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Retirement Account

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Retirement Account in detail

Retirement Planning

How does the Retirement Planning work?

  • Retirement Account has the flexibility of being a Personal Pension with a self invested option if required.
  • It allows you to consolidate your retirement savings in one Account, offering you choice and control.
  • Wide choice of investment options.
  • When you make a contribution, we’ll automatically add an additional amount in respect of basic rate tax relief*, meaning you can benefit from the tax relief being invested immediately. We recover the tax relief from HM Revenue & Customs at a later date.
  • Higher or additional rate tax payers can claim further tax relief in their self assessment tax return.

*If you are a Scottish taxpayer the tax relief you will be entitled to will be at the Scottish Rate of income tax, which may be different from the rest of the UK in the future.

The value of the tax benefits of your Retirement Account depend on your individual circumstances. Tax rules and circumstances may change in the future

Retirement Planning payments

  • The minimum payments that can be made after any tax relief has been added, are;
      New policies Increments
    Regular (monthly) £200 £50
    Regular (annually) £2,400 £600
    Single (one off payments) £10,000 £2,000
    Transfers (from another pension) £10,000 £2,000
  • All payments into or out of a Retirement Account will pass through the Control Account(s) which are unique to the Retirement Account. Each policy “part” (Planning or Income) has its own Control Account, which acts as a clearing and transactional account for all monies paid in and out of the Retirement Account. To help you to keep up to date with your Retirement Account you can view the Control Account(s) online.
  • There is no maximum limit on how much can be paid to your plan, although we can only accept contributions from you that are eligible for tax relief*. Relief is available on contributions which don't exceed your relevant UK earnings, or £3,600 if higher.
  • The Treasury sets an annual allowance on the amount that can be paid into all your registered pension schemes without incurring a tax charge. Higher earners will have a lower annual allowance limit, called the ‘Tapered Annual Allowance’. Your annual allowance may also be further limited to the ’Money Purchase Annual Allowance’ if you have flexibly accessed a pension with us or any other provider.
  • The Treasury applies a Lifetime Allowance to the total value of pension benefits you can receive. If the value of your pension benefits from all pension arrangements exceeds the Lifetime Allowance, a tax charge will be payable on the excess.

*If you are a Scottish taxpayer the tax relief you will be entitled to will be at the Scottish Rate of income tax, which may be different from the rest of the UK in the future.

The value of the tax benefits of your Retirement Account depend on your individual circumstances. Tax rules and circumstances may change in the future

Accessing your benefits – from age 55:

  • From age 55, you can choose to move (designate) part or all of the value of your Account from Retirement Planning to Retirement Income.
  • The minimum initial amount that can be designated from Retirement Planning to Retirement Income is £10,000 before tax free cash (TFC), provided you have £30,000 in the Retirement Planning element before monies are moved to Retirement Income. For subsequent designations to Retirement Income, the minimum amount is £2,000 before tax free cash.
  • You can take some or all of the value of the Retirement Planning part of your Account as a cash lump sum withdrawal. We call this a Partial Pension Encashment or a Full Pension Encashment.
  • For each pension encashment 25% of the value of the encashment will be tax-free and the remainder will be taxable.
  • The minimum Partial Pension Encashment you can take is £5,000.

Eligibility

  • There is no minimum age to take out the Retirement Planning part of the Account.
  • Maximum age of 74.  By age 75 the value of your Account must be designated into Retirement Income, used to buy an annuity or transferred to another pension provider.
  • You must be normally resident in the UK.

Pensions are a long-term investment. The retirement benefits you receive from your pension plan will depend on a number of factors including the value of your plan when you decide to take your benefits which isn’t guaranteed and can go down as well as up. The value of your plan could fall below the amount(s) paid in.

The value of the tax benefits of your Retirement Account depend on your individual circumstances. Tax rules and circumstances may change in the future.

High levels of pension encashments or income may not be sustainable and in some cases could reduce the value of your Retirement Account to zero. You should consider the impact this might have on your income in retirement.

Retirement Income

How does Retirement Income work?

  • The Retirement Income part of the Account allows you to take an income. Each time you move an amount from Retirement Planning to Retirement Income (this is called designation), you can normally take up to 25% of the value designated as a tax free cash sum (you may be able to take more if you have a protected entitlement). The remainder must be used to provide your taxable income, although you can choose to take nil income if you wish.
  • While taking an income, your fund will remain invested. The choice of investments is the same as those available in Retirement Planning with the exception of the Premier and Governed Investment Strategies.
  • You can choose to take your benefits in stages. This is known as 'phased retirement'. It's not possible to 'phase' the value of any former protected rights derived from contracting out of the State Second Pension (S2P) scheme.
  • If you choose to take an income (using Flexible Access Drawdown) you can take any amount up to the full value of the Retirement Income part of your Account.
  • You may be able to transfer the value of an existing 'Income Drawdown' plan to a new Retirement Account. The minimum transfer value is £22,500.
  • You must take all of your fund value as income or transfer to another pension arrangement by age 99 at the latest.
  • If you wish to buy a Scottish Widows's annuity, you must do so by age 75.
  • Alternatively, it may be possible to purchase an annuity after age 75 by transferring to another provider.

