FLEXIBILITY
AFTER AGE 75
Another reason why we think the
Collective Retirement Account is a plan for life
For financial advisers only
Why the
Collective Retirement Account?
Recent Government announcements have made taking a retirement
income from pension savings more flexible. However, contracts which
have a maximum age at which an annuity must be taken (normally
the policyholder’s 75th birthday) may not allow clients to benefit from
this increased flexibility. Unlike with many other pension providers
there is no requirement for our customers to crystallise at a particular
age. This enables our Collective Retirement Account (CRA) customers
to maintain investment control over their pension fund and make
important and sometimes daunting financial planning decisions at
their own pace.
"My current pension policy will cease
when I reach my 75th birthday. This
milestone is fast approaching but I
don’t want to be rushed into making
important financial planning decisions
by the restrictions in my current
pension contract." Peter Thornton (Customer)†
CASE STUDY Peter Thornton
OPTION 2 Take out an annuity ✗
• Peter will be 75 in six months’ time.
• Peter is not ready to make a decision about whether or not to take
out an annuity.
•H
is total pension fund is £350,000. £150,000 is crystallised,
£200,000 is uncrystallised.
• T he contract with ABC Pension plc will automatically cease on Peter’s
75th birthday.
• P eter has asked his financial adviser to examine the options he has
through his existing contract and what might be available in the
marketplace that might offer more choice to meet his requirements.
OPTION 1 Do nothing ✗
• ABC Pension plc may automatically crystallise Peter’s £200,000
uncrystallised fund at age 75.
• Consequently, Peter may lose his tax-free cash entitlement from these
funds, unless he instructs his ABC Pension plc before age 75.
• He will still be required to move his pension funds.
• His only retirement income option from the scheme will be an annuity
which may not be suitable.
He doesn’t want to be unnecessarily rushed into this option especially
in view of the Government proposals to provide more flexible income
solutions from pension savings from April 2015.
OPTION 3 Transfer to cra ✓
• Transfer £150,000 crystallised funds into the CRA
(capped drawdown).
• Transfer £200,000 uncrystallised funds into the CRA.
BENEFITS of Option 3
•A
ccess to 1000+ funds.
• Peter will have the ability to:
– take his tax free cash entitlement in advance of the Government
proposals coming into effect by linking to the capped drawdown
facility within the CRA, or
– to partially crystallise the savings to provide for short-term income
needs in advance of April 2015
•C
ontrol – there is no requirement to crystallise his £200,000 at a
particular age – Peter is free to take his tax-free cash lump sum when
he wants, either in one go or by phasing.
"The Collective Retirement Account
is one of the most flexible pension
contracts and does not cease at age
75. It gives customers the freedom
to make financial planning decisions
in their own time".
Jonathan Greer, Pensions Specialist, Old Mutual Wealth
• F lexible drawdown – if Peter has a £12,000 guaranteed pension
income, this feature could give him total control over his income.
•O
n death, Peter’s full pension fund will be available to provide
a pension benefit for his wife or as a lump sum to his named
beneficiaries*.
• P eter has a host of financial planning options to consider with his
financial adviser – most importantly, the CRA gives him the breathing
space he needs to make the right decisions.
Transfer age limits
• Into uncrystallised accounts up to five days before 75th birthday.
• Into capped drawdown up to five days before 85th birthday.
"The CRA is a genuine alternative to a
SIPP for those investing in unit linked
collectives – it has similar features
but importantly it doesn’t come with
the additional costs you’d normally
associate with a SIPP".
Adrian Walker, Head of Retirement Planning,
Old Mutual Wealth
†
Peter Thornton is a fictitious character created for the purposes of this document.
*Any lump sum death benefit paid after age 75 will be subject to a 55% tax charge.
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PDF8403/214-0587R/May 2014