TRA Brochure 26 Nov 09 .indd by suchenfz


									A Division of LEBC Group

                           Retirement Income
                                   Your choices
The Retirement Adviser

A Division of LEBC Group



Helping You Plan for a Financially Secure Retirement    2

The Retirement Adviser Process                          3

What Are Your Options?                                  4

What Types of Annuity Are Available?                    7

How Can You Provide For Your Dependants?                9

Areas of Discussion for those with Larger Funds or
Significant Other Assets                                10
                                                                            Call us free on       0808 1787 335

                                                                        Retirement Income - Your Choices

The Retirement Adviser
Helping You Plan for a Financially Secure Retirement

Welcome to The Retirement Adviser
The Retirement Adviser, a division of LEBC Group, is a
specialist Independent Financial Adviser, established to
help individual clients, employers and pension trustees
and scheme members to make the most of their pension
funds - either approaching or at retirement.

We have chosen to specialise in this key area of
financial planning due to our extensive experience and
qualifications in this crucial and complex area. We
are dedicated to improving your retirement income, to
allow you to enjoy the longest holiday of your lifetime,
knowing that you have maximised the income available
from your hard-earned pension fund.

Why is Independent Advice so important?

The Retirement Adviser provides a service for the
benefit of our clients and not for an insurance company
or provider. We are committed to ‘Treating Customers
Fairly’, and this is a high priority for us when advising
our clients.

The importance of using an Independent Financial
Adviser is simple.

There is a multitude of providers offering pension
income solutions, with ever more choosing to enter this
constantly-moving market. At The Retirement Adviser,
we will use our expertise to research the whole market
thereby not restricting our advice to a pool of providers
and enabling us to recommend the most advantageous
product to suit your circumstances. In many cases, this
results in a significant increase in income.

For conventional annuities, we are interested in those offering the most competitive annuity rates, thereby offering
you the best income. For those products that involve investment choice, we are interested in the investment
choices available, the flexibility of the contract and the service offered by the provider, as well as the income

Our advice is always tailored to your individual requirements and circumstances. We understand that one size does
not fit everyone and will always do our best to ensure that our recommended product is the right one for you.

The Retirement Adviser

The Retirement Adviser Advice Process

How does it work?
We would suggest that you instruct us approximately 3 to 4 months prior to
when you would like to receive an income from your pension funds. In most
instances, we hope to complete the process in a shorter timescale; however
we are very dependent on the turnaround times of existing providers, where
timescales can vary drastically. We will act on your behalf at all times during
the process and will keep you updated on the progress of your case.

First Contact
Now that you have received our brochure and our retirement questionnaire,
reading these documents is the first step to improving your retirement income
and considering all the options available.

Naturally you will have questions and possibly some concerns. We’re here to
help, so please do not hesitate to call us on:

Call us free on 0808 1787 335 or, if you prefer, email us at:

We will be more than happy to help you complete the retirement questionnaire
and answer any of your queries.

When we have received your completed questionnaire, we will call you to
discuss your requirements and clarify any issues.

Investigation & Policy Research
Once we have understood your requirements, we will write to your existing pension providers, requesting full policy
details and retirement quotations - unless you already have such information. On receipt of these details, we will
search the market to find the most suitable retirement income, based on your circumstances and objectives.

Providing a Recommendation
Having identified the most suitable product and provider for your retirement needs, your Retirement Consultant will
issue an individually tailored report. This can be done via the post and phone or, for more complex plans, this may
be presented face-to-face.

Our report will detail both what your existing providers will offer and the income offers available and will conclude
with a formal recommendation.

Proceeding with the Recommendation
Your Retirement Consultant will telephone you, or meet with you if your plans are more complex, to confirm that
the report matches your objectives as discussed during the “Investigation & Policy Research” stage. If you require
assistance in completing the retirement paperwork, your Consultant will be on hand to help.

On receiving your completed paperwork and documentation and your agreement to proceed, we will acknowledge
receipt and action the set-up of the new policy with the provider. We will pursue the existing and new providers
for swift fund transfer and establishment of the policy. We may ask for your assistance in encouraging a timely
transfer from your existing pension provider if we encounter any issues. Once the funds have been transferred,
we will check the final quotation and policy documents to make sure the policies are established in line with your
requirements. We will then send the originals on to you for safe keeping.

