Key Features of the Pension Annuity

Its aims

• To provide you with a secure income for the rest of your life.
• To enable you to use the pension fund you have built up with another company to buy an annuity from us.
• To let you choose the annuity best suited to your personal circumstances.
• To give you an opportunity to provide sufficient benefits for your spouse/civil partner or dependants after your death.

Your Commitment

• If you are entitled to take tax-free cash from your pension fund you must take it when you buy your annuity. You cannot do this afterwards.
• If your pension fund is being transferred from a registered pension scheme you will have to choose the type of annuity you need. However, if you are using your open market option from an occupational pension scheme, the benefit basis may have already been defined within the rules of the scheme (you may wish to check this with the scheme administrator/trustee).
• Once your annuity has been set up, you will not be able to change the type of annuity selected, or any of the options you have chosen.

Risks

• Your circumstances might change after your income starts.
• You may not have made sufficient provisions for your spouse/civil partner and/or dependants in the event of your early death.
• Inflation may exceed the rate of escalation (if any) of your income, and consequently it’s purchasing power may diminish in the future.
• The total income you will receive from your annuity will depend on how long you live and, if applicable, how long your spouse/civil partner and/or dependants live.
• You have 30 days from receipt of your first quotation from us to decide whether to proceed. Once your annuity is set up it cannot be cashed in or transferred to another provider.

QUESTIONS AND ANSWERS

What is a Pension Annuity?

A Pension Annuity uses your pension fund to provide you with an income that is paid for the rest of your life. If you are using your Open Market Option from an occupational pension scheme the type of annuity may be restricted by the rules of your pension scheme.

What is the difference between an Open Market Option and an Immediate Vesting Personal Pension?

• An Open Market Option is a right you have under your existing money purchase pension scheme. Under this option your scheme will pay you any tax-free cash you choose to take and check that you have not exceeded your Lifetime Allowance. The remaining fund will then be sent to us to buy your annuity.
• Under the Immediate Vesting Personal Pension, the whole of your pension fund will be transferred to us. This will be applied to a registered personal pension scheme, the LV Personal Pension Scheme, of which you will become a member. We will then check your benefits do not exceed your available Lifetime Allowance, pay you an income and any tax-free cash you are entitled to and choose to take. You will then no longer be entitled to any further benefits from your exisiting pension scheme.

What is the difference between a Lifetime Annuity and a Scheme Pension?

• A Lifetime Annuity is when a member of a money purchase scheme (either personal or occupational) decides to exercise their right to an Open Market Option to buy an annuity from an annuity provider of their choice.
• A Scheme Pension is when the trustees of a defined benefit scheme decide to secure a member’s pension entitlement by purchasing an annuity from a provider of their choice.

One of the differences between these types of annuity is the way the amount of your Lifetime Allowance that your annuity will use up is calculated.

What are my options?

Subject to legislation, HM Revenue & Customs limits, and any restrictions in your existing pension scheme rules you may choose from a variety of options. The level of your income will depend on the options chosen. You may choose:

• To use all of your fund to buy an annuity.
• To take a tax-free lump sum and use the balance to buy a reduced annuity.
• To take a smaller income initially so that your income will increase each year, for example:
• by a fixed amount, for example 3% each year, or
• in line with the change in the Retail Prices Index (RPI), or
• in line with the change in the RPI or 5%, whichever is lower.
• To take a reduced income for yourself to allow for an additional income to be paid to your spouse/civil partner/dependants should you die before them.
• To take a reduced income for yourself with a lump sum death benefit being paid to your beneficiaries should you die before age 75.
• To take a reduced income with a guarantee that it will be paid for up to 10 years, even if you die within the guarantee period.
• To take a monthly, quarterly, half-yearly or annual payment in advance or in arrears.

Are there any further restrictions for Contracted Out benefits?

• If your pension fund includes benefits arising from contracting out of the State Earnings-Related Pension Scheme (SERPS) or State Second Pension (S2P), then your benefit will contain either Guaranteed Minimum Pension (GMP), Protected Rights or Contracted out Salary Related (Section 9(2B)) Rights. These are substitutes for what would have been paid by staying in SERPS/S2P.
• Certain restrictions apply to the way benefits are paid, for example in respect of the rate at which the GMP must increase and whether a widow’s, widower’s or civil partner’s pension has to be paid.
• GMP cannot be taken in lump sum form.

