Web viewReview of Existing Group Pension Arrangement(s) INSTRUCTION TO USER – The following...

Review of Existing Group Pension Arrangement(s)

INSTRUCTION TO USER – The following section has been designed for inclusion within a report generated by the PPOL suitability report writing solution. You will need to use the PPOL software to create a report containing an Introduction section and any other required recommendation sections in the usual way. Once you have downloaded the report created via PPOL to Word, simply copy and paste the relevant section(s) below into the report as appropriate and then edit the text to reflect your individual requirements. You may also wish to replace the Introduction Section with the Corporate Introduction doc within PPOL Docs. It is also recommend that you include the accompanying Notes on Financial Products and Risk Warnings within the Appendix of the resultant report.

The text has been colour coded to aid with your understanding. Where the text is highlighted in blue this tends to suggest that the text may not be appropriate in all instances, and you may need to delete some or all of it. Where the text is highlighted in red, this will require your input.

<USE THIS SECTION WHERE THE EMPLOYER HAS AN EXISTING GPP>

Please find below a review of your existing group pension arrangements. Further information concerning the highlighted group pension arrangements can be found in the section entitled Notes on Financial Products in the Appendix of this report. Please note - The fund and transfer values illustrated below will be subject to daily fluctuations.

Further information concerning the past performance of your existing group pensions can be found in the section entitled Investment Fund / Portfolio Information at the back of this report. I do stress that past performance is no guarantee of future performance.

Group Personal Pension Plan – <INSERT SCHEME REF HERE>

Scheme Name

No. of Scheme

members

Total Gross Employer

ContributionFrequency

Total Gross Employee

ContributionFrequency

Scheme Fund Value

Scheme Transfer

ValueScheme NRD

<INSERT> <INSERT> <£INSERT> <INSERT> <£INSERT> <INSERT> <£INSERT> <£INSERT> <INSERT>

The group pension fund value is invested as follows:

Fund Risk Rating Allocation

<INSERT> <INSERT> <INSERT>

The group pension scheme includes the following:

Policy Benefits & Features

Tax Free Cash Entitlement – It is usually possible for members to take 25% of their individual member pension pot as a tax free cash payment (Pension Commencement Lump Sum). However for some policies established prior to 6th April 2006 higher amounts are available.

<DELETE PARAGRAPH WHICH IS NOT APPLICABLE>

I can confirm that no scheme members have a tax free cash entitlement in excess of 25%.

I can confirm that one or more scheme members have a greater than 25% tax free cash entitlement within this scheme. As such if these members were to transfer their fund values to an alternative pension arrangement this enhanced entitlement could be lost and their Pension Commencement Lump Sum entitlement would revert to the standard 25% of their fund value on retirement.

Pension Contribution Insurance Benefit – The current group pension plan includes Pension Contribution Insurance Benefit. In the event of members being unable to work due to illness or injury for a pre-determined period of time, the insurance company will credit member pots with contributions on their behalf; thereby avoiding the necessity for them to make the plan paid-up due to a lack of affordability. If you were to transfer this group pension, the members would lose this important benefit.

<INCLUDE IF APPLICABLE>

The employee contributions are presently insured through a Group Income Protection plan which includes pension payment protection. In the event of members being unable to work due to illness or injury for a pre-determined period of time, the insurance company will credit member pots with contributions on their behalf; thereby avoiding the necessity for them to make the plan paid-up due to a lack of affordability. If you were to transfer this group pension, the members would lose this important benefit.

Life Insurance – The GPP plan incorporates an element of additional life cover. In the event of a member’s death before their chosen retirement age, their nominated beneficiaries would receive an additional lump sum in addition to a return of the member’s pension fund. If you were to transfer this group pension the members would lose this benefit.

Stakeholder Guarantee - Although the charging structure of this group pension contract is not “stakeholder friendly” in the true sense of the word, the holding company have issued a guarantee to ensure it will not suffer annual charges in excess of a stakeholder pension.

Guaranteed Annuity Rate - This group pension plan incorporates a guaranteed annuity rate which could prove valuable when compared to the annuity rates available on the open market at the time of the members taking benefits. However, it is worth bearing in mind that a number of companies place restrictions on the "shape" of benefits the annuity can provide if the guaranteed annuity rate is to be applied. Usually if any other basis is required then current annuity rates will apply. I do stress that if you were to transfer this group pension members would lose this guaranteed annuity rate for an unknown rate which could turn out to be less when the member came to take an income from their pension pot. Although a guaranteed annuity rate is obviously an important potential benefit it should still be balanced with the overall scheme pension retirement objectives.

COMPLIANCE TIP TO USER - Please insert below details of the guaranteed annuity rates and any restrictions that may apply e.g. the annuity may have to be established on a single life basis, with no escalation etc. You should also confirm whether these restrictions reflect the individual member requirements, and how the guaranteed rates compare to those currently available on the open market.

The guarantee available for members is <£INSERT> per £1,000 of fund value and this will apply provided the annuity is established by a retiring member on the following terms: <INSERT ANNUITY TERMS e.g. single life, guarantee period etc.> For comparative purposes, if a retiring member

reaching the scheme retirement date were to purchase a comparable annuity on the open market they could receive a rate of <£INSERT> per £1,000 of fund value.

Guaranteed Minimum Pension - Please be aware that although this group pension plan does not incorporate a guaranteed annuity rate per se, but it does provide members with a Guaranteed Minimum Pension of <£INSERT> per annum, even if there was no further fund growth within the members plan values.

Future growth within member’s pension pots could mean their final guaranteed annuity is worth more than this minimum amount. Based on a typical member who is the average age of the current scheme members, were you to transfer the scheme, assuming a growth rate of <INSERT %> per annum, the new fund value could be worth <£INSERT> at the scheme retirement age. Based on current annuity rates, this could buy the member an annuity of <£INSERT> per annum. In order to match the current scheme guaranteed annuity income of <£INSERT>, the new group pension fund would have to grow to <£INSERT>.

It is possible that this could prove a valuable benefit to members when compared to the annuity rates that could be obtained on the open market in the future. If you were to transfer this group pension, the members would lose this potentially valuable benefit.

<SELECT RECOMMENDED ACTION>

1. <TRANFSER>

I have recommended that you transfer your existing group pension benefits to an alternative arrangement for the following reasons:

There would be no financial penalty to the members incurred on transfer This plan is not flexible enough to fulfil the qualifying criteria of the employer pension auto-

enrolment legislation being phased in between October 2012 to February 2018 The scheme cannot obtain auto-enrolment certification This group plan does not provide the necessary flexibility to allow members to tailor their

retirement benefits around their changing needs and circumstances So the pension assets can be self-invested by members within a SIPP which permits

investment into a much wider range of investments compared to the existing scheme So the scheme can be administered and invested via a Wrap or Platform which provides

greater flexibility and control for the employer and the members in terms of the implementation and management of the scheme assets

There is only a default investment fund for each attitude to risk with no further choices The present scheme provider cannot accept salary sacrifice (an employer priority) as a way

of member contributions being received into the scheme The current reversionary bonus rate applying to the scheme With Profit Fund is only <INSERT

%> per annum The annual bonus rates which have been applied to the schemes With Profit fund in recent

history have been poor The bonus rates declared by a life company are not an explicit reflection of the performance

of the underlying scheme assets held within the With Profit fund. In contrast a unit linked investment, such as I am proposing offers full transparency and its value is a true reflection of the underlying scheme assets

