Key features of Legal & General’s pension annuities Helping you make the right decisions for your future The Financial Services Authority is the independent financial services regulator. It requires us, Legal & General, to give you this important information to help you to decide whether our pension annuity is right for you. You should read this document carefully so that you understand what you are buying, and then keep it safe for future reference. Please read this document together with the quotation. Important information You should have received a copy of Legal & General’s ‘An Introduction to Conventional With Profits’ booklet which explains the particular features of With Profits investments and describes how we manage our conventional With Profits investments. A more detailed description of With Profits is contained in a document called ‘Principles and Practices of Financial Management’ (PPFM) which is available on request. Legal & General offers two types of pension annuity: • a Non Profit annuity, sometimes referred to as a conventional annuity, and • a With Profits annuity, a type of investment linked annuity. A lot of the information in this document applies equally to both, but where it doesn’t, it’ll be made clear. Its aims The aim of a pension annuity is straight forward. Depending on which options you choose, it may • To pay you a pension income for the rest of your also life. • pay a pension income to your spouse, registered civil partner or a financially dependent partner after you die. Your commitment Your commitment is also clear. • You firstly need to decide whether you want to • Buying a pension annuity is a once and for all buy your pension annuity from us. If you decide to decision: once you’ve bought it, you cannot do so, we need a lump sum to be paid to us – change your mind. usually from a pension fund built up over the years by you and/or your employer(s). Risks There are certain risks attached to your decision. It is • We write With Profits and Non Profit policies in our important that you understand and consider them With Profits fund. We provide guarantees for both carefully before making it. With Profits and Non Profit policies and the assets • Unlike some other financial products, a pension in the whole fund are ultimately available to meet annuity has no ‘cash in value’. You cannot sell it, or them. This means that, although you may benefit transfer it to someone else. from support from the assets backing Non Profit • The annuity rates available can go up and down business, we could reduce the amount we pay depending on investment conditions at the time. you if we have to use the assets backing You could find you would have done better or With Profits business to support Non Profit business. worse by waiting for a change in investment market conditions. The following only applies to our Non Profit annuity • Once you’ve bought your annuity you can’t • We may request a report from your doctor after change the options you’ve chosen, for example, your income starts in order to check any medical add a new spouse’s income option if you get and/or lifestyle information you have given us. married after your income starts. If we find the doctor’s report does not support the • Depending on the choices you make when your information you gave us and we have paid you income starts, you may find that the effects of too much income, then it may be reduced and, at inflation over time leave you less well off than worst, you may receive our lowest standard you’d hoped, planned or expected. annuity rate. We will then recover any overpayments from you. The following only applies to our With Profits annuity If the report suggests you would have qualified for • Your income could go up or down, depending on a higher income, we will not increase your income a number of factors including the performance of as a result. It is therefore your responsibility to the underlying investments. ensure that any medical and/or lifestyle • Past performance is no guarantee of future information you give us is both accurate and performance. complete so that you can obtain the maximum • You share in the risks of other With Profits pension level of income. annuities, which can reduce your bonuses and therefore the amount we pay you. You also share in the risks of other With Profits policies, such as bonds. Key features of Legal & General’s pension annuities 2 Your questions answered In this section, we will try to answer any questions We want you to be confident that you have all the you may have, and give you a bit more information information you need, to ensure that the decision about our pension annuities and how they work. you make is the right one for you. A copy of the This is an important, once and for all, decision. It will terms and conditions is enclosed. If you haven’t largely determine your financial circumstances for received it, please contact us. the rest of your life – and possibly of your husband, Needless to say, if there’s anything you’re still unsure wife or partner if they outlive you. of, we will be very happy to answer any questions you might have. You may also like to talk to other companies and/or an independent financial adviser if you haven’t already done so. The basics What is a pension annuity? The income from a With Profits annuity will also be A pension annuity is a way of turning the pension affected by the Anticipated