Frequently Asked Questions
As a Financial Adviser, you probably have lots of questions you want to ask. We have answered some of the most frequently asked questions below. Consumers looking for further information should consult their usual Adviser.
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Who are Living Time and what is Living Time’s financial strength? »
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Where is the client's fund invested? »
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What age restrictions apply to Living Time Plans? »
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What are the minimum investment restrictions? »
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What pension funds can be used to buy a Living Time Plan? »
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Does a client have to be a UK resident to apply for a Living Time Plan? »
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Can a Living Time plan accept funds via the Open Market Option (OMO)? »
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At the end of the Plan term, does the client have to stay with Living Time? »
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Why take out a Living Time Plan and not Income Drawdown or a Lifetime Annuity? »
Who are Living Time and what is Living Time’s financial strength?
Living Time is an independent, privately owned company founded by Kim Lerche-Thomsen. Our aim is to bring innovative product solutions to the 'At retirement' market, designed to meet the changing needs of today’s retirees.
Find out more about Living Time here »
Living Time is an appointed representative of Alico. Alico is authorised and regulated by the FSA, therefore meeting all of the solvency requirements of current legislation.
There is a separate account, established by Alico for its insurance business conducted in the UK through the UK branch. This account must keep the assets of UK policyholders separate and distinct from other assets of Alico. UK policyholder assets are not available to meet any liabilities other than those directly related to the account.
Alico is one of the most successful international life insurance companies in the world, conducting business in 54 countries worldwide.
As at the end of 2008, Alico had more than $89 billion of Assets under Management, and over 19 million policyholders worldwide. Alico’s solvency and liquidity remain strong, with an S&P financial strength rating of ‘A+’ (negative outlook), as at 1 July 2009.
Where is the client's fund invested?
Living Time Fixed Term Annuities are provided by Alico and funds are invested by Alico in similar assets to lifetime annuities – namely fixed interest investments of suitable length to match the payments due to annuitants. The backing is largely UK Corporate Bonds as these provide a good match for the liabilities. However, from the client’s point of view it does not matter what assets are purchased as all benefits are fixed and known in advance – there is no investment performance risk for the client.
In addition it should also be noted that assets are not allocated specifically to individual policies. Assets are held as part of the overall Alico assets.
What age restrictions apply to Living Time Plans?
Minimum age at entry: 50 (55 from 6th April 2010)
Maximum age at entry: 71y 11m (Income Plan) and 65y 11m (75 Plan).
What are the minimum investment restrictions?
The normal minimum for our Plans is £10,000 net of PCLS. However, there are circumstances where we would consider accepting smaller case sizes. For example, where a client has both Protected Rights and Non Protected Rights pension savings, Living Time could accept a Protected Rights fund as low as £5,000 net of PCLS providing that the client simultaneously submits a Non Protected Rights Plan application for at least £10,000 (giving a total of £15,000 net of PCLS).
What pension funds can be used to buy a Living Time Plan?
Clients can buy a Living Time Plan with money from any one or a combination of the pension plans or pension schemes registered with Her Majesty’s Revenue & Customs (HMRC), including money from Protected Rights funds. The Planholder must be habitually resident in the UK at the time of purchase.
At the present time, GMP pension funds cannot be invested in Living Time Plans. Alico may consider transfers from Defined Benefits schemes but IFAs should consult with Living Time before making an application.
Does a client have to be a UK resident to apply for a Living Time Plan?
Yes. Clients must be UK residents. Applications cannot be accepted in respect of US citizens or sanctioned countries.
A sanctioned country is one that has been instructed by the Office of Foreign Assets Control (OFAC) United States Department of the Treasury as being subject to sanctions. In the UK, HM Treasury maintains the list of sanctioned countries and targets of financial sanctions: http://www.hm-treasury.gov.uk/financialsanctions. The countries identified by OFAC are listed by HM Treasury as well.
Can a Living Time Plan accept funds via the Open Market Option (OMO)?
No. Living Time Plans are written under Unsecured Pensions (USP) rules and therefore can only take transfers. The Pension Commencement Lump Sum (PCLS), if required, is paid by Alico.
In practice, when the OMO is exercised using the funds from a maturing pension plan, the PCLS is payable from the existing pension provider and the balance is sent to the new provider to set up the lifetime annuity.
As Living Time Plans are written under USP rules the full fund has to be transferred to Alico to set up the USP. Alico then pay out any applicable PCLS as instructed and then invest the balance in a Living Time Plan.
At the end of the Plan term, does the client have to stay with Living Time?
No, Living Time Plans do not tie clients in for life to one contract. At the end of the Plan term, clients have the ability to move to a lifetime annuity, an Unsecured Pension of their choice or, if they are 75, to an Alternatively Secured Pension (ASP).
Why take out a Living Time Plan and not Income Drawdown or a Lifetime Annuity?
Living Time Plans are designed for people who want to keep their options open during retirement rather than be locked in a Lifetime Annuity, but at the same time want to avoid the investment performance risk and annual management charges typically associated with Income Drawdown.
