For adviser use only – not approved for use with clients

Aegon Retirement Choices – suitability guidance 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:

Self-Invested Personal Pension (SIPP); Individual Savings Account (ISA), and

General Investment Account

SIPP

Our SIPP offers your clients the following benefits:

A savings and income solution – your clients can accumulate savings and take an income from age 55

Pre-funds 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 of tax

A wide range of investments – access to growth and income-focused funds through our fully insured fund range and open-architecture investments

Flexi-access drawdown – providing income for your clients in a tax-efficient savings environment with ongoing potential for growth

The value of an investment can fall as well as rise for a number of reasons, for example market and currency movements. Your client could get back less then they invest.

All references to taxation are based on our understanding of current taxation law and practice in the United Kingdom, which may change.

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 their benefits.

There’s a number of ways your clients can take their benefits such as; cash lump sums, flexi-access drawdown pension and annuity and can combine different options to meet their needs.

Cash lump sum

Your clients can withdraw all or some of their pension savings as a cash lump sum anytime from age 55 onwards and then spend, save or reinvest it as they like. 25% of the lump sum will be tax-free with the balance taxed as income.

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. 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.

Annuities

If, when your clients are ready to retire, they decide they’d rather take an annuity to provide their retirement income, they’ll normally have the option to take up to 25% of their ARC account value, the part they’ve not yet taken benefits from, as tax-free cash, and use their remaining fund to buy an annuity using the open market option.

Death benefits

If your client’s Aegon SIPP is written under a valid trust, we’ll pay a lump sum to the trustees. If there isn’t a valid trust in place, we’ll decide who to pay death benefits to - taking into account your client’s circumstances when they die and anyone they’ve told us they’d like the money to go to.

If we 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 we decide to pay someone who wasn’t nominated by your client, depending on your client’s circumstances when they die, we may only be able to offer a lump sum.

Any payment we make to a trust or a charity nominated by your client will be paid as a lump sum.

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 our 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.

ISA

Aegon’s ISA is a stocks and shares ISA and comes with a wide range of permissible funds. It’s free from capital gains and income tax.

Your clients can find out the current ISA limits at https://www.gov.uk/individual-savings-accounts

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. We won’t charge your client, however, their existing provider might charge an exit fee or penalty.

The value of an ISA will be directly linked to the performance of the investments selected and may fall as well as rise. Your client may get back less than they invest. An investment in a stocks and shares ISA won’t provide the same security of capital associated with a cash ISA. However, it’s likely to offer better long-term growth potential. The favourable tax treatment of ISAs may not be maintained in the future and is subject to changes in legislation.

GIA

The GIA (Net) is our non-tax wrapped account. It offers the same wide investment range as our ISA. 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 offshore bond

ARC gives your client’s access to the tax-efficient offshore bond, managed by Canada Life International. Assets in the offshore bond will be held in the GIA (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. We keep 0.25% of all contributions 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, we’ll 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 goals, 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:

insured funds – SIPP only; collectives;

equities (shares);

investment trusts, and

exchange-traded funds.

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 investment needs.

Please note they can’t go back to a previous gate should they change.

Where you have a discretionary relationship with your client, this will be their Natural Person’s Unique Identifier (NPUI), which is made up of their nationality and a unique identifier; for example a National Insurance number. If you have a non-discretionary relationship with your client, this will either be your Legal Entity Identifier (LEI) or the client’s NPUI that’s required.

Your clients will also have access to discretionary fund managers (DFMs), should you choose to recommend one. You can find out more about the DFMs available at https://www.aegon.co.uk/advisers/arc/dfms.html

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.

Fund factsheets or Key Investor Information Documents provide more details about individual funds.

The value of an investment can fall as well as rise for a number of reasons, for example market and currency movements. Your client could get back less than they invest.

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.

Savings and investments in one place

Having all their savings and investments together on ARC, could give your client:

access to a wider range of investments that their current plan offers; 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 could help make it easier to keep control of their finances if they have a single overall view of their portfolios.

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’ve have access to up-to-date information. They can:

view the value of their account; see details of the investment they hold;

see a full transaction history for their account;

view projections of what they might get back from their pensions, 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:

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 three core charges:

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. We may vary these charges in the future.

The table below details the charge.

ARC account value Annual percentage charge

First £29,999.99 0.60%

Next £20,000 (£30,000 to £49,999.99) 0.55%

Next £50,000 (£50,000 to £99,999.99) 0.50%

Next £150,000 (£100,000 to £249,999.99) 0.45%

£250,000 and over 0.00%

Drawdown fee

If your client chooses to take an income (either regular or ad hoc) from their SIPP within your ARC account, there’s a charge to cover the ongoing administration. The drawdown fee is £75.00 each year and we’ll take this charge the first time they take an income payment and every year after that.

Investment 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) or total expense ratio (TER). This charge applies to the following types of investments:

insured funds; collectives;

investment trusts, and

ETFs.

The charge depends on the investments you and you client choose.

Stockbroker fee

A fee will apply to every sale or purchase of equities and investment trusts. The fee is £15.00 for each sale and purchase.

Aggregated stockbroker fee

A fee will apply to every sale or purchase of ETFs. If the amount held in an ETF increases or decreases, either as a result of automatic rebalancing or you actively change this, the charge won’t apply. It only applies to new purchases or full sales.

Other dealing related charges

Stamp duty

Stamp duty is payable on any purchase of investment trusts and equities made through our stockbroker service Winterflood.

The amount of stamp duty your client will pay is worked out at a flat rate of 0.5% (rounded up or down to the nearest penny) based on the purchase amount.

For example if shares are bought for £1,000 your client will pay £5 stamp duty.

Panel of Takeovers and Mergers (PTM) levy

This is a charge automatically imposed on investors, and is collected by our stockbroker Winterflood, when equities or investment trusts are bought or sold with an aggregate value of more than £10,000. The charge is £1, and the money raised goes to the PTM.

Investment entry and exit charges

Investment entry and exit charges may also apply. Please refer to either your Key Information Document, Key Investor Information Document or fund factsheet for details.

Discretionary fund manager charges

If you and your client decide to use a discretionary fund manager (DFM) to help manage your clients’ investments, we’ll pay a charge to this manager on your client’s behalf. The fees charged by DFMs vary. We’ll take the charge from the cash facility.

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. We can facilitate:

initial charges; ongoing charges, and

ad hoc charges.

You can find full details of the charges in the ARC 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.