Bonus Rate (ABR) you fund you have built up over the course of your choose and the bonuses we declare (see ‘What is a working life into a regular income. Basically, your With Profits annuity?’). pension provider gives us the fund, as a lump sum. The income from a Non Profit annuity could be In return, we commit to pay you a regular income affected by your postcode and certain medical for as long as you live. and/or lifestyle conditions. Can I take a cash lump sum? How will I receive my income? Yes. The rules governing how much you can take Your payments are made directly into your bank or vary from time to time, but currently the rule is that building society account. you can take up to 25% of your pension fund as a cash lump sum. What’s left of your fund will then be What happens when I die? used to buy your annuity. Unless you have made certain choices, which we will cover shortly, your income will stop. Can I use a one-off payment to buy a pension This could mean that the total amount of income annuity? paid from your annuity may be less than the value Yes. If you use a lump sum rather than the proceeds of the pension fund used to buy it. of a pension scheme, we then claim tax relief from HM Revenue & Customs (HMRC) at the basic rate, When can I buy a pension annuity? add it to your lump sum, then use the total amount You can buy a pension annuity as long as you will to pay for your annuity. If you pay higher rate tax, be over 50 (55 from 6 April 2010) and under 75 when you’ll be entitled to extra tax relief, but you’ll need the annuity starts. to claim it yourself through your tax office. If you buy it before you’d originally planned to, your Your employer can also make a one-off payment. income might be smaller than you expected, since your pension fund will have had less time to grow, How much regular income will I receive? and the income will be paid to you for longer. The income you receive will depend on the size of the fund you have accumulated over the years and Should I be worried about inflation? market conditions at the time you buy your annuity. The rate of inflation will vary but for example, if It will also depend on your age and sex, and, to at inflation averaged 2.5%, after 10 years the value least some degree, on how and when you choose of £100 in terms of today’s prices would be to receive it. It will also depend on various choices only £78; and after 25 years, just £54. you make when you buy it – see the section ‘Your payment options’ for more details. 3 Key features of Legal & General’s pension annuities With Profits annuity What is a With Profits annuity? What is the guaranteed minimum annuity? A With Profits annuity will pay you an income for the Whilst the level of income we pay you from a rest of your life. The level of income can go up and With Profits annuity can go down, it will never fall down. This is because a With Profits annuity allows below a minimum level (the guaranteed minimum you to invest in a broad spread of assets. These annuity). The guaranteed minimum annuity will include stocks and shares, fixed interest securities (a depend on the ABR you choose and will be based fixed interest security is a way of ‘lending’ money to on a percentage of your starting level of income. a Government, or to a company, in return for a fixed The table below shows the percentages: rate of interest over a fixed period), UK property and cash. ABR selected Guaranteed minimum annuity (%) as a % of starting income Returns are credited in the form of bonuses which we declare each year. The level of bonus is not 0 100 guaranteed and will depend on a number of factors, including investment performance, our 0.1 - 1.0 75 mortality experience and expenses. 1.1 - 2.0 60 There are two types of bonus: 2.1 - 3.0 50 • Temporary Bonus, which is payable for one year and can be changed or withdrawn at any time, 3.1 - 4.0 40 and 4.1 - 5.0 30 • Annual Bonus, which, once added, cannot be withdrawn (other than by the effect of the We suggest you consider quotations with different Anticipated Bonus Rate (ABR)). ABRs before making a decision. The ABR allows you to exercise your own judgement Can I change a With Profits annuity to a Non Profit on what future bonus levels are likely to be. You can annuity? select a rate from outset of between 0% and 5% in increments of 0.1%. Our With Profits annuity can be converted to a Non Profit annuity at any time after the first policy The lower the ABR you choose, the lower your anniversary date, but before doing so we may have starting level of income will be, but there’s a greater to ask for medical evidence. We use the medical likelihood it will increase over time as bonuses are evidence to estimate your life expectancy which is added. On the other hand, the higher the ABR you then used in the calculation of the revised annuity. choose, the higher your starting level of income will be, but there is a higher chance that your income There will be a charge for making the change. Your will fall over time. This is because the level of revised quotation will take account of this charge. bonuses will need to be higher to match or exceed Once you have converted to a Non Profit annuity the ABR. you can’t revert back to a With Profits annuity at a We will send a full statement each year with details later date. of the bonuses that will be added to your With Profits annuity. Can I change my ABR in the future? You