DB Advice checklist - Scottish Widows

1 For adviser use only this document should not be given or shown to your client. Scottish Widows has created this checklist for you to use when you are discussing the pros and cons of transferring your client s Defined Benefits (DB) to another arrangement. It will help flag some of the key issues for consideration but it is not a replacement for your regulatory, compliance or due diligence s name (DD MM YYYY) ConsiderCommentsFlexibility the fact that the DB pension cannot be altered but your client may want to take a greater level of income in early retirement whilst they are more active, or perhaps until they are eligible for the State pension? if your client does decide to transfer, have you discussed the possibility of taking a flexible income as part of a strategy to maximise tax efficiency?

2 The use of all available tax allowances. have you discussed your client s desired income needs in the run up to, and throughout their retirement? Have you used a cashflow modeller to demonstrate the future fund values based on their income requirements and discussed the investment returns required to achieve this? If so, have you stress tested the results to show the impact of market volatility? Have you assessed and documented their essential income needs as well as their objectives? If applicable, was an enhanced annuity discussed as this could provide a higher income than the DB scheme? if partial transfers are allowed by the DB scheme as this could provide your client with more options by combining a level of certain income with the flexibility that would be available on transferring the rest of the DB benefits to a DC arrangement.

3 If the DB scheme has a protected early retirement age, have you discussed a block/buddy transfer to protect this? that if income levels are too high in the early years then there is a risk that income may not last for their lifetime. has the scheme been through a GMP equalisation exercise, and if not, what effect this could potentially have on future transfer values and scheme Lump Sum if all means of generating a cash lump sum have been discussed including ISAs and other investment vehicles. if the DB scheme has protected tax free cash, have you discussed a block/buddy transfer to protect this? how much is available as this is often calculated differently in a DB scheme than a DC arrangement. what are the different calculation basis and figures for the existing scheme versus the new plan?

4 Does the client need their tax free cash in one lump sum, or would they like to phase it for a more tax efficient income stream?DB Advice CHECKLISTC onsiderCommentsDeath Benefits setting up a protection policy to cover the difference between the CETV and the current capitalised value of the death benefits within the DB scheme. whether they are happy with their current death benefits from a wealth planning the possibility that if a transfer takes place, the benefits could run out if the client lives a long life. potential inheritance tax charges if your client were to die. What is their current state of health and family history, do they smoke, do they have any pre-existing health conditions etc? If the client is not in good health, death within two years of the transfer could trigger an inheritance tax charge.

5 If applicable, was an enhanced annuity discussed as this could provide a higher income than the DB scheme?Investment Choice if it is sufficiently clear to your client that they will be responsible for the investment risk once the transfer takes place and that the pension needs to be managed. This will mean that they will incur charges from their pension provider ( product AMC plus fund charges) and possibly charges for Advice . This would probably not be the case if they remained in the DB scheme. how your client would be affected if they transferred their benefits to a DC arrangement and this then falls in value. have you discussed and documented the client s attitude to risk and attitude to transfer?Capacity for Loss what your client s ability is to absorb any falls in the value of their investments?

6 If they understand what their essential retirement income needs are versus their desired lifestyle and discretionary spend? what impact any shortfall or increase in income created by a transfer would mean for their finances? if a transfer is appropriate for your client at all, given the relative safety of a DB scheme, especially if they will rely on this for the majority of their retirement income?Balancing Needs and Objectives if you have identified all of your clients needs and objectives? where these needs and objectives come into conflict with each other or are unachievable? if the client need to compromise to achieve their aims and how should they go about this? if it would help to have your client look at this through what is essential to their future lifestyle vs what is desirable or Solvency the current financial position of the DB scheme and the level of support the Pension Protection Fund might provide.

7 How the current financial position of the DB scheme could affect any future transfer Pension Transfer Analysis & Transfer Value Comparator for the Appropriate Pension Transfer Analysis there needs to be a comparison between the proposed scheme vs the relevant work place scheme (WPS) default arrangement. how the client feels about the Transfer Value Comparator? the transfer value and how this might change in the future. if the Hurdle Rate is achievable based on the client s attitude to risk. if the Critical Yield is achievable based on the client s attitude to Allowance discussing Lifetime Allowance (LTA) impacts with your client and the possible tax implications for them. if the client has a current or potential future LTA issue and would this affect the critical yield?

8 Dependants if your client is married/in a civil partnership, were both parties involved in the discussion? if your client is aware that if they transfer their DB benefits they will lose any spouse s/civil partner s automatic pension. if important to your client, were alternative solutions discussed for providing an income for a spouse/civil partner on death? the cost of providing an income for a spouse/civil (Workplace Pension) have you compared the advantages and disadvantages of the proposed scheme and the relevant WPS default arrangement? whether your client needs a broad range of complex funds that require ongoing rebalancing, given their risk profile, and knowledge and experience of investing. the proposed product charges, including those for the underlying investments, with the actual charges in the WPS default arrangement, and how the level of charges could affect the income your client will ultimately receive.

9 Whether ongoing Advice is necessary, given these points, or whether the client is likely to be better off taking ad hoc Advice when Widows Limited. Registered in England and Wales No. 3196171. Registered office in the United Kingdom at 25 Gresham Street, London EC2V 7HN. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Financial Services Register number 04/21