My pension fund
What is a defined benefits (eg final salary pension) scheme?
This is a pension scheme where the members are entitled to a certain level of pension benefit. It is defined by a formula which uses the member’s length of pensionable service in conjunction with their salary to help determine benefits upon retirement. A final salary pension scheme is probably the most common type of defined benefits pension scheme.
What is a defined contribution scheme?
This is a pension scheme that has an agreed contribution rate from either the employer, the employee or both. Contributions are known and agreed in advance. Each member has their own 'pot' of money in the scheme. By the time the employee retires, the size of the pension fund will depend on the contributions made, the length of time they have been invested, investment returns and charges taken. The value of the fund can go up and down and there is a risk that it could be less than the amount paid in to the scheme.
What is the state pension age?
This is the age at which you can begin to claim your state pension if you're entitled to one. State pension age can vary depending on your gender and when you were born. Visit https://www.gov.uk/calculate-state-pension to find out if and when you will be eligible for the state pension.
How do I know what state pension benefits I'm entitled to?
The Pension Service will contact you about three months before you reach your state pension age. They will ask you to fill in a form telling them whether you want to start taking your state pension and how often you want it to be paid. For more information visit What benefits am I entitled to in retirement?
You may also be entitled to other benefits. Visit the government website at www.gov.uk or get in touch with your local benefits office to find out more.
What's the difference between protected rights and non-protected rights?
Protected rights were the value of the government's payments paid into your own pension arrangement. The money came from National Insurance contributions you made above those needed for the basic State Pension. If you contracted out of the State Earnings Related Pension Scheme (SERPS) or the State Second Pension, the government redirected your contributions to your personal pension instead. This was known as 'contracting out'.
Non-protected rights were the value of the payments that you and/or your employer made into your pension fund.
There used to be a difference between how you could use protected rights and non-protected rights benefits. When contracting out ended on the 6 April 2012 this difference ended and protected rights and non-protected rights are now treated the same.
How do I get hold of my pension fund statements?
If you are an Aviva customer, you may be able to log in and see the current value of your pension fund at MyAviva. If you can't, please give us a call on 0800 0686 800 to ask for your current pension fund value. If you have a pension fund with another provider, please call them and ask for an up-to-date statement.
How long will my pension last when I retire?
You can use the My Retirement Planner tool to estimate the future value of your personal pension plans. By inputting different target incomes you can get an idea how long your money might last in retirement. The tool provides an illustrative example only, it isn't intended to provide personalised advice or give personal recommendations.
Why has my pension fund value changed since I received my quote?
Your pension fund invests in different types of assets, such as equities, property, government bonds (gilts) and corporate bonds. This means that the value of your pension fund can go up and down in line with the performance of these assets, isn't guaranteed and may be worth less than the amount paid in. If the value of the underlying assets goes up or down, so will the value of your pension fund. This may happen at any time, including the period between you receiving your quote and retiring.
How do I combine multiple pension funds?
If you want to combine your pension funds and transfer them to our Aviva Pension visit our site and follow the simple instructions.
When might it not be right for me to put all of my pension funds together?
Combining your pension plans may not always be the best option. If your current pension provides a guarantee of the money you'll be paid, or guarantees a certain level of investment returns, you might be better off leaving it where it is. If you have any of the following pension plans or plans that include the features listed below, you should speak to a financial adviser:
- defined benefit pensions or pensions that provide any other salary-related benefits
- pensions promising set annuity rates (also known as guaranteed annuity rates)
- pensions with guaranteed minimum pension benefits
- pensions invested in guaranteed funds or funds promising guaranteed investment returns
- pensions with any other guarantees.
For more information, visit What you need to consider before combining your pension plans.
Are there any penalties for transferring my fund to another provider?
Generally, there aren't any charges or penalties for transferring your pension fund to another provider, but this depends on the type of pension plan you have and the terms and conditions of the other provider's pension plan.
You will need to take a close look at the benefits each of your pension plans offer so you don't risk losing valuable benefits if you combine them.
Please speak to either your financial adviser or current provider for details of any charges/penalties which may be applied upon transfer.
