For customers International investments AEGON Secure Lifetime Income A guaranteed income for the rest of your life Pensions Investments Protection
Introducing AEGON Secure Lifetime Income AEGON Secure Lifetime Income is for customers aged between 45 and 79 and who have at least 15,000 to invest. If you can identify with any of the statements on the opposite page, we tell you where you can get more information that might help alleviate your concerns. However, there s a lot more to AEGON Secure Lifetime Income that you might find important, so here s a summary of what we cover in the guide. Four things that could affect your retirement income Page 4 A guaranteed income for the rest of your life Page 6 Monthiversary feature potential for your income to increase Page 7 Guaranteed increases before taking income Page 8 Leaving money to loved ones Page 9 What else is important to you? Page 10 A recap Page 13 There are a few important things you need to have in mind when reading this guide: n When we talk about a guarantee or guarantees, we mean the promise we make that the product or feature will deliver you a certain benefit. n Any guarantee is based on the ability of the issuing insurance company in this case AEGON Ireland plc to pay it. If, for example, that company no longer existed, then the guarantee(s) it provides would be affected. n It does cost a bit extra for guarantees. It s much like paying for the things you insure on a day-to-day basis just now. The cost of guarantees will depend on where you choose to invest your money. n If you decide to cash in the plan then the guarantee(s) will no longer apply. We don t offer a guarantee cash-in value so you could get back less than the amount you originally invested. n 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. Your financial adviser will be able to explain these to you and tell to what extent your investment may be protected in certain circumstances. AEGON Ireland plc is part of the AEGON Group one of the world s largest providers of pensions, investments and protection. We run a sophisticated, prudent programme that aims to allow us to honour the guarantees we make you. Your financial adviser will be able to give you full details of how we do this.
Do any of these sound like you? 02 03 I ve been worried that the money I have in the bank might run out. It would be a great relief to know I have an income that will always be there throughout my retirement. Then a guaranteed income for life might suit your needs. See page 6 for more information. I ve had some tough times, with markets affecting my investments and what I can take out. It would be reassuring to know that my income won t go down but could go up if my investment grows. Read about our unique Monthiversary feature available to you on page 7. I ve been concerned about the impact inflation might have on how much I can buy in the future. Although I don t need an income now, I d be really pleased to know that getting a minimum increase will at least help offset some inflation until I do need it. The potential for guaranteed pre-income increases and uncapped lock-ins might help. Find out more on page 8. The last thing I want is for any money I have left when I die not to go to my family. It would be comforting to know that anything left in my plan gets passed on. You could be looking for a death benefit guarantee. Find out more on page 9.
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 ve saved for retirement will have to last longer than you might imagine. This is often referred to as longevity risk. We ve highlighted in the table that 1 in every 4 60-year-old men and 1 in every 3 60-year-old women could live for at least 35 years. This is a long time for savings to last. The chances of a 60-year-old living to age: Man Woman 75 4 in 5 9 in 10 85 3 in 5 3 in 4 95 1 in 4 1 in 3 Source: AEGON, based on CMIB mortality investigations, 2012 With this information in mind, think how useful a product would be that could provide you an income that will be paid for the rest of your life. 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. Taking income when markets are going up means you re less likely to be eroding the amount you originally invest. This in turn would mean your savings will last you longer. Value Time However, if you take income when markets are going down, then you could be making a big impact on your original investment amount. The concern with this is your savings, and therefore your income, could run out. Would you like to protect your income from market falls, but potentially gain from market increases?
04 05 3. Low interest rates Interest rates have been low for a sustained period of time now. You may not be happy with the interest you receive on your bank or building society savings. This is interest rate risk. An example of how low interest rates can impact on savings: n A 60-year-old has 100,000 in the bank n Their interest rate is 2.0% gross n They take an income of 3,600 a year By the time they reach age 95 (1 in 4 chance for a man and 1 in 3 for a woman) they would only have 4,459 left that would leave them just over one year s income left. When we compare investment bonds to bank or building societies, please remember that these are different types of investments. 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 your whole 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. If you had 100,000 to spend now, in 30 years time, it would be like having: n 41,198 if the inflation rate was an average of 3% n 23,137 if the inflation rate was an average of 5% n 5,730 if the inflation rate was an average of 10% 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 guaranteed income for the rest of your life. But there are other features of it that could help towards alleviating these four risks. Read on to find out more.
