Pensions
Option 32 Pension Transfer Policy - Royal London
Option 32 Pension Transfer Policy - Royal London
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<strong>Pensions</strong><br />
OPTION 32<br />
PENSION TRANSFER<br />
POLICY<br />
Reminder of important facts
What is an Option 32 Pension<br />
Transfer policy?<br />
You transferred benefits from a previous<br />
employer’s occupational pension scheme<br />
(OPS) into this policy. The options available<br />
to you are included in the Taking your<br />
pension benefits section.<br />
In addition, depending on your original<br />
OPS benefits, you may also have some life<br />
cover.<br />
Where does Royal London invest my<br />
policy?<br />
When you transferred pension benefits<br />
from a previous employer’s pension<br />
scheme into this policy we invested the<br />
amount into the RLCIS OB & IB Fund,<br />
referred to here as the with-profits fund.<br />
We explain how we manage the withprofits<br />
fund in the Principles & Practices<br />
of Financial Management (PPFM) of the<br />
RLCIS OB & IB Fund document<br />
available on our website<br />
royallondongroup.co.uk/RLCIS or on<br />
request. In the event of conflict between<br />
this guide and the PPFM, the PPFM shall<br />
prevail.<br />
Does my Option 32 Transfer policy<br />
have any guarantees?<br />
Your policy comes with some important<br />
guarantees. These are explained below.<br />
When your policy was set up<br />
Your policy will provide you with a<br />
guaranteed amount of regular income on<br />
your Chosen Retirement Date*. This<br />
regular income is known as your ‘Basic<br />
Pension’.<br />
We set your Basic Pension when you took<br />
your policy out by making assumptions on:<br />
1. The future investment returns we would<br />
make by investing the transfer value we<br />
received from your previous pension<br />
scheme into the with-profits fund and;<br />
2. The number of years we would pay<br />
regular income to you before you died.<br />
In recent years<br />
We may have added annual bonuses to<br />
your policy when investment returns were<br />
good.<br />
However, our investment returns in recent<br />
years and expected future investment<br />
returns are much lower than we assumed<br />
when you took out your policy. Because of<br />
this we have reduced, or even stopped,<br />
annual bonuses for some types of policy.<br />
Life expectancy rates have also increased<br />
significantly since you took out your policy.<br />
This means that pension providers, including<br />
Royal London, have to pay regular income<br />
to people for a longer period.<br />
The combination of these factors means<br />
that the underlying value of your policy<br />
(i.e. the initial transfer value plus<br />
investment returns to date, less expenses)<br />
is significantly less than the value of your<br />
guaranteed benefits and will remain so at<br />
your Chosen Retirement Date.<br />
Despite this, we guarantee that your policy<br />
will pay out the total Basic Pension,<br />
including any annual bonuses already<br />
added, at your Chosen Retirement Date.<br />
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Guaranteed Minimum Pension<br />
If your previous employer’s OPS<br />
contracted you out of the State Earnings<br />
Related Pension Scheme (SERPS), then<br />
part of your benefits will provide a<br />
Guaranteed Minimum Pension (GMP).<br />
Regulations require that we must pay this<br />
amount to you as a minimum (from age 60<br />
if you are female and from age 65 if you<br />
are male) and in a certain format.<br />
When can I take my pension benefits?<br />
Pension benefits can normally be taken<br />
from age 55. However, if your Chosen<br />
Retirement Date is before this date,<br />
special rules mean that you will still be<br />
able to take pension benefits from your<br />
Option 32 Pension Transfer Policy from<br />
age 50. We will write to you in the months<br />
leading up to your Chosen Retirement Date<br />
to inform you of your options, unless you<br />
contact us to request an earlier retirement<br />
date.<br />
However, early retirement will only be<br />
possible if your pension pot is sufficient to<br />
pay your GMP at that time.<br />
Taking your pension benefits<br />
If your policy does not contain GMP<br />
The Government has made a number of<br />
changes to the way in which you can take<br />
your pension benefits. This means that you<br />
now have more choice than ever before in<br />
how you can take the pension pot you<br />
have saved. In summary, these choices are:<br />
Option 1 – Take all your pension pot as a<br />
single lump sum, subject to certain<br />
eligibility criteria. Normally, 25% of your<br />
lump sum is tax free.<br />
Option 2 – Convert your pension pot into<br />
a guaranteed income for the rest of your<br />
life. This is called an annuity. In certain<br />
circumstances you may be able to take part<br />
of your pension pot as tax-free cash, and<br />
then use the rest to buy an annuity.<br />
Option 3 – Take some of your pension pot<br />
and leave the rest invested for another<br />
time. You can take a series of lump sum<br />
payments or income at different times or a<br />
mix of both (including the option to take<br />
up to 25% as tax free cash).<br />
Option 4 – Postpone taking your pension<br />
pot – you can leave your pension benefits<br />
