Key Features of the NFU Mutual Pension Annuity

Key Features of the NFU Mutual Pension Annuity

Contents Who should buy this product? page 1 Its Aim page 1 Your Commitment page 1 Risks page 1 How do pensions work? page 2 What is a Pension Annuity? page 2 How flexible is it? page 2 What might I get when I take my pension income? page 2 When can I take my pension income? page 2 What are my pension income choices? page 2 How does the With-Profits pension income option work? page 3 What about bonuses? page 3 How will I get my pension income payments? page 3 What about tax? page 3 What happens to my pension income when I die? page 4 What are the charges? page 4 Can I change my mind? page 4 How to contact us page 4 Making a complaint page 5 Other information: page 6 - Law and language used page 6 - Compensation page 6 - About NFU Mutual page 6 - Our Mutuality page 6 - Your policy document page 6 - Is this product right for you? page 6 Key Features of the NFU Mutual Pension Annuity

Who should buy this product? The Pension Annuity is designed for people who are aged at least 55 and wish to use their pension fund to buy a pension income for life. You may : be someone who has built up your pension fund with NFU Mutual - you don t have to buy your pension income from us, you can shop around have built up your pension fund with another pension provider be the trustee(s) of an occupational scheme buying a pension income on behalf of one of your scheme members. In this case, where this Key Features Document refers to you or your, it means your scheme member. Its Aim To pay you a pension income for the rest of your life. Your Commitment To use some or all of your pension fund to buy a pension income from NFU Mutual. To make once and for all decisions about the type of pension income you want. The choices available for an occupational scheme member may be restricted by the rules of the occupational pension scheme. The Government will take into account the pension income you get from this Pension Annuity when assessing the amount you may get from means tested benefits such as State Pension Credit. For With-Profits Annuities: - Your money is invested in our With-Profits Fund. The With-Profits Fund includes a range of investments, including shares. Values can go up and down and this will affect any bonuses that may be added to your pension income. - Your pension income may not go up each year, as future bonuses aren t guaranteed. - We ve already made promises to some of our With- Profits customers. We expect to pay the costs of meeting these from our free assets (the amount by which our assets are more than our liabilities). If we cannot, this will affect the level of profits available for all With-Profits policyholders. See What about bonuses? for more information. About tax The tax treatment depends on the individual circumstances of each customer and may be subject to change in future. Please read the section What about tax? for more information. Risks What you might get back The amount of pension income you can buy depends on your age and investment conditions at the time you buy your Pension Annuity, and the choices you make. You could get more if you buy your Pension Annuity later when investment conditions are different, on the other hand you could get less. If you re buying the Pension Annuity on behalf of a scheme member for whom you ve guaranteed a set level of pension income, you ll need to pay enough into the Pension Annuity to provide that amount. You can t change your Pension Annuity or cash it in once it s started. There s no protection from inflation unless you choose a pension income that increases each year. The total payments you receive from your Pension Annuity could be less than the amount used to buy it. Page 1

Questions and answers How do pensions work? Your payments + Any payments made on your behalf + Tax relief on those payments + Any payments made by employer + Any transfers from other pensions Your pension fund How flexible is it? You choose the basis for your pension income before we set up your Pension Annuity. See the section What are my pension income choices?. Once we ve started paying your pension income you can t change your mind about your Pension Annuity, or cash it in. What might I get when I take my pension income? Your illustration shows what you might get back. The total amount you get back over the years isn t guaranteed. If you haven t received an illustration, or you want an alternative personalised one, please call us on 0800 622323. Or you can write to us at the address given under the section How to contact us shown later on. Use to buy your pension income When can I take my pension income? You can use your pension fund to buy a pension income any time from age 55 (unless your scheme rules specify a different age). However, you might be able to take your pension earlier if you have to retire because of ill health. You must provide acceptable evidence of your age. For this purpose we ll accept your birth certificate, passport or driving licence. What is a Pension Annuity? It s a plan that provides you with a pension income for the rest of your life. You buy it with your pension fund. It s not necessary to buy it from the company where the pension fund was built up. You can shop around and buy it from the company offering the best deal for you (known as taking the open market option). Some companies specialise in pension annuities for people with ill health or who have certain lifestyle factors. You don t have to stop working to take your pension income. If, however, you re buying the Pension Annuity on behalf of your scheme member, your scheme rules may require them to stop working before they can take their pension income. You can usually take up to 25% of the pension fund as a tax-free lump sum. If you re buying the Pension Annuity on behalf of your scheme member, you re responsible for paying out any tax-free lump sum before using the rest of their fund to buy the pension income. You can t take a tax-free lump sum if you ve been drawing an income from your pension fund (known as drawdown pension) before you bought the pension annuity. What are my pension income choices? You may combine the various choices explained in this section (unless the rules of your occupational scheme don t allow this). The amount of your pension income will be affected by the choices made. Adding extra benefits will generally reduce the starting amount of your pension income. If you re buying the Pension Annuity on behalf of a scheme member, your scheme rules will determine who is able to make the choices, and which choices are allowed. Level or increasing pension income You may be able to choose a pension income that stays the same each year, or one that increases each year by: - a fixed amount between 0.5% and 8.5% (in 0.5% amounts). Or - a variable amount in line with the Retail Prices Index (RPI). The upper limit we ll use for these increases is 5% each year. Or - the addition of yearly bonuses - this is called a With- Key Features of the NFU Mutual Pension Annuity Page 2