Can I take my pension fund as a lump sum?
Yes, you are able to take all of your pension fund as lump sum, however this is taxable. The amount of tax you pay will depend on your personal circumstances. Visit our How do I take money from my pension fund? For a personal review we recommend you speak to a financial adviser.
My pension fund is less than I thought. What are my options?
You can choose to work longer and continue paying into your pension fund. You may have other money that you could use or invest to help pay for your retirement. If you own your own home, you might like to consider equity release. If you are worried about the size of your pension fund, we recommend that you talk to a financial adviser. They will be able to help you identify what options you have and what the best course of action for you may be.
If you don’t have an adviser, you can visit www.unbiased.co.uk.
If you have any queries or need further information about our products, talk to a member of our team by calling 0808 250 7935.
How do I shop around?
If you choose to buy an annuity, you can ask any annuity provider to give you a quote for the amount of income they may give you. You need to tell them the size of your pension fund. If you have more than one fund, it may be worth combining them into one large fund, although this is not always possible. See our FAQ on "When is it not right for me to put all of my pension funds together?". You can either contact the annuity providers yourself or ask your financial adviser to get you some quotes. It's probably easier to get a financial adviser to help you shop around. Once you have the quotes, you can compare them and find the best deal for you. The quotes you receive from the annuity providers are usually only an indication of what you might receive, so check with each provider if the quote is guaranteed.
Can I combine my pension funds so I can buy just one annuity?
Yes. If you want to combine your pension funds to buy an annuity from us, simply tell us so on the application form. We will contact your pension providers and ask them to transfer the funds to us. You don't have to do anything yourself. See our FAQ on "When is it not right for me to put all of my pension funds together?".
How do I choose the right options for my annuity?
If you're considering buying an annuity, you can use the Pension Annuity Calculator to see what options are available to you and how they affect your income. The calculator explains the options it offers you and lets you choose whether you want to take them or not. You can generate more than one quote, so you can pick and choose different options and see how this affects your income. Some options will suit your circumstances better than others, so it’s worth using the calculator to generate a number of quotes to compare. The quotes you receive are only an indication of what you could get and are not guaranteed. Just give us a call if you would like to discuss the quotation, you will need to provide us with your quote number.
We strongly recommend that you talk to a financial adviser to make sure it's the right retirement income option for you.
I don't have an Aviva pension plan, can I still buy an annuity from you?
Yes, you can. If you decide to buy an annuity from us, we will ask your pension provider to send your pension fund to us, so you can buy your annuity.
What are single and joint life annuities?
A single life annuity will only cover you and stops when you die unless it is within your guarantee period. A joint life annuity covers you and your spouse, civil partner or dependant. It will continue to pay an annuity to that person after you die.
Do I have to pay charges if I buy an annuity?
There are product charges, but we allow for them in the annuity rate that we offer you, so you won't pay any extra charges once we have agreed the rate with you. We can pay an adviser charge from your pension fund at your request.
What is a guaranteed annuity rate?
A guaranteed annuity rate is a fixed rate at which you can convert your pension fund into an annuity. The rate is written into the terms and conditions of your pension policy at the start and guarantees a minimum rate. You can use the open market option to compare what your guaranteed annuity rate would provide against the rates available in the market when you come to buy an annuity. These guaranteed rates are often significantly higher than the rates available on the open market. This makes them a valuable part of your plan and worth considering if the annuity available suits your personal circumstances.
The guaranteed annuity rate is usually only available if you retire on your selected retirement date. So, if you choose to retire earlier or later than that date, you won’t receive the guaranteed rate.
The guaranteed annuity rate normally only provides income for a single life, which means that you won’t be able to provide an income for your spouse, civil partner or dependant. It also usually gives you a level income for the rest of your life, without the option to increase your income in later years.
Before you buy an annuity, we recommend that you speak to a financial adviser. If you don't have an adviser, find one in your area at www.unbiased.co.uk.
What factors influence the level of income that I get from my annuity?
