Eagle Star Self-directed Pension Customer Brochure Puts you in control
About Zurich Life Zurich Life Assurance plc is a member of Zurich Financial Services group, an insurance-based financial services provider with a global network of subsidiaries and offices in North America and Europe as well as in Asia-Pacific, Latin America and other markets. Founded in 1872, Zurich Financial Services group is headquartered in Zurich, Switzerland. It employs approximately 60,000 people serving customers in more than 170 countries. As one of Ireland's most successful life insurance companies, we offer a full range of Eagle Star Pension, Investment and Protection products. We gained recognition for our excellent investment performance at the most recent MoneyMate & Investor Magazine Awards in 2008 when the company was named Best Investment Fund Manager and was awarded Best Balanced Managed Pension Fund and Best Balanced Managed Investment Fund. Our investment team, based in Blackrock, Co. Dublin, is responsible for funds under management of approximately 9.8 billion, of which pension assets amount to 5.7 billion (as at 31st March 2010). We are committed to the provision of excellent customer service. We have won a number of industry service awards, including the Professional Insurance Brokers Association Broker Service Award of Excellence 2009, for the seventh year in a row, and we are fourteen times winner of the Irish Brokers Association Service Excellence Award. We are a market leader in providing policyholder information online through our innovative website, www.zurichlife.ie We have a strong commitment to good corporate citizenship and are a founder member of Business in the Community Ireland (BITC).
Content Why invest in a Self-directed Pension? 2 How do I know which product would suit me? 2 The advantages 2 Monitor your Eagle Star Self-directed Pension online 3 Tax effective 4 How do I fund for my retirement? 5 What happens on retirement? 5 What happens on death? 5 How Self-directed Pensions work in practice 6 Additional information about Self-directed Pensions 6 Self-directed Pensions - at a glance A Self-directed Pension is an excellent alternative for those who want more control over the investment of their pension fund. 1
Why invest in a Self-directed Pension? An Eagle Star Self-directed Pension from Zurich Life will provide you with: The opportunity to make provision for yourself and your dependants in the future. Control over the investments that make up your pension fund. A tailored pension fund to suit your objectives. Generous tax treatment. A very attractive option due to generous individual pension contribution limits. A one to one relationship with an independent stockbroker. A daily online valuation of your pension fund from Zurich Life, a leading pension provider. A range of pension products for both before and after you retire. Personal Pensions Executive Pensions PRSAs Buy-out Bonds A(M)RFs Choosing the PRSA option means that you are choosing to invest in the Personal Portfolio Fund option on an Eagle Star PRSA product. You will also have access to all of the other funds which are available on that PRSA product. For further details, please contact Zurich Life. How do I know which product would suit me? If you are: self-employed or an employee in non-pensionable employment, you are eligible to take out a Self-directed Personal Pension; or a company director and your company wishes to take out a policy to fund for your retirement, then a Self-directed Executive Pension is suitable; or In all of the situations listed above, you must have net relevant earnings taxable in Ireland. Net relevant earnings are defined in a note to the table on page 4. For Buy-out Bonds and A(M)RFs, please refer to page 5. The advantages Control You can direct how your pension fund is invested and managed. Choice You can choose from an extensive range of asset types including: equities, government and corporate bonds, collective investment vehicles, etc. Flexibility You can alter the structure of your pension fund investments at any time. You may also be eligible* to invest some/all proceeds of your pension fund in a Self-directed A(M)RF post-retirement to continue to retain control of the asset management and level of income drawdown. Tax Efficiency The tax advantages are considerable. They include the income tax reliefs for pension funding and the tax-free growth of your pension fund. You may also be eligible to take a tax-free lump sum on retirement. Transparency The charging structure and the composition of the permitted assets is clear and unambiguous. Personal Service We understand that no two investors are the same. Your Investment Partner will advise you on the most suitable assets to choose for your pension investment. * For Personal Pensions, PRSAs and Executive Pensions held by 5% Directors. a senior executive who wishes to manage your own pension plan, then you can opt to make Additional Voluntary Contributions using a PRSA and choose the Personal Portfolio Fund option. 2
