Flexibility and options

Our pension annuity gives clients a guaranteed income for life which isn’t affected by interest rate changes or stock market volatility. We offer a comprehensive range of benefits and options, helping you meet the individual needs of each client.

Tax-free lump sum
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Most people can choose to take up to 25% of their accumulated pension fund as a tax-free lump-sum.

Points to consider

  • Clients can use their tax-free lump-sum for any purpose, for example, addressing other financial needs they may have in retirement;
  • Once they’ve received their tax-free lump-sum, they can’t change their mind;
  • Generally, only 25% of pension savings can be taken tax-free – withdrawals above this will be subject to tax at their marginal rate of income tax.
Providing for dependants
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A dependants pension pays a fixed percentage of the annuity to the dependant (for example, a spouse or civil partner) for as long as they live.

Clients can choose to cover any percentage of income, depending on their needs and circumstances. The diagram below shows how the option works across different levels of cover:

 

Points to consider

  • Clients can provide the medical details of their dependant, so they can be factored into an underwritten quote;
  • It’s worth considering this option alongside any other pensions, savings or life assurance policies;
  • If a client with a joint life annuity dies before the age of 75, any payments to their dependants will be tax-free. If they die after 75, the income will be taxed at the dependant's marginal rate of tax*.

*References to taxation are dependent on individual circumstances and subject to change.

Guarantee periods
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Clients can select a guarantee period (up to 30 years from the first payment), so if they die before the end of the guarantee the income will continue to be paid until the end of the period.

See below for an overview of how this option can work:

Points to consider

  • Your client can choose a guarantee period between one and 30 years;
  • There’s a cost for this choice – the longer the guarantee period, the lower the income received;
  • If they live past the guarantee period, then the income will continue until the client dies;
  • If a client dies before 75 and has a guarantee period, any payments made to beneficiaries will be tax-free. If they die after 75, the income will be taxed at the beneficiaries’ marginal rate of tax*.

*References to taxation are dependent on individual circumstances and subject to change.

Value protection
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This money back guarantee returns a lump-sum if the policy holder dies having not received the full value of their annuity purchase price. Clients can choose to protect up to 100% of the annuity purchase price.

The protected amount less any payments already made is paid to the beneficiary as a lump sum.

The lump sum will be tax-free if a client dies before their 75th birthday. If the death occurs after then, a one-off tax charge is then applied by Her Majesty's Revenue and Customs (HMRC). This tax charge is based on the income tax rate of the beneficiary*.

Points to consider

  • Any lump-sum isn’t normally counted as part of the estate for inheritance tax purposes;
  • It’s available with or without a dependant's pension selected. It’s available on a first or second life basis where the client has put in place a dependant's pension;
  • If the total gross income paid exceeds the protected amount, no lump-sum will be paid on death;
  • To find out more information about how value protection can benefit clients, please see our Key Features Document.

If a client chooses not to include a guarantee period, dependant's pension or value protection, their annuity income would stop when they die and no further payments would be made.

*References to taxation are dependent on individual circumstances and subject to change.

Escalation
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Inflation can affect clients’ retirement income over time. Clients can choose to automatically increase the income they receive each year by either a set percentage (i.e. 3% or 5%), or by linking to a measure of inflation such as the Retail Prices Index (RPI). These options will reduce the starting income but give the client peace of mind that their income will grow by the rate chosen.

Points to consider

  • If escalation is not chosen future increases in the cost of living may reduce the real value to annuity income;
  • In times of deflation, RPI no floor index linked annuities can decrease, while others have built in 'floors' meaning annuity income will never fall.
Overlapping benefits
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Some of these options can be combined. For example, a client choosing a dependant's pension and a guarantee period can specify when each option should start. So, if they die during the guarantee period, the dependants' annuity payments can start either at the end of the guarantee period or from the client’s date of death.

If they choose from their date of death, their surviving dependant would receive income from both the guarantee period and the dependant’s pension for the remainder of the guarantee period – the ‘overlap’.

See the diagram below for an illustration of how this works:

Timing and frequency
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Clients can choose to take their retirement income monthly, quarterly, every six months or annually. It can be paid either in advance or at the end of the chosen frequency period (in arrears).

The diagram below shows how this works:

Points to consider

  • Choosing the frequency of payments will depend on clients’ individual circumstances; for example, how easy budgeting between payments is, and the impact it has on their retirement income;
  • Choosing overlapping payments will impact the starting income;
  • Payments will stop when they die, unless options to protect their solution or to guarantee future payments are chosen at the time of the original purchase.
Proportion
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If a client chooses to be paid in arrears, there’s a further option to make a final payment on their death to their nominated beneficiaries, which covers the period between the last payment date and the client’s date of death. The diagram below helps to explain how this feature works:

If income is paid less frequently (i.e. annually) and in arrears, the final payment due on death could be more substantial.

To find out more about our pension annuity then please view our Dedicated Product page.

Alternatively, you can contact our Customer Support team on 0345 302 2287 or support@wearejust.co.uk.