The amount you receive depends on:
- Your age
- The value of your pension fund
- Investment conditions
- Your marital status
- Your lifestyle and medical conditions
- Where you live
- The options you choose
- The adviser you choose.
If you are a member of a defined benefit pension scheme, your benefits will be calculated differently.
Why do I need to tell you all my medical history in my annuity application form?
The income you will receive from your annuity could be affected by your health. It is therefore very important that you disclose your alcohol consumption, smoker status and any health conditions as this may result in you receiving a greater income in retirement. This is because by understanding all of these factors we are able to produce a tailored annuity quote that reflects your life expectancy. More details on retiring in difficult circumstances.
What are enhanced benefits?
Enhanced benefits can offer a higher income to people who are affected by certain medical and lifestyle conditions. If you or your spouse, civil partner or dependant suffer from or have suffered from any of a number of defined conditions, it's likely that you or they may not live as long. This means that your annuity will probably not have to stretch over as many years, so you can get a higher income. You will receive an income from your pension annuity with enhanced benefits for as long as you live. This income may continue after your death depending on the options you have chosen.
Which medical and lifestyle conditions do you consider for enhanced benefits?
You can find a list of the medical conditions we consider for enhanced benefits in the Enhanced Pension Annuity conditions list (PDF 70KB) (PDF 70KB).
My quote talks about a guarantee. What is this?
Your Aviva annuity comes with a one year guarantee as standard. However, you can select to guarantee your income for up to 30 years. This means that if you die within the period you select, we will pay the amount owed to your estate until the end of the guaranteed period. This could be paid as a lump sum or a continuation of income, depending on the options selected when you buy your annuity.
You can only select a guaranteed period when the plan is set up and once selected it can't be changed.
This is separate to any income you select for your dependants.
What are the benefits of guaranteeing my income payments?
If you guarantee your income payments and die within the guaranteed period, we'll pay the amount owed to your estate until the end of the guaranteed period. This could be a lump sum or a continuation of income, depending on the options selected when you buy your annuity. If you don't guarantee your payments, we'll stop paying the income after your death.
What is the difference between inflation protected and escalating annuities?
The income from annuities that are protected against inflation will increase every year in line with the rate of inflation measured by the UK Retail Prices Index. If the RPI goes down (deflation), your income will remain level. It will start to increase again once the RPI has risen above the point it was at when your income became level. With an escalating annuity, your income will increase by a set amount, usually 3% or 5% each year.
If I choose to increase in line with inflation, how is this measured?
We use the UK Retail Prices Index to measure inflation. The UK Retail Prices Index (RPI) is an official measure of inflation in the UK.
Can I receive my annuity yearly instead of monthly?
Yes. For most annuities, you can choose when you would like to receive the payment. You choose the frequency (monthly, quarterly, half-yearly or yearly) and whether it's paid in advance or in arrears. These options are available when the plan is setup and once selected cannot be changed.
Why is my initial income lower if I choose to have my payments increase?
Your initial income will be lower because we need to use more of your pension fund to pay the higher income later on. You will receive income from your annuity for the rest of your life, so we need to make sure we will have enough money later on to cover the higher payments.
What happens to my annuity when I die?
If you die within the first 90 days of the date your plan starts, and any dependant named on the policy dies before you, Value Protection will apply and a lump sum will be payable to your estate.
If you die after 90 days but within your guarantee period, payments will continue until the end of the guarantee period. These will be paid to your estate or dependant on the policy.
If you have chosen for an income to be paid to a dependant and they are still alive, agreed payments will be made to them.
Please see your terms and conditions or contact your financial adviser for further information and exclusions which may apply to the above.
What is Value Protection?
If you die within 90 days of your plan start date, and any dependant named on the policy dies before you, we will make a payment to your estate. This will be equivalent to the value of your annuity, minus any payments already made. This payment will include any guaranteed period payments.
How do I choose my retirement date?
You can choose to retire at any time after your 55th birthday. Whether you want to retire early, or feel you’d be happy to carry on working for many years, there's a lot to think about before you make your decision.
We've provided more information to help you answer the question of when's the right time to retire?
Why do I need to budget?