The investment fund choices available to members are quite restrictive and it is my view better prospects for growth on the scheme assets would be achieved elsewhere

The Free Asset Ratio of the scheme With Profit fund is <INSERT %>. This is low when compared to others in the market place. The Free Asset Ratio is a measure of the company's With Profit fund’s assets over its liabilities and can be considered a useful indication of the likely returns the scheme will receive in the future

Although market value adjustments may be reduced or removed in time, it is impossible to provide any indication as to when they will no longer be applied in their entirety

A transfer will crystallise the terminal bonus applying to the With Profit fund The only fund available under this group pension plan is With Profits which does not offer

the prospect of greater returns for the members and as such, I have disregarded the option of an internal fund switch in favour of a provider with greater investment choices

The range of investment opportunities available under this group pension is restrictive. As such I have disregarded the option of an internal fund switch

There are no suitable alternative investment opportunities available under your existing pension. As such I have disregarded the option of an internal fund switch

It is possible to transfer your existing group pension plan to an alternative group pension plan with a more competitive charging structure. A summary of the charges of your existing plan and the proposed alternative can be found later in this report

This existing group plan offers limited online functionality You have been extremely disappointed by the service you have received from the present

group pension plan provider There have been a number of questions raised concerning the financial strength of the

group pension plan provider in recent times The group pension holding company has closed their books to new business. No new

contributions can be accepted to the scheme which is unacceptable to you as employer, the members and ourselves as your advisers

Death benefits of the scheme are inferior is so much as the member beneficiaries would only receive a return of contributions under this group pension and not a return of the members fund value under the proposed alternative, which is greater

Although member death benefits will reduce by <£INSERT> immediately following transfer due to the one-off exit charges incurred, I believe the potential for enhanced returns to members provided by the proposed alternative will soon compensate for this fact

Although guaranteed annuity rates currently apply to this group pension plan, I believe the potential for long term growth offered by the company’s With Profit fund is limited and the overall effect of the guaranteed annuity rate is therefore of limited benefit to members

I have calculated that the proposed alternative group pension will need to grow at a rate of <INSERT %> until the scheme retirement date in order to match the guaranteed annuity rate / guaranteed pension provided by this plan. Although I believe this growth rate is achievable and commensurate with the company / members risk profile I do stress this is not guaranteed

To absolve the scheme trustees of any additional responsibility and onerous administration as a result of the Pensions Act 2004 (if existing scheme is occupational)

<INSERT ADDITIONAL REASONS HERE>

2. <INTERNAL FUND SWITCH>

The existing group pension has members with differing attitudes to risk. Based on the attitudes to risk set out below, I have recommended the following internal fund switches for those members and for the reasons detailed below:

<INSERT ATR i.e. LOW>

Fund to be transferred % Fund to transfer into %

<INSERT ATR i.e. LOW to MEDIUM>


<INSERT ATR i.e. MEDIUM>


<INSERT ATR i.e. MEDIUM to HIGH>


<INSERT ATR i.e. HIGH>


This group pension already meets the minimum qualifying scheme criteria for the auto-enrolment legislation requirements of the business and there is no need to make any changes beyond investment selection

This scheme has been certified as a qualifying scheme for auto enrolment purposes Members can transfer in other pensions as well as transfer their funds away which offers

flexibility to the membership The current investment funds have performed below average since our last review The current reversionary bonus rate applying to the scheme With Profit Fund is only <INSERT

%> per annum The bonus rates declared by a life company are not an explicit reflection of the performance

of the underlying scheme assets held within the With Profit fund. In contrast a unit linked investment, such as I am proposing offers full transparency and its value is a true reflection of the underlying scheme assets

The annual bonus rates which have been applied to the scheme With Profit fund in recent history have been poor

Although market value adjustments may be reduced or removed in time, it is impossible to provide any indication as to when they will no longer be applied in their entirety

The Free Asset Ratio of the scheme With Profit fund is <INSERT %>. This is low when compared to others in the market place. The Free Asset Ratio is a measure of the company's With Profit fund’s assets over its liabilities and can be considered a useful indication of the likely returns the scheme will receive in the future

Equities have traditionally outperformed fixed interest securities over the longer term. Therefore to maximise the return from a With Profit fund, there must be a reasonably high percentage of the underlying scheme assets invested in equities (ie in excess of 45%). Having analysed the asset allocation of the scheme With Profit fund, I can confirm that the percentage of the equity allocation is low in relative terms. This will in turn affect the fund’s potential for long term capital growth of the scheme assets

A fund switch will crystallise the terminal bonus applying on the scheme With Profit fund The recommended funds have been more consistent in terms of providing above average

sector performance

The recommended funds have been awarded a Fund Rating for quality by <INSERT> The recommended funds have provided superior returns over the past years It will reduce the volatility (risk) currently associated with the scheme assets as per your

stated objective The recommended investment strategy will align members portfolios more closely to their

stated attitude to investment risk The consensus market outlook for the recommended sector(s) is positive With a large percentage of scheme members approaching retirement, I have recommended

that you switch more of your group pension plan assets into a lower risk environment After discussing your dissatisfaction with the performance of this group pension plan to

date, it was agreed that we would look at the opportunity of investing the scheme assets in a professionally managed environment, such as a “manager of managers”, “fund of funds” or ‘’model portfolio’’ type investment


When undertaking a switch of funds, I would draw your attention to the following important information:

o Past performance is used as a guide only, and is no guarantee of future performance.o There is no guarantee that the newly recommended funds will perform better than the

existing funds.o Some funds have a higher level of volatility then others, particularly those that invest in

emerging markets, concentrate investment in one industry or geographical location, or have an investment strategy to hold a concentrated portfolio of a small number of stocks.

o Although external fund links bring an additional layer of charge, it is my opinion that the potential for outperformance gained from the quality of the fund(s) and manager(s) more than outweighs these additional charges.

3. <RETAIN>

I have recommended this group pension be retained for the following reasons:

This group pension already meets the minimum qualifying scheme criteria for the auto-enrolment legislation requirements of the business and there is no need to make any changes

This scheme has been certified as a qualifying scheme for auto enrolment purposes New eligible employees can be added at any time providing membership does not fall below

<INSERT No.> I am satisfied with the performance of this group pension to date Members can transfer in other pensions as well as transfer their funds away which offers

flexibility to the membership A salary sacrifice scheme is in operation for employee contributions and working successfully A penalty would be incurred on the transfer of this group pension The charging structure of this group pension is competitive when compared to similar group

pensions available in the market place The group pension provider remains financially strong The group pension provides additional benefits which could prove valuable to members in

the future It offers additional member benefits already such as waiver of contributions, indexation and

premium holidays <INSERT ADDITIONAL REASONS HERE>

4. <PAID UP>

I have recommended this group pension be made ‘Paid Up’ for the following reasons:

The existing plan contributions from employer and employee continue to attract charges in excess of more modern plans within the current market place

The members fund values will all be reduced should a transfer take effect due to the application of exit penalties


Group Pension Recommendation

Auto-enrolment

The government has introduced legislation making it easier for people to save for their retirement. Employers will be required to enrol their workers into a qualifying workplace pension scheme if they are not already in one. From October 2012 through to February 2018, all employers have to automatically enroll workers who:

Are not already in a qualifying workplace pension scheme Are at least 22 years old Are below state pension age Earn more than £9,440 a year (2013/14) Work or ordinarily work in the UK (under their contract)

If workers do not qualify to be automatically enrolled they still have the right to join the scheme via an ‘Opt In’ which the employer must allow.