Monitor your Eagle Star Self-directed Pension online One of the major advantages of an Eagle Star Self-directed Pension is that you can monitor your pension fund through a secure password-protected facility on www.zurichlife.ie. When you start your Self-directed Pension, you will be automatically registered for this facility. You will then be able to obtain summary and detailed valuations relating to your Self-directed Pension and view details of all trades, income and expense items. Summary Valuation Information is updated daily (business days) and shows the total current market value of the fund broken down by currency and between securities and cash. The cost of securities is also shown with the unrealised gain or loss on securities held in the fund. Detailed Valuation This breaks down the summary valuation by the individual stocks held. Cash Details Details relating to all income and expenditure are shown e.g. dividends or interest received, and expenses such as the management charge. These details include the date and the amount received or paid. Trade Details This shows details of stock purchases and sales including deal date, stock name, original cost, proceeds and realised gains or losses. Regular Eagle Star Investments bulletins are available online. To view these, visit www.zurichlife.ie. 3
Tax effective Eagle Star Self-directed Pensions offer all the normal taxation advantages associated with pension policies. Taxation 1. Income tax relief at your marginal rate for personal contributions paid. The relief granted varies depending on your age bracket and is related to your net relevant earnings # for that tax year (see table below). % of net relevant earnings # qualifying for tax relief Age Limits It is recommended that you seek advice from your professional advisor/accountant in relation to your own taxation position. Up to 30 years 15% of net relevant earnings** 30 to 39 years 20% of net relevant earnings** 40 to 49 years 25% of net relevant earnings** 50 to 54 years 30% of net relevant earnings** 55 to 59 years 35% of net relevant earnings** 60 and over 40% of net relevant earnings** # For Personal Pensions, relevant earnings are earnings from trades, professions and non-pensionable offices and employments. For Executive Pensions and Additional Voluntary Contributions via a PRSA, relevant earnings are earnings from offices and employments. Net relevant earnings are relevant earnings less capital allowances, losses and charges. ** Subject to maximum earnings of 150,000 p.a. for 2010. A minimum 30% limit applies, regardless of age, for certain categories of person that typically retire earlier than usual, such as athletes, jockeys, etc. 2. Employer contributions into an Executive Pension plan are not taxable. Subject to certain conditions, the employer will be able to claim tax relief on its contributions. 3. Investment growth achieved on the fund is tax free. 4. You have the option of taking your benefits at retirement in a number of different forms; these depend on your type of pension product and are set out in the table below. Benefit Options Available at Retirement Benefit Options Personal Pension Executive Executive Pension Pension 5% Director AVCs using a PRSA Buy-out Bond PRSA Tax-free Lump Sum of 25% of Fund 1 3 4 Tax-free Lump Sum of up to 1.5 times 2 Salary A(M)RF 1 3 4 Taxable Lump Sum 1 3 4 Annuity 1,2 4 1 These benefit options can be combined on retirement. 2 These benefit options can be combined on retirement. 3 Please note that these benefit options are only available to 5% Directors. 4 You do not need to mature your PRSA at retirement. However, you cannot remain invested in a PRSA beyond age 75. Please note that the benefit options available under an Executive Pension and a Buy-out Bond will depend on whether or not you are a 5% Director. A 5% Director is one that controls more than 5% of the company sponsoring the pension scheme. The maximum tax-free lump sum available will depend on your salary and service at retirement and cannot exceed 1.5 times your salary. To invest in an ARF or to take a taxable lump sum, you must have an annual guaranteed lifetime income of at least 12,700 or have invested at least 63,500 in an AMRF or an annuity or a combination thereof, or have reached 75 years of age or have at least 63,500 in a vested-prsa. 4