When you retire, it's likely that your income will be lower than you're used to, and depending on the options you choose, may not increase from year to year. Budgeting will help you see how much of this money you need to cover your bills and how much is left over for other expenditure. It may also help you identify where you can make savings.
What is income drawdown?
Also known as pension fund withdrawals, income drawdown is a way of taking an income from the money you've built up in your pension fund while still keeping it invested.
You can use the income you receive from an income drawdown plan to fully or partially retire. As your pension fund remains invested, you still have the potential for growth, free of UK income and capital gains tax. The only tax suffered in the fund will be when certain investment returns are received with tax credits or after tax deductions which cannot be reclaimed (e.g. the 10% tax credit attaching to UK share dividends). However, you must bear in mind that the value of your fund can go down as well as up, it isn't guaranteed and may be worth less than the amount paid in.
From 6 April 2015 there will be no limits on the amount you can withdraw. For more information about this see How do I take income from my pension fund?
What is equity release?
Equity release is a way of releasing money that's tied up in your home, providing you with a cash lump sum.
You can continue to live in your home and use the money to enjoy a better retirement. Taking a lump sum, plus the costs, will reduce the value you have in your home and the amount of any inheritance you leave. Your tax position and entitlement to welfare benefits may also be affected.
We offer two lifetime mortgages. There are restrictions on the age of applicants and property values. Please visit our dedicated equity release website to find out more. Lifetime mortgages are not available in the Channel Islands or the Isle of Man.
This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration.
Is the lump sum I get from the equity release on my home tax free?
Yes, you won't have to pay either UK income or capital gains tax on any money you release from your home. However, it's possible that the money will affect your tax position and any entitlement you have to welfare benefits.
Am I eligible for equity release?
Lifetime mortgages are available to homeowners aged 55 and over. Whether you qualify and the amount you can release will depend on a number of factors including your age, value of property and type of property.
You may be able to borrow a higher loan amount on the Lifestyle Lump Sum Max plan if you have certain health or lifestyle conditions. Find out if you're eligible for a lifetime mortgage.
This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration.
What types of annuity are available?
There are a number of annuities available to you. At Aviva, we offer a range of annuities that you can tailor to suit your personal circumstances:
- Pension Annuity: This is the most common type of annuity. Most people opt for this as it’s low risk, it’s guaranteed and it will pay you an income for the rest of your life.
- Pension Annuity with enhanced benefits: This type of annuity is the same as our Pension Annuity but it can pay a higher income if you and/or your dependant have (or have previously suffered from) certain medical conditions.
- With Profits Pension Annuity: This type of annuity allows you to link your income to the performance of our With-Profit Fund. It’s a higher risk than a conventional Pension Annuity but it gives you the potential for your income to grow. You need to remember that because your money is invested in the With-Profit Fund your income could also go down.
- Immediate Life Annuity: This type of annuity is purchased with your own money such as investments, savings and tax-free cash from your pension fund. It is a low risk option and will guarantee an income for the rest of your life.
Our Pension Annuity Calculator provides quotes on our Pension Annuity and Pension Annuity with enhanced benefits.
Can I fill in my form and return it before my retirement date?
Yes, you can. We need some time to set up your payments, so it's better if you return your completed form before you retire. However, we need to use the actual value of your pension fund when you retire, so it's probably worth waiting until you're about two months from your retirement date to send in your forms.
What if I want to retire early?
You can choose to retire any time after your 55th birthday, however there are many considerations that may affect your decision of exactly when to retire. More details can be found about retiring early.
If I decide I want to partially retire, will this affect my state benefits?
It may affect your state benefits. Contact your local benefits office or visit www.gov.uk to find out more.
How do I retire later?
You must write to your pension provider and tell them your new retirement date. Generally with Aviva the maximum retirement age you can select is 75.
What happens to my fund value if I choose to delay my retirement?
If you're invested in a unit-linked fund, the fund value can go up and down. The degree of fluctuation will depend on the type of fund you're invested in. If your money is in a high risk fund, the value is likely to fluctuate to a greater degree than if it was in a lower risk fund.
