What will I get from my With Profits pension plan?
The plan provides a guaranteed minimum pension or guaranteed minimum fund value at your selected retirement date. Your contributions are used to buy units in the Guarantee Plus Pension Fund, also known as the With Profits Fund. Any profits from investing in the fund may be distributed as a bonus. Some pension plans provide a ‘Terminal’ bonus, which is added at the selected retirement date. Payment of a bonus depends on the performance of the fund. For details of the bonus and minimum guaranteed pension or fund value, please see your latest Annual Statement.
How does the With Profits pension plan work?
Your contributions are ‘pooled’ together with other policyholders in the Guaranteed Plus Pension Fund once the charges have been deducted. These charges cover the cost of managing your plan and any life assurance or other plan benefits. A portion of the fund’s pooled assets is allocated to each With Profits plan. The portion allocated to your plan depends on the contributions made, and when, and the unit price at the time of each contribution.
Your contributions buy units in your fund and each unit has a price, which changes weekly. There are two types of unit ‘capital’ and ‘accumulation’, which are shown on your Annual Statement.
Charges and deductions
There are costs for managing your pension’s investment and for looking after your plan. See ‘What are the charges?’ below.
The fund invests in a mix of UK and overseas company shares (or ‘equities’), gilts and corporate bonds, such as loans to the government and companies, property and cash deposits. Occasionally this selection is extended to include other types of investment, referred to as ‘hybrid’ products.
Your contributions may be invested in collective investment arrangements such as Open Ended Investment Companies (OEICs) and unit trusts. A collective investment arrangement is a way of pooling the contributions of several investors to purchase different types of investments as described above.
The selection and allocation of each investment type depend on the main aim of the Guaranteed Plus Pension Fund, which is to provide the guaranteed minimum pension or fund value for all our with profits pension plans.
There are principles and practices governing how we manage our With Profits Fund. You’ll also find details on behind the scenes management.
I have a With Profits pension, why does my Annual Statement show units?
The units shown on your statement reflect your share of the With Profits Fund(s), based on your pension contributions, and after the charges are deducted. This is known as a ‘pooled’ investment, which means you pay into the fund along with other policyholders. The combined contributions are invested over an agreed period in, for example, shares, bonds, cash and property. For more details of the investment mix, see the question above ‘How does the With Profits pension plan work?’.
Any ‘profits’ from your contributions into the plan will depend on how well the fund is performing.
How does the guarantee work?
Guaranteed minimum pension:
The guaranteed minimum pension is the amount agreed at the start of your plan. To calculate this amount, we take into account your selected retirement date and total pension contributions. We apply compound interest to each contribution and then convert this into your guaranteed minimum pension using an annuity rate.
Historically, you would have a choice between our annuity rate and those of other providers. But as we no longer provide income products, we will calculate an equivalent amount in cash for you to buy an income product from another provider.
Your selected retirement date is important because it’s linked to the guarantee. You can change this date as long as there are five or more years to go before your original retirement date. If you decide to make a change, we will recalculate the guaranteed amount.
Should you decide to leave your pension beyond your retirement date and without setting a new one, your retirement age will be automatically set as age 75, although the guaranteed amount will stay the same.
Guaranteed minimum fund or plan value:
This guarantee is linked to your selected retirement date, which you can change, although any other changes to your plan will cancel the guarantee. For example, reducing or interrupting your contributions or taking your money from your plan before your selected retirement date.
The guaranteed minimum fund or plan value is the sum of money payable from your pension plan at your selected retirement date. It is the amount that was agreed when you took out your pension plan, based on your contributions. It is an important benefit because it guarantees that no matter what happens to investment performance, your pension plan will never pay less than the agreed amount, provided all your contributions are up to date. If the plan value is higher than the guaranteed minimum amount, you’ll receive the higher of the two amounts.
Your latest Annual Statement gives details of your minimum guaranteed pension or fund or plan value, and bonus.
How will I receive my guaranteed minimum pension at retirement?
We will calculate the cash amount needed to provide your guaranteed minimum pension based on the current annuity rates available in the market. This is because we don’t currently offer income for life products, such as annuities.
Do bear in mind that the annuity rate used for the calculation will not take into account any health and lifestyle factors. Should you decide to buy an income product from another provider, we can transfer this amount directly to them.
Today, you have far more choice about how to use the money from your pension(s), including a mix-and-match approach. You’ll find more details here, and in our comprehensive guide, ‘The pension options explained’.
How are my pension plan benefits calculated?
Guaranteed minimum fund or plan value
The Guarantee Plus Pension Fund is valued weekly, and units allocated to each pension plan. The value of the units is usually based on an ‘unsmoothed’ unit price value, although in some cases the ‘smoothed’ price may be used. With Profits plans often use a technique known as ‘smoothing’, which aims to even out some of the short-term ups and downs of your policy’s fund prices. This helps reduce the impact of changes in the unit prices.
Guaranteed minimum pension
We will work out how much income your pension will provide at retirement based on the growth of your pension’s investment. This will be equal to or more than your guaranteed minimum fund or plan value, depending on how well your pension plan has performed over the years, and provided all your contributions are up to date.
What affects the benefits payable from my plan?