<Insert Business Name here>

You are an employer with a staging date of <INSERT DATE> based on your current number of employees and you do not have a qualifying workplace pension scheme in place.

<SELECT PREFERRED RECOMMENDATION PARAGRAPH>

1. <DO NOTHING>

I believe it is in your best interests to wait until nearer to your own specific staging date before planning your employee’s retirement. I am making this recommendation for the following reasons:

Not all of your employees are qualifying You have a high staff turnover and this is likely to continue You expect your employees to reduce which will defer your present staging date Your profitability is not yet sufficient to incur the additional pension costs You anticipate on-going changes to the structure and shape of your business You need to segregate your employees and upgrade your HR systems and controls <INSERT ADDITIONAL REASONS HERE>

It is extremely important however that we review your business situation on a regular basis to ensure that any actions required are undertaken well ahead of the anticipated staging date. I therefore recommend that you contact me no later than 12 months from now so that your business circumstances can be reassessed at that time.

2. <COMPLY>

I believe it is not in your best interests to wait until nearer to your own specific staging date to begin planning your employee’s retirement.

<USE THE FOLLOWING IF RECOMMENDING NEST>

I have recommended therefore that you join the National Employment Savings Trust (NEST) pension scheme with immediate effect for the following reasons:

NEST is a qualifying pension scheme established by law to support the introduction of automatic enrolment

NEST has a public service obligation to accept all employers that want to use it as a pension scheme to fulfil their duties under the Pensions Act 2008.

NEST Corporation as the trustee of NEST has certain powers which they can exercise to ensure that the scheme is run in the interests of members

NEST is open to UK employers of any size and is designed to meet the needs of people who are largely new to pension saving such as your own workforce

While invested members funds will benefit from tax advantaged growth Member benefits can be taken at any time from age 55 and the requirement to buy an

annuity at age 75 was scrapped from 6th April 2011 25% of un-crystallised members pension funds can be taken as a Pension Commencement

Lump Sum (tax free cash) payment There will be no death benefit tax charge on any member un-crystallised pension fund on

their death before age 75 assuming the total value of the members pension benefits are within the lifetime allowance. This will help ensure the members beneficiaries are looked after, financially and in a tax efficient manner, upon their death

Members will receive tax relief on their contributions Any employer contributions will qualify as a business expense which can be offset against

the business's taxable profits You wish to keep the membership investment choices fairly simple and this plan will offer

sufficient fund choice for your needs You wish to keep the associated costs and charges to an absolute minimum and this plan has

been designed to achieve this objective <INSERT ADDITIONAL REASONS HERE>

There are a number of factors to be considered when selecting the most appropriate pension provider.

Investment Options and Performance

There is obviously no means to categorically predict future investment performance. Although it should be stressed that past performance is no guarantee of future performance, it can act as a useful guide. It is also beneficial to compare the range of investment options available. Flexibility to switch between a wide range of strong performing investment opportunities is important. The membership will have differing attitudes to risk which could change, and as a result they may wish to take an alternative investment strategy in the future.

Charging Structure

The effect of charges is reflected in the Reduction in Yield of the selected pension. The Reduction in Yield, outlined in the members illustrations provided, includes deductions for expenses, adviser remuneration and other adjustments. For further information concerning charges, I refer you to the employer illustrations and Key Features Document provided.

Financial Strength

A pension is a long term investment. As such, it is imperative to select a group pension provider who is financially secure and will be able to meet all their obligations to policyholders in the future.

Summary of Recommendations

Having compared the whole of the market place, I have recommended the following workplace pension for the reasons detailed below:

Ownership Pension CompanyGross Single

Employee Contribution

Gross SingleEmployer

Contribution

Gross p/mEmployee

Contribution

Gross p/mEmployer

Contribution

Scheme NRD

<INSERT> NEST NEST CORPORATION <INSERT> <INSERT> <INSERT> <INSERT> <INSERT>

National Employment Savings Trust - Pension Scheme

<ADD FREE FLOW HERE REGARDING PROVIDER> NEST has a firm financial footing despite it being a new scheme. This is because it has agreed

a loan with the Department for Work and Pensions which will pay for the scheme to be set up and cover the expected funding shortfalls in earlier years while the membership is growing. This will be repaid through member charges

There are currently no charges for employers to set up and use NEST Members can get the key information they need from the NEST website or UK-based contact

centre. This means fewer questions from workers and so less time spent by yourselves as employers addressing these issues

Every NEST member has one retirement pot for life so you as the employer won’t have to manage the accounts of workers who have moved on

We as you advisers can take on the administration of your NEST pension accounts through a simple delegation process

NEST corporation will always communicate clearly and transparently with its members and supports them as they save

NEST can be used as a sole scheme for all the workers in an organisation where there is no current pension provision in place, which is in line with your wishes

NEST can be used for a particular group of workers alongside an existing scheme already in place for a different category of workers which is in line with your current circumstances and wishes

NEST can be used as an entry level scheme where there is an existing scheme that has a waiting period which is in line with your wishes

NEST can be used as a base scheme to help employers comply with their new employer duties which is in line with your wishes

NEST can be used as a scheme that eligible workers are enrolled into if they don’t voluntarily join an existing arrangement which is in line with your wishes

The employer can choose to base contributions on a preferred definition of pay NEST is run for the benefit of members as a trust-based scheme NEST allows you to provide access to a pension scheme for all your workers If you hire someone who already has a NEST pot, you don’t need to set up a new pot for

them It is flexible, you can use NEST to pay minimum contributions or choose to offer more if you

want to It is adaptable, i.e. it can work alongside another scheme, so you may use NEST for a

particular group of workers or your whole organisation

It has no charges for day to day services and has low member annual management charges meaning potentially better growth prospects on contributions from you and your workers

It is possible to switch the underlying funds of members fund values free of charge

<USE THE FOLLOWING IF RECOMMENDING A NEW GPPP>

I have recommended therefore that you commence a new qualifying Group Personal Pension Plan for the following reasons:

This type of pension will satisfy the employer responsibility and minimum criteria for auto-enrolling your employees into a workplace pension in line with auto enrolment legislation

It provides the opportunity for the business to offer its employees a valuable benefit to build up their own pension fund ahead of your auto enrolment staging date

It will allow you to set different payment limits for different categories of staff, thereby promoting employee recognition

It will assist with the retention of your employees that will remain attracted by the pension benefits available through your employment

While invested members funds will benefit from tax advantaged growth Member benefits can be taken at any time from age 55 and the requirement to buy an

annuity at age 75 was scrapped from 6th April 2011 25% of un-crystallised members pension funds can be taken as a Pension Commencement

Lump Sum (tax free cash) payment There will be no death benefit tax charge on any member un-crystallised pension fund on

their death before age 75 assuming the total value of the members pension benefits are within the lifetime allowance. This will help ensure the members beneficiaries are looked after, financially and in a tax efficient manner, upon their death

Members will receive tax relief on their contributions Any employer contributions will qualify as a business expense which can be offset against

the business's taxable profits You wish to keep the membership investment choices fairly simple and this plan will offer

sufficient fund choice for your needs You wish to keep the associated costs and charges to an absolute minimum You are comfortable paying slightly more than stakeholder charges to gain access to a

broader and more sophisticated range of investment opportunities <INSERT ADDITIONAL REASONS HERE>

There are a number of factors to be considered when selecting the most appropriate pension provider.

