With Profit Annuities vs Conventional Annuities FAQ

Question	Conventional Annuity	With Profits Annuity
Who can take out the annuity?	1. Member of any registered pension scheme 2. Trustees/ administrators of any registered pension scheme (open market option only) 3. The dependant(s) who receive benefits from a member's pension scheme after the member's death (open market option only) 4. The recipient of Pension Credit Benefits following a divorce (transfers only)	1. Member of any registered pension scheme 2. The dependant(s) who receive benefits from a member's personal pension scheme after the member's death (open market option only)
Does the annuity accept Protected Rights?	Yes	No
Does the annuity accept Guaranteed Minimum Pension (GMP)/ Section 9 (2B) rights?	Yes - if buying a transfer into the Norwich Union Personal Pension Scheme, the GMP must be converted to protected Rights by the ceding scheme.	No
How is the annuity set up?	1. Lifetime Annuity or 2 Scheme Pension - defined benefits arrangements must be on a Scheme Pension basis	Lifetime Annuity
Is tax free cash payable?	1. If transferring, up to 25% can be taken from the fund and must be paid by the annuity provider. 2. If exercising the open market option, the ceding scheme pays the tax free cash.	1. If transferring, up to 25% tax free cash can be taken from the fund and must be paid by the annuity provider. 2. If exercising the open market option, the ceding scheme pays the tax free cash.
What is the minimum age?	50 (55 from 2010) - an earlier age is allowed if the member is retiring through ill health - or where the annuity is being bought for a dependant following the death of the member (minimum age 20).	50 (55 from 2010) - an earlier age is allowed if the member is retiring through ill health - or where the annuity is being bought for a dependant following the death of the member (minimum age 20).
What is the maximum age?	90 for open market option 74 for transfers	90 for open market option 74 for transfers
What is the minimum amount for an annuity?	Typically the minimum amount for an annuity is £10,000 after tax free cash has been taken.	Typically the minimum amount for a with profits annuity is £20,000 after tax free cash has been taken.
Can the annuity be writeen on a single or joint life?	1. Single Life. 2. Single Life with dependant- on death of the member a new second pension income becomes payable to the dependant. 3. Longest Life - on death of the first member the annuity continues to the dependant on the same or reduced amount. ("Ceasing on remarriage/ forming a new civil partnership" and "overlap" are not applicable.)	1. Single Life. 2. Longest Life - on death of the first member the annuity continues to the dependant on the same or reduced amount. ("Ceasing on remarriage/ forming a new civil partnership" and "overlap" are not applicable.)
How often will the annuity be paid?	Monthly, quarterley, half yearly or yearly in advance of arrears.	Monthly, quarterley, half yearly or yearly in advance of arrears.
Can a payment date for the annuity be chosen?	Yes	No
Will the annuity income be taxable?	Yes- the annuity income will be treated as earned income and taxed upon the individual's circumstances.	Yes- the annuity income will be treated as earned income and taxed upon the individual's circumstances.
Can the annuity be cancelled?	Yes- within 30 days of signing the application form. To cancel you must: 1. Gain agreement that the transferring scheme will accept the pension funds back, or if not then gain agreement from another annuity provider to receive the funds. 2. Return the cancellation notice. 3. Return within the 30 day period, the tax free cash sum and any installments paid.	Yes- within 30 days of signing the application form. To cancel you must: 1. Gain agreement that the transferring scheme will accept the pension funds back, or if not then gain agreement from another annuity provider to receive the funds. 2. Return the cancellation notice. 3. Return within the 30 day period, the tax free cash sum and any installments paid.

Question

Conventional Annuity

With Profits Annuity

Who can take out the annuity?

1. Member of any registered pension scheme

2. Trustees/ administrators of any registered pension scheme (open market option only)

3. The dependant(s) who receive benefits from a member's pension scheme after the member's death (open market option only)

4. The recipient of Pension Credit Benefits following a divorce (transfers only)

1. Member of any registered pension scheme

2. The dependant(s) who receive benefits from a member's personal pension scheme after the member's death (open market option only)

Does the annuity accept Protected Rights?

Yes

Does the annuity accept Guaranteed Minimum Pension (GMP)/ Section 9 (2B) rights?

