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Aegon Retirement Choices
Suitability guidance
This communication is for financial advisers only. It mustn’t be distributed to, or relied on by, customers.
Here, we provide some factual information that you may find helpful when explaining why you think
Aegon Retirement Choices (ARC) will meet your particular clients’ needs when drafting your suitability
letters. This is solely for information, and isn’t designed to show you how your suitability letters should be
formatted, or what information they should include.
It’s your responsibility to make sure that the content of your suitability letters is sufficient to meet your
regulatory requirements. We won’t accept liability for any consequences resulting from the use of any of
the information we’ve supplied here.
What is ARC?
ARC is a platform - an online solution that lets you and your client manage their savings and
investments. It gives your client access to a wide range of product wrappers and investment options,
helping them to make the most of their savings. ARC also provides a seamless transition to retirement
with its full range of retirement options — giving your client flexibility over their income when they’re
ready to retire.
Product wrapper choice
ARC provides your clients with a range of product wrappers, giving them a variety of ways to save for
their future. Your client can choose from the following product wrappers:
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Aegon self-invested Personal Pension (SIPP);
Individual Savings Account (ISA);
General Investment Account (GIA); and
GIA for Aegon Ireland International Bonds – access to the Wealth Management Portfolio (WMP)
managed by Aegon Ireland plc.
Aegon SIPP
Our SIPP offers your clients:
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a savings and income solution – your clients can accumulate savings and take an income from age
55;
pre-funded tax-relief – your clients won’t need to wait for tax-relief to be paid, as we’ll
automatically pay any tax-relief due at the basic rate;
a wide range of investments – access to growth-focused and income-focused funds through our
full insured fund range and open-architecture investments;
ability to choose a secure level of income through the Secure Retirement Income option; and
flexi-access drawdown – providing income for your clients in a tax-efficient savings environment
with ongoing potential for growth.
Retirement income options
Your clients can start to take their pension benefits from age 55. They may be able to take benefits
earlier than this if they’re in ill health, or if they have a protected low pension age that continues to apply
under their ARC account. If we don’t receive instructions from your clients as to how they’d like to take
their retirement income by age 75, their fund will remain invested and they can continue to contribute to
their SIPP until they decide to take a drawdown pension or buy an annuity.
Flexi-access drawdown
This provides the ultimate flexibility over your clients’ retirement income. Your clients can normally take
up to 25% of the value they want to use to provide retirement benefits, as tax-free cash, with the
remainder moving into the drawdown element, and there are no limits on the amount of income your
clients can withdraw.
You can make all requests to move your clients’ funds into the drawdown element of their account online,
using our secure online services – speeding up the process, giving your clients even quicker access to
their tax-free cash and income.
Secure Retirement Income option
Secure Retirement Income is an investment option that provides your client with guaranteed income
payments for life, even if the fund were to fall to zero, with the option of also adding a guaranteed
minimum death benefit. The guaranteed income payments won’t fall if the value of the investment falls
but might rise if the value of the investment rises.
It’s important to know that any guarantee is based on the ability of the issuing insurance company – in
this case Scottish Equitable plc to pay it. If, for example, that company no longer existed, then the
guarantee(s) would be affected.
How flexible is it?
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Your clients can invest in Secure Retirement Income between the ages of 45 and 74 in both the
savings and drawdown elements of their account.
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Your client can make multiple investments in Secure Retirement Income but the initial investment
must be for at least £20,000 and each subsequent investment must be at least £5,000. Your
clients can’t select Secure Retirement Income as an investment option for regular contributions.
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Each application to invest in Secure Retirement Income is held in its own account within the
savings and/or drawdown elements of their account.
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Your client can select the Secure Retirement Income option on its own or along with the
guaranteed death benefit option. The guarantee charge will depend on the benefits they select
and the fund choice.
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They have access to two funds we offer under the Secure Retirement Income option, but only one
fund can be selected for each application. Switches from one fund to the other aren’t permitted.
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To start guaranteed income payments from a Secure Retirement Income investment, your clients
must move some or all of the value of the investment to the drawdown element of the account.
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They can start the guaranteed income payments from the Secure Retirement Income investment
at any time from age 55.
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The guaranteed income payable from the Secure Retirement Income investment is based on the
income base value of the investment and the income rate. See the ‘Income base value’ and
‘Income rate’ sections for further information.
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Your client doesn’t have to decide on the basis the income will be paid until they want to start
income from a Secure Retirement Income investment. Once they decide to start guaranteed
income payments they can choose from the single-life income option or the joint-life income
option, see the ‘Income basis’ section for further information.
