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What the April 2015 Pension Changes mean to you


Your Pension Fund is one of the most important savings vehicles you have; its purpose is to provide you with an income in your retirement and whatever decision you take, the question that you need to think about first is what overall provision you have made for your retirement and the part provided by your Sanlam policy.

Please remember you do not need to take benefits at this time just because the option is available to you now. You can leave your pension fund invested, consolidate several smaller pots into one fund (if it is in your interests to do so) and take advantage of the new flexibility in the future when it suits you.  

The following step by step guide is designed to help you understand the main issues and take you through the decision making process.

Step 1. Understand the range of options available to you

Your first option is to do nothing and leave your money invested with us. If however you decide that you wish to receive your pension benefits then the options available to you are outlined in Step 2 below.

Irrespective of how you decide to receive your pension benefits, these may be taken with a pension provider of your choice. Please note that not all providers will offer all the options and most will offer different products and rates. Just because the legislation allows all of the flexibility it doesn’t mean that all options will be available under all pension contracts. Where a specific option is not available, normally, it will be necessary for you to transfer to another pension plan.

Some providers will only accept funds above a certain amount, and you may, if you have several pension funds, have to transfer them into a single pot before taking benefits. However, a word of warning; it may not always be in your best interests to do this.   

Step 2. Gain an appreciation of what you may wish to do

If you wish to take benefits, you need to decide whether:

  1. you want a one off lump sum payment, or
  2. you want a series of regular or ad-hoc lump sum payments, or
  3. you want a guaranteed income for life.

These options are explained further in the table below; please note the specific references to options available under different Sanlam products:-

Your current intentions

Option(s) to consider

Option(s) available with Sanlam

Anything more to consider?

I do NOT want to take any benefits at the present time.

Defer taking your pension benefits

 
Yes

You may wish to switch your pension fund into a lower risk investment, in order to protect its value.

I want to receive a regular guaranteed income for life.

Buy an annuity

 
Yes

It is likely that you can significantly increase your income in retirement by buying an annuity with another provider; particularly if you have health problems.

I want to take ALL my pension fund as a one off lump sum.

Take a Small Lump Sum Payment
(if fund under £10,000)
 
OR
 
Take an Uncrystallised Funds Pension Lump Sum
(if fund over £10,000)

 
Yes

You will need to satisfy the qualifying conditions to take benefits in this manner. For more information see the Pension Maturity Options Table.

 
Yes

 

 
See Notes 2 and 3 below.

I want to take my pension fund as a series of regular or ad-hoc lump sum payments

Take an Uncrystallised Funds Pension Lump Sum
 
 
 
OR
 
Take Flexi-Access Drawdown Pension

 
No

To do this you will need to transfer your benefits to another provider who offers this option.
 
See Notes 2 and 3 below.

 
Yes
(See Note 1)

 
See Notes 2 and 3 below.

Notes:

  1. Flexi-Access Drawdown is available with Sanlam under OneSIPP, Portal Personal Pension and Transfer Pension Portfolio. If you hold any other type of personal pension contract with Sanlam, it will be necessary for you to transfer to either OneSIPP or Portal Personal Pension in order to take your benefits in this form.

  2. ​If you take your benefits in the form of an Uncrystallised Funds Pension Lump Sum OR Flexi-Access Drawdown, a liability to higher or additional rate income tax may arise, even where you have previously always been a basic rate tax payer.
  3. If you flexibly access your benefits such as in the form of an Uncrystallised Funds Pension Lump Sum OR income taken from Flexi-Access Drawdown, your ability to make tax relievable pension contributions in the future will be reduced

It is important for you to carefully consider the tax implications of taking your pension benefits in the form of lump sum payments, as you may become subject to higher or additional rate tax even where you have previously always been a lower rate tax payer. Depending on your circumstances, it may be possible to arrange how you take your pension benefits over a number of tax years in order to minimise the amount of tax payable. You should consider consulting a financial adviser if you have any doubt about your potential tax liability as a consequence of how you take your pensions benefits.

Step 3. Seek financial guidance

 

Before you make any decisions on how to take your pension benefits, you should seek free and impartial guidance from the independent organisations appointed by the government for this purpose.

HM Treasury has set up a website called 
Pension Wise, which is designed to help you understand your options and guide you through the decision making process, by providing online tools/guidance.

Through Pension Wise, you will be able to access online guidance from both The Pensions Advisory Service and The Citizens Advice Bureau. You will also be able to obtain telephone guidance from The Pensions Advisory Service and face to face guidance from The Citizens Advice Bureau.