                                                                           Call us free on       0808 1787 335

                                                                        Retirement Income - Your Choices

What Are Your Options?
Under current legislation, pension benefits can normally be taken between age 50 (from 2010, this minimum age
will increase to 55) and 75. Legislation currently sets age 75 as the limit by which a pension income must have
been purchased.

When you begin thinking about taking your pension income, you have an ever-increasing number of options to
            • Do you require a lump sum in addition to an income?
            • What level of income do you require?
            • Should you consider a guaranteed income or one dependent on future investment performance?

This is just the beginning, with the list being almost endless. The Retirement Adviser is here to guide you through
these questions, to advise you on your options and to arrange the purchase of your retirement income.

Firstly, we will help you decide upon your preferred area of retirement income:

    •   Conventional Annuities                                    • Third Way and Variable Annuities
    •   Lifestyle, Enhanced and Impaired Annuities                • Alternatively Secured Pension
    •   Unsecured Pension (Drawdown)                              • Additional Variations or Combinations
    •   Unsecured Pension (Phased)                                  of the above,

What is an Annuity?
An annuity provides you with an income for the rest of your life and is purchased from an insurance company using
your accumulated pension funds.

Each insurance company offers a different annuity rate. Although your existing provider may offer you an annuity
income, because annuity rates differ between companies, your provider may not offer you the best income. It
is therefore important to ‘shop around’ for the best annuity rate. This is often referred to as the Open Market
Option (OMO).

In most instances, an annuity is a final purchase and cannot be unwound. It is therefore essential that the right
decision is made at outset.

The Retirement Adviser

Changes in Annuity Rates
In calculating annuity rates, providers take into account many factors. These factors include life expectancy and
gilt yields.

                                                               Historic Annuity Rates


                                                                                                                            Source: Legal & General, November 2009
              Annuity £pa




                                    Jan    Jan    Jan   Jan      Jan   Jan         Jan    Jan    Jan    Jan   Jan     Jan
                                   1998   1999   2000   2001    2002   2003       2004   2005   2006   2007   2008   2009


Life expectancy is a major factor in calculating annuity rates. Today, people are generally living longer due to
healthier lifestyles and advances in medical knowledge. This has resulted in a marked decrease in annuity rates
over the past few years.

Gilt yields also affect annuity rates, although these tend to be less volatile than the changes in interest rates.
Whilst interest rates generally have an immediate effect on mortgage rates and savings rates, there is not a direct
correlation between these and changes in annuity rates.

                                                                                                                                                                            Call us free on                                   0808 1787 335

                                                                                                                                                                    Trust Investment Review Service
                                                                                                                                                                  Retirement Income - Your Choices

Lifestyle and Enhanced Annuities
If you suffer from any medical conditions or are a regular smoker, due to the possible effect on your life
expectancy, you could qualify for higher annuity rates with some providers. In some instances, you can receive a
significant increase in income.

Qualifying conditions often include Cancer, Stroke, Heart
conditions and Diabetes. The underwriting requirements with
some of the providers has changed over recent years, which
means that more minor conditions could also qualify you for an
enhanced annuity rate. For example, high blood pressure and
high cholesterol.

If you are a regular drinker of alcohol or you have worked in a
manual job during your working life, this can also be taken into
consideration. In addition, some providers will also take into
account your postcode in the annuity rate they provide; this is
even available with some of the standard rate annuity providers.

Your existing provider will rarely consider these options, which
is why it is essential to take independent financial advice when
taking your pension benefits.

As indicated above, you do not have to be severely ill to qualify
for enhanced or lifestyle annuity rates and the potential to achieve
these rates should not be overlooked. We pride ourselves on
ensuring our clients achieve the level of income they are entitled
to and always discuss medical and lifestyle areas with all our
clients. For example, between January and August 2009,
we achieved an enhanced annuity rate for 65% of our

You may need to complete a short medical questionnaire to allow
us to investigate this area for you. If in any doubt simply ask us if
you would qualify.