Yes - if buying a transfer into the Norwich Union Personal Pension Scheme, the GMP must be converted to protected Rights by the ceding scheme.

How is the annuity set up?

1. Lifetime Annuity or

2 Scheme Pension - defined benefits arrangements must be on a Scheme Pension basis

Lifetime Annuity

Is tax free cash payable?

1. If transferring, up to 25% can be taken from the fund and must be paid by the annuity provider.

2. If exercising the open market option, the ceding scheme pays the tax free cash.

1. If transferring, up to 25% tax free cash can be taken from the fund and must be paid by the annuity provider.

2. If exercising the open market option, the ceding scheme pays the tax free cash.

What is the minimum age?

50 (55 from 2010) - an earlier age is allowed if the member is retiring through ill health - or where the annuity is being bought for a dependant following the death of the member (minimum age 20).

What is the maximum age?

90 for open market option

74 for transfers

90 for open market option

74 for transfers

What is the minimum amount for an annuity?

Typically the minimum amount for an annuity is £10,000 after tax free cash has been taken.

Typically the minimum amount for a with profits annuity is £20,000 after tax free cash has been taken.

Can the annuity be writeen on a single or joint life?

1. Single Life.

2. Single Life with dependant- on death of the member a new second pension income becomes payable to the dependant.

3. Longest Life - on death of the first member the annuity continues to the dependant on the same or reduced amount. ("Ceasing on remarriage/ forming a new civil partnership" and "overlap" are not applicable.)

1. Single Life.

2. Longest Life - on death of the first member the annuity continues to the dependant on the same or reduced amount. ("Ceasing on remarriage/ forming a new civil partnership" and "overlap" are not applicable.)

How often will the annuity be paid?

Monthly, quarterley, half yearly or yearly in advance of arrears.

Can a payment date for the annuity be chosen?

Yes

Will the annuity income be taxable?

Yes- the annuity income will be treated as earned income and taxed upon the individual's circumstances.

Can the annuity be cancelled?

Yes- within 30 days of signing the application form.

To cancel you must:

1. Gain agreement that the transferring scheme will accept the pension funds back, or if not then gain agreement from another annuity provider to receive the funds.

2. Return the cancellation notice.

3. Return within the 30 day period, the tax free cash sum and any installments paid.

Yes- within 30 days of signing the application form.

To cancel you must:

1. Gain agreement that the transferring scheme will accept the pension funds back, or if not then gain agreement from another annuity provider to receive the funds.

2. Return the cancellation notice.

3. Return within the 30 day period, the tax free cash sum and any installments paid.

With Profit Annuities vs Conventional Annuities Product Features

Question	Conventional Annuity	With Profits Annuity
Guarantee Option - if the annuitant dies during the guaranteed period the remaining income payments within the guaranteed period can be paid into the estate.	Yes - for up to 10 years. A guaranteed period of more than 5 years is not available for any protected rights benefits or GMP. The guaranteed payments are available as: 1. A continued income. 2. A value protected lump sum: - discounted lump sum - this means the lump sum is equal to the current value of the remaining payments. - non discounted lump sum - this means the lump sum is equal to the total value of the remaining payments. Either the discounted or the non-discounted lump sum is used in calculating the basis of value protection. If the pension is under a Defined Benefit arrangement there are two choices of lump sum: 1. Defined Benefit lump sum death benefit - the lump sum will count towards the individual's Lifetime Allowance. 2. Pension Protection lump sum death benefit- subject to a tax charge, currently 35%. If the pension is from a money purchase scheme, this will provide an Annuity Protection lump sum death benefit - subject to a tax charge, currently 35%. In accordance with legislation, lump sums are only payable if the member dies before age 75. If the member dies after 75 but still within the guaranteed period installments will continue to be paid in lieu of a lump sum. Lump sums are available on a single life and single life with dependant basis. All choices are made at outset	Yes - for up to 10 whole years. The guaranteed payments are available as a continued income.
Escalation option - to protect your annuity payments from inflation	Yes- annual escalation is available. The choices are: 1. Fixed rate each year up to a maximum of 8.5% for a Lifetime Annuity, or 5% for a Scheme Pension. 2. Indexation in line with the Retail Prices Index. 3. Post 5/4/88 GMP must escalate at a minimum of 3% compaound each year. If the pension is from a definaed benefit scheme: - any pension earned after 5/4/97 will increase in line with the retail prices index (RPI) up to 5%.	Escalation is not available. You can choose an Anticipated Bonus Rate (ABR) within a range of 0% to 4% in 0.25% steps. This will set the initial annuity income and will affect future levels of income. A guaranteed floor provides a minimum level of income below which the with profits annuity cannot fall. After the first year you have the option to: 1. Change the Anticipated Bonus Rate within limits set by the annuity provider. 2. Convert the with profits annuity over to a conventional annuity so that future payments are know. The pension will then be re-calculated.
Proportionate payment - a proportionate payment may be made to cover the period between the previous instalment and the date of death.	Yes - where the pension is paid in arrears or on a chosen payment date.	Yes - where the pension is paid in arrears.
With/ without overlap option With overlap- the dependant's pension will start from the next date a payment would have been paid to the annuitant. Without overlap- the dependant's pension will start from the next payment date after the guaranteed period ends.	Yes- available on a single life with dependant's basis.	Not applicable
Ceasing on remarriage/ forming a new civil partnership - provides the choice to the annuitant to stop the dependant's pension if the dependant remarries or forms a new civil partnership.	Yes - available on a single life with dependant's basis.	Not applicable