may be able to vary your ABR provided you are under the age of 75. Any request to do so must be received by us in writing four weeks prior to your ‘policy alteration date’ (normally your policy anniversary). We may ask for medical evidence before we can provide you with a quotation based on the revised ABR. We use the medical evidence to estimate your life expectancy which is then used in the calculation of the revised annuity. There will be a charge for making the change. Your revised quotation will take account of this charge. Do note that changing your ABR can significantly affect your future income, and may leave you worse off than if you had not made the change. We would recommend taking financial advice before you request a change. Key features of Legal & General’s pension annuities 4 Non Profit annuity What is a Non Profit annuity? Can my income go down over time? A Non Profit annuity will pay you an income for the No. The level of income we pay you cannot ever rest of your life. actually go down - although inflation can reduce how much you can buy with the money you A fixed income receive. You can choose from outset to be paid a fixed income, set at a defined level. With this option, you Can I change a Non Profit annuity to a With Profits know where you stand. But there is the danger that annuity? your pension income won’t buy as much over time No. The option to convert from a Non Profit annuity due to inflation. to a With Profits annuity is not available. An income which increases You can choose an income which increases year on year, either by: • a fixed percentage – anything up to and including 10%, or • in line with the Retail Prices Index (RPI). RPI is the index of the average change in the prices of goods and services in the UK. You can choose to have the increase capped at 5%, referred to as ‘Limited Price Indexation’. RPI increases are not available on our Non Profit annuity where enhanced rates have been applied. The trade off for choosing an income that increases over time is that it starts out at a lower level than a fixed income. Either way, once in payment, that’s it. Unlike some other types of annuity, our Non Profit annuity will not be affected by what happens for example to the stock market or by changes in the housing market. 5 Key features of Legal & General’s pension annuities Your payment options How can I adapt my pension income to my needs? A guaranteed payment period There are a number of options you’ll need to Your income is guaranteed to be paid for as long as consider carefully before you buy your annuity. It’s you live. However, you can choose to have it paid important to realise that the options you choose for a guaranteed period of up to 10 years, to your cannot be changed or added to after your income estate or any other person you specify, if you die has started. Not all of them may be available to you within that period. Again, if you choose this option due to restrictions imposed by the pension fund you your income will start at a lower level. have. But normally, you can choose from any of the You could combine an income which has a following: guaranteed payment period with an income payable to your dependant on your death. In this An income for your dependant case, you need to choose whether their income You can choose for an income to be paid to your starts when you die (known as ‘with overlap’), or surviving spouse or registered civil partner if you die when the guaranteed payment period ends (known before they do. Or, if you’re not married or in a as ‘without overlap’). registered civil partnership, then you can choose for an income to be paid to a financially dependent Can I combine other options? partner. Yes. Please ask us for a quotation showing the This income would be paid to them for the rest of options that you want. Do bear in mind that their life. The amount they’ll get can be set at any any option(s) you choose will affect the size of the level you want up to a maximum of your own income you receive. income. Some types of pension funds must have certain Choosing this option will reduce your starting level options by law. If yours is one of them, your of income. quotation will reflect this. If you want an income to be paid to your surviving spouse or registered civil partner, you can choose How often will I receive my pension income? for it to be paid to: When you buy your pension annuity, you must • The person you’re married to or in a registered specify how frequently your income payments are civil partnership with when you buy your annuity. to be made – monthly, quarterly, half yearly or If you later remarry or enter into a registered civil yearly, in advance (at the start of the payment partnership with someone else, they will not period) or in arrears (at the end of the payment be entitled to your income. This is known as period). ‘named’ basis; or If you choose to have your payments made in • the person you’re married to or in a registered arrears, you may decide that you would like a final civil partnership with when you die, even if payment to be made to cover the period between they’re not the same person you were with when your last payment and your death. This is called a you bought your annuity. This is known as ‘any’ ‘proportionate’ payment. basis. Once again, the choices you make will affect the The option you choose will affect the amount of starting level of your income. For