Scottish Life launches flexible Income release plan

Scottish Life, the pensions specialist arm of the Royal London Group, is to launch an Income Release plan that allows IFAs and their clients to maximise the flexibility provided by A-day rule changes, as well as to provide a traditional income drawdown facility.

Illustrations for Income Release will be available to IFAs from 5 November with new business being written from 3 December.

Fully integrated within Scottish Life’s successful Pension Portfolio proposition, Income Release allows customers to take a tax-free lump sum without the need to take income and then continue to save for retirement – so giving the opportunity to “accumulate as well as decumulate”.

In addition, where a client elects to take planned income payments, the product includes an innovative ‘Income Tap’ facility which transfers an agreed amount of money into a low risk fund, while the remainder of the portfolio continues to be invested for longer-term income and growth. Once the Income Tap has been set up, it can be automatically topped-up at an agreed frequency in order to help secure ongoing income payments.

Keith MacPherson, Head of Individual Business at Scottish Life, comments: “Technically speaking, Income Release provides an integrated unsecured pension option which allows the adviser and client to consider fully or partially crystallising the pension fund to provide a pension commencement lump sum and/or income, within a single plan.

“Put more simply, Income Release allows individuals to get a tax-free lump sum from their pension plan after the age of 50 (age 55 from April 2010) while still building up their pension fund. It means that a pension is no longer ‘locked up’ until you stop working.”

Income Release is available both for new plans and for existing Pension Portfolio and ‘Individual’ policyholders. There is no minimum for the amount that can be taken in cash. There is no designation charge to take income or cash if the initial fund value is over £40,000. Further charges would be deducted from the plan to cover the advice costs for Income Release, where a customer has agreed a commission remuneration payment with their adviser.

Keith MacPherson added: “We believe that the very competitive annual management charge, often as little as 0.5%, will make Income Release particularly attractive to IFAs and their clients.”

The plan has been developed after extensive research and feedback from advisers. It uses ‘notional designation’, where all investments within a single plan, both designated and non-designated, are treated as identical for investment purposes.

Clients can also invest the proceeds of other, non-pension, savings in the Income Release plan (such as ISAs, stocks and shares, deposit savings) so maximising the tax-efficiency of an individual’s overall retirement savings.

The product is backed up by extensive online service for advisers and clients.