your guide to understanding the old mutual wealth pension … · scheme pension overall. the...

YOUR GUIDE TO UNDERSTANDING THE OLD MUTUAL WEALTH PENSION TRANSFER VALUE ANALYSIS (TVA) REPORTUser gUide

This guide aims to help you understand the contents of our TVA report by covering the most frequently asked questions.

The calculations contained in any TVA report are based upon the input data which is summarised at the end of the document. it is therefore important you ensure that you’re happy with the data before referring to the content of the report.

if, after reading this document you still have questions, or require more information, please contact a member of the TVAs Team on 0808 171 2596.

2

PENSION TRANSFER VALUE ANALYSIS (TVA) REPORT User gUide

Specim

en TVAS R

eport

www.oldmutualwealth.co.uk

Please be aware that calls and electronic communications may be recorded for monitoring, regulatory and training purposes and records are availablefor at least five years.

Old Mutual Wealth Life & Pensions Ltd is registered in England and Wales under number 4163431. Registered Office at Old Mutual House, PortlandTerrace, Southampton SO14 7EJ, United Kingdom.Old Mutual Wealth Life & Pensions Ltd is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and thePrudential Regulation Authority. Their Financial Services register number is 207977. VAT number 386 1301 59.

PENSION TRANSFERANALYSIS

Prepared for

Mr C Yield

Relating to

Example Pension Scheme

Prepared13 February 2019Heather Morgan

Old Mutual Wealth

Specim

enTVAS

Report

Prepared For Mr C Yield13 February 2019 Prepared by Old Mutual

Wealth

CONTENTS

Introduction .............................................................................................................. 3Transfer Value Comparator....................................................................................... 5Critical Yields For Annuity Purchase ....................................................................... 6Retirement Benefits at age 65 For Annuity Purchase............................................... 7Flexi-Access Drawdown Cash Flow From Age 65 ...................................................... 8Retirement Benefits at age 60 For Annuity Purchase .............................................. 9Flexi-Access Drawdown Cash Flow From Age 60 ..................................................... 10Existing Scheme Pension Benefits ............................................................................ 11Existing Scheme Tax Free Cash (PCLS) ...................................................................... 12Transfer Value .......................................................................................................... 12Additional Voluntary Contributions (AVCs) ............................................................. 12Existing Scheme Capitalised Value ........................................................................... 12Transfer Alternatives ................................................................................................ 13Benefits on Death Before Retirement ...................................................................... 14Benefits on Death After Retirement .........................................................................14Death Benefit Comparisons ......................................................................................15Pension Protection Fund .......................................................................................... 16Other Matters ........................................................................................................... 18Assumptions ............................................................................................................. 19Notes and Data used for the Report ........................................................................ 20

This has been produced for guidance only

3


Specim

enTVAS

Report

Prepared For Mr C Yield13 February 2019 Prepared by Old Mutual

Wealth

INTRODUCTION

This Pension Transfer Analysis Report is designed to assist in deciding whether a transfer of benefits from the ExistingScheme to an alternative pension contract would be appropriate.

This report provides:

A Transfer Value Comparator. This is a comparison required by the FCA which shows the difference between theTransfer Value offered by the scheme and the capitalised value of the scheme benefits projected to NormalRetirement Age and then discounted to the current date.

A calculation of the annual rate of growth (Critical Yield) required in order to match the value of the benefits thatwould have been available in the Existing Scheme assuming the transfer value is invested into a Personal Pensionand an annuity is purchased at retirement.

Comparisons of the projected benefits in the Existing Scheme and the potential benefits arising from purchasing anannuity from a Personal Pension.

A series of Cash Flow Models illustrating the potential outcomes on transfer to a Personal Pension assumingPension Drawdown is used to access benefits equivalent to those available in the Existing Scheme.

A comparison of the projected benefits available upon death, before and after retirement.

Assumptions

As we are projecting into the future, we have to use a range of assumptions. This report follows the assumptions laid outby the industry regulators, the Financial Conduct Authority (FCA). The assumptions cover how your pension fund maygrow, how your pension fund is converted into an annual pension and future inflation rates. The FCA sets out 3 economicscenarios which are described as Low, Intermediate (Mid) and High. The projected values of the personal pension are notguaranteed.