If you're invested in a with-profits fund, the value can go up and down. We may apply a market value reduction if you delay your retirement and continue to invest in the fund.
If you're invested in a unit-linked fund or a with-profits fund then you may get back less than the amount paid in.
You should check with your financial adviser or pension provider about the implications of delaying your retirement before you make your final decision.
My information pack
What is the information pack and how can I get hold of one?
All pension providers send their pension customers a statement giving them the value of their pension fund as they approach retirement. The statement is usually accompanied by:
- Information about how you could convert your pension fund to an income
- General information on the options available to you when you retire.
At Aviva, we contact our pension customers five months before their retirement date and again two months before. If you have an Aviva pension plan and would like an information pack now, please call us on 0800 533 5195.
If you have a pension plan with another provider, call them and ask for information on retiring.
Is there a time limit on replying?
No, there isn't. The annuity rate we offer you in your quote isn't guaranteed, so if you don't reply, you should ask us for another quote at a later time. With Aviva, you must convert your pension fund into an income by your 75th birthday.
What is tax-free cash?
Tax-free cash is money you can take as a lump sum from your pension fund without having to pay tax on it. You can spend this money on anything you want. You can usually take up to 25% of your pension fund as tax-free cash, although this may not be the case for everyone. For example, lump sums from final salary schemes are calculated differently. For the vast majority of people, tax-free cash will be a feature of their pension plan, but you should check with your pension provider what the rules are for your pension fund. You should also bear in mind that taking tax-free cash reduces the amount you can use to provide an income during your retirement.
If you have more than one pension fund and have already taken tax-free cash from one of those funds, you won't be able to combine that fund with any other pension funds you have. We can give you a quote for each individual fund and you will be able to take tax-free cash from the funds that you haven't yet taken money from. You can also combine any funds that you haven't taken tax-free cash from and get a quote for these funds. It is not always possible to combine your pension funds, please see ‘When is it not right for me to put all of my pension funds together?' FAQ.
There are many ways that you can take a retirement income which will affect how you take your tax-free cash. To see what these options are see How do I take money from my pension fund?
How does taking tax-free cash affect my pension fund?
You can normally take up to 25% of your pension fund as tax-free cash. Taking this money means that you have less in your pension fund to use to provide an income during your retirement. If you are worried about having a low income, you might want to consider taking less tax-free cash.
What do you mean by…?
What do you mean by shop around for the best rates?
Many people are tempted to simply buy an annuity from their pension provider. This might actually turn out to be the best deal for you, but, as with most other things, you might be able to get a better deal from another provider. Annuity providers may offer different rates for different types of annuity, so it's worth your while asking for quotes from a number of different companies. You don't lose anything by doing this and you may actually end up with a better income. You can ask a financial adviser to help you ask for quotes from a number of companies. This is known as the open market option.
What is the open market option?
Your pension plan includes an open market option, which basically means that you can buy an annuity from any pension provider; you don't have to stick with your existing pension provider. You can shop around to find the annuity that suits you best. Different providers will offer different annuity rates. Once you've bought an annuity, you're generally locked into that rate for the rest of your life and can't change it at a later date even if your circumstances change. So it makes sense to see who can offer you the best deal.
To shop around, you need to know:
- Your total pension fund value, including the value of any other plans you may have. You should also check whether or not you can combine them to provide a higher income
- The features you are interested in
- The amount of tax-free cash you can take.
Choosing the right annuity is one of the biggest financial decisions you will ever make, so we strongly recommend that you speak to a financial adviser before you make your final decision. They will be able to assess your personal situation and advise you on the best course of action for you.
If you want financial advice, please contact your Financial Adviser. If you don't have a Financial Adviser you can find one via www.unbiased.co.uk.
If you have any queries or need information about our products, talk to a member of our team by calling 0808 250 7935.
How do I take money from my pension fund?
Deciding what to do with your pension savings is an important step, and now you'll have more choices once you reach 55. For more information visit How do I take money from my pension fund?
What is a lifetime allowance?