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The guaranteed income paid out of a Secure Retirement Income investment is paid into the cash
facility of the drawdown element of your client’s account. Your client then decides how much
drawdown income they want to take. Any cash paid into the cash facility of the drawdown element
from the Secure Retirement Income investment is ring-fenced against the required level of
drawdown income. If there is insufficient ring-fenced cash to cover the drawdown income required
the balance is taken from other available cash and other assets held in the drawdown element. If
your client elects to take less drawdown income than the cash paid in from Secure Retirement
Income investments then the excess cash will become ordinary cash within the drawdown
element.
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Clients can switch out of a Secure Retirement Income investment to the cash facility at any time.
However, this would proportionately reduce the income base value, and any other values we use
in the calculation of guaranteed income payments, in line with the proportion of the Secure
Retirement Income investment that had been switched out and, where income is in payment from
the investment, it would also reduce the income being paid out of the investment.
Income base value
The income base is a notional value that’s recorded on a yearly basis at the review date of the Secure
Retirement Income investment. It’s initially set equal to the amount invested into Secure Retirement
Income. This value may increase at a review date if;
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the fund value of the investment at any monthiversary date is higher than the current income
base value of the Secure Retirement Income investment; or
the guaranteed pre-income increase feature, if applicable, produces a higher income base value.
See the ‘Monthiversary feature’ and ‘What is the guaranteed pre-income increases feature’ sections for
more information.
Income basis
When your clients decide to switch on guaranteed income payments from a Secure Retirement Income
investment they’ll have two options on how this will be paid.
Single life
This pays guaranteed income payments from the Secure Retirement Income investment into the cash
facility of the drawdown element of your client’s account on a monthly basis for the life of your client.
The guaranteed income payments will continue to be paid even if the value of the Secure Retirement
Income investment falls to zero.
On the death of your client, the guaranteed income payments will stop and any remaining fund value of
the Secure Retirement Income investment will be used along with the value of other assets held to
provide death benefits to the client’s beneficiaries.
Joint life
This allows your client to nominate a dependant to receive guaranteed income payments on your client’s
death, but they can’t be more than 10 years younger than your client. Once selected;
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any guaranteed minimum death benefit that had been selected, if applicable, will no longer apply;
the guarantee charge we take from the Secure Retirement Income investment will change to the
joint life guarantee charge rate based on the Secure Retirement Income fund held; and
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the nominated dependant can’t be changed to someone else at a later date. If your client’s
circumstances change they can request for the nominated dependant to be removed but the joint
life guarantee charge will continue to apply.
On the death of your client the nominated dependant, assuming they are still a dependant at the date of
death of your client, will be given the option of continuing guaranteed income payments equal to 50% of
what your client would have received had guaranteed income payments continued to them.
If the nominated dependant elects to continue guaranteed income payments, the Secure Retirement
Income investment will become theirs and be moved into a new drawdown account in their own name.
The guaranteed income payments will continue to be paid to them until they die even if the value of the
Secure Retirement Income investment were to fall to zero. On the death of the nominated dependant the
guaranteed income payments will stop and any remaining fund value of the Secure Retirement Income
investment will be used along with the value of other assets held to provide death benefits.
Income rate
The income rates that apply to your clients Secure Retirement Income investment are set when your
client applies for the investment.
These rates set out the income-rate percentages applicable for each age from age 55. The rate that
applies when guaranteed income payments start is determined based on your client’s age when the first
payment is made from the investment.
This rate is then locked in for that investment for life. We use this rate in conjunction with the income
base value to calculate the amount of monthly guaranteed income payments that are paid out of the
Secure Retirement Income investment. If the income base value at a review date increases the
guaranteed income payments also increases. However, if your client were to switch out of the Secure
Retirement Income investment this would reduce the amount of the guaranteed income payments
payable from the Secure Retirement Income investment.
Monthiversary feature
In the first year, Aegon sets your client’s income base equal to their original investment amount. With the
monthiversary feature, at the Secure Retirement Income review date, Aegon look back to see what the
fund value of the investment was on this date and each of the corresponding monthly anniversaries – the
monthiversary. This means there are 12 values for Aegon to review every year. If the highest of these 12
values is more than the current income base, Aegon lock in this amount as your client’s new income
base.
From the start of the next year, Aegon will use the new income base to re-calculate the guaranteed
income payments payable from the Secure Retirement Income investment.
When Aegon lock in a new income base for a Secure Retirement Income investment, it won’t go down in
the future if the fund value falls but it would reduce if your client switched out of the Secure Retirement
Income investment. It may go up if the fund value goes up and Aegon don’t limit the amount the income
could increase by.
Any increase will depend on the performance of the underlying funds, changes and payments made.