A guaranteed income for the rest of your life AEGON Secure Lifetime Income gives you a minimum income every year for the rest of your life no matter how long that is even if your original investment runs out. When you start AEGON Secure Lifetime Income, your original investment is your income base. We calculate the amount of income you get by multiplying the income base with the relevant age-related income percentage. The table below sets out the age-related income percentages: Age you start taking income and guaranteed income percentage 60 3.35% 65 3.80% 70 4.05% 75 4.30% 61 3.45% 66 3.85% 71 4.10% 76 4.35% 62 3.55% 67 3.90% 72 4.15% 77 4.40% 63 3.65% 68 3.95% 73 4.20% 78 4.45% 64 3.75% 69 4.00% 74 4.25% 79+ 4.50% The guaranteed income percentage doesn t increase each year as you get older. For example, if you start income at age 65 and get 3.80% of your original investment each year, it doesn t go up to 3.85% when you turn 66. Working out the guaranteed yearly income amount You invest 100,000 at age 65 and take income straight away Income base: 100,000 Age-related income percentage: 3.80% Guaranteed yearly income amount: 100,000 x 3.80% = 3,800 When you take guaranteed income from your plan, it will reduce the fund value by the amount of income taken out. It s a relief to know that the money I have saved can give me an income that will last for the rest of my life that won t go down.
Monthiversary feature potential for your income to increase 06 07 In the last section we explained that your initial income base is the amount you originally invest and we use the income base to calculate your income. Our Monthiversary feature means your income base, and therefore your income, has the opportunity to go up. How the Monthiversary feature works At the end of every year after you take out the plan, we look back to see what the value of it was on each of the corresponding monthly anniversaries we call these dates the Monthiversary. This means there are 12 values for us to review every year. This gives you 12 opportunities for every year you have your plan to lock in any growth. If the highest of these 12 values is more than the amount you originally invested, we lock in this amount as your new income base. From the start of the next year of your plan, we use the new income base to re-calculate your income. When we lock in a new income base it won t go down in the future (it could go up again) and we don t limit the amount your income could increase. The following graph illustrates how this could work. Monthiversary fund value Lock-in month Lock in New income base Fund value ( ) Original amount invested 1 2 3 4 5 6 7 8 9 10 11 12 1 2 12 Monthiversaries every year Let s say you invest 100,000 at the start of your plan. After reviewing the 12 Monthiversary values, we see that it was the highest at month nine for example, it was 105,000 on that date. We lock in this value. From the start of year 2, 105,000 would be your new income base and amount we use to calculate your guaranteed income. I never realised it would be possible to protect my income from market falls and still potentially benefit if they increase. That is reassuring.
Guaranteed increases before taking income If you don t want or need to take your guaranteed income payments straight away you can defer them. If you defer them, every year before you start taking income payments after starting the plan we ll automatically increase the income base. The amount your income base will increase by depends on how your fund value performs. It will increase by the higher of: n 3.25% a year of your original investment, or n the Monthiversary lock-in value Growing your income base This table shows how the automatic pre-income increases and Monthiversary features can work together to grow your income base. In the following table, if you invest 100,000 at the start of your plan, we highlight the income base we lock in at the end of every year you don t take income. 3.25% of original investment increase Highest monthiversary lock-in value during year New income base End of year 1 103,250 105,000 105,000 End of year 2 108,250 105,000 108,250 End of year 3 111,500 108,000 111,500 End of year 4 114,750 115,000 115,000 End of year 5 118,250 115,000 118,250 If you started taking income at the start of year six when you were age 65, the guaranteed income payments would be 118,250 x 3.80% (this is the guaranteed income percentage for a 65-year-old) = 4,493.50 every year. This is 1,143.50 a year more income than you would have got if you d starting taking it at age 60. I can see how that might help offset some inflation when I defer taking my income. I m pleased about that as inflation is a concern.
Leaving money to loved ones 08 09 Having worked hard for many years to build your retirement portfolio, you would want the value of it to go to your loved ones if you die. AEGON Secure Lifetime Income provides a death benefit guarantee, which could give you reassurance from knowing any money left in your plan can be passed on to your loved ones. When you die, we guarantee to pay your estate the higher of: n your original contribution less the guaranteed income payments received, or n 100.1% of the cash-in value of your plan It s important to remember that, if you ve received more in guaranteed income payments than the amount you originally invested, and there s no cash-in value, then there won t be any money to pass on. The graph below shows how this could work. Original investment If you die at this point, the death benefit would be 100.1% of the cash-in value 100.1% of the cash-in value of your plan If you die at this point, the death benefit would be original investment less income already received Fund value ( ) This fall represents the guaranteed lifetime income received, in this case at the end of each year 1 2 3 4 5 Years It s certainly a comfort to know my family won t lose out on the money I invest when I die.