Eligibility

  • Minimum age of 55 to take out the Retirement Income part of the Account (may be lower in certain circumstances)
  • Maximum age of 98
  • You must be normally resident in the UK
  • Minimum contributions are:
    • £30,000 from Retirement Planning or external pension transfer.
    • £22,500 drawdown to drawdown transfer.

How much income can I take?

What income you can take from your Retirement Account will depend on a number of factors:

  • how much you pay in,
  • how well investments perform,
  • any pension encashments you have taken
  • interest rates and your age (for Capped Income Drawdown, see below)

The value of the plan when you decide to take your benefits isn't guaranteed and can go down as well as up and could fall below the amount(s) paid in.

Depending on when you first moved into Drawdown, your income will be set-up in one of the following ways:

Flexible Access Drawdown - any customers who move into drawdown for the first time on or after 6 April 2015, or for customers transferring from an existing policy who prefer to have Flexible Access Drawdown.

  • There is no restriction on the amount of income you can take in a year (up to the full value of the Retirement Income part of your Account.).
  • You can choose to take a regular income as a percentage of your fund or as a fixed monetary amount.

Capped Income Drawdown – any customer who set-up an income policy before 6 April 2015 (and since that date, has elected not to move to Flexible Access Drawdown).

  • The amount of income you can withdraw is from £0 up to the maximum yearly income limit of 150% of the basis amount determined by reference to the Government Actuary’s Department (GAD) tables.
  • We’ll recalculate the maximum income you can take at least every three years (every year from age 75). When your income is reviewed, the maximum income you can take may reduce.
  • If you want to take an income higher than the maximum allowed, you can choose to switch to a Flexible Access Drawdown basis. However you will not be allowed to switch back to Capped Income Drawdown at a later date.
  • If you choose to move to a Flexible Access Drawdown basis and take an income, you will be subject to the ‘Money Purchase Annual Allowance’ which will restrict the amount you can contribute if you want to continue saving into a pension.
  • We’ll send you an updated illustration each year to show you how much income you can take.

The following applies to both Flexible Access Drawdown and Capped Income Drawdown:

  • If the Retirement Income element of your Retirement Account reduces to zero (and there is no remaining value in your Retirement Planning Account and you're not making regular payments), we will close the Account

The value of the Retirement Income element of your Account will change:

  • each time you move an amount into the Retirement Income element of your plan
  • if you use an amount to buy an annuity
  • when you take income
  • as the value of investments rise and fall
  • when charges are deducted.

Payment of income

  • Income is normally paid on a monthly, quarterly, half-yearly or yearly basis. Ad-hoc payments can also be made. The frequency and amount of income payments can be varied at any time.
  • Payments are made from the Retirement Income Control Account(s) via BACS, net of tax using PAYE.
  • There must be sufficient balance in each relevant Control Account or sufficient units in Scottish Widows Pension Funds to cover the income payments due. If not, a partial payment or no payment will be made.

How much do you need in retirement?

Charges

  • Clear and transparent charging structure which is broken down into components so that you can:
    • see what each of the parts actually costs; and
    • assemble a tailored pension contract to meet your requirements and your budget.
  • There are three main types of charge:
    • Service Charge – this is charged by Scottish Widows, and is for the set up and ongoing administration of your Retirement Account.
    • Investment Charge – this is the cost of each investment, including purchase and sale costs, management charges and other investment-related expenses. Investment charges differ depending on the investments selected.
    • Adviser Charge – this is the cost of advice and any other related services you agree with your financial adviser.
  • The Service Charge is tiered, with lower charge rates applying to higher Account values. If the value of your Account increases from one tier to another, the Charge rate(s) will reduce. However, if the value of your Account falls from one tier to a lower tier, the rate(s) will increase.

Pensions are a long-term investment. The retirement benefits you receive from your pension plan will depend on a number of factors including the value of your plan when you decide to take your benefits which isn’t guaranteed and can go down as well as up. The value of your plan could fall below the amount(s) paid in.

The value of the tax benefits of your Retirement Account depend on your individual circumstances. Tax rules and circumstances may change in the future.

High levels of pension encashments or income may not be sustainable and in some cases could reduce the value of your Retirement Account to zero. You should consider the impact this might have on your income in retirement.

Investment options

More than 2,600 funds to choose from

The Retirement Account caters for both straightforward investment needs and those that are more complex and offers you access to a wide range of funds and asset classes.

The investments options are:

Governed Investment Strategies

A range of strategies, which from up to 15 years out, gradually move your plan into lower risk investments as you approach your selected retirement date. Each strategy invests in a portfolio of funds and we regularly review the Governed Investment Strategies and their underlying funds and make any changes as necessary. Your fund will automatically adjust 5 years from your selected retirement date strategically investing in one of three ways targeting Annuity, Encashment or Flexible Access Drawdown.