instance, an income you get. income payable yearly in arrears will be greater than one payable yearly in advance. If you want an income to be paid to a financially dependent partner, then they must be named before your annuity starts. When you die, they will need to be able to prove they were financially dependent on you at the time of your death. We will not pay an income to any other dependant other than those described above. Key features of Legal & General’s pension annuities 6 Rules, taxes and charges How are any benefits from contracting-out treated? How much commission is paid to my financial If your pension fund includes benefits arising from adviser? contracting-out of the earnings related part of the We may pay commission to your financial adviser State Pension, your income may be subject to for arranging your plan. Any such commission would certain restrictions as to how it can be paid. Any depend on the size of the pension fund, and be such restrictions, if applicable, will be shown on your paid for out of the charges, with details provided in quotation. your quotation. Is my income subject to tax? Are there maximum limits on how much income I Yes. And if you have chosen a surviving dependant’s can receive? income option, any payments to them will also be There are no restrictions on how much income you subject to income tax. We will send a P60 each year can receive, but payments above a certain level confirming the total amount of any tax we have are subject to a higher rate of tax. If the total value deducted. of your pension savings exceeds your ‘Lifetime The amount of tax you pay on your income can Allowance’, as set by the Government, the excess change from time to time with changes in your will be subject to tax at up to 55%. The level set, circumstances, tax rates and other factors. When however - £1.75 million for tax year 2009/2010, these changes happen, the level of income that increasing to £1.8 million for 2010/2011 - means you receive from us will also change in line with the relatively few people will be affected. instructions that we are given by HMRC. The basic rate of tax for the tax year 2009/2010 is 20%, but the rate you pay may be different. 7 Key features of Legal & General’s pension annuities Your quotation How long is my quotation guaranteed for? It’s worth shopping around (also known as taking The annuity rate used in your quotation is the Open Market Option), as different providers guaranteed for a limited period. For this rate to offer different rates. If you do get quotations from apply, we must receive all funds from your pension other providers, do make sure to specify the same scheme(s) before the date shown in the ‘Important options, to ensure that you’re comparing like with information’ section in your quotation. If the funds like. are received after this date then the rate available You should also be careful to check for any at that time will apply. guaranteed pension benefits you might lose if you were to change provider. They may have What should I do if I want to accept this quotation? guaranteed annuity rates or charges for switching Simply complete the application form, and any providers. other accompanying documentation, and return it Make sure you understand the implications fully to your financial adviser. before you make any decisions. What if the quotation has expired? We will send you a final quotation before your pension annuity is set up. If our rates have changed since your last quotation, the figures will reflect this. What should I do if I want to see other quotations? If you would like us to give you new quotations based on any other options outlined, we will be happy to provide them. You can of course also ask any other life insurance company for a quotation, either through an independent financial adviser or some may deal with you directly. Key features of Legal & General’s pension annuities 8 Further Information About Legal & General Sales-related complaints that we cannot settle can The Legal & General Group, established in 1836, be referred to the: is one of the UK’s leading financial services Financial Ombudsman Service companies. Over 6.5 million people rely on us for life South Quay Plaza assurance, pensions, investments and general 183 Marsh Wall insurance plans. The Legal & General Group is London responsible for investing £287 billion worldwide (as E14 9SR at 30 June 2009) on behalf of investors, Telephone: 0300 123 9123 policyholders and shareholders. Email: firstname.lastname@example.org Legal & General is a UK based insurer. Website: www.financial-ombudsman.org.uk Making a complaint to The Pensions Advisory Queries or complaints Service or the Financial Ombudsman will not If you need any further information, prejudice your right to take legal proceedings. please contact us at: Legal & General Assurance Society Limited Compensation scheme Legal & General Annuities Department We are covered by the Financial Services PO Box 809 Compensation Scheme. You may be entitled to Cardiff compensation from the scheme if we cannot meet CF24 0YL our obligations. This depends on the type of Email: email@example.com business and the circumstances of the claim. If you wish to complain about any aspect of the Currently, the first £2,000 of a claim is protected in service you have received, please ask for a leaflet full. Above this amount, the Scheme covers setting out our internal