What is the guaranteed pre-income increase feature?
Where your client decides not to, or is unable to take guaranteed income payments from the Secure
Retirement Income investment when it’s purchased, they’ll also benefit from a guaranteed minimum
increase to the income base value at each review date where guaranteed income payments haven’t yet
started from that Secure Retirement Income investment.
The minimum increase will be equal to 1%, this is the current rate, of the original investment paid into
the Secure Retirement Income account. This will be added to the income base value of the Secure
Retirement Income investment at the review date if it produces a higher income base value than the
highest fund value calculated using the monthiversary feature and guaranteed income payments haven’t
yet started at the review date.
If your client switches out of the Secure Retirement Income investment at any point, the value of the
‘original investment amount’ Aegon use will be proportionately reduced to account for the switch out, and
that new ‘original investment amount’ will be used in the calculation of any minimum increase at the
review date.
Death benefits
If your client’s Aegon SIPP is written under a valid trust, Aegon will pay a lump sum to the trustees. If
there isn’t a valid trust in place, Aegon will decide who to pay death benefits to - taking into account your
client’s circumstances when they die and anyone they’ve told Aegon they’d like the money to go to.
If Aegon decide to pay someone nominated by your client, it might offer them the following options from
their share of your client’s fund:
 a flexi-access drawdown pension in their own name;
 an annuity using the open market option; or
 a lump sum.
If Aegon decides to pay someone who wasn’t nominated by your client, depending on your client’s
circumstances when they die, Aegon may only be able to offer a lump sum.
Any payment Aegon makes to a trust or a charity nominated by your client will be paid as a lump sum.
If your client dies as a direct result of an accident before their SIPP has been running for five years,
Aegon will pay an extra amount into your client’s SIPP equal to 10% of their total contributions and
transfer in payments. Some exclusions apply, which can be found in the terms and conditions.
What tax is payable on death benefits
The tax payable on any benefits paid from your client’s Aegon SIPP account on their death is generally
dependent on whether they die before reaching age 75 or at or after reaching age 75.
Death before age 75
As a general rule, whether benefits are paid from the savings or drawdown elements on your client’s
death, payments to the beneficiary will be tax free.
Death at or after age 75
As a general rule, whether benefits are paid from the savings or drawdown elements on your client’s
death, payments to the beneficiary will be subject to a tax charge.
Exceptions to the above may apply in certain circumstances.
The statements made in this document are based on Aegon’s understanding of current law and regulation
which may change. Any payments made from the Aegon SIPP Scheme must be permitted by and made in
accordance with the provisions of the Scheme.
Annuities
If, when your clients are ready to retire, they decide they’d rather take an annuity to provide their
retirement income, they’ll have the option to take up to 25% of their ARC account value as tax-free cash,
and use their remaining fund to buy an annuity using the open market option.
ISA
Aegon’s ISA is a stocks and shares ISA:
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Aegon’s stocks and shares ISA comes with a wide range of permissible funds, and is free of capital
gains and income tax.
Your client can find out the current ISA limits at www.hmrc.gov.uk/isa/faqs.htm
Transfers and re-registrations
Your client can consolidate existing investments by transferring or re-registering existing cash and stocks
and shares ISAs held with another provider over to ARC. Aegon won’t charge your client, however, their
existing provider might charge an exit fee or penalty.
Tax-free income
Your client can take single or regular withdrawals at any time from their ISA. All income and capital gain
is free from tax. Your client can only contribute a total amount equal to the ISA limit for that tax year,
even if they’ve taken withdrawals.
GIA
The General Investment Account (Net) is our non-tax wrapped account – with few restrictions on the
choice of investments, so your clients can hold a wide variety of investments with access to a broad
range of underlying assets. There’s no upper limit on how much they can invest and they can take
withdrawals at any time. If your client has made the most of their tax efficient savings using ISAs and
pensions but have more they’d like to save the GIA could be the solution.
Transfers
Your client can consolidate their existing investments by transferring assets held with other providers
over to the GIA. The minimum transfer amount is £250.
GIA for Aegon Ireland international bond
ARC gives your client’s access to the tax-efficient Wealth Management Portfolio (WMP), managed by
Aegon Ireland plc. Assets in the WMP will be held in the General Investment Account (Gross) product
wrapper – this won’t automatically deduct tax.
Cash facility
All of ARC’s product wrappers have their own cash facility that all contributions will be paid into before
they’re invested. Aegon keep 0.25% of all contributions, that aren’t invested in Secure Retirement
Income, in this cash facility. This is used to pay income and all charges that are relevant to your clients’
account, including adviser charges if we’re asked to facilitate these.