The graph that follows shows how an annuity might be affected for a male aged 60 on a Single Life annuity
purchased with £40,000. Income figures are per annum gross.

                                                                                                                                                                                              Source: Partnership Assurance

                                                                                                                                                                                                      November 2009




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The Retirement Adviser

What Types Of Annuity Are Available?
Guaranteed Income

This is the lowest risk income you could purchase from your pension funds. The income is guaranteed for life and
can be level in payment or build in some form of escalation. Escalating options will reduce the level of income you
can receive.

Fixed/Level: The income will remain level for
life and will be guaranteed at the same level
from outset. This option will not necessarily
be protected from the future effects of                                £2,500

inflation.                                                              £2,000

Index-linked: The income will start lower than
a Fixed/Level income, however will change                              £1,000

annually, broadly in line with inflation.                                 £500

Escalating: The income will start lower than                                        Level           RPI          3% Esc   5% Esc
a Fixed/Level income, however will increase
annually at a certain percentage. The highest
maximum increase could be up to 10% per                      The graph above shows how an annuity might be affected for a male
annum. The higher the escalation selected, the               aged 60 on a Single Life Level Annuity purchased with £40,000.
lower the starting income.                                   Income figures are per annum gross.
                                                             Source: October 2009

Non-Guaranteed Income

This type of income involves a level of investment risk. The future income levels will be dependent upon the
performance of the underlying investment fund. To consider this type of income, you should bear in mind that the
future income could increase or decrease dependent on performance.

With-Profits: The income from this type of annuity will depend on the performance of the
underlying with-profits fund. A with-profits fund is generally made up of a mix of equities,
property and fixed interest investments.

A bonus declaration is made on an annual basis by the provider. The aim of a with-profits fund
is to provide a ‘smoothed’ return over the period the investment is held. The bonus declarations
vary between provider, due to the differing returns made on each individual with-profits fund. The
assets within each provider’s with-profits fund will vary and will affect the performance of the

At outset, an Anticipated Bonus Rate (ABR) will be agreed. The level of the chosen ABR will affect
the starting level of income. The higher the ABR, the higher the starting level of income. In line
with this, however, the higher the associated investment risk, as a higher investment return and
subsequent bonus declaration will be required to maintain or increase the income level.

Dependent on the level of ABR selected, some providers will offer an income guarantee below
which the income cannot fall.

                                                                    Call us free on     0808 1787 335

                                                                   Trust Investment Review Service
                                                                 Retirement Income - Your Choices

Unit-linked: The income from this type of annuity will depend on the performance of the chosen
underlying investment funds. A wide selection of funds is generally available and you can choose
a mix of fund types i.e. Managed, Property, Equity, Cash. This type of annuity is higher-risk than
a with-profits annuity as there is no ‘smoothing’ effect. Your income will be directly affected by
changes in the unit value of your investments and will change with every income payment.

The starting income is determined in the same way as a with-profits annuity in that an Assumed
Growth Rate (AGR) is selected at outset.

Variations on the ‘traditional’ unit-linked annuity have been introduced to allow more flexibility
to the investor. As an alternative to the lifetime annuity, you can purchase a temporary annuity
for a period of five years. This costs less than a lifetime annuity and, as such, an element of your
pension fund remains invested. The income will be guaranteed for the five-year period and you
will then have the option to purchase another five-year temporary annuity or a lifetime annuity at
the end of the first five-year period.

The Retirement Adviser

How Can You Provide For Your Dependants?
Annuity income can be set up to include death benefits for your spouse, civil partner or dependants.

There are a number of options you can include whether these be in isolation, or as a combination of options. The
inclusion of these will help protect your spouse, civil partner or dependants should you predecease them.

The following options should be considered. They will all reduce your annuity income by different amounts, but
would offer your dependants some financial protection on your death.