Many factors affect the benefits payable under your plan. The main ones are as follows:
Investment gains or losses in the Guarantee Plus Pension Fund affect the benefits from your plan. Fund performance depends on many factors, including the mix of investment types. The fund is a mix of both high and low-risk investments, such as company shares and property, and fixed-interest Government and corporate bonds, and cash deposits. For more details of the investment mix, see the question above ‘How does the With Profits pension plan work?’.
Investment performance can vary over time and so the fund’s progress is regularly monitored and assessed. Changes designed to improve the overall performance for the long term are made when necessary. The primary aim of the fund is to provide the returns needed to meet the guarantees of all our with profits plans.
Ups and downs of the stockmarket
A technique known as ‘smoothing’ is used, which aims to even out some of the short-term ups and downs of the stockmarket. This helps reduce the short-term impact of changes in the unit prices. The formula used for the smoothing technique is adjusted when necessary to make sure the outcome is fair to policyholders.
Charges and expenses
There are costs for managing your pension’s investment and for looking after your plan. For more details, see ‘What are the charges?’ below.
Cost of guarantees
Currently 0.75% of the fund value is set aside each year to make up any shortfall between the value of a plan’s units and the cost of providing the guaranteed benefits for all policyholders. This charge is capped at 1.5% and no excess is kept by the shareholders. All the money set aside is allocated to the policyholders investing in the fund and will be returned to each plan if there is no need to pay for the future cost of guarantees. We review the position at least once a year.
How does Countrywide Assured manage risk?
The fund is exposed to a number of risks. The biggest risks come from the need to pay all the guarantees when they are due and the possibility of large and potentially ongoing investment losses.
We regularly review our investment strategy to manage the risks to the fund and make any changes or adjustments when needed.
What are the charges?
This is also known as the ‘Policy charge’ and covers the cost of looking after your plan until your selected retirement date.
Annual management charge
This yearly charge is 1.25% of the fund value. It covers the cost of managing the investment fund(s) and administration. The annual management charge is calculated each day based on the value of the fund. Because we deduct the charge when pricing the fund rather than by selling units from your plan, the amount shown on your Annual Statement is an estimated charge. This estimate also includes the Guarantee charge.
This charge is currently 0.75% of the fund value and limited to 1.5%. It covers the cost of maintaining your plan’s guarantee and is deducted from your With Profits Fund. The estimated annual management charge shown on your Annual Statement takes into account this charge. We review this position at least once a year.
The charges are particular to your plan. Your latest Annual Statement provides a breakdown of charges for each of your plan benefits, if any, as well as the cost of looking after your plan over the past year.
There may be costs in addition to those mentioned above, arising from the management of direct property investments and investment expenses within a collective investment scheme, for example, transaction costs.
What happens to my With Profits plan when I die?
If you die before reaching your selected retirement date, your beneficiary will receive a lump sum payment.
What happens if I decide to cash in my plan early?
If you are thinking about cashing in your pension plan before your selected retirement date, we strongly recommend you get advice. The reason being you will lose your guarantee and Terminal Bonus. Any change needs careful thought. It’s important to check your plan details so you don’t lose out.
Changing your selected retirement date may be one alternative to consider, especially as taking money from your pension before your selected retirement date means you’re likely to get less than expected from your plan. To find an independent financial adviser (IFA) in your local area visit unbiased.co.uk.
If you have any questions about your pension plan or would like any information on taking your retirement benefits, or changing your retirement date, please get in touch.
How do I take my plan benefits?
This depends on the type of pension plan you have with us. Our guides ‘Which pension option is right for me?’ and ‘The pension options explained’ may help answer this question.
If this is something you are considering, it needs careful thought, especially if your plan has any guarantees or bonuses. We strongly recommend you get advice before taking any action, which you will have to do if your pension plan has a guarantee and a value of £30,000 or more. The Financial Conduct Authority (FCA) has introduced this measure to help protect consumers and their retirement savings. If you don't have an independent financial adviser (IFA), visit unbiased.co.uk to find one in your local area.
It’s important to check the details of your plan to make sure you don’t lose out. Your Annual Statement can help here, and if you have any questions, please get in touch.
Where can I find information about managing my plan?
There’s a series of web pages to answer popular questions about managing a pension plan, such as “Can I change my selected retirement date?” or “What happens when my plan reaches this date?”.
If you can’t find the answer to your question, try searching the site. If that doesn’t work, please contact us.
Can I switch to another fund?
It may be possible to switch funds, but you will lose your guarantee and Terminal Bonus. Any change needs careful thought. It’s important to check your plan details so you don’t lose out. Please contact us to find out more.
We’ve created an investment checklist for you to consider as part of your ongoing pension review or as you prepare for retirement. You’ll also find details of Pension Wise, a government backed service offering information and free pension advice to individuals age 55 and over.
How can I increase my contributions?
It may be possible to increase (or reduce) your contributions but it depends on the type of pension plan you have with us. To find out more. please get in touch.
Where can I find out how my fund is performing?
Where can I get financial guidance and advice?
Independent financial advisers offer advice. So if you have an adviser, we strongly recommend you speak to them first. If not, you may be able to find one in your area by visiting unbiased.co.uk.
For guidance about pensions, Pension Wise (moneyhelper.org.uk), a government-backed service, provides a wealth of information on their website. They also offer a free face-to-face or telephone appointment to individuals age 55 and over.
For more information about guidance and advice, click here.
Your latest Annual Statement gives key information about your plan. If you have changed your selected retirement date since receiving your latest statement, or you can’t find the information you’re looking for, please contact us.