Enhanced Pension Annuity Key Features

Its aims

• To pay you a guaranteed pension for the rest of your life.
• To pay a pension to a dependant when you die, if you choose.
• The pension received will depend on your current health/lifestyle, and that of your dependant if relevant.

Your Commitment

• To use your pension fund to buy a pension from us on fixed terms, to last the rest of your life.
• To make a once and for all decision about the pension you want.
• To ensure you answer all the questions on the health questionnaire fully, truthfully and accurately to the best of your knowledge. If you fail to do so, your income may be reduced to our standard rates. Any overpayments already made will be recovered.
• To tell us if any of the medical details or other information you give us changes between the time you sign the application form and the start of your plan.

Risks

• You can’t change or cash in your pension, even if your personal circumstances change.
• Your dependant won’t have any income from this plan after you die, if you haven’t arranged for your pension to continue.
• Remember inflation will reduce what your money can buy in the future.
• There’s no protection against inflation unless you choose a pension that increases each year.
• If you die in the early years, the total pension payments you’ve received may be less than the original payment made to buy the pension.
• Your annuity payments may be reduced to standard rates if your doctor is unable to support the medical/lifestyle information you supplied unless further medical evidence is provided.

QUESTIONS AND ANSWERS

What is a Pension Annuity?

• It's a plan that provides you with an income for life based on your health/lifestyle (or your dependants if appropriate). You buy it with your pension fund.
• You may be able to take a tax-free cash sum of up to 25% of your pension fund when you buy your Enhanced Pension Annuity.
• It can provide a dependant with a pension when you die.

What medical conditions are covered?

• If you have (or previously have suffered) from cancer, a heart attack, a stroke, have diabetes or any other serious medical condition that could shorten your life expectancy, you may qualify for an Enhanced Pension Annuity. Not all forms of these conditions are covered.

Will I have to attend a medical examination?

• You will not be required to attend a medical examination. However, we’ll ask you to complete a health questionnaire. We may also ask your doctor for a medical report.
• If your doctor is unable to support the medical information you have supplied and no further medical information can be provided, your income may be reduced to our standard rates and any overpayments already made will be recovered.

How flexible is it?

• Before your plan is set up, you can choose its basis and how it’s paid.
• You can find details of the choices you can make when setting up the plan, under the headings:
• ‘What will my pension be?’
• ‘What choices will I have about how I get my pension?’
• You can’t change or cash in your plan, or defer a payment.

What will my pension be?

• The amount of pension you get will depend on a number of things when you set up your plan, including:
• your age and sex
• your health/lifestyle
• interest rates at the time
• the choices you make about your pension (see below).
• You can choose to take a smaller pension at the start, so that a pension is paid to a dependant if you die before them.
• If a pension is to be paid to a dependant after you die, we can take account of their health, when deciding the amount of pension they’ll receive. We can do so even if you are healthy at the start of the plan.
• You can choose to take a smaller pension that is guaranteed for up to 10 years. This is called the ‘guaranteed period’.
• You can choose for the remaining payments to be paid as:
• continuing payments, or
• a lump sum (this only applies if you die before the age of 75).
• You can choose to take a smaller pension at the start, which will increase each year. If a pension is to be paid to a dependant after you die, this will increase in the same way.
• Your pension can increase:
• at a fixed rate each year, or
• in line with inflation over the past year as measured by the Retail Prices Index (RPI). We’ll use the RPI figure published the month before the increase is due. Your pension won’t go down.
• The Government has special rules for increases to pensions from ‘defined benefit’ schemes that are earned after 5 April 1997. Your illustration will show the details. An example of a defined benefit scheme is a pension linked to your employer's service and earnings.
• You can choose combinations of these options. You can ask for illustrations with different options so that you can see the difference they would make to your pension.
• While you’re alive we won’t reduce or stop the payments you’ve chosen.

What is the contracted-out part of my pension?

• If you have been employed, you or your employer may have arranged for the State Earnings Related Pension Scheme (SERPS)/State Second Pension (S2P) part of your National Insurance payments to be paid into your pension scheme. If so, they are paid into a separate part of your pension and are called ‘protected rights’. We call the other part of your pension ‘non-protected rights’.
• Protected rights provide a substitute for your SERPS/S2P pension and may be more or less than you might have got from SERPS/S2P.
• If you have protected rights, then the pension you may get from these is included in your illustration.
• If you buy this pension as a result of a divorce settlement, the protected rights part of the fund is called ‘safeguarded rights’ but works in a similar way. Non-protected rights are called ‘non-safeguarded rights’.
• Contracting out works differently for a defined benefits scheme. The contracted-out part you earned before 6 April 1997 is included in your illustration as a ‘Guaranteed Minimum Pension’.
• The Government has special rules about the type of pension you can buy with contracted-out funds. Your financial adviser will be able to give you more details.

What choices will I have about how I get my pension?

• You can choose how often you’ll receive your pension. This can be monthly, quarterly, half-yearly or yearly. You can choose whether the payment is made at the beginning or end of the period.
• For monthly payments you can choose the day of the month that we make payments. This can be any day up to the 28th of the month.
• These choices will affect the amount of pension you’ll get.
• We will pay your pension directly into your bank or building society account.

What are the charges?

• We use the fund to pay our charges for setting up and running your plan. We do this by taking these charges into account when we work out the price of the pension.
• The illustration shows how much pension the fund will buy. No further charges will be taken from your pension.

What about tax?

• Your pension will be treated as earned income and taxed according to your personal circumstances.
• Your pension payments will normally be made after the tax payable has been deducted.
• Any payments made to your or your dependant’s estate may be subject to inheritance tax.
• The Government has put a limit on the total value of all retirement benefits (excluding State Pensions) that you can normally take without paying a tax penalty. The limit is called the ‘lifetime allowance’ and the tax is called a ‘lifetime allowance charge’. You should already be aware if you are likely to be affected. Your financial adviser will be able to give you more details.
• Your illustration will show whether your pension is a ‘lifetime annuity’ or a ‘scheme pension’.
• A lifetime annuity is a pension that must be bought from an insurance company you’ve chosen.
• A scheme pension will be paid by your pension scheme or an insurance company chosen by the scheme.
• A defined benefits scheme can only provide a scheme pension. For other types of pension schemes, you must be given the opportunity to choose a lifetime annuity.
• The Government has different rules for lifetime annuities and scheme pensions, including how the two types are valued for lifetime allowance purposes.
• If you die in the guaranteed period, and a lump sum is payable, then:
• – the lump sum may be taxed, currently at 35%, or
• the lump sum may count towards your lifetime allowance.

Your illustration will show which applies.

• Please note we’ve included only a general tax summary and individual circumstances may differ.
• Tax rules can change.
• Your financial adviser can give you more details about your tax position.