The lifetime allowance is a limit on the total amount of pension fund you can use for retirement benefits before extra tax applies. It is set by the UK Government. The limit for 2015/2016 is £1.25 million. Most people will not be affected by this limit.
What is a market value reduction?
Market value reductions are a way of making sure that customers remaining in the With-Profit Fund are not disadvantaged when others leave.
A market value reduction is most likely to apply following a large or sustained fall in the stock market or when investment returns are below the level we would normally expect. We apply a market value reduction to make sure that all investors receive their fair share of the returns earned over the period of their investment. If one applies when you withdraw your money from the With-Profit Fund, it may mean that the value of your investment is lower than expected.
We guarantee we will not apply a market value reduction on your death.
If you keep your money invested in the With-Profit Fund until the retirement date you originally chose we will not apply a market value reduction. However, this doesn't apply if:
- You started your plan within 5 years of your original retirement date
- You have made any new one-off investments or increased your regular contributions (except those automatic increases which have been agreed by us) within 5 years of your original retirement date
- You switched into the With-Profit Fund within 5 years of your original retirement date
Please refer to your policy terms and conditions for further details.
We can't guarantee the amount you will get back if you move out of the With-Profit Fund before or after your originally selected retirement date.
You can find further details about the With-Profit Fund and market value reductions in 'A guide to your with-profits investment and how we manage our With-Profit Fund - for customers investing through pension plans', which is available at aviva.co.uk/savings-and-retirement/products/select-investment/funds-to-invest-in/with-profits/useful-guides.html.
What do you mean by dependant?
You can choose to provide an income for your dependant if you die before them. This may reduce your income. A dependant could be your spouse, civil partner or a financially dependent adult.
What do you mean by smoker status?
Here are the different definitions for each of the smoker statuses:
- Current smoker: Someone who smokes ten or more cigarettes a day (including hand rolled) and has done so for at least 10 years. This does not include anyone who smokes cigars or pipes or uses tobacco replacement products.
- Light smoker: Someone who smokes between one and nine cigarettes a day (including hand rolled), one or more cigars/pipes a day. This does not include anyone who uses tobacco replacement products.
- Non-smoker: Anyone who has never smoked, given up or doesn’t come under the two categories described above
How will inflation affect my savings and investments?
Inflation reduces the buying power of your money. This means that as inflation causes prices to rise, you will be able to buy less and less with the same amount of money. So, while you will still have your savings and investments, the money won't go as far as it once did.
Can I take regular withdrawals from my investment to supplement my pension income?
It depends on the type of investment you have. With collective investments, you can invest in a fund specifically designed to provide you with an income, but you may have to pay tax on these income payments. You can also make regular withdrawals from some investments such as bonds, but you may have to pay tax on these withdrawals. You also have to remember that you may be eating into your original investment.
What is a will?
It's a legal document in which you say what you would like to happen to your estate when you die. Your estate is everything you own at the time of your death. Things like your house, money, investments, car and personal belongings.
Your will doesn't always cover possessions that you jointly own with another person - these will often pass to the joint owner automatically.
How do I make a will?
You can make a will whenever you like. We recommend paying a solicitor or professional will-writer to draw one up for you, rather than using a do-it-yourself will-writing pack.
Getting expert help makes it more likely that your will has a rock-solid legal basis. Find out more about making a will.
If you don't have a solicitor, you can find a local one at www.unbiased.co.uk. You can also find more advice about wills at the Citizens Advice Bureau website.
What is 'MyAviva'?
'MyAviva' is our online service for our existing customers. You can log into 'MyAviva' to check your fund value and manage your personal details.
How do I find out more information about my tax code?
Contact your local tax office for your tax code. You may also be able to find this on your most recent payslip.
What is the inheritance tax threshold?
The inheritance tax threshold for 2015/2016 is £325,000 for a single person. In addition married couples and civil partners can pass property tax-free to their surviving partner when they die. When the second partner dies, their executors or representatives can also claim any unused proportion of their late partners inheritance tax allowance. So people who are married or in a civil partnership can potentially leave as much as £650,000 after the second partner dies before inheritance tax is due. Tax rules may change in the future.