Guaranteed Pension Annuity
questions & answers
These questions and answers will help you understand this annuity, and decide if you want to go ahead and buy. If there’s anything you don’t understand please check your personal quote to see what applies to you or speak to your Financial Adviser.
If any of the pension funds being used for this purchase are subject to a pension sharing or earmarking order from a divorce, or a bankruptcy order, this could reduce what you will be entitled to receive from your annuity. If so, we will tell you once you have applied.
Your investment
What is a Guaranteed Pension Annuity?
It is an insurance policy purchased with money from a pension fund.
It promises to pay you an income for life. So even if you live to be 100 or more, your income will never run out.
Is there a minimum or maximum purchase price?
Normally the minimum is £10,000 and the maximum £100,000. But if your pension fund changes in value between the date of our quote and the date we receive the money, we can usually accept slightly under or over these amounts.
Can I use more than one pension fund to buy my annuity?
Yes, you can normally combine up to three funds (provided all the funds are acceptable to us). The annuity will not be issued until all funds are received by us.
What happens when my pension funds move to Hodge Lifetime?
If you’re combining more than one fund to buy your annuity we hold the money in a deposit account in our name until all the funds are received (no interest is payable). When the final money arrives we confirm this in writing to both you and your adviser.
However, the transfer of funds to us can take some time to arrange. Depending on your existing pension fund provider it could be anything from a week to a month, or may be more. We progress this regularly with your provider, so you don’t need to do anything.
What happens about taking tax free cash?
Any pension commencement lump sum you are taking must be paid to you by your existing pension fund provider, before they transfer your annuity purchase funds to us.
Annuity rates and the open market option
The open market option is your legal right to choose your annuity and find the best deal for you and your pension funds.
This is important because annuity rates can vary considerably between companies. Even the same company can offer you different rates based on the combination of annuity options you choose. Who’s top for one quote might not be top for another.
How long do you guarantee your quotes for?
We guarantee our quotes until our next annuity rate change and for 14 days from that rate change.
If we receive your application during this quote guarantee period, we automatically extend your quote guarantee for another 30 days from the date we receive your application.
If we receive all the application paperwork and purchase money within the 30 day application period, we will set up your annuity based on your guaranteed quote.
Otherwise, we will issue you with a final quote for your Financial Adviser to accept on your behalf before we set up the annuity using our new annuity rate and let you know when the first income will be paid.
If the new rate is lower, you’ll get a lower income. But, if our rates go up at any stage during the application process you’ll automatically receive a higher income.
Can I rely on the quotes you give me?
Yes, the only time we don’t stand by the figures in a quote are when:
- The quote passes its expiry date, or
- if we find out it was based on inaccurate or incomplete information, in which case the quote will be invalid. If your annuity is purchased on the basis of an invalid quote we may adjust your annuity income or even cancel your annuity and unwind the whole transaction.
Your annuity income
How much income will I get from my annuity?
Your quote shows how much we can pay you, based on our current annuity rates – provided we receive all your application details and purchase money before the expiry date shown on the quote.
The amount of income depends on several things:
- Your age and sex (and your dependant’s age and sex if you buy a dependant’s annuity)
- The purchase price
- The annuity options you choose
- Our underlying annuity rate which in turn reflects current long term interest rates.
We may change our annuity rates for new quotes at any time.
Will my income change in the future?
No. The amount of income you get stays the same for life (it doesn’t go up or down). That’s guaranteed.
But, because it doesn’t increase, bear in mind that you could be worse off in the future if income tax or inflation go up.
If you feel it is important to have a rising income, please tell your Financial Adviser.
Is my annuity income taxed?
Yes, the income is taxed like earned income using the “Pay As You Earn” (PAYE) system, and it must be declared on your yearly tax return.
We normally deduct tax before we pay you, based on your tax code at the time, and pass the tax on to HM Revenue and Customs. When your annuity starts it may be taxed on emergency coding until we receive all your tax details.
If income taxes or your personal tax rate changes, so could the amount of income you receive.
How do you pay my income?
We pay the money directly into your nominated UK bank account. We can’t make payments to non-UK banks and the account must be in your name (or joint-name).
Does the Lifetime Allowance affect me?
Whether or not you are affected will depend on the total value of all your pension funds added together.
The Lifetime Allowance is the Government’s way of limiting the tax-efficient benefits from private and company pensions. It is a tax charge designed to affect only those with extremely large pension funds, and should not affect the majority of people.