Investment Options and Performance

There is obviously no means to categorically predict future investment performance. Although it should be stressed that past performance is no guarantee of future performance, it can act as a useful guide. It is also beneficial to compare the range of investment options available. Flexibility to switch between a wide range of strong performing investment opportunities is important. The membership will have differing attitudes to risk which could change, and as a result they may wish to take an alternative investment strategy in the future.

Charging Structure

The effect of charges is reflected in the Reduction in Yield of the selected pension. The Reduction in Yield, outlined in the members illustrations provided, includes deductions for expenses, adviser remuneration and other adjustments. For further information concerning charges, I refer you to the employer illustrations and Key Features Document provided.

Financial Strength

A pension is a long term investment. As such, it is imperative to select a group pension provider who is financially secure and will be able to meet all their obligations to policyholders in the future.

Summary of Recommendations

Having compared the whole of the market place, I have recommended the following pension for the reasons detailed below:

Ownership Pension CompanyGross Single

Employee Contribution

Gross SingleEmployer

Contribution

Gross p/mEmployee

Contribution

Gross p/mEmployer

Contribution

Scheme NRD

<INSERT> GPP <INSERT> <INSERT> <INSERT> <INSERT> <INSERT> <INSERT>

<INSERT PROVIDER> Group Personal Pension Plan

<ADD FREE FLOW HERE REGARDING PROVIDER> They are a market leader in the group pensions market place Their scheme has been developed with auto-enrolment legislation in mind Their scheme is a qualifying scheme and has auto enrolment certification as such The charging structure of the recommended group pension plan is competitive when

compared to similar plans in the market place Although the charges of the proposed group pension plan are higher than certain others in

the market place, I believe the greater investment opportunities afforded by the extended range of professionally managed specialist funds will result in enhanced scheme returns over the remaining term of investment. I do stress past performance is no guarantee of future performance

They offer a rebate to the scheme annual management charge when the overall pension fund reaches a predefined size. I refer you to the employer illustrations for further information of this

The research tool I have used to review the group pension market place identified them as the most suitable and competitive solution for the business needs and objectives

They have provided us and our clients with an excellent service in the past They provide access to a wide range of investment opportunities making it simple for

members to vary their investment strategy to reflect changing market conditions, or should their risk profile change in the future

They provide access to a number of world-leading fund managers and investment houses. This not only provides greater scope to create a bespoke portfolios tailored to members individual risk profile and objectives; but the resultant diversification will also diminish the members associated investment risk

This provider offers a single consolidated statement to both the employer and scheme members which significantly reduces the typical administration and paperwork associated with running a group pension scheme

It is possible to switch the underlying funds of members fund values free of charge

It is possible to access this pension via a Corporate Wrap, providing all manner of administrative efficiencies

They provide the membership with access to a range of model investment portfolios They provide the membership with access to discretionary fund management They provide the facility for the employer and members to manage their investment online,

providing access to instant valuations, fund information and other investment analysis tools They offer the membership with a deferred SIPP option under their pension arrangement,

which could prove useful for members who wish to self-invest in the future. Members will not incur any additional charges for this option unless they make use of these SIPP features

This group pension offers members a seamless transition into other retirement options which could prove advantageous when taking benefits in the future

Pension Contribution Insurance is available under this pension They offer numerous ways of crediting employee contributions to the scheme including a

salary sacrifice or exchange style arrangement <INSERT ADDITIONAL REASONS HERE>

Investment Strategy

<USE FOR GPP IF RECOMMENDING MODEL PORTFOLIOS>

Different types of assets such as equities, property or bonds behave in different ways. The first step in forming any investment strategy is to achieve the right balance between major asset classes. This asset allocation is fundamental to meeting the employer and membership investment goals in the medium to long term.

Model portfolios offer a clearly defined risk and return against an appropriate benchmark. Making use of the resources and expertise of investment professionals, they combine asset allocation with fund selection to create a range of model portfolios. They consider the historic rates of return of different asset classes over long periods of time to create a portfolio of investments to reflect member’s attitude to risk and investment objectives.

In view of the different risk profiles and investment objectives of the membership, I have recommended that the available monies be invested as follows:

Portfolio Name Portfolio Objective Risk Rating Allocation

LowLow Medium

MediumMedium High

High

I have recommended the above for the following reasons:

The above portfolios reflect the memberships stated risk profiles and investment objectives The provider has significant experience and expertise in providing model portfolio solutions The portfolios can meet the growth and income requirements of the membership The provider of the portfolios automatically include an expert research and fund selection

process with robust risk controls The portfolios have performed well when compared to their sector targets and benchmark

The portfolios are proactively reviewed and rebalanced on a regular basis to reflect changes in market conditions and the agreed attitude to risk

The portfolios offer a low cost fully passive managed approach to investment strategy The portfolios offer a fully actively managed approach to investment strategy The portfolios offer a combined passive approach with actively managed tactical asset

allocation <INSERT ADDITIONAL REASONS HERE>

I recommend that you contact me regularly (unless other servicing arrangements have been agreed) to review the performance of the group pension plan investment strategy and continued suitability to the recommended Model Portfolio(s).

Further information concerning the past performance of the recommended investment strategy can be found in the section entitled Investment Fund / Portfolio Information at the back of this report.

<USE FOR GPP IF RECOMMENDING A DFM>

I have recommended that the member’s monies be invested with a Discretionary Fund Manager. Discretionary Fund Management ensures the underlying assets of the portfolio are invested in accordance with your specific risk profile and agreed investment objectives of each member. The portfolio is managed on a regular basis, and all the daily investment decisions are the responsibility of the dedicated investment manager. There are a number of advantages associated with a discretionary fund management including:

Member’s portfolios will be professionally managed on a daily basis to ensure they remain closely aligned to their risk profile and continue to reflect their collective needs and investment objectives.

Provides members with access to a broad range of funds and assets at institutional terms, some of which are not normally available to private investors.

Provides members with access to their own dedicated investment manager (if required) offering a more personal service, regular contact

Members can request additional benefits such as bespoke reporting including consolidated tax statements.

Members retain an opportunity to dictate investment preferences e.g. ethical, exclusion of tobacco etc.

Members will benefit from an investment manager who exists “closer to the market” and therefore can switch funds quickly to take advantage of potential investment opportunities.

Members can monitor their fund performance against a pre-determined agreed benchmark


Discretionary Fund Manager Portfolio Name Investment Objective Risk Rating Allocation

LowLow Medium

MediumMedium High

High


They provide their investment managers with a degree of flexibility and discretion, whilst having robust control systems in place centrally to ensure they are performing to expectations

They provide access to a broad and diverse range of investment vehicles via their portfolios They have a clear and structured process in place for regular reporting They offer a high level of flexibility to ensure members portfolios are set up to meet their

investment goals and requirements The charging structure of the recommended provider is competitive when compared to

similar services in the market place The research tool I have used to review the market place identified them as offering the

most suitable and competitive discretionary managed service to meet the members needs and objectives

They have provided us and our clients with an excellent service in the past <INSERT ADDITIONAL REASONS HERE>

I recommend that you contact me regularly (unless other servicing arrangements have been agreed) to review the performance of the group pension plan investment strategy and continued suitability to the recommended Discretionary Fund Management Service.