Guarantee Period: You have the option to include a guarantee period on your annuity income, which
will guarantee payments for a set period
regardless of your survival. Generally, the
most used options are a five-year or a 10-year
guarantee period, although many providers will             £2,560

offer any period you require.                              £2,550
If you die within the period selected, the annuity                    £2,530
income will continue until the guarantee period                       £2,520
ends. If you survive longer than your guarantee
period, the annuity income will continue until
your death.                                                                        No gte          5-yr gte         10-yr gte

The cost of including a guarantee period is, in
most instances, relatively small. The cost will,
however, depend on your state of health, your               The graph above shows the approximate potential cost of including
gender and your age.                                        guarantee periods for a male aged 60 on a Single Life Level annuity
                                                            purchased with £40,000. Income figures are per annum gross.
Value Protection: Selecting value protection
                                                            Source: October 2009
allows you to protect the fund used to purchase
the annuity at outset. This only applies prior
to age 75 and, on death, will pay out a lump
sum equal to the amount used to purchase
the annuity, less the gross income payments                              £2,400
received. The lump sum will be liable to a tax                           £2,350
Spouse, Civil Partner or Dependant’s Pension:                            £2,250
By selecting this option you would be providing
an income for your spouse, civil partner or
dependant. This is chosen at a percentage of                             £2,150
the income you receive on an annual basis.                               £2,100
The most commonly used is a 50% spouse’s/                                              50% SP              66% SP               100% SP
dependant’s pension whereby, on your death,
your income would reduce by 50% and continue
to be paid for the lifetime of your spouse, civil
partner or dependant. The cost of this option will
                                                             The graph above shows the approximate potential cost of including a
depend on your age, gender and state of health as            spouse’s pension for a male aged 60 purchasing a level annuity with
well as that of your dependant.                              a purchase price of £40,000 and assuming a spouse of three years
                                                             younger. Income figures are per annum gross.

                                                             Source: October 2009

                                                                               Call us free on       0808 1787 335

                                                                            Retirement Income - Your Choices

Areas of Discussion for those with Larger Funds or Significant
Other Assets
For those with larger pension funds and a significant amount of other assets, alternative routes for pension income
are available. These plans could offer you the ability to retain some form of investment control over your pension
and flexibility on your income levels.

Unsecured Pension (USP)
This type of plan can provide you with a lump sum and a pension income. Your remaining pension fund is invested.
You can decide the level of income that you require (subject to limits imposed by the Government Actuaries
Department (GAD) Tables).

There are different types of plan available under this route:

Traditional Income Drawdown
This type of plan allows you to select a level of required income between a minimum and maximum amount. There
is no current minimum and you could therefore decide you do not require an income, whereas the maximum is
120% of GAD. This is roughly equivalent to 120% of a Single Life Level Annuity for your current age.

If you wish to take a lump sum from your pension income, this must be taken up-front. The remainder of your
fund is then invested in a portfolio of funds. These will be discussed with your adviser and a portfolio will be
selected in line with your accepted attitude to risk and income requirements.

Current legislation allows this type of plan to run until age 75 when you must either purchase an Annuity or an
Alternatively Secured Pension (ASP).

                                                      Your income levels are required to be reviewed every five
                                                      years under current legislation. It would be beneficial,
                                                      however, to review your plan every year to ensure that
                                                      your investments remain in line with your requirements and
                                                      current market conditions.

                                                      The death benefits available under Drawdown are much
                                                      more flexible than those available under Annuity Purchase.
                                                      Current legislation allows the following death benefits from a
                                                      Drawdown plan:

                                                         •      Return of fund less a 35% tax charge
                                                         •      Continuation of drawdown to spouse/dependant
                                                                (if under 75) or
                                                         •      Alternatively Secured Pension (if over 75)
                                                         •      Annuity purchase for your spouse/dependant

                                                         Please be aware that the higher the income you choose
                                                         to take from this type of plan, the higher the risk you are
                                                         accepting. The income you choose to take may not be
                                                         sustainable from your pension fund and your pension fund
                                                         may be eroded. The value of your remaining pension fund
                                                         can rise and fall dependent upon the performance of the
                                                         underlying investment funds.

The Retirement Adviser

Drawdown Without An Income
The changes in pensions legislation in April 2006 removed the minimum income requirement for those in

This therefore allowed the flexibility for people to take the maximum Pension Commencement Lump Sum without
having to effect an income. This is particularly useful for those wishing to realise the lump sum for a specific
purpose but have no income requirement.