The Personal Pension used as the alternative contract in this report is the Old Mutual Wealth Collective RetirementAccount and all references to Personal Pension in this report assumed the contract is the Old Mutual Wealth CollectiveRetirement Account.

The analysis assumes that the crystallisation of benefits will fall within a client's available Lifetime Allowance. Where inpractice this may not be the case, the effect of the Lifetime Allowance tax charge, on part of the projected value ofbenefits payable, would reduce the value of future benefits received from that time

Life Expectancy for Cash FlowModelling

The Cash Flow Models use data provided by the Office for National Statistics to make assumptions about average lifeexpectancy. In your case the assumptions are as follows:

UK Average Life Expectancy (source: ONS) You PartnerBased upon your gender and year of birth 85 88

Specim

enTVAS

Report

Prepared For Mr C Yield13 February 2019 Page 4 Prepared by Old Mutual

Wealth

Please Note

This report does not include a Section 32 comparison as Old Mutual Wealth Life & Pensions Ltd does not offer asection 32 contract.A member may have at 5 April 2006 Protected Tax Free Cash rights in excess of 25%. This analysis assumes that thehigher of the revalued Protected Tax Free Cash, or 25% of the fund will be payable at retirement.If the member has enhanced or primary protection, rights to the tax free cash may be lower than 25%. This reporttakes no account of this restriction.Care should be taken if the member has enhanced protection. The amount of the transfer value may be such thatthe 'Relevant Benefit Accrual' occurs and the protection could be lost if benefits are transferred.

Disclaimer

This report is designed to provide information to help to evaluate the merits of transferring benefits from an existingpension scheme to an alternative pension contract. The report considers only the Old Mutual Wealth CollectiveRetirement Account as the alternative pension contract and does not provide a whole of market view. The reportprovides our interpretation of the information provided, which is given in good faith, but while we believe ourinterpretation to be correct, we cannot guarantee it.

Old Mutual Wealth is not responsible for, and will not accept any liability for, any advice, recommendation or actionprovided or taken by financial advisers resulting from the information contained in this Transfer Analysis report. Thisreport is based on the information you have provided to us. If the information provided to us is inaccurate or incompletethen the report may not be accurate or complete. Old Mutual Wealth has no responsibility or liability in relation toinaccuracies in fact due to the proper treatment of incorrect information provided to us by you.

“Old Mutual Wealth” means Old Mutual Wealth Life & Pensions Limited.

IMPORTANT NOTE

There is normally a three month guarantee for the transfer value amount. if a transfer request is received within this time frame the amount to be transferred is not normally altered. A member is only entitled to one cash equivalent transfer value calculation without charge once every 12 months. Any AVCs a member holds will not be included within the analysis and will need to be assessed separately.



4

Specim

enTVAS

Report


Wealth

TRANSFER VALUE COMPARATOR

You have been offered a cash equivalent transfer value of £787,000 in exchange for you giving up any future claims to apension from the scheme.

Will I be better or worse off by transferring?

We are required by the Financial Conduct Authority to provide an indication of what it might cost to replace yourscheme benefits.

We have done this by looking at the amount you might need to buy the same benefits from an insurer.

It could cost you £1,319,955 to obtain a comparable level of income from an insurer.

This means the same retirement income could cost you £532,955 more bytransferring.

Notes

1. The estimated replacement cost of your pension income is based on assumptions about the level of your schemeincome at normal retirement age and the cost of replacing that income (including spouse's benefits) for an averagehealthy person using today's costs.

2. The estimated replacement value takes into account investment returns after any product charges that you might beexpected to pay.

3. No allowance has been made for taxation or adviser charges prior to benefits commencing.

This is the estimated current replacement cost of the full scheme pension if you transferred now. This figure is based on the scheme projected pension at the scheme normal retirement age and assumes a spouse’s pension is payable regardless of marital status.

More information can be found in the Transfer Value Comparator Guide

This is based on a standard product charge of 0.75% per annum as prescribed by the FCA.

This is the current transfer value offered by the scheme.