Questions and answers continued Profits pension income. There s no guarantee how much bonus may be added each year. See How does the With-Profits pension income option work? for more information. An increasing pension income may or may not keep pace with inflation. The starting level for a pension income that increases each year is lower than one that doesn t increase. Single life or last survivor pension A single life pension pays you an income for your life. It stops when you die, unless you ve chosen a guaranteed payment period (as explained later). A last survivor pension pays you an income for your life. When you die, a pension income will continue to be paid to your husband/wife or civil partner, or to someone else who we accept is financially dependent on you (if allowed under your occupational scheme s rules). You must provide acceptable evidence of your marriage/civil partnership or of the financial dependency, and also of their age. Guaranteed payment period You can choose a pension income that s guaranteed to be paid for a minimum of 5 or 10 years, regardless of when you die. Example If you choose a single life pension with a 5-year guarantee period and you die after 2 years, we ll continue to pay your pension income for another 3 years. We ll pay the remaining payments to your estate. If you choose a guaranteed payment period on a last survivor pension and then die within the guaranteed period, the pension payments will be paid first for the remainder of the guaranteed period and then the last survivor pension will start. How does the With-Profits pension income option work? We ll invest the pension fund you use to buy your Pension Annuity in our With-Profits Fund. We invest your money, together with that of all of our With-Profits policyholders, in a wide range of investments including shares, commercial property, government securities and corporate bonds. The objective of the With-Profits Fund is to achieve longterm growth. Returns on your savings are smoothed out over time. This means that, instead of simply sharing out what the fund makes or loses each year, we even out some of the fluctuations. In practice we keep some of the growth back when investment conditions have been good, so that we can add it back when investment conditions are poor. We promise to pay you a minimum level of pension income, but we may increase this by adding bonuses. Any bonus amount added will depend on the investment performance of the With-Profits Fund. What about bonuses? At least once a year we decide whether we can add a bonus, and if so how much. We don t guarantee the size of future bonuses because they depend on any future profits we might make. We may have to cut bonus rates in future. If we add a bonus we ll increase your pension income amount. Once we ve added a bonus we can t take it away. You re guaranteed to receive this new increased amount for the rest of your life, even if we cut bonus rates in future. Please see the guide provided with this Key Features Document, which gives more details of how the With-Profits Fund works, and how we calculate any bonuses. The guide is also available on our website www.nfumutual.co.uk. There s a more detailed document, called Principles and Practices of Financial Management which is also available on our website. Alternatively, you can contact us for a copy of either document, see How to contact us. How will I get my pension income payments? We ll pay your pension income directly into a bank or building society account held in your name or your joint account. What about tax? Your pension is treated as earned income and is taxed on a PAYE basis. When we start your payments, we ll use an emergency tax code until HM Revenue and Customs send us your actual tax code. HM Revenue and Customs have set a lifetime allowance, which limits how much you can build up free of tax in all of your pension schemes and arrangements from whatever source. State pension benefits don t count towards this limit. Page 3

