This page is designed to help you to understand the difference between the main types of pension. Your Rothesay policy is defined benefit (DB).
We have also included some typical policyholder questions and answers below.
There are two main types of pension arrangements
Defined benefit (DB)
A defined benefit pension arrangement (sometimes known as a final salary or CARE (Career Average Revalued Earnings) scheme) generally pays you a pension based on how many years you were a member of the arrangement and the salary you earned at that time.
This secures you an income for life. Some DB arrangements continue to pay a pension to your spouse, civil partner or dependants when you die.
Defined contribution (DC)
With a defined contribution pension arrangement (sometimes known as money purchase), you build up a ‘pot’ of money that you can use to provide an income in retirement. The size of your pot will depend on how long you save for, how much you pay into your pension pot, how much, if anything, your previous employer paid in, how well your investments perform, and what charges are taken out of your pot by your pension provider. The value of your pot might go up or down.
Questions and answers
- What pension options does Rothesay offer me?
Your options are based on the rules of your previous arrangement.
As an alternative to taking your DB benefits directly from Rothesay, you can request a transfer of the value your pension benefits (your 'transfer value') to another pension arrangement. This may give you access to additional options.
For more details please click on the link below.
- Can I take a lump sum now and leave the rest of my benefits in the policy for later?
No, in accordance with DB pensions legislation you will need to start receiving your regular pension payments once you take a lump sum from your Rothesay policy.
Please click the link below for more information.
- What additional flexibility is available through DC?
Since the government brought in Pensions Freedom and Choice legislation in April 2015, individuals in a DC pension arrangement have more choice over how they take their pension benefits. You cannot access this flexibility directly from your Rothesay policy.
For more information, please read our guide by clicking on the link below.
- Can I cash-in my policy?
Policyholders sometimes ask if they can cash-in, or receive a one-off lump sum in return for surrendering their right to future pension payments (including any benefits payable on their death).
If you are already receiving regular pension payments, you do not have the right to cash-in.
If you are not receiving your pension yet and the value of your benefits is less than £30,000, you may have the option to exchange your policy benefits for a one-off lump sum.
- Why have my benefits gone down?
The value of your pension benefits, known as your 'transfer value', may change but your benefits do not.
Transfer values vary with market conditions, but it is important to understand that the pension benefits available from your Rothesay policy are unchanged.
- Why has my transfer value changed?
A transfer value is the current value of the pension benefits payable under your policy.
Our transfer values are calculated using market conditions at the time of the calculation. Market conditions affect transfer values, for example they affect the pension increases we expect to pay, which in turn affects the value of the policy.
Our transfer values are also calculated based on our assumptions for life expectancy. We usually review our life expectancy assumptions annually at the end of each calendar year but may do more regularly if deemed appropriate. These assumptions are used for our financial reporting and are subject to external scrutiny.
As the underlying assumptions for the calculation can change so too can the transfer value associated with a policy. All transfer values have a 6-month guarantee period from the date of calculation. Policyholders do not need to take the transfer value quoted and they can request further transfer value quotes but no more often than one every 12 months. Policyholders can also choose to receive their pension benefits directly from Rothesay.
Please click on the link below for more information.
- Why haven't I received any funding statements from Rothesay?
Rothesay, as a regulated insurance company, does not need to produce a funding statement. Rothesay is subject to the Solvency II funding regime. Under this regime we are required to hold an amount of capital, known as the Solvency Capital Requirement (SCR).
- What contributions does Rothesay pay towards my pension?
Rothesay does not pay pension contributions towards policyholders' pension benefits.