5


Specim

enTVAS

Report


Wealth

CRITICAL YIELDS FOR ANNUITY PURCHASE

The benefits in an individual pension plan grow according to the investment return of the funds in which the plan isinvested. The Critical Yield shows how much growth is required each year in order to match the value of the benefits thatwould have been available in the Existing Scheme assuming an annuity purchase in an individual pension plan. For thepurposes of valuing the Existing Scheme benefits, an Annuity Interest Rate of 1.3% has been used. This rate is set by theFCA and is reviewed each month.

The rates in the Personal Pension Critical Yields table below breaks down the Critical Yield into two components: thegrowth required to match the value of the starting pension in the existing scheme; and the additional annual growthrequired to match the value of guaranteed periods and increases to the existing scheme pension once it comes intopayment.

The table is also broken down into Single Life and Joint Life Critical Yields. The Single Life Yields make no allowance for anyspouse's pensions in the existing scheme, whereas the Joint Life yields will allow for the Existing Scheme's spouse'spension. Based on your current marital status and the scheme rules, you would currently be classified as Joint Life.

The critical yields shown have been based on a transfer to the following plan:

Personal Pension Old Mutual Wealth (Self Select) CRA

Personal Pension Critical Yields

The following critical yields are based on a transfer value of £787,000.

Single LifeCurrently Classified as

Joint LifeFull Pension Cash & Reduced

PensionFull Pension Cash & Reduced

Pension

Retiring at Age 65 6.5% 3.6% 7.9% 5.3%Comprised of

Level Pension of £35,021 (Full) £21,806 (Reduced) 1.9% 0.0% 2.8% 1.1%Effect of Pension Increases and Guaranteed Period +4.6% +3.6% +5.1% +4.2%

Retiring at Age 60 7.2% 2.2% 9.6% 5.2%Comprised of

Level Pension of £23,645 (Full) £15,630 (Reduced) -2.6% -5.4% -1.1% -3.7%Effect of Pension Increases and Guaranteed Period +9.8% +7.6% +10.7% +8.9%

Assuming Scheme applies to Pension Protection Fund Today

Single Life Joint LifeFull Pension Cash & Reduced


Pension

Retiring at Age 65 3.1% 2.7%

Retiring at Age 60 2.9% 2.0%

These figures directly below provide a further breakdown of the critical yield shown above it.

These are sometimes referred to as ‘Hurdle rates’ and show the annual growth rate required to match the equivalent fund value of the projected scheme pension at retirement, assuming a single life, level pension with no guarantee.

The numbers in bold are critical yields. The critical yield is the annual growth rate required to match the equivalent fund value of the projected scheme pension at retirement age, on the basis selected.

These represent the annual growth rates required if the scheme went into the Pension Protection Fund (PPF) on the date of this report. Please refer to the PPF section later on in this report for more information.


6


Specim

enTVAS

Report


Wealth

RETIREMENT BENEFITS AT AGE 65 FOR ANNUITY PURCHASE

Annual Pension Benefits

The graph below compares the projected pension benefits for the Existing Scheme with those that could becomeavailable at age 65 if purchasing an annuity from the Personal Pension at the Low, Mid and High rates of return. The initialpensions are:

Existing Scheme Personal Pension£35,021 £16,191 (Low) £26,534 (Mid) £42,640 (High)

Tax Free Cash and Reduced Annual Pension

The estimated maximum amounts of tax free cash and annual pension payable at age 65 are as follows:

These are based on the same level of spouse’s pension and guarantee period as the existing scheme, but the escalation rate in payment is on the same basis as the largest amount of scheme pension overall.

The personal pension (PP) tax free cash figures are calculated as 25% of the projected PP fund value at retirement.

This figure may be restricted if gMP is not covered at gMP payment age.

This is the projected scheme pension revalued to normal retirement age.


7


Specim

enTVAS

Report


Wealth

FLEXI-ACCESS DRAWDOWN CASH FLOW FROM AGE 65

The tables below show the funds left within the Personal Pension Plan, assuming you use Flexi-Access Drawdown (FAD) toprovide the same pension benefits each year as would be payable to you if you stayed in the Existing Scheme. In addition,they show the growth required from now until various ages to match the scheme pension payable net of tax from thePersonal Pension.

