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Taking your pension - questions & answersQ. I am coming up to the selected retirement age on my Windsor Life pension policy. What are my options? A. You have a wide range of choices at retirement. You may start receiving
your pension (called a Lifetime Annuity) from Windsor Life at once; take
a tax-free cash lump sum (often called a pension commencement lump sum) and
a reduced pension; put back your retirement date up to age 75; or take your
pension fund as an Open Market Option to another company to buy a Lifetime Annuity
product from them. If your pension fund is very small, you may be able to take
your full pension fund as a cash lump sum (this is known as Trivial commutation).
For a detailed explanation of your options, please refer to the Your retirement options page of our website. Q. Can I change my mind after making a decision? A. We allow 30 days from the date on your application form during which you
can change your mind. After this period is up, you cannot amend, transfer or
cancel the lifetime annuity. Q. Will my pension increase after a period of time and how will it affect the initial pension? A. It depends upon the type of benefit chosen at the outset. If you choose
the Invested Lifetime Annuity, then the initial pension will be lower (compared
with the Level Lifetime Annuity) but it may increase over time with bonuses. Q. How much tax-free cash can I take from my policies? A. Tax-free cash is called the pension commencement lump sum (PCLS). Generally, you can take a maximum of 25% of the fund value at retirement free of tax. HM Revenue & Customs (HMRC) have introduced some restrictions on using
your PCLS to invest back into another registered pension scheme. This
is known as recycling. Recycling is classed as an unauthorised payment
by HMRC and would be subject to a tax charge. You can find more information
about recycling in HMRC's Registered Pension Schemes Manual by clicking here Q. Is it possible to defer taking my pension benefits? A. If you wish to defer taking your retirement benefits, you can until you
reach age 75. Just before age 75 you will be asked to make a further decision
about what you want to do with your pension funds. If we do not hear from you
then, we will buy a lifetime annuity for you. This lifetime annuity may not
be what you yourself would have bought. Please note that if you do not take
your retirement benefits before age 75 you will lose your right to any tax-free
cash. Q. My pension fund is very small. Is it possible to take all of it as cash? A. Yes, it is possible to take your full pension fund as a cash lump sum, if
it meets certain requirements. This is known as trivial commutation, or triviality.
If your pension fund with us is relatively small, we will have included a form
(form E) for you to complete. Remember that this affects all of your registered
pension schemes with any other providers. If you believe that you are eligible
to do this, and don't have a form, contact us and we will send you one. Please
refer to the Triviality page on
our website for more detail. Q. Are there any other circumstances when I could commute my pension funds? A. Yes, if you are suffering from an illness where your life expectancy is
considered to be less than 12 months. We would need this diagnosis confirming
by a registered medical practitioner suitable to us, before we would pay any
lump sum. Following confirmation of the diagnosis we will pay the lump sum
tax-free as long as it is below the available Standard Lifetime Allowance (SLA)
for the tax year in which you are applying for commutation. If not, the excess
will be taxed at 55 per cent. This payment must extinguish all your entitlement
to benefits from your pension fund. Q. What are Protected and Ordinary Rights? A. Dependant upon the type of pension there may be either or both of the following accounts in the pension fund. Protected Rights - If you have contracted out of the State Second Pension (S2P), formerly called the State Earnings Related Pension Scheme (SERPS), your Insurance Company has invested part of your National Insurance contribution for you. This is known as Protected Rights and provides benefits from the age of 50 (rising to age 55 from 2010). There are some restrictions on the Lifetime Annuity bought with these funds. Ordinary Rights - contributions have been invested by your Insurance
Company and have grown over time as Ordinary Rights. This fund provides set
benefits at any age from 50 (rising to age 55 from 2010). Our pension scheme
rules require all pension benefits to be taken by age 75. Q. What is the Open Market Option? A. You have the option to buy an annuity from us or take your retirement fund
to another pension provider and buy an annuity of your choice from them. There
are different types of annuity products available using varying annuity rates
to project the amount of retirement income that could be available to you.
Choosing the right type of annuity for you will depend upon your circumstances
at that time. Other providers may offer a retirement income that appears to
be higher than that offered by us. However you should carefully compare illustrations
to take into account any differences between the nature of benefits provided,
both at outset and in the future. If you choose this option we will forward
your fund to the chosen pension provider. Q. What does ‘monthly in arrears’ and 'yearly in advance' mean? A. If you select your annuity payments to be monthly in arrears, they will be paid at the end of each payment period. If you select your annuity payments to be yearly in advance, they will be paid at the start of each payment period. Please note that if your annuity is less than £35 per annum we can only pay it yearly in advance. Q. What happens if I die after taking my pension? A. Again, it depends upon the type of benefit chosen. If you are married at
the time you take your retirement benefits, any Protected Rights fund must
be used to provide a lifetime annuity in respect of a spouse to whom you are
married to at the date of death. You do not have to include a lifetime annuity for a spouse from an Ordinary Rights funds, but if you do choose to include a spouse's annuity
we will be only able to pay it to the person you were married to at the date you started to receive
your annuity. The definition of spouse is also used to describe those who are signatories
to an in-force ‘Civil Partnership’ agreement. Choosing a guarantee
period will mean that if you die during the guarantee period, the lifetime
annuity will be paid to your dependants for the remainder of that period of
time and then cease (unless you have purchased a joint life annuity, which
would commence at the end of the guarantee period). If you outlive the guarantee
period then the lifetime annuity will continue to be paid for the remainder
of your life. Q. I am confused by the complexity of all of this. Will Windsor Life offer any advice as to the way forward? A. Although Windsor Life does not give advice on the best course of action for you to take, we do believe in providing as much personalised information on your policies as we can, to help our customers make their own informed choice. If you feel that you need financial advice then you should consider taking independent professional advice, which would be at your own expense. If you have any questions, please contact our Client Services Department on 0870 887 3333. |
. When you complete your Windsor Life Retirement Forms we will ask you to declare that you do not intend to recycle your PCLS.