Your personal quotation already takes into account these restrictions and shows what benefits you can receive from your pension fund.

How do I decide what option is right for me?

You should consider how much difference each option would make in light of your personal circumstances now, and in the future. This will include your health and that of your spouse/ civil partner/dependant and your other financial assets and how they could be impacted by inflation and changing economic/investment conditions.

How much time do I have to decide?

The amounts shown in the quotation will remain valid for a minimum of 14 days. After this time, you have until your annuity has been set up to consider whether to proceed, although you should recognise that the figures quoted could change according to market conditions. If you decide to proceed it is essential that you return the application form and any relevant documentation to your Financial Adviser without delay. If we receive the completed application form and cheque from your previous scheme after the quotation has expired, we cannot guarantee that the amount of income will remain the same. If the annuity rate used in the quotation has to be reduced by more than 1%, because of this we will let your Financial Adviser know. We cannot accept any responsibility for any changes to your expected income in the event of a delay in us receiving your completed application form and any relevant documentation supporting your application.

Will I need to attend a medical examination?

You will not be required to attend a medical examination. However, we may write to your doctor to confirm any medical or lifestyle information you have supplied to us, upon which the quotation is being provided.

If your doctor is unable to support the smoking and/or medical information you have supplied then, in the absence of further evidence, your income will be reduced to our standard rate and any over payments of income already made will be recovered. This reduction will take place no longer than 6 months from the date the policy was issued.

Important Information About Your Right to Withdraw

Notice of your right to withdraw

You will not be able to change your mind once your annuity has been set up. Therefore you should carefully read the following information explaining your right to withdraw from your annuity purchase.

How long do I have to make my decision?

You have at least 30 days after you receive your first quotation from us to decide whether to proceed. If we receive your application and pension fund before the 30 days are up, we will not set up your annuity until this period has expired to allow you enough time to think it over. Once you have sent back the application form and the annuity has been set up your decision will be final. You will then not be able to change your mind. Please note that the 30 day period is effective on the date you receive this notice, and that any subsequent quotes will not include a revised notice.

What should I do if I want to consider my options?

When you have made your choice your annuity will be set up from your selected date, or from the date we receive the funds from your current pension scheme. If you send for a quote from another company they will send a new notice and they will also allow at least a 30 day period for reflection.

What should I do if I want to withdraw?

If you have not yet completed our Pension Annuity application form, you need take no further action. We would suggest that you contact your Financial Adviser to make alternative arrangements. If you change your mind after sending in your application form but before the annuity is set up you should immediately inform us using the slip below or by writing to the address below. As long as it is within the 30 day period from the date you received the first quotation, the annuity purchase will be cancelled.

What is the effect of withdrawing?

If you have exercised your withdrawal rights within the 30 day withdrawal period, we will cease processing your application form. If we have received any money from your original pension scheme, we will return it to them.

Important Information

Tax

Your annuity payments will be treated as pension income and will normally be paid after deduction of income tax at the appropriate rate. If the Government changes the tax treatment of your annuity the income paid to you may fall. Any lump sum death benefits payable will normally be paid after deducting 35% tax. The tax treatment of your annuity will, in part, depend on your personal tax status, which may be subject to change. This is based on our understanding of current legislation and HM Revenue & Customs practice which is subject to change.

Compensation

The Financial Services Compensation Scheme (FSCS), as established under the Financial Services and Markets Act 2000, is responsible for the payment of compensation in the event of default. In the event that LV= is unable to meet its obligations, the FSCS may arrange to transfer our policy to another insurer, provide a new policy, or if these actions are not possible, provide compensation. For long term insurance (such as pension plans or life assurance) the first £2,000 of a claim is protected in full. Above this amount, the Scheme covers up to 90% of the value of the policy if the company goes into liquidation. Further information about compensation arrangements is available from the Financial Services Compensation Scheme, 7th Floor, Lloyds Chambers, 1 Portsoken Street, London E1 8BN Tel: 020 7892 7300 Fax: 020 7892 7301 or email (enquiries@fscs.org.uk).