Taking Full Scheme Pension and No Tax-Free Cash - using FAD in Personal PensionThis table assumes the Flexi-Access Drawdown option will be used in the Personal Pension, which means that you onlycrystallise the fund value required to provide the same scheme pension each year (4 times the income is crystallised sothat the 25% tax free element matches the required net income) until only crystallised funds remain, then income isdrawn from the crystallised fund (and taxed). The initial pension payable at age 65 from the scheme is £35,021. Allowingfor tax of 20%, your net of tax income from the scheme at age 65 would be £28,017.

Probability of Personal Pension Fund Remaining at Start of Year Growth Rate requiredYour Reaching Your Age Annual Scheme Low Mid High to fund pension untilAge You Partner Pension after Tax 2% 5% 8% age65 93% 96% £28,017 £766,000 £1,050,000 £1,430,00070 88% 93% £31,576 £618,000 £1,050,000 £1,730,000 -8.6%75 81% 89% £35,598 £422,000 £1,040,000 £2,110,000 -2.5%80 71% 82% £40,142 £188,000 £949,000 £2,590,000 0.6%85 57% 72% £45,278 fund depleted £813,000 £3,160,000 2.4%90 39% 57% £51,083 fund depleted £619,000 £3,860,000 3.6%95 20% 36% £57,642 fund depleted £354,000 £4,750,000 4.4%

100 7% 17% £65,056 fund depleted £2,290 £5,880,000 5.0%105 1% 4% £73,435 fund depleted fund depleted £7,320,000 5.4%

Age Pension Fund Depleted 83 100 >105Probability of Reaching that Age (You/Partner) 63%/77% 7%/17%

Taking Initial Cash and Reduced Scheme Pension - using FAD in Personal PensionThis table assumes the Flexi-Access Drawdown option will be used in the Personal Pension, which means that you onlycrystallise the fund value required to provide the £145,372 tax free cash and the same reduced scheme pension each year(4 times the initial cash is crystallised and 4 times the income is crystallised so that the 25% tax free element matches theinitial scheme cash and required net income) until only crystallised funds remain, then income is drawn from thecrystallised fund (and taxed). The reduced initial pension payable is £21,806. Allowing for tax of 20%, your net of taxincome from the scheme at age 65 would be £17,445.

Probability of Personal Pension Fund Remaining at Start of Year Growth Rate requiredYour Reaching Your Age Annual Scheme Low Mid High to fund pension untilAge You Partner Pension after Tax 2% 5% 8% age65 93% 96% £17,445 £621,000 £907,000 £1,280,00070 88% 93% £19,614 £517,000 £949,000 £1,600,000 -6.3%75 81% 89% £22,064 £388,000 £968,000 £2,010,000 -2.6%80 71% 82% £24,830 £243,000 £962,000 £2,540,000 -0.2%85 57% 72% £27,954 £80,600 £936,000 £3,200,000 1.4%90 39% 57% £31,482 fund depleted £883,000 £4,040,000 2.5%95 20% 36% £35,466 fund depleted £798,000 £5,130,000 3.4%

100 7% 17% £39,965 fund depleted £671,000 £6,560,000 4.0%105 1% 4% £45,047 fund depleted £493,000 £8,410,000 4.4%

Age Pension Fund Depleted 87 >105 >105Probability of Reaching that Age (You/Partner) 50%/67%

increases in payment are in line with the existing scheme.

increases in payment are in line with the existing scheme.

Average life expectancy.

Average life expectancy.

This is the gross growth rate which takes into account CrA charges.

This is the gross growth rate which takes into account CrA charges.

This is the annual rate of return required by the CrA to provide the illustrated level of income each year until the date shown, with the fund being fully extinguished at that age.

This is the annual rate of return required by the CrA to provide the illustrated level of income each year until the date shown, with the fund being fully extinguished at that age.

The growth rates used are determined by the funds selected. i.e. fund specific growth rates.

The growth rates used are determined by the funds selected. i.e. fund specific growth rates.

This matches the figure from the previous page.

This matches the figure from the previous page.

The income after attaining average life expectancy will depend on the cash flow model basis selected. Please refer to the personal information section of the data report.