<USE FOR GPP IF RECOMMENDING INDIVIDUAL FUNDS>

I have recommended that the member’s monies be invested collectively with others to benefit from the inherent advantages of working as part of a group. A portfolio of funds can be assembled to match member’s investment objectives and attitude to risk. Funds are typically selected on the basis of their specified investment aims, their past investment performance, their volatility and other factors such as fees.


<INSERT RISK LEVEL> Risk Members

Fund Sector Risk Rating

Fund Rating

Initial Charge

Annual Managemen

t Charge

Total Expense

RatioAllocation

<REPEAT THE ABOVE TABLE FOR DIFFERENT MEMBER RISKS>


The above reflects the stated risk profile and investment objectives of the membership You wish to take a relatively simple approach to the members investment where the

strategy is straightforward and not overly complicated The performance has predominately been above the sector average since inception

They have excellent fund ratings - Morningstar apply a fund rating of 1 (poor) to 5 (good) stars to investment funds. This is a risk-adjusted measure of fund performance relative to the fund’s peers within its sector

They have excellent fund ratings - Standard & Poors apply a risk-adjusted measure to a fund’s performance relative to its peers within its sector. The ratings range from A to AAA. Standard & Poors currently only applies a rating to about 20% of all funds

They have excellent fund ratings - OBSR provides Fund Ratings as an independent mark of quality. Based on a proven research process where qualitative research is supported by quantitative analysis, their Ratings are evidence that a fund is, for its type, consistently producing the returns it set out to deliver and will continue to do so. The ratings are Gold, Silver, Bronze, Neutral and Negative. OBSR currently rates about 250 out of a universe of approximately 2500 funds. They do not work to a 'quota' nor are they paid to rate funds

They have excellent fund ratings - Lipper Leader ratings are derived from highly sophisticated formulas that analyse funds against clearly defined criteria. Funds are compared to similar funds and only those that truly stand out are awarded Lipper Leader status. Funds are ranked against their peers on each of four measures: Total Return, Consistent Return, Preservation and Expense. For each measure, the highest 20% of funds in each peer group are named Lipper Leaders. The next 20% receive a rating of 4, the middle 20% are rated 3, the next 20% are rated 2, and the lowest 20% are rated 1

By investing in an actively managed fund you are not only gaining exposure to a range of asset classes, but the asset allocation and specific stock selection is being professionally managed on a daily basis

A With Profit fund invests in a selection of fixed interest securities, equities, property and cash. The returns achieved from a With Profit fund do not explicitly reflect the performance of the underlying assets, but are instead a function of the bonuses declared by the individual life company. The With Profit Fund aims to smooth the returns of your investment. The effect of smoothing is that you are likely to see a steadier return year on year rather than watching your investment rise and fall directly in line with the traditional stock market. However the value of a With Profit fund can still fall as well as rise. For example, the insurance company reserves the right to apply a Market Value Adjustment

A Distribution fund is actively managed and provides the ability to withdraw the natural distributions from the underlying fund as a regular income without eroding the units of the underlying capital

Multi-manager funds provide access to a range of investment managers under the umbrella of a single fund, with the fund normally able to negotiate special terms that are not available to individual investors. The multi-manager uses their expertise to select and assess the best performing fund managers in each asset class and regional sector. To this end, you will benefit from two layers of management expertise as well as considerable diversification. The asset allocation is set by the multi-manager who also monitors the performance of the underlying funds on a daily basis and re-balances the portfolio where necessary

UK equities have traditionally provided good risk adjusted performance over the longer term and act as an ideal core holding. The UK stock market is one of the largest in the world and is well regulated

Exposure to global equities will provide greater diversification. The economies of the world are often at different stages in their economic and investment cycles. Therefore by investing in different markets you can diminish the overall volatility of your investment portfolio

Gilts are UK government securities. These are very safe, less volatile than equities and should provide a relatively stable return over the medium to long term

Corporate bonds are fixed-interest securities issued by companies. They are generally riskier than gilts and therefore tend to pay a higher rate of interest. However they tend to be less

volatile than equities and should provide a relatively stable returns over the medium to long term

Commercial property has generally provided relatively stable long term growth in both income and capital over the medium to long term. It is also considered a valuable asset class to hold within an investment portfolio, as it provides diversification away from equities and fixed interest securities

Absolute Return funds aim to achieve positive returns regardless of investment market conditions by investing in a variety of securities and derivate instruments. They typically aim to return a small margin above the bank base rate and are normally considered to be less volatile than equities or fixed interest securities

To provide further diversification and the potential for superior returns, I have recommended some exposure to some niche / specialist funds as I believe the outlook for these sectors is positive at the current time

Exchange Traded Funds provide the ability to track the performance of a chosen market index, which in turn provides a broad market exposure, a high degree of diversification and reduced risk. They are cheaper than many traditional pooled funds and are ideal investments to build highly effective portfolios that balance risk and return


I recommend that you contact me regularly (unless other servicing arrangements have been agreed) to review the performance of the group pension plan investment strategy and continued suitability to the recommended individual funds.


<INCLUDE FOLLOWING PARAGRAPHS FOR ALL GPP INVESTMENT STRATEGIES>

Please bear in mind that the outlook for market sectors can change, certain asset classes and funds will perform better than others and as a result member’s asset allocation may become unbalanced over time which will require corrective action.

<SELECT PREFERRED WORDING>

This will be undertaken automatically by the recommended investment strategy provider(s)

This will be undertaken by us at the annual review date for the scheme

There may be occasions when an individual fund or funds that populate a member’s portfolio have a higher risk rating than the members stated attitude to risk. If this is the case, then the overall risk rating applied to all of the combined funds being recommended is still designed to meet the members stated risk profile.

I would wish to stress that higher charges can have an effect on the scheme investment performance. In essence, where the investment strategy of the new group scheme has higher charges than the previous scheme it will need to perform better in order to cover any increased charges.

<USE FOR NEST IF RECOMMENDING RETIREMENT YEAR FUNDS>

I have recommended that the member’s monies be invested within the default investment strategy represented by a range of 45 ‘life-styling’ funds known as the Nest Retirement Date Funds as follows:

Fund Name ‘Life-styling Stage’ No. of membersNEST 2013 Retirement Fund Consolidation 2NEST 2020 Retirement Fund Growth 5NEST 2030 Retirement Fund Growth 7NEST 2040 Retirement Fund Growth 10NEST 2050 Retirement Fund Growth 12NEST 2055 Retirement Fund Foundation 7

<THE TABLE WILL TYPICALLY REPRESENT THE MEMBERS AGES AND STATE RETIREMENT DATES>


Members can simply be enrolled into the fund that targets their year of expected retirement which unless specified otherwise will be their state retirement date

Each fund has a consistent objective which is to target investment returns in excess of CPI inflation after all charges over the longer term

The target is a realistic one of CPI + 3 per cent The aim of each fund is to deliver this objective by saving throughout three phases or

periods known as Foundation, Growth and Consolidation As members get older these funds will transition between the phases with lifetime savers

spending most time within the ‘Growth’ phase with consolidation expected to commence around on a phased basis 10 years before the members retirement

Each fund will have a set of ‘building block’ funds and an asset allocation which always remains appropriate to its target date

Funds can be blended between return seeking and income seeking objectives to manage the on-going risk profile

Funds will be blended between active and passive management strategies Transition between phases is managed dynamically, based on what is happening in financial

markets, the economy and member characteristics The length and timing of transition is managed via NEST Corporation investment committee <INSERT ADDITIONAL REASONS HERE>

Options Available

<INCLUDE IF OPTION IS TAKEN (ONLY FOR GPP)>

Pension Contribution Insurance - This is designed to help safeguard member’s pension contributions in the event of them being unable to work through illness or injury for a prolonged period of time. This is an invaluable benefit because if they did become seriously ill or disabled and were unable to work, they would find it difficult to keep paying regular contributions to their plan and their pension and retirement standard of living could suffer as a result. You agreed to include this benefit which is reflected in member illustrations.