with us until you are age 75, after which<br />
you will be required to take your pension<br />
benefits.<br />
You cannot normally take advantage of<br />
these options until you have reached age<br />
55. However, if you are unable to work<br />
because of poor health then you may be<br />
able to take your benefits earlier.<br />
If your policy contains GMP<br />
The new flexibilities detailed above only<br />
applies to pension savings held as Money<br />
Purchase (also known as Defined<br />
Contribution) benefits. Money Purchase<br />
benefits are those where the pension<br />
benefits provided by the scheme are based<br />
on a fund value built up from<br />
contributions into the scheme.<br />
This new pension legislation does not<br />
allow payment of such lump sums where<br />
pension savings provide a Defined Benefit.<br />
Such benefits are often based on the<br />
length of your employment and your<br />
wages or salary.<br />
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4<br />
The GMP benefit within your policy is<br />
based on the length of your service in your<br />
former OPS and your salary. Accordingly,<br />
this benefit has been classified as a<br />
Defined Benefit and falls outside of the<br />
new flexibilities.<br />
So, no lump sum is payable except where<br />
already permitted within the terms of your<br />
policy. For example, if you have benefits in<br />
your policy in excess of your GMP benefit,<br />
there is a clause in your policy allowing<br />
you to exchange this excess for a tax free<br />
lump sum provided it is within certain<br />
prescribed limits.<br />
Taking your pension benefits –<br />
further information<br />
As you approach your chosen retirement<br />
date we will send you a detailed pack with<br />
all your options and details of what you<br />
need to do.<br />
To help you understand your options and<br />
make the right choices, the Government is<br />
making available a free and impartial<br />
guidance service - Pension Wise. We<br />
strongly recommend that you use this<br />
service to help you understand your<br />
options and make the right decision. You<br />
can access Pension Wise online by visiting<br />
gov.uk/pensionwise.<br />
This service will not provide advice or<br />
recommend specific products or providers.<br />
If you feel you need advice, we recommend<br />
you talk to a financial adviser. If you do<br />
not have a financial adviser, you can get<br />
details of local financial advisers by visiting<br />
unbiased.co.uk. Advisers may charge for<br />
providing such advice and should confirm<br />
any cost to you beforehand.<br />
What happens if I die before I take<br />
my pension benefits?<br />
Depending on the features of your original<br />
occupational pension scheme, your policy<br />
value will be used to provide either:<br />
– a pension for your spouse or civil<br />
partner, or<br />
– a lump sum payable to your next of kin<br />
or a dependant, or<br />
– a mixture of both.<br />
If you die before the age of 75, it will<br />
normally be paid tax free. If you die after<br />
the age of 75, it will be subject to tax at<br />
45% if it is paid before 6 April 2016. After<br />
this date it will be taxed as income, i.e.<br />
depending on their total taxable income in<br />
a year, your beneficiary may pay income<br />
tax on these payments.<br />
What happens if I am in ill-health?<br />
If you retire early due to ill health, we may<br />
be able to make special arrangements for<br />
when and how you access your pension<br />
benefits. For example, if you are in severe<br />
ill health it may be possible to access your<br />
pension benefits before age 55.<br />
Can I transfer my policy?<br />
You can transfer your policy to another<br />
pension provider at any time before you<br />
access your pension benefits. We will not<br />
charge for doing this.<br />
However, if you do transfer your policy,<br />
you will lose the valuable policy<br />
guarantees described earlier.<br />
We recommend that you speak to a<br />
financial adviser before you transfer your<br />
policy.
Additional information<br />
This guide is a short reminder of the<br />
main features of your Option 32 Pension<br />
Transfer policy and any important<br />
changes that might affect your policy. You<br />
should refer to the policy document we<br />
sent to you when you took out your policy,<br />
together with any contract endorsements,<br />
for more detailed information. In the<br />
event of conflict between this guide and<br />
the policy document, the policy document<br />
will prevail.<br />
Notes<br />
*Throughout this document, whenever we<br />
refer to ‘Chosen Retirement Date’, this is<br />
the date that you originally stated you<br />
would like to retire and is the date shown<br />
on your annual statement (unless<br />
subsequently changed).<br />
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If you would like a copy of this leaflet in large print,<br />
audio or Braille, please contact us.<br />
Royal London<br />
Churchgate House, 56 Oxford Street, Manchester, M1 6EU<br />
royallondon.com<br />
The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated<br />
by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England and Wales number<br />
99064. Registered office: 55 Gracechurch Street, London, EC3V 0RL.<br />
MKT2626_RL 06/2015