Self-directed Personal/Executive Pension Tax Example This example is based on a person making a regular contribution of 25,000 p.a. into a Self-directed Personal/Executive Pension over a ten year term, with an assumed investment return of 6% p.a.*, and assuming income tax relief of 41%. The growth of the fund* If you leave a company-sponsored pension scheme, you can transfer your benefits under the scheme to a Buy-out Bond or, subject to legislation, to a PRSA in certain situations. A Buy-out Bond allows you to take your existing pension entitlement when moving from one employment to another and transfer it to a bond in your own name. A Self-directed Buyout Bond will give you greater control in managing your benefits and make you independent of your former employer. Net cost to you 147,500 What makes up your retirement fund? Self-directed Pension fund growth 63,661* Taxman contributes 102,500 Self-directed Pension fund at retirement 313,661* This chart shows how the eventual size of a retirement fund is made up of three factors: contributions net of tax ( 147,500), the taxman s contribution (i.e. tax relief of 102,500) and the illustrated growth* of the Self-directed Pension fund ( 63,661). The total illustrative fund* is 313,661. How do I fund for my retirement? Net cost to you 147,500 * These are illustrations and are not forecasts because the value of your fund may grow at a faster or slower rate than the 6% p.a. assumed and the value of your fund may be expected to fall from time to time as well as rise. This example is based on an allocation rate of 95% and an annual management charge of 1%. Warning: These figures are estimates only. They are not a reliable guide to the future performance of this investment. Benefits may be affected by changes in currency exchange rates. There are three products whereby you can use a Self-directed Pension plan to fund for your retirement: Personal Pension, Executive Pension, and PRSAs (see page 2). Single and regular contribution plans are available, which provide you with a pension fund at retirement. From this fund, you can then take a tax-free lump sum and provide for your retirement benefits. Your benefit options are set out in the table opposite. By contributing to one of these plans, you are helping to ensure adequate provision for yourself and your dependants in the future, while benefiting from the generous tax reliefs available. What happens on retirement? When you retire, you can continue to manage your pension assets through what is called an Approved (Minimum) Retirement Fund or an A(M)RF. An A(M)RF allows you to invest the proceeds of your accumulated pension fund at retirement. The ARF can provide you with pension income and you are free to withdraw this money at any time. A Self-directed A(M)RF allows you to maximise the benefits of your accumulated retirement fund - you can control how it is invested and make your own asset choices. Any withdrawals from your A(M)RF pension fund will be liable to income tax (subject to the normal tax credits and exemption limits) but while invested in an A(M)RF, your investment growth is not taxed. A tax is payable on a deemed withdrawal of 3% of the value of the fund on every December 31st. Actual withdrawals taken during the year reduce the year-end deemed withdrawal to be taxed. A PRSA is primarily a pre-retirement vehicle. However, you can remain invested in a PRSA until age 75. This means that your PRSA can be used in a similar way to an A(M)RF product. What happens on death? The way the death benefit is paid will depend on which of two options has been selected on the application form by the Policy Owner at the outset. Depending on which option is chosen, Zurich Life will either: Option 1: Encash the assets of the unit-linked fund underlying the Personal Portfolio Fund as soon as possible (given the nature of these assets), following receipt by Zurich Life of notification of the death of the Life Insured. The death benefit payable will be the value of the unit account on the date the assets are encashed. OR Option 2: Pay no death benefit and instead retain the assets within the unit-linked fund underlying the Personal Portfolio Fund until the legal representatives of the Policy Owner (or the Policy Owner in the case of an Executive Pension) give alternative instructions. If neither option is selected on the application form, Option 1 will apply. 5