Questions and answers continued The lifetime allowance is 1.5 million. You have to pay extra tax on any amount above this (25% if you use it to buy a pension income, or 55% if it s paid as a lump sum). Every year we ll send you a P60 showing the pension income paid during the tax year, any tax deducted and what percentage of your lifetime allowance your Pension Annuity has used up. Any payments made to your estate, or to your dependant s estate, may be subject to inheritance tax. The Government may change the tax treatment in future. What happens to my pension income when I die? Any benefits due will depend on the choices made when you started your Pension Annuity. A single life pension will end when you die, unless you choose a guaranteed payment period. A last survivor pension will be paid to you as long as you re alive. After your death we ll pay a pension income to your husband/wife or civil partner, or someone else who we accept is financially dependent on you, until they die. If you choose a last survivor pension and your husband/ wife, civil partner or financial dependant dies before you, your pension income stops when you die. If you choose a pension income with a guaranteed payment period and you die within that time, we ll pay your pension income to your estate for the rest of the guarantee period. If you die after the guaranteed period, your pension income will end then. If you chose a pension that increases each year, any pension income we pay to your husband/wife, civil partner or dependant, or any remaining pension income payments due under a guaranteed payment period, will continue to increase each year on the basis you chose. What are the charges? We ll take any charges for setting up and running your Pension Annuity from the pension fund used to buy it, including any advice charges you ve agreed to have taken from the pension fund. Your illustration shows how much pension income your pension fund will buy. For the With-Profits pension income option: - We ll work out our expenses each year and allow for them when we calculate any bonuses. - Your illustration shows the effect this may have on reducing the potential growth of your pension income in future. - You ll find more information about this in the guide provided with this key features document, and our Principles and Practices of Financial Management, available on our website. Can I change my mind? If you change your mind about taking out a Pension Annuity, or about the pension income choices you ve made, you ll have 30 days to tell us. If you re buying the Pension Annuity on behalf of your scheme member, they will need to tell you so that you can let us know. The 30 days start when you sign the pension benefit claim form in the Pension Annuity application form. If you don t tell us within the 30 days, we ll start your Pension Annuity based on the pension income choices made, and as set out in these key features. If you change your mind, write to us at the address given under How to contact us. How to contact us If you want to: - change your mind about your Pension Annuity in the 30 days before it starts - make a claim - ask any other questions Or call us on 0800 622323. Our telephone lines are open on weekdays from 8.30am to 6.00pm. We may record telephone calls for training, monitoring or security purposes. write to us at: NFU Mutual Life Services Tiddington Road Stratford upon Avon Warwickshire CV37 7BJ Key Features of the NFU Mutual Pension Annuity Page 4

Questions and answers continued Making a complaint If you need to make a complaint, please write to us or call us on 0800 622323, as indicated above, and we ll do all we can to resolve the complaint to your satisfaction. If you re not satisfied with our response to a complaint, you can contact: The Financial Ombudsman Service (FOS) South Quay Plaza 183 Marsh Wall London E14 9SR 0300 123 9123 www.financial-ombudsman.org.uk Making a complaint won t affect your legal rights. Page 5

Other information Law and language used Under English law, people making contracts can choose which law applies. The law of England will apply to this Pension Annuity, unless you agreed otherwise with us before it started. The Pension Annuity and all our other communications with you will be in English. Compensation If NFU Mutual is unable to pay claims because of financial difficulties, you may qualify for compensation from the Financial Services Compensation Scheme. You can contact the Financial Services Compensation Scheme for further details, on 0800 678 1100 or 020 7741 4100 or www.fscs.org.uk. About NFU Mutual NFU Mutual is The National Farmers Union Mutual Insurance Society Limited. It s a registered company that s limited by guarantee, which means its capital isn t divided into shares. Its Head Office is in the United Kingdom of Great Britain and Northern Ireland, situated at: Tiddington Road Stratford upon Avon Warwickshire CV37 7BJ NFU Mutual s main business is providing financial services and general insurance. It s authorised and regulated by the Financial Services Authority (FSA) and is entered on their register under number 117664. You can contact the Financial Services Authority: Our Mutuality We re a Mutual company, which means we have no shareholders. We aim to pass on the benefits of mutuality to our financial services customers by low charges and personalised service. In the unlikely event of de-mutualisation, any windfall payment arising from the policy you re taking out would be paid to The NFU Mutual Charitable Trust, instead of to you. Your policy document This key features document gives you a brief explanation of the most important features of the Pension Annuity. It s based on our understanding of current law and tax practices, which can change. The full terms and conditions are in the policy document. If you d like a copy of this, please ask your NFU Mutual Financial Adviser, or contact us as explained under How to contact us. We ll always send you a copy of this when we ve set up your Pension Annuity. Is this product right for you? If you re unsure if this product is right for you, please speak to your NFU Mutual Financial Adviser or telephone one of our Customer Telephone Advisers on 0800 622323. Consumer helpline: 0845 606 1234 25 The North Colonnade Canary Wharf London E14 5HS Key Features of the NFU Mutual Pension Annuity Page 6

NFU Mutual is The National Farmers Union Mutual Insurance Society Limited (No. 111982). Registered in England. Registered Office: Tiddington Road, Stratford upon Avon, Warwickshire CV37 7BJ. Authorised and regulated by the Financial Services Authority. A member of the Association of British Insurers. For security and training purposes, telephone calls may be recorded and monitored. www.nfumutual.co.uk KFD/PEN/31.12.12