complaint handling payment to 90% of the value of a policy. However, procedure. Please contact us at: from 1 January 2010, this limit is changing to cover 90% of the whole claim. Legal & General Annuities PO Box 809 You can get more information from the Financial Cardiff Services Compensation Scheme. CF24 0YL Client categorisation Telephone: 0370 050 2616 Calls to this number will not exceed your fixed line If you buy this Legal & General product, we will treat or mobile phone provider’s national rate and will be you as a ‘retail client’. There are various categories included in any inclusive free minute plan or of client set out in the financial regulations. Being a discount scheme you may have with your retail client gives you the greatest level of telephone provider. Call charges will vary between protection under the regulations and ensures you telephone providers. get full information about any products you buy. We may record and monitor calls. If, under the regulations, you are a professional client or eligible counterparty, we will still treat you Complaints regarding our administration that we as a retail client, although this would not necessarily cannot settle can initially be referred to: mean that you would be eligible to refer any The Pensions Advisory Service complaints to the Financial Ombudsman Service or 11 Belgrave Road to make a claim under the Financial Services London Compensation Scheme. SW1V 1RB Telephone: 0845 601 2923 Conflicts of interest Email: firstname.lastname@example.org During the term of your policy, conflicts of interest Website: www.pensionsadvisoryservice.org.uk may arise between you and us, our employees, our and may then be referred to: associated companies or our representatives. The Pensions Ombudsman A conflict of interest is where our duties to you as a 11 Belgrave Road customer may conflict with what is best for London ourselves. To ensure we treat customers consistently SW1V 1RB and fairly, we have a policy on how to identify and manage these conflicts. Telephone: 020 7630 2200 Email: email@example.com A copy of the full policy is available on request by Website: www.pensions-ombudsman.org.uk writing to us at the address detailed above in the section ‘Queries or complaints’ or from our website at www.legalandgeneral.com/legal-security. 9 Key features of Legal & General’s pension annuities Our Regulator We will then cancel the plan. We are authorised and regulated by the Financial If you do not take this opportunity to cancel, your Services Authority, and appear on their register plan will continue and your benefits will continue to under number 117659. You can check this at: be paid. www.fsa.gov.uk/register If you decide to cancel we will make every effort to Or by telephone on: return the original payment to the original source. 0300 500 5000 They may not be obliged to accept the return of this You can write to them at: payment. If they will not accept the return of the Financial Services Authority payment you can either arrange for your annuity to 25 The North Colonnade, be purchased with another provider and we will Canary Wharf forward the monies to them, or your annuity with us London will continue. E14 5HS If you have received any benefits from the annuity, you must return this money to Legal & General Tax within 30 days of notifying us. This information reflects our understanding of the current law relating to pensions. Law and language English law governs this contract. We will Cancellation rights communicate in English throughout its course. If we If you apply for a Legal & General pension annuity, need to contact you, we will normally do this by you have 30 days from the date of your quotation letter or by telephone. to change your mind. If you return the completed application form before the 30 days have passed, With Profits the annuity will not commence until at least 14 days Our regulator, the Financial Services Authority (FSA), of the 30 days have passed. You will then have the requires us to publish a document called ‘Principles unexpired balance of the 30 days cancellation and Practices of Financial Management’ (PPFM) period to cancel the contract. which is a detailed description of our approach to managing with profits investments. The following applies to a personal pension In addition to this, the FSA also requires us to contribution for immediate retirement only: produce a guide which summarises the main points When we receive your application and cheque we of the PPFM. This is called ‘An Introduction to will, in accordance with the law, send you a notice Conventional With Profits’ and you can ask us or of your right to cancel. You then have 30 days in your adviser for a copy of both of these documents. which to change your mind. For all other plans: If you wish to cancel your application you must write to us at: Legal & General Assurance Society Limited Legal & General Annuities Department PO BOX 809 Cardiff CF24 0YL Key features of Legal & General’s pension annuities 10 Authorised and regulated by the Financial Services Authority Legal & General Assurance Society Limited Registered in England No. 166055 Registered office: One Coleman Street, London EC2R 5AA This is also our head office in the United Kingdom A member of the Association of British Insurers www.legalandgeneral.com W12326 10/09 Approval number: H106390 At least 55% of this paper is made from recycled materials.