The income after attaining average life expectancy will depend on the cash flow model basis selected. Please refer to the personal information section of the data report.

it is assumed that the tax free cash taken by the client is the same as the existing scheme tax free cash available and not the full 25% of the personal pension fund.

This figure represents the projected fund value at a retirement age. The CrA fund is assumed to grow in line with the low, mid and high growth rates shown.

This figure represents the projected fund value at the retirement age after the deduction of the existing scheme tax free cash sum. The CrA fund is assumed to grow in line with the low, mid and high growth rates shown.


8


Specim

enTVAS

Report


Wealth

RETIREMENT BENEFITS AT AGE 60 FOR ANNUITY PURCHASE

Annual Pension Benefits

The graph below compares the projected pension benefits for the Existing Scheme with those that could becomeavailable at age 60 if purchasing an annuity from the Personal Pension at the Low, Mid and High rates of return. The initialpensions are:

Existing Scheme Personal Pension£23,645 £12,841 (Low) £18,756 (Mid) £26,871 (High)

Tax Free Cash and Reduced Annual Pension

The estimated maximum amounts of tax free cash and annual pension payable at age 60 are as follows:

This figure is revalued to the early retirement date. The retirement benefits available from the scheme on early retirement are reduced by the factors advised by the scheme. The penalty will apply to the pensionrevalued to either the normal retirement age or the early retirement date in accordance with the scheme rules.

Please note: early retirement will only be shown if requested.


9


Specim

enTVAS

Report


Wealth

FLEXI-ACCESS DRAWDOWN CASH FLOW FROM AGE 60

The tables below show the funds left within the Personal Pension Plan, assuming you use Flexi-Access Drawdown (FAD) toprovide the same pension benefits each year as would be payable to you if you stayed in the Existing Scheme. In addition,they show the growth required from now until various ages to match the scheme pension payable net of tax from thePersonal Pension.

Taking Full Scheme Pension and No Tax-Free Cash - using FAD in Personal PensionThis table assumes the Flexi-Access Drawdown option will be used in the Personal Pension, which means that you onlycrystallise the fund value required to provide the same scheme pension each year (4 times the income is crystallised sothat the 25% tax free element matches the required net income) until only crystallised funds remain, then income isdrawn from the crystallised fund (and taxed). The initial pension payable at age 60 from the scheme is £23,645. Allowingfor tax of 20%, your net of tax income from the scheme at age 60 would be £18,916.

Probability of Personal Pension Fund Remaining at Start of Year Growth Rate requiredYour Reaching Your Age Annual Scheme Low Mid High to fund pension untilAge You Partner Pension after Tax 2% 5% 8% age60 97% 98% £18,916 £768,000 £912,000 £1,070,00065 93% 96% £21,402 £668,000 £946,000 £1,310,000 -18.0%70 88% 93% £24,091 £550,000 £972,000 £1,620,000 -7.5%75 81% 89% £27,129 £391,000 £970,000 £2,010,000 -2.6%80 71% 82% £30,561 £213,000 £928,000 £2,500,000 0.2%85 57% 72% £34,438 £12,800 £856,000 £3,090,000 1.9%90 39% 57% £38,818 fund depleted £745,000 £3,850,000 3.1%95 20% 36% £43,766 fund depleted £587,000 £4,820,000 3.9%



Taking Initial Cash and Reduced Scheme Pension - using FAD in Personal PensionThis table assumes the Flexi-Access Drawdown option will be used in the Personal Pension, which means that you onlycrystallise the fund value required to provide the £104,198 tax free cash and the same reduced scheme pension each year(4 times the initial cash is crystallised and 4 times the income is crystallised so that the 25% tax free element matches theinitial scheme cash and required net income) until only crystallised funds remain, then income is drawn from thecrystallised fund (and taxed). The reduced initial pension payable is £15,630. Allowing for tax of 20%, your net of taxincome from the scheme at age 60 would be £12,504.