Cash held here will accrue interest at a daily rate, on a daily basis, which will be credited monthly.
Your clients need to maintain a minimum balance of 0.25% in their cash facility. It’s you and your clients’
responsibility to make sure that their cash facility contains sufficient funds to cover all their charges and
income withdrawals, as these may amount to more than the 0.25%. If there’s not enough money in their
cash facility to meet any charges, Aegon will automatically sell some investments, starting with the
largest liquid asset.
Wide investment choice
ARC lets your clients use different investment strategies to suit their savings needs. You can tailor
investments depending on their age, lifestyle and retirement strategy, as well as to suit their attitude to
risk and income needs.
With ARC, your clients can invest in a range of investment types, including:
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cash;
insured pension funds;
unit trusts;
OEICs;
stocks and shares;
investment trusts;
exchange traded funds (ETFs); and
alternative investments.
All of these investments can be traded online, using leading-edge technology. If you’d like, you can even
give your clients access to trade online using our unique and innovative gating functionality. As a default,
your clients will be able to trade insured funds only. However, if you wish, you can change this access
when you set up their account depending on their level of financial confidence.
Your clients will also have access to:
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discretionary fund managers; and
ability to choose to receive guaranteed income payments through the Secure Retirement Income
option.
These options are only available through a financial adviser.
Your clients can hold a maximum of 40 investments at any one time, and can switch as often as they like
without incurring any switching costs – although dealing costs may apply.
Our fund factsheets and the Key Investor Information Documents for investments outside our insured
fund range, provide more details about individual funds.
Rebalancing
The investments in product wrappers can be rebalanced to the original proportions to help make sure
your client’s investment choices continue to match their attitude to risk. Rebalancing can be done
quarterly or yearly, at no extra cost. Any rebalancing attached to an Aegon SIPP wrapper where Secure
Retirement Income investments are held will not include those investments as part of the rebalancing.
Savings and investments in one place
Having all their savings and investments together on ARC, could give your client:
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access to a wider range of investments than their current plans offer;
potentially lower charges than they’re currently paying overall; and
the ability to view and manage all their investments together online – with only one username and
password to remember.
By choosing to bring their savings and investments together, your client will be able to see exactly how
much they’ve saved. And it’ll be easier for them to keep control of their finances if they have a single
overall view of their portfolio.
Stay in control
As your clients’ ARC account will be administered online, they’ll be able to view valuations, reports and
statements online if you give them access.
It’s easy to use and they’ll have access to up-to-date information. They can:
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view the value of their account;
see details of the investments they hold;
see a full transaction history for their account;
view projections of what they might get back from their pension; and
view details of their existing Aegon pension plans.
Your clients can also take a more active role by making changes to their account and transacting online,
by:
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updating their personal details;
making additional contributions to their account;
switching investments within the gates they have access to; and
managing their beneficiaries.
Transparent charges
ARC has a clear, transparent charging structure – so your clients will know exactly what they’re paying
for.
It has four core charges:
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ARC charges – these are to cover the cost of administering your clients’ ARC account. The higher
the fund value the less your clients’ annual charge as a percentage will be. Existing Aegon plans
shown on ARC are also taken into account when calculating the charge, further reducing the
charge as a percentage.
If your client holds Secure Retirement Income investments in an Aegon SIPP wrapper these
investments carry additional charges to cover the cost of;
o administering the Secure Retirement Income investment – the product charge
o providing the benefits requested from the investment, income alone or income and
guaranteed minimum death benefit.
Fund charges – these charges cover the cost of managing investments and checking they’re
performing as expected. They’ll vary depending on assets chosen. The fund charge is sometimes
called the ongoing charges figure (OCF).
Adviser charges – these are the charges you agree with your clients for the services you provide
and will apply if we’ve been asked to facilitate them.
You can find full details of the charges in Aegon’s Aegon Retirement Choices - charges guide or Secure
Retirement Income – charges guide
About Aegon
Aegon is a global provider of pensions, investments and protection, present in over 20 countries, with
major markets in the USA, the Netherlands and the UK. This gives it a truly global perspective because it
can draw on the experience and insight of all its businesses around the world.
Aegon is a brand name of Scottish Equitable plc (No. SC144517) and Aegon Investment Solutions Ltd (No. SC394519) registered in
Scotland, registered office: Edinburgh Park, Edinburgh, EH12 9SE. Both are Aegon companies. Scottish Equitable plc is authorised
by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
Aegon Investment Solutions Ltd is authorised and regulated by the Financial Conduct Authority. Their Financial Services Register
numbers are 165548 and 543123 respectively. © 2017 Aegon UK plc
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