Financial Services Authority. The registered office for both companies is Sackville House, Fenchurch Street, London EC3M 6BN. V4 RPA /12