How Self-directed Pensions work in practice Financial Advisor Consultation on investment transactions. Investor Makes initial investment. Decides on subsequent investment transactions. Zurich Life provides policy & transaction information online. Investor liaises with Investment Partner. Investment Partner Gives investment advice. Facilitates the purchase and sale of assets. Zurich Life Provider of Self-directed Pension product. Offers investor additional investment options through the Matrix range of funds. Investment Partner advises Zurich Life on purchase/sale/transfer of investments. Once a policy has been issued by Zurich Life, the Investment Partner will contact you to commence trading. The assets you choose will be purchased on your behalf by the Investment Partner after consultation with you. You (or the pension scheme trustees) will own the pension policy (provided by Zurich Life) and Zurich Life will own the underlying assets. The value of your policy will move in line with the value of the underlying assets (i.e. your Personal Portfolio Fund). The Investment Partner will execute all trades for your pension fund and report to Zurich Life daily on transactions that have taken place. You can alter the asset allocation of your investment fund at any time in consultation with the Investment Partner. Additional information about Self-directed Pensions Can I transfer shares that I already own into my Self-directed Pension? It is possible to sell shares that you own personally and use the proceeds to make a pension contribution. The process may result in a capital gain or loss. The capital gain will be taxed at the Capital Gains Tax rate (currently 25%) and a capital loss can be carried forward and may be used against other personal capital gains you may have. Once in the Self-directed Pension environment you can purchase the shares in the same or different companies but in a better tax environment. Example Purchase 5,000 Shares @ 10 each 50,000 Sell 5,000 Shares @ 8 each 40,000 Capital loss 10,000 Reinvestment of 40,000 into a Self-directed Pension Income tax relief (41%) 16,400 PRSI / Health levy relief (8%) 3,200 Capital Gains Tax loss relief (25%) 2,500 Total tax benefit 22,100 If you already have shares in another Self-directed Pension then you can transfer these shares without paying any Capital Gains Tax. 6
What other options do I have? You have the option to top-up an existing Self-directed Pension at any time. You can generally transfer money from other pension plans into a Self-directed Pension. On retirement you may have the following options (see also page 4): take part of your retirement income as a tax-free lump sum; purchase an annuity; remain in a PRSA; invest in an A(M)RF; take a taxable lump sum. The options available for the way the death benefit is paid are outlined on page 5. For Personal Pensions, PRSAs and Executive Pensions held by 5% Directors. How is a Self-directed Pension different to other pensions? Investments in a traditional pension fund are managed by an investment manager. This means that the investment manager makes all the decisions regarding the pension fund, i.e. the type of assets held, the buying and selling of assets, etc. In comparison, investors in a Self-directed Pension can make their own investment decisions and have complete control over how the assets in their pension fund are invested. What type of assets are permitted? The type of assets chosen for a Self-directed Pension should be liquid (i.e. they can be realised in the short-term) and should be publicly traded, with regular valuations available. Examples of assets which are permitted are as follows: Securities Government Bonds Restrictions: Of OECD states only. Supranational Body Bonds Excluding: Bonds with credit ratings lower than C (Standard & Poor's, Fitch, IBCA) or the equivalent rating of other recognised rating agencies accepted by Zurich Life. Corporate Bonds Excluding: Zurich Financial Services group or other quoted companies within the Zurich group, corporate bonds of unlisted companies, corporate bonds with credit ratings lower than C (Standard & Poor's, Fitch, IBCA) or the equivalent rating of other recognised rating agencies accepted by Zurich Life. Equity Shares Restrictions: Prior approval needed for unquoted equity.* Prior approval needed for stock exchanges not on the permitted list.* Excluding: Zurich Financial Services group or other quoted companies within the Zurich group. Other Investments Cash Restrictions: Currencies consistent with permitted stock exchanges. Bank Deposits Restrictions: Deposit taking institutions as approved by Zurich Life. Forward Currency Trades Restrictions: Consistent with hedging exposure to currencies in which assets held in the portfolio are traded back to euros. Collective Investment Vehicles Restrictions: All funds complying with the provisions of Directive 85/611 EEC (as amended) including property funds. Prior approval needed for other Collective Investment Vehicles.* Prior approval is required for PRSAs.