Question

Conventional Annuity

With Profits Annuity

Guarantee Option - if the annuitant dies during the guaranteed period the remaining income payments within the guaranteed period can be paid into the estate.

Yes - for up to 10 years.

A guaranteed period of more than 5 years is not available for any protected rights benefits or GMP.

The guaranteed payments are available as:

1. A continued income.

2. A value protected lump sum:

- discounted lump sum - this means the lump sum is equal to the current value of the remaining payments.

- non discounted lump sum - this means the lump sum is equal to the total value of the remaining payments.

Either the discounted or the non-discounted lump sum is used in calculating the basis of value protection.

If the pension is under a Defined Benefit arrangement there are two choices of lump sum:

1. Defined Benefit lump sum death benefit - the lump sum will count towards the individual's Lifetime Allowance.

2. Pension Protection lump sum death benefit- subject to a tax charge, currently 35%.

If the pension is from a money purchase scheme, this will provide an Annuity Protection lump sum death benefit - subject to a tax charge, currently 35%.

In accordance with legislation, lump sums are only payable if the member dies before age 75. If the member dies after 75 but still within the guaranteed period installments will continue to be paid in lieu of a lump sum. Lump sums are available on a single life and single life with dependant basis.

All choices are made at outset

Yes - for up to 10 whole years.

The guaranteed payments are available as a continued income.

Escalation option - to protect your annuity payments from inflation

Yes- annual escalation is available. The choices are:

1. Fixed rate each year up to a maximum of 8.5% for a Lifetime Annuity, or 5% for a Scheme Pension.

2. Indexation in line with the Retail Prices Index.

3. Post 5/4/88 GMP must escalate at a minimum of 3% compaound each year.

If the pension is from a definaed benefit scheme:

- any pension earned after 5/4/97 will increase in line with the retail prices index (RPI) up to 5%.

Escalation is not available.

You can choose an Anticipated Bonus Rate (ABR) within a range of 0% to 4% in 0.25% steps. This will set the initial annuity income and will affect future levels of income.

A guaranteed floor provides a minimum level of income below which the with profits annuity cannot fall.

After the first year you have the option to:

1. Change the Anticipated Bonus Rate within limits set by the annuity provider.

2. Convert the with profits annuity over to a conventional annuity so that future payments are know. The pension will then be re-calculated.

Proportionate payment - a proportionate payment may be made to cover the period between the previous instalment and the date of death.

Yes - where the pension is paid in arrears or on a chosen payment date.

Yes - where the pension is paid in arrears.

With/ without overlap option

With overlap- the dependant's pension will start from the next date a payment would have been paid to the annuitant.

Without overlap- the dependant's pension will start from the next payment date after the guaranteed period ends.

Yes- available on a single life with dependant's basis.

Not applicable

Ceasing on remarriage/ forming a new civil partnership - provides the choice to the annuitant to stop the dependant's pension if the dependant remarries or forms a new civil partnership.

Yes - available on a single life with dependant's basis.

Not applicable