After taking the lump sum, the remainder of the
pension will be invested in a portfolio of investments
agreed with your Retirement Consultant. These will
be in line with your attitude to risk and will take into
account any future income requirements.

It is important to note that the death benefits under
this option are likely to be lower than your unvested
pension plans. You would need to have a good reason
for taking the lump sum without the need for income.
Many use the lump sum to pay off their debts, for
example. Care should be taken as the pension plan is
a tax advantageous wrapper.

By taking benefits early, lower benefits could be
received with the result that your standard of living
might be significantly affected. Most people face a
reduction in income at retirement and by unlocking
their pension commencement lump sum this reduction
could be all the more severe.

To discuss this option further, please contact
The Retirement Adviser on      0808 1787 335.

Phased Drawdown
This type of plan combines a lump sum and income
drawdown to provide an income. Phased Drawdown
was originally introduced as a solution for those who
gradually retire, by allowing the pension fund to
supplement any earned income.

In order to phase the drawdown payments, the
pension fund is split into segments. The pension fund
will be invested in a portfolio of investments just like
under the drawdown option. A number of segments
are then vested in order to provide the required level
of income. Initially, the income will be made up of
a lump sum and drawdown in the first year. When
additional income is required, further segments can
be encashed.

This provides a tax-efficient form of income, however it should be noted that you will not receive a lump sum up
front; any lump sum taken will be within the vested segment and form part of your income for one year.

The death benefits on the vested segments will be the same as under Full Drawdown, whereas the unvested
segments will be the same as personal pension rules. The death benefits are very flexible.

                                                                              Call us free on   0808 1787 335

                                                                              Trust Investment Review Service
                                                                            Retirement Income - Your Choices

Phased Retirement
Alternatively, rather than purchase drawdown with the vested segments, you could purchase an annuity after
taking the lump sum. This would still allow you tax- efficiency, however the death benefits for the vested segments
would only be those purchased under the annuity. Any unvested segments would be treated under personal
pension rules.

It should be noted that annuities of a different type can be purchased at each time.

Third Way & Variable Annuities
Over recent months, new products have come to the market in the
form of Third Way and Variable Annuities.

Some of these contracts are often referred to as Guaranteed
Drawdown. Guaranteed Drawdown provides guarantees in one or a
combination of the following two ways:

•       Income guarantee
•       Fund value guarantee

It also includes the ability to defer the purchase of a Lifetime Annuity.
Each different plan contains a different risk and different guarantees,
which you would need to be prepared to accept prior to effecting an

This can work very well for those that like the flexibility of drawdown
but do not want their income or fund to be directly affected by
changes in the stockmarket.

This new type of product aims to provide an element of secured
income, combined with some of the flexibility of an unsecured pension
(income drawdown). The products themselves vary widely in the
elements on offer to clients and new products are constantly coming
into the market.

Guaranteed Drawdown – Income Guarantee
Some products guarantee to provide a certain level of income;
generally at a set percentage of the fund for the term of the contract.

Other providers will offer a specified monetary amount of income at outset that will be paid for the agreed term.
At the end of this term, a fund value will be available to either purchase another Third Way product or commence
Unsecured Pension, Alternatively Secured Pension (if 75 or over) or a Lifetime Annuity. In some instances, though
not all, this fund value may also be guaranteed at maturity.

Guaranteed Drawdown – Fund Guarantee
Some products guarantee to provide a certain level of fund at the end of the term agreed at outset as indicated
above, however all policies work differently.

There are some products on the market that will agree to ‘lock in’ growth on the pension fund on a policy
anniversary whether this be annually or on a predetermined basis. In some instances this growth will be capped.
Once the agreed growth is ‘locked in’ this will be part of the guaranteed fund value at maturity. Any guarantees
will only be available on maturity or death within the term. Some of the contracts are complex, but others are very
simple. For instance, one such product is set up on a simple basis of offering a guaranteed income for a
defined period with a guaranteed maturity value.

The Retirement Adviser

Alternatively Secured Pension (ASP)
At age 75, a decision must be made whether to purchase annuities
or an Alternatively Secured Pension (ASP). This type of plan is
very similar to drawdown, however is more restrictive in terms of
income levels and death benefits.