* Exchange Traded Commodities / Exchange Traded Funds Restrictions: Prior approval needed for stock exchanges not on the permitted list.* Prior approval is required for PRSAs.* * Approval must be given by Zurich Life. Decision will be based on factors such as: access to regular verifiable market value, level of liquidity, length of any lock-in. What type of assets are not permitted? Options, Futures and Contracts for Difference. Commodities such as gold or diamonds. Any shares in Zurich Financial Services group or other quoted group companies. Direct holdings in property, including land or buildings. The portfolio is not permitted to borrow or hold overdrawn bank balances except in cases of delayed trades or commercial necessity. The portfolio is not allowed to engage in stock lending activity. If in doubt, you should contact your Investment Partner, to check if certain investments meet these requirements. 7
If I currently have losses on securities, can I offset these against Capital Gains? If you are sitting on losses on privately held securities, you can use these securities to pay your pension contributions and thus generate losses which you can offset against other personal Capital Gains. Are there limits on the amounts I can invest? Minimums apply for both single and regular contributions. These can vary from time to time and details are available on request from Zurich Life. While your accumulated pension fund is less than 50,000, the contributions will be invested in the Eagle Star Secure Fund (unless another Matrix fund is advised). You may request a switch to the Personal Portfolio Fund once the total accumulated fund in the Eagle Star Secure Fund exceeds 50,000. There is no upper limit on the amount you can invest (however, you need to keep in mind the Revenue s tax relief limits - see table on page 4). There is also a limit on the size of the pension fund and on the size of the tax-free lump sum that can be taken at retirement. The maximum pension fund is 5,418,085. If your pension fund exceeds this at retirement, you will have to pay tax at 41% on the excess. The maximum tax-free lump sum that can be taken at retirement is 1,354,521. Note that for PRSAs, the minimum contribution is 10 per payment for payment by electronic transfer (including direct debit) or 50 for payments by any other means. However, you must wait until you have accumulated a fund of at least 50,000 before you can switch into the Personal Portfolio Fund. Lower contributions can be accepted with prior approval from Zurich Life/your Investment Partner. How do I set up a Self-directed Pension? Simply contact your Investment Partner or email Zurich Life at customerservices@zurich.ie A Self-directed Pension...puts you in control. 8
Eagle Star Self-directed Pensions - at a glance Eligibility Those with net relevant earnings taxable in Ireland. Assets Certain assets are acceptable, some are unacceptable (see page 7 for more details). The assets in the pension fund are owned by Zurich Life. Types of pension Personal Executive PRSA Buy-out Bond A(M)RF On retirement Take a tax-free lump sum. Purchase an annuity. Remain in a PRSA. Invest in an A(M)RF.* Take a taxable lump sum.* * For Personal Pensions, PRSAs and Executive Pensions held by 5% Directors. Pension fund size Minimum fund size before you can transfer to the Personal Portfolio Fund: 50,000 Lower contributions can be accepted for non-prsa contracts with prior approval from Zurich Life/your Investment Partner. Tax relief Available on contributions.** Pension fund grows tax free. Pension fund value The pension fund value is determined by the value of the assets underlying an individual s Self-directed Pension (i.e. their own Personal Portfolio Fund). Death benefit The options available for the way the death benefit is paid are outlined on page 5. Tax-free lump sum at retirement. ** Relief granted by employer or upon application to Revenue Commissioners. Online information Summary valuation Detailed valuation Investment partner Gives investment advice. Facilitates the purchase and sale of assets. Trade details Cash details Policy details Warning: The value of your investment may go down as well as up. For more information, simply contact your Investment Partner or email Zurich Life at customerservices@zurich.ie
Print Ref: PB78 (Generic) 0710 Zurich Life Assurance plc Zurich House, Frascati Road, Blackrock, Co. Dublin, Ireland. Telephone: 01 283 1301 Fax: 01 283 1578 Website: www.zurichlife.ie Zurich Life Assurance plc is regulated by the Financial Regulator. Intended for distribution within the Republic of Ireland. The information contained herein is based on Zurich Life s understanding of current practice as at July 2010 and may change in the future.