Indexation - This will result in the member’s regular contributions increasing automatically each year, which will help ensure that their income requirements are met in retirement. You agreed to include this option with employer and members contributions increasing annually by <INSERT %>

<INCLUDE IF OPTION IS DECLINED (ONLY FOR GPP)>

Pension Contribution Insurance - This is designed to help safeguard member’s pension contributions in the event of them being unable to work through illness or injury for a prolonged period of time. This is an invaluable benefit because if they did become seriously ill or disabled, and were unable to work, they would find it difficult to keep paying regular contributions to their plan, and their pension and standard of living in retirement would suffer as a result.

I confirm you did not wish to include this feature due to the following reasons:

The additional cost was prohibitive Due to the membership’s limited time until retirement You and the membership did not feel this feature was necessary <INSERT ADDITIONAL REASONS HERE>

Indexation - This will result in member’s regular contributions increasing automatically each year, which will help ensure that their income requirements are met in retirement.

I confirm you did not wish to include this feature due to the following reasons:

You and the membership did not feel this feature was necessary You agreed to review the level of your employer and member contributions on a regular

basis which would largely be dictated by auto-enrolment legislation You expected increases to be in line with the uplift in wages over time <INSERT ADDITIONAL REASONS HERE>

<INCLUDE FOR ALL RECOMMENDATIONS>

Membership


It has been agreed that the recommended group pension will be implemented ahead of your ‘Staging Date’ as a small to medium sized business and membership of the scheme will be strictly in line with the current auto enrolment legislation.

It has been agreed that the recommended group pension will be implemented ahead of your ‘Staging Date’ as a small to medium sized business and membership of the scheme will be as follows:

<INSERT HERE DEFINITION AND / OR RESTRICTION WORDING>

Income Requirements in Retirement

Contributions


It has been agreed that the employer and employee schedule of contributions will be strictly in accordance with Teir-1 of the current auto enrolment legislation.

It has been agreed that for the membership of the recommended group pension as set out above, the following contribution levels will be set with effect from the plan start date for the following 12 months: By Employer

Contribution Level Salary Definition Frequency<£INSERT> <INSERT> <INSERT>

By Employee

Contribution Level Salary Definition Frequency<£INSERT> <INSERT> <INSERT>

<REPEAT TABLES IF DIFFERING LEVELS OF EMPLOYEROR EMPLOYEE CONTRIBUTIONS APPLY>

Each scheme member has received an accompanying illustration which provides an indication of the income they could receive from the recommended group pension plan in retirement and the agreed contributions. It is important that we review your group pension provision on a regular basis as the current level of funding may prove insufficient to meet legislation or the members stated income requirements in retirement. If members elect to take part of their pension fund as a tax free cash payment, this will reduce the income they receive from the residual pension fund. The illustration does not include member’s State Pension entitlement.

It is possible for members to obtain a personal forecast of the State Pension they can expect to receive by contacting The Pension Service.

Expression of Wish

I would recommend that all members complete an Expression of Wish Form. This will ensure the proceeds of their pension, subject to the trustee's discretion, are paid to your their chosen beneficiary on their death.

Further Information and Risk Warnings

Further information regarding the recommended product can be found in the Key Features Document provided and the Appendix of this report.

For further information regarding the level of contributions that can be made to, how benefits can be taken from, and the taxation of a group pension arrangement I refer you to the Technical Notes in the appendix of this report. A summary of the Risk Warnings associated with my recommendations can also be found in the Appendix of this report.

Alternative Solutions Considered But Discounted

I confirm due consideration was given to a range of alternative solutions but subsequently discounted for the following reasons:

Group Stakeholder Pension

Although the charges of the recommended group pension are no greater than a group stakeholder at this time, it is worth noting that this could change in the future subject to the provider's discretion. Whereas the charges of a stakeholder plan are capped at 1.5% pa for the first ten years and 1% pa thereafter

Many of the members are sophisticated investors and wish to invest in a group pension vehicle that offers a wider choice of investment opportunities and the flexibility to take benefits in a staggered fashion to suit their future circumstances and objectives

It is not possible to access the recommended investment strategy via a stakeholder pension The investment opportunities available via a group stakeholder pension are more restrictive

then the recommended group pension plan The range of options available via a group stakeholder pension are more restrictive than the

recommended pension plan It is not possible to access the range of specialist investment opportunities required to meet

the different risk profiles of the membership via a group stakeholder pension <INSERT ADDITIONAL REASONS HERE>

Group SIPPs

The membership did not require the facility to self-invest The charges associated with a group SIPP are generally greater than a group personal or

group stakeholder pension plan You and the members are happy to keep the investment strategy associated with your group

pension scheme fairly straight forward and do not require the broader range of investment opportunities available via a SIPP

You and the members have no requirement for the additional options and features associated with a SIPP at this time


National Employment Savings Trust (NEST)

As an employer you required the facility for your employees to be able to transfer in or transfer out their previous or current funds to alternative providers or schemes if their circumstances change

You felt the fund choices were too restrictive You have higher earning employees and did not want a cap on the scheme contributions You preferred to operate a salary sacrifice arrangement for employee contributions <INSERT ADDITIONAL REASONS HERE>

Occupational Pension schemes

You preferred the more flexible provider member contract basis of a group personal pension scheme because of the potential staff turnover expected in your company

You did not wish to undertake any occupational trustee duties <INSERT ADDITIONAL REASONS HERE>

APPENDIX

Risk Warnings – Group Personal Pension Plan

In addition to the risks shown below, I recommend you read carefully the section entitled “risk factors” in the Key Features Document provided which highlights any possible disadvantages of affecting this plan.

For a full explanation of the charges and how they affect your plan, please refer to the employer personalised illustration and Key Features Documents.

The figures on any quotations provided are for illustration purposes only and are not guaranteed.

The value of the scheme investments is determined by the value of the units, the price of which can fall as well as rise. Past performance is no guarantee of future returns.

What members get back is not guaranteed, it will depend on investment performance and the cost of converting the members pension fund into an income for life

The value of member’s pension pots may be eroded by the effect of inflation over time. The recommendations are based on current taxation, law and practice and the current legal

and administrational framework and are based on my current interpretation and understanding of those, all of which may be subject to change.

When members retire, their pensions may be lower than illustrated if:o They stop or reduce any agreed regular contributions.o Investment performance is lower than illustrated.o The cost of converting their pension fund into an income for life is more than

illustrated.o They start taking their pension earlier than their chosen pension age.o Tax rules change.o Charges increase above those illustrated.