ASP income is based on the GAD tables like Drawdown, however
the minimum income is set at 55% of GAD and the maximum at
90% of GAD. Again, GAD is based on a single life level annuity.
For ASP, the 75 age attained will always be the level used.

Should you die whilst in ASP, your remaining fund can pass to your
spouse, civil partner or dependant at no charge. If you do not
have a spouse, civil partner or dependant, you can leave your
remaining fund to your estate or a registered charity. Any
benefit paid to a registered charity will be tax-free, however any
other transfer of your fund (other than to a spouse, civil partner or
dependant) can have a levied tax charge of up to 82%.

ASP was originally introduced for those with religious beliefs that
prevented them from purchasing an annuity due to the benefit
of mortality cross-subsidy. Anyone however can take out an ASP
plan. The Government therefore introduced a minimum income
level and taxation requirements making it much less tax-efficient
for estate planning.

Significant care is required when selecting ASP. This requires
ongoing advice in line with changes in future legislation, market
movements and your requirements.

Scheme Pension
This has existed as an option for many years, however has only recently been made available for individuals in this
market. Its strength is that the income that can be taken is based on the individual’s own circumstances rather
than external factors such as GAD rates or equivalent annuity income figures. An actuary calculates the income
based on a client’s age, mortality expectation, fund size and performance This potentially allows a far greater
income than that which would be available under an annuity or ASP.

The difference in income comes down to the fact that an ASP contract is designed to prevent people’s funds from
running out whereas a Scheme Pension can be set up to ensure the fund is as close to zero as possible at date of

If your health deteriorates whilst in a Scheme Pension, the actuary can recalculate the income to take into account
the new life expectancy. The new level of income can then be used and will assist in the way of reducing any
potential inheritance tax liability.

The levied tax charge of up to 82% under ASP also applies to the scheme pension, although because the Scheme
Pension is designed to have as close a fund value to zero at date of death as possible, the liability should be a lot
less than under ASP.

The scheme pension can include a guarantee period of up to 10 years. This doesn’t guarantee the value of the
income but that a spouse or dependant would continue to be paid an income on your death within the period.

This is an extremely complex area of retirement planning and should be discussed in a face-to-face meeting.

                                                                       Retirement Income - Your Choices

About LEBC Group
LEBC Group was established in 2000 with a vision
to create a national company dedicated to providing
expert and truly independent financial advice to all
clients in a refreshingly different way, built on the
“quiet conversation” which is the keystone of our

LEBC Group has gone from strength to strength and
is today a highly-respected provider of top-quality
independent financial advice and employee benefits.

Client relationships are of paramount importance
to us and we believe that, to be most effective, our
advice must be delivered in a long term relationship
of mutual trust. The creation and maintenance of such
relationships is the key to our success.

Our team of salaried independent financial advisers
work from branch offices across the UK and are
supported by experienced administration, IT and
marketing staff.

The specialisations of our consultant staff enable
us to provide expert advice across the spectrum of
financial services, from corporate pensions and trust
investments to personal retirement planning and

Our independence ensures that we always act in the
interests of our clients, and their interests alone.

We have come to understand that, whilst our clients do appreciate all the work we carry out behind the scenes on a
day-to-day basis, it is the “quiet conversation” that is the focus of our relationship.

It presents an opportunity to sit down, away from the everyday pressures of business, to focus quietly on planning
for the future and:

 • Provides an opportunity to explain how, in many ways, LEBC Group is very different from other advisers

 • Offers a comfortable environment to promote our service and advice

 • Creates the right atmosphere in which to build a civilised and balanced two-way relationship

A quiet conversation is the way we do business.

Call us free on            0808 1787 335


We are open Monday to Friday 9am to 5pm

A Division of LEBC Group

The Retirement Adviser, Atlantic House, Imperial Way, Reading RG2 0TD

Switchboard: 0118 903 6075    Fax: 0118 903 6275

The Retirement Adviser is a division of LEBC Group which is an appointed representative of Sesame Ltd.
Registered office: LEBC Group Limited, 1285 Century Way, Thorpe Park, Leeds LS15 8ZB
Registered in England No. 03995199

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