What else is important to you? Here we explain how other features of AEGON Secure Lifetime Income might help you meet some of your other needs. Tax-efficient income With AEGON Secure Lifetime Income, you don t pay income tax on the income you receive from your original investment. This might only change if your income increases. When you start taking income, we ll work out the tax-free capital content of your income payments. This is the amount of your income that won t be liable to tax and is a percentage set by HM Revenue & Customs. The percentage amount is based on your sex and your age when you start to take income payments. You can carry over any unused capital content allowance from year to year. If your income does increase above the tax-free capital content allowance, then tax will only be payable on the amount that s above this allowance. The following graph shows how this works. Unused tax-free capital content amount carried over to year 2. It carries over again to year 3 The income in year 4 increases above the fixed tax-free capital content amount there s no tax to pay as the carried over amount from previous years is used to offset tax liability. The same happens in year 5 after this year all the carried over allowance has been used up Tax is only payable on income amount over tax-free capital content allowance Fixed tax-free capital content amount Guaranteed income amount Capital content amount Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Your financial adviser will be able to tell you how this works as tax can be a relatively complex subject. Any reference to tax is based on our understanding of current legislation, taxation law and practice, which may change. The amount of any tax liable depends on the individual circumstances of the investor.
10 11 Choice over where your money is invested We realise that everyone has their own attitude to risk, so we can give access to a range of portfolios and individual funds to help suit your needs. There are six ready-made portfolios to choose from, which are a mix of fixed interest and equities (stocks and shares). The ready-made portfolios vary in the amount of equity content they have you can choose from 20%, 30% or 40%. If you prefer, you and your financial adviser also have the choice to build your own portfolio from a range of funds from many of the leading fund managers in the business. Depending on which portfolio or funds you choose, a different cost will apply. It s important that you speak to your financial adviser about your investment choice. They can help you determine your own attitude to risk, match this to the right funds and tell you how much it will cost. Your financial adviser can give you a Charges leaflet and an Investment choice leaflet which give you more information on what costs apply and the choice available.
Access to your money just in case As your circumstances could change in the future, plans you put in place now may not still meet your needs in many years time. For that reason, you can take additional withdrawals these are withdrawals over and above the guaranteed 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. When you take the guaranteed income from your plan, it will reduce the fund value by the amount you take out, which will affect how much you have left in your plan to take additional withdrawals. It s important to know that taking additional withdrawals from your plan will proportionately reduce the guarantees you receive and there could be a cash-in charge applied. When we say taking additional withdrawals will proportionately reduce the guarantees on you plan we mean, for example, if you take a withdrawal that is equal to 10% of the fund value, the guarantees would reduce by 10%. What will happen to my income? If your income payments were 4,000 a year before the withdrawal, after it they would be: 4,000 x 0.9 = 3,600 a year What will happen to the death benefit? On death, if the original investment less income received so far is higher than 100.1% of the cash-in value, then the amount payable would be reduced by 10%. For example, if the original investment was 100,000 and you d received 50,000 of income, the death benefit guarantee would be: 100,000 less 50,000 = 50,000 50,000 x 0.9 = 45,000 However, if 100.1% of the cash-in value of the plan was higher than the original investment less income received so far, then the full 100.1% of the cash-in value would be paid, as this amount will have already had the additional withdrawal amount taken from it. You should also know that taking additional withdrawals could result in a tax liability. Any tax liable would depend on your own personal circumstances. Can I cash in my whole plan? You can also cash in your whole plan at any time. If you do this, you may get back less than the amount you originally invested and there may be a cash-in charge especially in the early years of your plan. Your financial adviser will be able to explain the effect of taking additional withdrawals on the guarantees as well as if a cash-in charge will apply. Any reference to tax is based on our understanding of current legislation, taxation law and practice, which may change.
12 13 A recap 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 financial 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. Here s a quick recap of the features as well as some information on eligibility. AEGON Secure Lifetime Income could be suitable for you if: n you re aged between 45 and 79 n you have at least 15,000 to invest n you want a guaranteed income for life from age 60 or older n you don t want that income to go down, but would like it to have the potential to increase n you want a guaranteed increase in your income base before you start taking your guaranteed income n you want to be able to pass on any money left over to your loved ones when you die n you want a tax-efficient income n you want a choice of where you can invest your money n 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 AEGON Secure Lifetime Income is for you.
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