Probability of Personal Pension Fund Remaining at Start of Year Growth Rate requiredYour Reaching Your Age Annual Scheme Low Mid High to fund pension untilAge You Partner Pension after Tax 2% 5% 8% age60 97% 98% £12,504 £664,000 £808,000 £974,00065 93% 96% £14,147 £598,000 £862,000 £1,210,000 -15.6%70 88% 93% £15,883 £510,000 £916,000 £1,530,000 -8.1%75 81% 89% £17,843 £405,000 £947,000 £1,940,000 -3.7%80 71% 82% £20,054 £288,000 £967,000 £2,460,000 -1.0%85 57% 72% £22,551 £156,000 £975,000 £3,120,000 0.7%90 39% 57% £25,368 £8,530 £967,000 £3,970,000 1.9%95 20% 36% £28,549 fund depleted £938,000 £5,090,000 2.8%




10


Specim

enTVAS

Report


Wealth

EXISTING SCHEME PENSION BENEFITS

The pension benefits accrued in the Example Pension Scheme are comprised of a number of separate elements, or slicesof pension that are treated differently by the scheme or have different legislation governing their behaviour.

The following details the types of pension benefit that were accrued and the different slices of benefit within each typealong with details of how they increase before and after retirement.

Guaranteed Minimum Pension (GMP)Pre 88 GMPPension at 31 March 2005 £250Increases before age 65 4.5% per annumIncreases after age 65 No increases

Post 88 GMPPension at 31 March 2005 £750Increases before age 65 4.5% per annumIncreases after age 65 CPI (max 3%) per annum

GMP is not payable before age 65. When you retire before this age, the scheme will pay a pension in lieu of the GMP(known as a GMP Bridge). For details of this see the 'Data Used for the report' section at the back of the analysis.

Other Scheme Pension BenefitsPre 6/4/97 ExcessPension at 31 March 2005 £11,000Increases before retirement Statutory Orders (5% cap)Increases after retirement RPI (max 5%)

Post 5/4/97 PensionPension at 31 March 2005 £7,926.25Increases before retirement Statutory Orders (5% cap)Increases after retirement RPI (0% min, 5% max)

Transferred-in BenefitsThere are no fixed transferred-in benefits although there may be some added years' service included in the pensionbenefits listed above.

Specim

enTVAS

Report


Wealth

EXISTING SCHEME TAX FREE CASH (PCLS)

The scheme rules permit some pension to be exchanged for a tax free cash sum up to the maximum permitted by HMRevenue & Customs (HMRC).

This is otherwise known as pension commencement lump sum (PCLS). Whether this amount is completely tax-free willdepend upon your remaining lifetime allowance.

The amount of cash available depends on the total value at retirement of the pension benefits, together with the rate atwhich the Existing Scheme exchanges pension benefits for cash; this is known as the commutation rate.

The weighted average commutation rate used for the existing scheme on retirement at age 65 is 11.0 and on retirementat age 60 is 13.0.

TRANSFER VALUE

You have been offered a transfer value of £787,000, in lieu of benefits under the Existing Scheme, which can be investedinto a Personal Pension contract.

ADDITIONAL VOLUNTARY CONTRIBUTIONS

No Additional Voluntary Contributions have been paid by the member.

EXISTING SCHEME CAPITALISED VALUE

This is calculated by taking each slice of pension from the existing scheme, revaluing it to retirement using any knownhistoric increases and the relevant FCA assumption for any future increases and applying any early or late retirementfactors. The resulting pension is converted into a Capitalised Value by multiplying by an annuity rate which reflects howthat slice of pension behaves. Allowance is made for adjustments to the pension for GMP becoming payable, temporarypensions and pensions that come into payment at a later date.

The Capitalised Values calculated for the Existing Scheme are shown below:

Single LifeCurrently Classified as

Joint LifeFull Pension Cash & Reduced


Pension

Retiring at Age 65 £1,234,727 £907,958 £1,418,232 £1,091,463

Retiring at Age 60 £1,030,442 £778,522 £1,173,859 £921,939

These are calculated proportionally based on the commutable pension.

This figure is used to calculate the estimated current replacement cost of the full scheme pension in accordance with the Transfer Value Comparator calculations set down by the FCA.


11


Specim

enTVAS

Report


Wealth

TRANSFER ALTERNATIVES

These benefits, apart from being left within your existing scheme, can be transferred to a Personal Pension Plan or aSection 32 contract.