Your Financial Adviser will explain the details and say whether or not you will be affected.
Do you take my health into account when I apply?
No we don’t. If you smoke or have any health problems (or your dependant does) please tell your adviser as you might be eligible for an enhanced annuity which could pay you a higher income.
What happens to my annuity income when I die?
That depends on your annuity options. If you have chosen a Guaranteed Payment Period and/or a dependant’s annuity there could be further payments after you die. (See ‘Your annuity options’ below).
If you haven’t chosen these options your income will stop when you die.
Your annuity options
You choose the options you need when you apply for your annuity. Once your annuity has been set up you can’t change them.
Your choice affects how much income your annuity pays. Your Financial Adviser will help you compare different options and choose the one that is most suitable for your needs.
How often can I be paid?
You can choose from four options:
- Monthly
- Quarterly
- Half yearly
- Yearly
You also choose whether you want your income to start straight away (known as ‘in advance’) or be paid at the end of each period (‘in arrears’).
If you choose to be paid in arrears, and die in between payments, there will be a final proportionate payment based on the number of days between your death and the previous payment. If you have chosen a dependant annuity, a proportionate payment will be made only on final death.
What if I die early on?
Your annuity promises to pay you an income for life – however long or short a time that may be.
With our Guaranteed Payment Period, you can protect your income if you die within either the first 5 or 10 years of buying your annuity.
For example, if you chose a 10 year guarantee period and died after 6 years and 3 months, we would continue to pay your annuity income in full for the remainder of the guarantee period; in this example for another 3 years and 9 months. The money would be paid to either your:
- Named dependant’s as a regular income – if you have a dependants annuity, or
- to your estate as an equivalent lump sum if you die before age 75. The lump sum is subject to deduction of tax which is currently at the rate of 35%.
If you die after age 75, then any payments due will be paid as a regular income. If you don’t choose this guarantee your income will stop when you die, even if this happens in the early years.
Can my partner have an income after I die?
Yes, you can have an annuity that names a specific financial dependant.
This can be your husband, wife, civil partner or life partner (living together as if married or civil partners and financially dependent on you or in a mutually dependant financial relationship with you). We cannot accept other dependants such as friends, carers, relatives or children.
If you die first, we’ll pay your named dependant an income for the rest of their life. You choose how much – either half, two-thirds or all of your income.
If you have also chosen a minimum guaranteed payment period and die during that time, your dependant’s income will start when payments under the guarantee stop.
What if my dependant dies first?
Your income will continue as normal, but no dependant’s income will be payable. Also, you won’t be able to revert to a single life annuity and benefit from a higher income yourself.
What if I get divorced, my civil partnership or life partnership ends?
Your former partner will not be entitled to receive a dependant’s income from this annuity after your death. Nor can you transfer the dependant’s income to any new partner or receive a refund.
Costs and charges
What are they?
All our charges and the cost of advice are built into the annuity rate shown on our quote, and are reflected in the income we pay you.
How much does the advice cost?
If you have agreed a separate remuneration with your adviser, you should check the amount and purpose of the fee with them.
Changing your mind
Can I cancel my annuity?
If you apply and then change your mind about going ahead, you will have 30 days from when you receive our terms and conditions and sign your application to cancel. If you cancel in the first 14 days we will not have received any proceeds from your original pension provider.
Are there any risks if I cancel after 14 days?
That depends on whether or not we have received your pension fund at the time you cancel.
Refund of your purchase money – within 30 days of cancelling your annuity we will pay back to your original pension provider any monies they have paid to us.
If your original pension provider refuses to accept your returning pension fund you can either:
- Choose a different annuity with us, or
- transfer to a different annuity provider.
Refund of pension commencement lump sum – you may be required to repay any tax free cash to your original pension provider.
Refund of income – if we have already paid you some income, you must repay it in full, immediately. We will not pay any money back to your original pension provider until you have repaid us.
If you wish to cancel after the cancellation period has expired and we have already set up your annuity it will be too late. You must keep the policy for life. You can’t unwind the transaction, transfer to another provider, cash in your policy or alter it in any way.
How do I cancel?
If you wish to cancel your application, you may do so by completing the cancellation form provided with your quote. Alternatively, you may write to us at Hodge Lifetime, Annuity Administration Centre, Sutherland House, Russell Way, Crawley, West Sussex RH10 1UH or email annuities@hodgelifetime.com.
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