It is important to periodically review the value of the scheme investments and members share of this against expectations particularly as members approach their chosen retirement age when it is advisable to transfer some or their entire fund to a more stable investment environment.

Where a property fund has been recommended the value of the fund is based on the valuer’s opinion rather than fact. You should be aware property and land can be difficult to sell – so you may not be able to cash-in this investment when you want to. In extreme market conditions the fund manager may have to delay acting on your instructions to sell your investment.

An investment in corporate bonds is generally less secure than an investment in Government bonds due to the greater possibility of default.

Where a fund invests in overseas markets, changes in currency exchange rates mean that the value of the investment can go up or down.

Where salary sacrifice (or exchange) arrangements are in use, these are contractual agreements. This means that employers must alter the terms and conditions of employment for the employees who choose to opt-in

The employer must ensure that the salary sacrifice (exchange) arrangement is effective in the eyes of HMRC

An employee’s gross salary must not fall below the National Minimum wage as a result of salary sacrifice (exchange)

Employees should be made fully aware salary sacrifice (exchange) is a legally binding contract and may impact on other benefits which are linked to their salary, for example, benefits on death, redundancy payments and over-time rates. Statutory benefits linked to

lower salary may also be impacted such as, basic state pension, statutory maternity, paternity and sick pay and working or child tax credits.

Technical Notes – Pensions

On the 6th April 2006, commonly known as A Day, the government introduced a new set of rules in an attempt to “simplify” the pensions market and provide increased flexibility for individuals in retirement. These included a complete overhaul of the previous pension regimes, which have now been replaced by a single set of rules governing the level of contributions that can be made, how benefits can be taken and the future taxation of pension schemes. A number of these rules have subsequently been revised and a current summary of the main legislation relating to pensions can be found below.

State Pension Age

Historically the State Pension Age has been 60 for women and 65 for men. Between 2010 and 2018, the State Pension Age for women will increase to 65 to ensure equality. The State pension age is planned to further increase to age 66 by 2020 for both men and women and as a result of increasing life expectancy, the Chancellor announced in his 2011 Autumn Statement a further increase to age 67 between 2026 and 2028.

The Lifetime Allowance

The lifetime allowance is the limit on the total amount of pension benefits you can draw from before tax penalties are applied. Excess benefits are subject to a recovery (tax) charge on the balance over the lifetime allowance. The charge is 25% or 55% depending upon whether the excess benefits are taken as an income or a lump sum.

The lifetime allowance is currently £1.5 million Pensions in payment before A Day will be multiplied by a factor of 25:1 to determine the

notional fund value against the allowance. Enhanced Protection, Primary Protection or Fixed Protection may have ring fenced benefits

from the lifetime allowance.

Contributions

There is no difference between different types of pension schemes. It is possible to contribute to both a personal pension and a company pension at the same time.

Individual contributions are unlimited. However there is a limit on the amount of gross contributions that an individual can pay each tax year and receive full tax relief upon. This is restricted to the higher of £3,600 or 100% of salary – subject to the annual allowance.

The annual allowance for the 2013/14 tax year is £50,000. It is possible to offset one-off spikes in contributions in excess of the annual allowance against unused allowances from the previous three years.

Contributions or accruals in excess of the annual allowance are subject to a tax charge at the member’s marginal rate of tax relief. This applies to contributions made by the employee or employer.

Employer contributions count towards the annual allowance. Also, it is up to the Employer's local inspector of Taxes whether or not the entire contribution will be relievable for tax purposes. The HMRC website suggests that a pension contribution when considered as being “wholly and exclusively for the purposes of trade” will qualify for tax relief. Only where there

is a clear non-trade purpose may tax relief be restricted or not allowed. Even where tax relief is granted large employer contributions could have the tax relief spread over a number of accounting periods.

In measuring “defined benefit schemes” against the limit, any annual increase in the pension benefit is multiplied by 16 to convert it to its contribution equivalent.

No tax relief will be granted on contributions paid after age 75.

Retirement Ages

From 6th April 2010, the earliest retirement age rose from 50 to 55. It is still possible to take benefits exceptionally early on the grounds of permanent ill health. It is possible, if scheme rules allow, to take benefits and continue to accrue benefits while in

the same scheme before or beyond scheme pension age. Compulsory annuitisation by age 75 has been scrapped.

Retirement Benefits

From 6th April 2011 the effective requirement for members of registered pension schemes to secure an income, usually by purchasing an annuity with their pension fund, by age 75 has been removed. It is now possible to draw retirement benefits (income and lump sum) after your 75th birthday.

A new retirement framework of Capped and Flexible Income has replaced the previous former rules for Unsecured Income and Alternatively Secured Pension and with effect from 26th March 2013, the maximum Capped Drawdown GAD limit reverts back to the original 120% of the prevailing annuity rate which can be withdrawn in any given policy year. The previous 100% limit was acknowledged by government as being too restrictive. Flexible Income allows those who already meet a minimum income requirement (MIR) to take income without limit from their pension fund. The MIR has been set at £20,000 p.a. of secured pension income.

The whole of an individual’s pension fund can be taken as cash (25% of which will be tax free) under the triviality rules provided their entire pension fund is not more than £18,000. The individual has to be at least 60 years old.

From 6 April 2012, individuals attaining age 60 can exchange ‘personal pension’ benefits for cash under triviality rules even if the main rules above have not been met. This is conditional on the payment not exceeding £2,000, it extinguishes all rights of the individual under the arrangement and not more than one payment has previously been received under a similar scheme.

Tax-free lump sums

It has been possible to take a tax free cash (Pension Commencement Lump Sum) payment of 25% of the fund value from any pension since A Day.

It is possible for an individual to protect any entitlement to a Pension Commencement Lump Sum payment in excess of 25% accrued prior to A Day. However detailed records have to be held and the protection can be lost on transfer.

HMRC have established a fiddly anti-avoidance rule for the “recycling” of Pension Commencement Lump Sum payments. Significant contribution increases over 30% of the lump sum, where a Pension Commencement Lump Sum payment taken in the previous twelve months exceeds 1% of the lifetime allowance will be scrutinised.

Death Benefits

On death before age 75, there will be no death benefit tax charge on an uncrystallised pension fund, assuming the total value of the pension benefits are within the lifetime allowance.

Death on or after your 75th birthday will result in a tax charge of 55% on all uncrystallised pension benefits if taken as a lump sum.

The same 55% tax charge on death will also apply to any crystallised pension benefits, regardless of age.

Investments

There is a single set of investment rules which, subject to DWP (Department of Works and Pensions) requirements, apply to all registered pension schemes.

Any personal use of an asset other than on commercial terms will give rise to an income tax assessment, like a benefit-in-kind.

There is no ban on transactions between connected persons. Small business owners and professional partnerships can transfer their own business

premises and company shares into their pension pots. Scheme borrowing is limited to 50% of scheme assets.

If you have opted for any form of “protection” either enhanced or primary as a result of A Day or fixed protection since A Day it is important that you inform me of this fact, as this could affect my advice concerning your pension planning.

Auto-Enrolment

The Pensions Act 2008 established new duties on employers to help more people save for their retirement. All employers are required by law to automatically enrol certain members of their workforce into a pension scheme and make a contribution towards it. These duties take effect for the largest employers from October 2012 with all other sized employers being phased in until October 2018.