Want to know more about the Living Time product solutions? Click here »
Glossary »
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- A-Day
On 06/04/2006, the Government introduced new legislation designed to simplify the rules and tax regimes applicable to pensions (so-called 'Pensions Simplification'). This date became known throughout the industry as ‘A-Day’. - Annual Allowance
Under the new rules introduced on ‘A-Day’, an annual allowance (or cap) on pension contributions was set. Anyone contributing more than this allowance to their pension scheme would find their contributions subject to an additional tax charge.
- Annuitant
Someone who takes out an annuity and receives benefits from that plan (i.e. income) is an ‘annuitant’. - Annuitisation
The process of exchanging a pension fund for an annuity is known as ‘annuitisation’. Under current legislation, the latest age at which you can leave your pension fund before annuitisation is 75. - Annuity
A product that converts a pension fund into a fixed pension income. There are many different types of annuity on the market and different rates will apply depending on your age and your health as well as the type of benefit(s) you elect to buy. - ASP
Alternatively Secured Pension. This is a product designed to allow individuals to continue to withdraw income from a pension fund after age 75 (the age at which you would normally be required to purchase an annuity). ASPs were introduced primarily as an alternative for people who object to Lifetime Annuities on religious grounds. - AVC
Additional Voluntary Contribution. A pension contribution made by an employee into their employer’s pension scheme to help boost their standard retirement benefits.
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- Chargeable Amount
If an amount of benefit crystallised at a ‘Benefit Crystallisation Event’ exceeds the Lifetime Allowance, this would give rise to an additional ‘chargeable amount’ or ‘Lifetime Allowance Charge’. - COMP
Contracted Out Money Purchase (scheme). A Money Purchase arrangement that is contracted out of SERPS/S2P. Members of COMPs do not receive ‘State Second Pension’ (S2P, formerly SERPS) benefits from the State but receive them via their employer’s pension scheme in the form of ‘Protected Rights’ benefits. - Contracted Out
To be ‘contracted-out’ (opted out) of the State ‘Second Pension’ (S2P), formerly known as SERPS (State Earnings Related Pension Scheme). In return for opting out, individuals receive rebates on National Insurance contributions that would have been used to secure S2P/SERPS pension benefits on their behalf. These rebates must be applied to an appropriate pension product (see Protected Rights). - CPA
Compulsory Purchase Annuity. An annuity provided for a retiring member of a Defined Contribution pension scheme.
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- Defined Benefit/Contribution
A pension scheme that has either a set (defined), regular contribution, or a defined benefit. Defined Contribution schemes cannot guarantee what benefit will be paid to the member when they retire as this will largely depend on stockmarket performance. A Defined Benefit scheme gives a guarantee of a certain level of pension benefit from outset, usually based on the number of years service completed with the employer and the ‘final salary’ of the employee when they either retire or leave service (hence Defined Benefit schemes are sometimes referred to as ‘Final Salary’ schemes). - Dependant
For calculating ‘Dependant’s Benefits’ under a pension arrangement, this includes a legally married spouse/civil partner, unmarried partner, children, financial dependant or even an ex-spouse if they were married to the member when they first started to take the pension benefits. - Drawdown (Income Drawdown)
Introduced in 1995. This gives people the option to take a pension income directly from their pension fund, rather than converting the fund into an annuity to get an income. The member remains in control of their fund and can continue to contribute to it if they so wish. The amount of income they are able to take is restricted by limits set by the Government Actuary’s Department (GAD).
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- Enhanced Annuity
The ability to secure higher annuity rates because of lifestyle issues. For example, someone who smokes may be able to get ‘enhanced annuity rates’ that are higher than those for a non-smoker of the same age, reflecting the likelihood that they will develop smoking-related illnesses later in life and are likely to die sooner than the non-smoker. - Enhanced Protection
Prior to ‘A-Day’, people with large pension funds that were (or likely to be in the future) in excess of the ‘Lifetime Allowance’ were given the ability to protect all of their pension benefits from a Lifetime Allowance Charge. Individuals were not allowed to continue contributing to their scheme once they had been given Enhanced Protection.
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- GAD
Government Actuary’s Department. An independent actuarial service working within Government. Amongst other things, GAD calculates and applies limits (reviewed on a 5 yearly basis) to the amount of income that can be taken from an Income Drawdown facility. - GPP
Group Personal Pension. A money purchase pension scheme run by an employer for the benefit of its employees. - Guaranteed Maturity Amount (GMA)
The guaranteed sum paid at the end of the term of a Fixed Term Annuity plan. This must be used to purchase another appropriate pension product. - Guaranteed Period
A period during which benefits payable under an annuity are guaranteed to be paid even after the death of the plan holder. Guaranteed Periods are usually set for either 5 or 10 years.