A telephone booking line is now available for Pension Wise. You can call 030 0330 1001 between 8am and 10pm, Monday to Sunday, to make a face to face or telephone appointment. More information can be found at
www.pensionwise.gov.uk/appointments

You can also contact The Pensions Advisory Service:

Website: 
www.pensionsadvisoryservice.org.uk
Telephone: 0300 123 1047

Or visit any Citizens Advice Bureau to find out about the Pension Wise service
 
In addition to receiving the financial guidance mentioned above, you may also wish to consult with your financial adviser.
If you do not have a Financial Adviser then you may wish to consider contacting Sanlam Wealth Planning, a financial advisory firm within the Sanlam UK Group who offer a range of advice options.  They have representation across the country.  If you feel this is of interest to you then please contact 
pensions2015@sanlam.co.uk

Alternatively you may be able to access financial advice through your workplace and if you are resident in the UK, you can find details of financial advisers (who will agree with you what they will charge for their services) in your area at the following websites:

www.unbiased.co.uk or www.financialplanning.org.uk 

Step 4 – Make your decision

Having read the information we have provided and having sought financial guidance / advice, you need to decide how you wish to proceed. Please remember that doing nothing remains an option. You are not obliged to start taking your benefits immediately, just because you have the option to do so.

Once you have decided how you’d like to take your benefits, we will ask you some questions. These are designed to provide you with enough information so that you can make an informed decision and help you understand the risks involved, depending how you choose to take your benefits. More details on this are provided here.

Rules have been introduced by the Financial Conduct Authority (FCA), the financial services regulator, which require Sanlam (and other pension providers) to give appropriate retirement risk warnings to consumers who decide to access their defined contribution pension savings after 6th April 2015.
 
The purpose of the rules is to ensure that when communicating with a client about taking pension benefits, we give appropriate retirement risk warnings at the point when the client decides how to access their pension savings. The client then has enough information to make an informed decision.

Sanlam will implement certain steps at the point when the client has decided (in principle) to take one of the following actions (and before the action is concluded):

  • buy a pension decumulation product; or
  • vary their existing pension contract to enable the client to flexibly access pension savings, such as using drawdown pension; or elect to take a one-off payment out of uncrystallised funds. In order to fulfil the FCA’s requirements all pension providers will be required to take the following steps:

Step 1 - ask clients whether they have received pensions guidance or regulated advice.
Step 2 - ask clients questions to identify whether any risk factors are present from their chosen option. 
Step 3 - give clients appropriate retirement risk warnings in response to the answers provided to the questions.
 

Important Points to Note

 

Whatever the means of communication, Sanlam will be required by the new rules to ensure that the client cannot progress to the next stage unless the relevant signpost or retirement risk warnings have been communicated.

We will give retirement risk warnings to the client regardless of whether they have already received guidance from Pension Wise or taken regulated advice, except where the client wishes to access their benefits via an adviser.

For clients who have received regulated advice but who contact us directly to access their pension savings, the risk warnings will still be important. We may not know the content of the advice and the client may be choosing a different course of action.

Important Risk Warnings
  • The above information is issued on behalf of Sanlam Investment & Pensions and is based on our understanding of the law as at 6 April 2015.
  • ​By taking all of your pension benefits in one go, or in stages, you may incur a higher tax liability as a consequence.
  • If you withdraw part of your pension fund, the remainder of your fund will continue to be invested. You should review how much risk you are prepared to take with the remainder of this fund, and consider switching into a lower risk fund.
  • Withdrawing benefits from your pension fund before your intended retirement date reduces the scope for investment growth on the remainder; the closer you are to your intended retirement date the greater the probability that your remaining fund will not achieve sufficient investment growth to compensate.
  • By withdrawing part of your pension fund you may reduce the maximum annual contribution amounts you can continue to make for future retirement provision to £10,000. This is an important consideration if you wish to invest in the future with the intention of making up for amounts already withdrawn.

  • If you have any doubts whatsoever about the suitability of a course of action for you, or the potential consequences on your overall long – term retirement provision, we very strongly recommend that you consult a financial adviser.

Customer Information for Pension Changes

Information from HM Revenue & Customs about the reduction in the Lifetime Allowance from April 2016

More

Important information on the taxation of pension cash lump sums

More

Taxation of Pension Death Benefits

More

The benefits of shopping around

More

Pension Wise Letter

More

Glossary of terms

More

How to decide on your pension option

More

Pension options table

More

Investing involves risk and the value of investments and the income from them may fall as well as rise and are not guaranteed. Investors may not get back the original amount invested.