The government has set a minimum percentage that has to be contributed in total which will be based on a band of your gross annual earnings and will include your contribution, your employer's contribution and the tax relief added together. This minimum increases gradually between 2012 and October 2018 at which point the total contribution will be no less than 8% (of which at least 3% will be paid by the employer).

Where employers already provide a pension scheme for their workers, it will need to be checked if it is a qualifying scheme i.e. it meets a number of conditions based on the level of contributions paid or the benefits that members receive. If it doesn’t qualify at the moment, employers may be able to change the scheme rules or amend the terms of the policy so that they will be able to use it.


Nest is a brand new workplace pension scheme designed to make it easy for employers to meet their new workplace pension duties in respect of auto-enrolment. It is open to employers of any size and it is a simple and low-cost pension scheme designed to give its members an easy way of building up a retirement pot. The self-employed are also eligible.

Salary Sacrifice (Salary Exchange)

Salary sacrifice or exchange is an arrangement where an employee gives up part of their future earnings or bonus in exchange for a non-cash benefit. As the salary is being ‘exchanged’ rather than paid, the employee does not pay NICs on the exchanged amount. In addition, the employer won’t pay NICs on the amount of salary exchanged either. The exchanged amount can then be paid to the employee’s pension plan as an employer contribution. The exchanged salary (where agreed) will be included in any employer contribution shown in the provider illustrations provided and annual statements.

The group pension scheme will be tailored to meet the needs of the employer and the employees in the first instance. However, where contributions are agreed between all parties, i.e. employer, employee and group pension provider, via a salary sacrifice or exchange arrangement, the employee decides to opt-in to salary exchange and an amount is agreed between the employer and employee to be exchanged. The employee’s gross salary is reduced by the agreed amount and this money can then be paid into their pension plan.

Salary sacrifice or exchange cannot normally be amended or terminated. The change to the employee’s contract of employment will normally last for the duration detailed in an agreement letter typically 12 months. The employer can decide that certain ‘lifestyle events’ may allow the employee to terminate the agreement earlier than this. Lifestyle events are significant changes to an employee’s circumstances, examples may include the birth of a child, divorce, a change to working hours or starting maternity leave.

Notes on Financial Products

Group Personal Pension Plan

Group Personal pensions aim to build up a sum of money in a tax efficient way which can subsequently be used by members to provide an income during retirement with the possibility of a tax free lump sum. Although similar to group stakeholder pensions they are not restricted by a cap on charges, can offer more investment choice and different options for taking benefits and can be more tailored to the members individual needs.

Modern personal pensions are generally extremely flexible in that they will accept regular, monthly or annual employee and employer contributions. One-off contributions can also be made and employers and employees can change regular contributions at any time, subject to the provider’s minimum contribution and the maximum limits set by the HM Revenue & Customs.

Employee contributions are effectively unlimited. However there is a limit on the amount of gross contributions that an employee can pay each tax year and receive full tax relief upon. This is restricted to the higher of £3,600 or 100% of salary, subject to an annual allowance of £50,000 for the current tax year. It is possible to offset one-off spikes in employee contributions in excess of the annual allowance against unused allowances for those employees from the previous three years. Employer contributions count towards the annual allowance but for irregular sizeable employer contributions, it is up to the Employer's local inspector of Taxes whether or not the entire contribution will be relievable for tax purposes. Employees are subject to a tax charge on the amount of any contribution (both employee and employer) paid in excess of the annual allowance each year. The tax charge will be at the member's marginal rate of tax. No tax relief will be granted on contributions paid after age 75.

A pension is one of the most tax efficient ways of saving for retirement. Member contributions qualify for tax relief at their highest rate of income tax, subject to the restrictions outlined above. Contributions are usually paid net of basic rate tax and the pension provider collects the member’s tax relief from the HM Revenue & Customs. This means that for every £80 the member contributes, £100 will actually be credited to their plan. Any higher rate tax relief to which they are entitled can be reclaimed through their annual Tax Return. Growth in the value of the pension fund is free from capital gains tax and certain types of dividends paid to the plan are free from income tax.

Benefits can usually be taken from age 55, including while the member is still working. At that time they can elect to take 25% of the accumulated fund as a Pension Commencement Lump Sum (tax free cash) payment. The remainder of the fund may be used to purchase an annuity, which can be established on a basis to suit the member’s individual circumstances and objectives at that time. Alternatively they can choose to take the benefits directly from their pension fund via a more flexible retirement plan. The effective requirement to buy an annuity by age 75 was removed from 6th April 2011.

On death of a member before age 75, there will be no death benefit tax charge on an uncrystallised pension fund, assuming the total value of the pension benefits are within the lifetime allowance. Death on, or after the members 75th birthday, will result in a member tax charge of 55% on all uncrystallised pension benefits. The same 55% tax charge on death will also apply to any crystallised pension benefits regardless of age. Under normal circumstances, no inheritance tax liability will arise from pension death benefits unless HMRC believe that an employee has deliberately deferred the crystallisation of their pension benefits to avoid tax charges.


The National Employment Savings Trust is a new, simple, low-cost pension scheme. It has been introduced as part of the workplace pension reforms and will have the following key features:

Charges - Member and employer contributions will incur a 1.8% charge on the value of each contribution to cover NEST's start-up costs. If £100 is paid into a pension pot every month, the 1.8% contribution charge would be £1.80 per month. Over one year, £1,200 would be paid into the pension pot in total. This means that the contribution charge over that period would be £21.60. An annual management charge (AMC) of 0.3% of the value of the fund will also be levied on member and employer contributions. If the total retirement pot is worth £1,200 at the end of the year, the AMC would be £3.60. In total therefore for that year, the said contributions would incur £25.20 in charges.

Investment choice - When members join NEST, contributions are invested in a fund that NEST believes is suitable for most people of that age. This is called a NEST Retirement Date Fund and there's one for every year up to the State Pension age that members could choose to take your money out. For example, if you plan to take your money out in 2058 NEST will invest your retirement pot in the NEST 2058 Retirement Fund. The funds focus on the issues which NEST thinks are important which include, protecting your savings from the rising cost of living, avoiding sudden falls in value, matching fund values to expectations, taking only appropriate risk to grow your fund and providing clear information about members accounts. Whilst NEST Retirement Date Funds are designed to suit most members, other funds are offered for people who have particular preferences about how their money is invested.

Opting out - Employers will need to automatically enrol their eligible workers into a qualifying pension scheme (which could be NEST) and make contributions to it. However, workers have the right to opt out within one month of being automatically enrolled if they don't think that pension saving is appropriate for them. If they opt out within the one-month period, their employer must pay back any contributions deducted from their pay. Also, any contributions the employer has made must be refunded to the employer by the pension scheme. After the one-month opt-out period is over, workers can't opt out and get a refund, but can stop contributing if they wish. If they do this, any contributions already paid, including those from their employer, will remain invested in the pension scheme.

Transfers - Transfers in and out of NEST are not allowed (except in specific limited circumstances). This will be reviewed in 2017.

Contribution limits - The current tax year limit on contributions into NEST is £4,400. This includes money the worker pays in, what their employer puts in and tax relief. The limit will be reviewed each year and is likely to increase in line with National Average Earnings.

Changing jobs - If a worker has been paying into NEST through their employer and changes jobs, their NEST pot can move with them. NEST members have one retirement pot which they can carry on paying into throughout their working life.

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