See the Governed Investment Strategy Guide for more details.

Premier Governed Investment Strategies

Our Premier Governed Investment Strategies also aim to spread your risk and gradually reduce your exposure to risk once you are 15 years from your selected retirement date, with the aim of helping to protect the value of the funds built up. However, they also include a wider range of underlying funds. They have higher annual charges than the Governed Investment Strategies but aim to provide better potential returns for broadly similar levels of risk. Your fund will automatically adjust 5 years from your selected retirement date strategically investing in one of three ways targeting Annuity, Encashment or Flexible Access Drawdown.

See the Premier Lifestyling Options Guide for more details.

Scottish Widows Pension Funds

We offer over 100 pension funds across a range of risk profiles. Our funds include mutli-manager and specialist funds, covering a wide range of asset classes, geographical locations, sectors and management styles.

You can find out more details on each type of investment and any requirement by contacting your financial adviser.

Funds accessed through a Fund Supermarket

With the Retirement Account, you can choose from over 2,600 funds, offered via a Fund Supermarket. You and your adviser can select the funds you believe are most suited to your needs.

What’s more, because we’ve negotiated terms on behalf of our customers, you could benefit from lower investment charges on the funds offered via the Fund Supermarket than if you were to invest in those funds direct.

Fixed Term Cash Deposit

The Scottish Widows Fixed Term Cash Deposit is intended to provide an alternative to cash funds and the Control Account if you’re risk-averse or wish to avoid short term market volatility.

Each Fixed Term Cash Deposit is available for investment during its ‘offer period’. The term and rate of interest will be agreed in advance.

The Fixed Term Cash Deposit:

  • Aims to protect the value of your investment,
  • Can allow you to benefit from competitive terms negotiated with deposit-takers, and
  • Offers a fixed level of interest, payable at the end of the term.

Direct investment on listed stocks, shares and other securities

You can invest directly in stocks, shares and other securities listed on HM Revenue & Customs recognised exchanges. Deals can be placed online or by telephone service. The Execution Only Share Dealing Service is currently provided by Stocktrade.

Your own personalised investment portfolio provided by one or more selected Discretionary Fund Managers

You and your adviser may decide that your investment needs are such that you require a more bespoke service to manage your Retirement Account investments. We offer a range of Discretionary Fund Managers for you to choose from.

Discretionary Fund Managers (DFM’s) manage your investments, making investment decisions that bear in mind your circumstances, stated aims, attitude to risk, and other requirements. They can provide investment guidance, detailed research and risk profiling services. Working with your adviser, the DFM will create and manage a bespoke investment portfolio on your behalf.

Direct investment in UK Commercial Property

Under current tax rules, your Retirement Account can help you gain significant tax efficiency from commercial property investments, although this does mean you will be unable to access the value of the property until you retire. For example, your Account can invest in your existing business premises or other property, subject to each property being acceptable to Scottish Widows. You won’t be able to invest former protected rights into Commercial Property.

For more information, please speak to your financial adviser.

Self investment option

For a self invested option, invest in Share Dealing and Discretionary Fund Management.

Risks

  • If any income and the charges deducted from your Account are more than any investment growth, the value of your Account will go down. This could reduce the amount of income that you can take in the future and the income from any annuity bought later.
  • Pensions are a long-term investment. The retirement benefits you receive from your pension plan will depend on a number of factors including the value of your plan when you decide to take your benefits which isn’t guaranteed and can go down as well as up. The value of your plan could fall below the amount(s) paid in.
  • The value of the tax benefits of your Retirement Account depend on your individual circumstances. Tax rules and circumstances may change in the future.
  • High levels of pension encashments or income may not be sustainable and in some cases could reduce the value of your Retirement Account to zero. You should consider the impact this might have on your income in retirement.
  • The income from your Account and any annuity bought later may be less than you could have received if you had bought an annuity at the start. The cost of buying annuities can change significantly over time. If the cost increases, the annuity income you can buy with the final value of your Account will be lower than illustrated.
  • If people buy an annuity, those who live longer gain at the expense of those who die early. If you delay buying an annuity and live longer, you’ll not gain to the same extent.
  • Your Account can invest in a range of investments which carry different levels of risk. Their value can go down as well as up.
  • Some investments, such as property can take longer to buy or sell than others. This may delay switching between investments and when benefits or any transfer payments can be taken.
  • Where investments are held on deposit, such as a Control Account or a Fixed Term Cash Deposit, there is a possibility that the provider(s) of those deposits may fail to meet their obligations. However we believe there is only a small risk that some or all of the value of that investment would be lost.
  • If you change your mind, you have 30 days to cancel your policy. The amount returned may be less than what was invested.
  • If you transfer from another pension plan, you could lose any guaranteed benefits and may not be able to return to it.

Need further information?

Read our FAQs or contact us.

View our pensions calculators and guides.

Not for you?

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Frequently asked questions for Retirement Account