Supporting Your Clients
Individual Annuities
Information that will help your clients.
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Clients often underestimate how long they will live, and don’t fully realise the value of an annuity, so income planning and support over the long term is essential.
The recent shift towards income drawdown comes with its own risks and challenges, and may not be suitable for everyone.
An annuity can be the right choice for those clients who may require a certain level of guaranteed income, or where their pension fund isn’t large enough to bear the risks of drawdown.
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An annuity is suitable for clients who:
- Are aged 55 up to age 75 at entry.
- Want a guaranteed income for life.
- Don't want their pension to be subject to any investment risk.
- Have a pension fund of between £10,000 and £1.5 million after any tax-free cash and adviser charge. (These limits don't apply to existing Scottish Widows pension customers).
- Are resident in the UK or Northern Ireland (excluding the Channel Islands and the Isle of Man) or existing Scottish Widows pension customers.
- Want the option to provide an income for a dependant after their death.
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Income from an annuity will be treated as earned income and will be taxable.
If your client decides to take a cash sum, it's normally tax-free.
Where applicable we'll deduct tax from each income payment before it's paid.
HM Revenue & Customs will notify us of the relevant tax allowances and we'll take these into account in working out how much tax to deduct.
If your client selects a joint life annuity, or a guaranteed period, and dies before they are 75, any income paid after the client’s death will not normally be subject to income tax, although any income paid to the client or dependant’s estate may be subject to Inheritance Tax.
Tax rules may change in the future.
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- Once it's set up, your client can't cash in their plan or change the basis of their income, even if their circumstances change.
- When your client dies, their income will normally stop. The total amount paid out may be less than the amount that was originally used to purchase the annuity.
- Your client will receive a lower income during their lifetime if they choose to have an income paid to their dependant after they die.
- If your client chooses an income that doesn't increase or increases at a rate lower than the future RPI, inflation will reduce what they can buy with it.
- If your client chooses an income that is linked to RPI it will vary in line with prices, and in the event of RPI being negative, it could go down.
- If your client transfers from another plan any guaranteed benefits associated with this would be lost on transfer.
- If your client chooses an Enhanced Annuity we may, within six months of your client's annuity being set up, check the health and lifestyle information they supplied in their application. To do this we may ask your client's doctor to complete a report. If the answers to the personal, medical and lifestyle questions are inaccurate or incomplete we may reduce their income.
Please note that charges, terms and limits may change. Tax treatment depends on the individual circumstances of your client and may be subject to change in the future.
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We allow for our charges when we calculate the amount of income offered.
Initial Adviser Charge:
This is an amount that may be agreed between you and your client for advice and services in setting up a new Scottish Widows Annuity. The charge can be either a fixed amount or a percentage of the annuity purchase price. This charge can be taken, after the tax free cash (if applicable), from the value of the purchase price.Initial commission (Non-advised)
Scottish Widows will pay a percentage of the annuity purchase price for services agreed in setting up a new Scottish Widows Annuity.