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- Lifetime Allowance
The overall maximum amount of pension savings an individual can accumulate in registered pension schemes without being subject to the Lifetime Allowance Charge. - Lifetime Allowance Charge
A tax charge (up to 55%) applied after 5th April 2006 to anyone with pension benefits in excess of the standard ‘Lifetime Allowance’. Special rules apply to those with transitional protection (see ‘Enhanced Protection’ and ‘Primary Protection’). - Lifetime Annuity
An annuity that provides a fixed income for the rest of your life. 9 out of every 10 people buy a Lifetime Annuity when they retire (according to the most recent statistics). The contract is literally ‘for life’ and dies with you, unless you have included spouse’s or dependant’s benefits.
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- Money Purchase
Pension schemes that define retirement benefits based on member contributions rather than on service or salary are called ‘money purchase’ schemes. - MVR/MVA
Market Value Reduction/Market Value Adjustment. In exceptional circumstances, the value of a pension fund may be altered (usually reduced) by a factor known as a ‘Market Value Adjustment’. This might be applied by a scheme administrator (e.g. life office) during periods of extreme stockmarket volatility.
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- Occupational Scheme
Occupational Pension Schemes are pension schemes (usually defined benefit or defined contribution) run by employers for the benefit of their employees. - OMO
Open Market Option. The ability to take your pension fund and ‘shop around’ on the open market to secure the best annuity rate or alternative pension vehicle when you retire, rather than leaving it with your current provider.
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- PCLS
Pension Commencement Lump Sum. This is the amount of benefit that can be taken from a pension scheme free of tax (currently). Typically, up to 25% of a pension fund can be taken in this way. Before ‘A-Day’ it was known as ‘Tax Free Cash’ and it is still often referred to in those terms today, despite the change in terminology post A-Day. - Pensions Simplification
On the 6th April 2006, the Government introduced new legislation designed to streamline the myriad rules and tax charges that applied to pensions at that time. The process was known as ‘Pensions Simplification’ and its introduction on 06/04/06 was dubbed ‘A-Day’. - PPP
Personal Pension Plan. An individual pension plan designed to create a fund that can be used to provide an income in retirement. - Primary Protection
Calculated on 06/04/06 as a percentage of an individual’s current pension fund value in excess of the Lifetime Allowance applicable at that time (£1.5m). This enabled people to eliminate or at least reduce the chance of a Lifetime Allowance Charge applying to them in the future. Unlike with Enhanced Protection, individuals could continue contributing to their pension schemes even after Primary Protection was applied. - Protected Rights
Pension benefits that accrue in lieu of ‘State Second Pension’ or ‘SERPS’ benefits (i.e. Contracted Out benefits) are known as ‘Protected Rights’ and have different legislative rules applied to them compared to non-protected rights benefits.
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- RAC
Retirement Annuity Contract. This is a type of pension contract that was available before the introduction of Personal Pension Plans in 1988. They have different rules applying to them compared to a PPP, particularly in relation to the calculation of the Tax Free Cash entitlement. - RDR
Retail Distribution Review. An on-going review by Government of the legislation regarding how financial services products and services are sold and remunerated in the UK.
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- Section 32/S32
Sometimes referred to as a ‘Buy Out’ plan, Section 32 Plans allow members to transfer benefits away from an Occupational Pension scheme to a different provider without having to go into another Occupational scheme. - Short Term Annuity
These are annuity contracts of not more than 5 years in length (or to age 75 if sooner). - SIPP
Self Invested Personal Pension. A personal pension plan that has extended powers of investment, giving individuals greater control over where and how their pension fund is invested (including the ability to invest in property and shares).
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- Tax Free Cash
Since A-Day, this term has been replaced by Pension Commencement Lump Sum (PCLS). This refers to the amount of a pension fund that can currently be taken free of tax (usually up to 25% of the fund). - TIP
Trustee Investment Plan. A lump sum investment plan for trustees of certain registered pension schemes (for example, SIPPs).
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- Value Protection
This refers to the protection benefit available for annuities whereby a lump sum will be paid out after the death of an annuitant. The lump sum is known as an ‘Annuity Lump Sum Death Benefit’ and is equal to the original purchase price, less the gross income payments taken to the date of death and a tax charge of 35% (currently). - Variable Annuity
A Variable Annuity contract offers regular income like an ordinary annuity, but a proportion of the fund will be invested and could go up and down depending on stockmarket performance. There are usually additional fees and charges applicable to this type of arrangement to help meet the cost of investment management.
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Alico is the insurance company that provides Living Time Plans.
Living Time Limited is an appointed representative of American Life Insurance Company (Alico). Living Time Limited is registered in England with company number 04750947 and has its registered office at 1 Conduit Street, London W1S 2XA. American Life Insurance Company is a private limited company incorporated with limited liability in Delaware, USA number 0123730. Head Office: One Alico Plaza, Wilmington, Delaware, USA 19801. Branch Office: 22 Addiscombe Road, Croydon CR9 5AZ. Registered in England number BR000230. Authorised and regulated by the Financial Services Authority (FSA reference number 139417).