Personal Pension Plan Benefits

In a Personal Pension the benefits at retirement are determined by how the transfer value has grown in the period toretirement, together with the annuity rates available at retirement to convert the pension fund into annual pensions.

The size of the pension fund also impacts the amount of death benefits and cash lump sums payable.

Personal Pension Plan - Annuity Shape of Pension Benefits

In a Personal Pension Plan, at retirement the member would be able to choose the rate of pension increase, spouse'spension percentage and guaranteed period.

For comparison purposes, the Personal Pension benefits are assumed to increase on a basis that matches the ExistingScheme as far as reasonably possible.

Specifically, the Existing Scheme may have different slices of benefits with different escalation rates and spouse'spensions, whereas in reality, one annuity shape would be purchased in the Personal Pension. Therefore, the TVAS reportchooses for the Personal Pension a single annuity shape.

The escalation rate for this will be based on the rate that applies to the largest amount of pension at Normal RetirementAge. Where the pension benefit is linked to an Index such as CPI, RPI or Pension Increase Orders, this will be classed asIndex Linked and grouped together.

In this instance the Personal Pension projections assume that the following annuity will be purchased:

Escalation Index Linked (RPI), 50% spouse's pension, 5 year guarantee.

Personal Pension Plan - Tax Free Cash Sum

The tax free cash sum is calculated as 25% of the entire pension fund.

Section 32 Plan Benefits

The benefits in a Section 32 contract are also determined by the fund value available at retirement, which is in turn usedto purchase pension benefits, death benefits and cash lump sums.

In addition the Section 32 contract treats any Guaranteed Minimum Pension (GMP) benefits in a similar way to theExisting Scheme and must ensure at least this level of pension is paid at age 65.

For the purposes of this report, no comparison has been made of the benefits on transfer to a Section 32 contract.

Specim

enTVAS

Report


Wealth

BENEFITS ON DEATH BEFORE RETIREMENT

Existing Scheme

A payment of £26,400 representing member's contributions plus interest at 3% per annum.

In the event of your death before retirement a Spouse's Pension is payable. This spouse's pension would be 50% of themember's pension.

Personal Pension

Where a Personal Pension Plan has been established as a result of a transfer from a Final Salary Scheme, the entire fundwill be paid as a lump sum although there may be an option to provide a pension with some or all of the lump sum.

BENEFITS ON DEATH AFTER RETIREMENT

Existing Scheme

The Existing Scheme member's pension will continue to be paid for a minimum of 5 years from the date of retirement.

Given your current marital status, on your death in retirement a spouse's pension of 50% would be payable based on themember's pension prior to commutation.

Personal Pension

In a Personal Pension the member chooses at retirement the style of benefit they wish to take, including the size of anyspouse’s pension.

For illustration purposes this report assumes a similar level of spouse’s pension would be chosen to that in the ExistingScheme. Were a higher spouse’s pension chosen, the amount of member’s pension that could be purchased would besmaller and vice versa.

The analysis cannot cater for children’s pensions which may be payable under the existing scheme.


12


Specim

enTVAS

Report


Wealth

DEATH BENEFIT COMPARISONS

Death Before Retirement

Assuming Death Benefit Payable Existing Scheme Personal PensionLow Mid High

Immediately Lump Sum £26,596 £771,260 £771,260 £771,260Annual Pension £13,853 £0 £0 £0

At age 60 Lump Sum £31,679 £768,817 £912,861 £1,078,695Annual Pension £15,763 £0 £0 £0

At age 65 Lump Sum £36,724 £766,753 £1,052,966 £1,434,313Annual Pension £17,511 £0 £0 £0

Capitalised Value of Death Benefits Before Retirement

To simplify the comparison of benefits payable on death before retirement, the graph below shows the capital cost ofproviding all projected death benefits from the Existing Scheme and the projected fund values that could be achieved by aPersonal Pension.

This will be based on the CrA fund value at the date of death.

These are in line with the scheme’s provisions for deferred members.

This graph shows the personal pension figures based on the low, mid and high rate fund values at each age which will provide benefits on death. The scheme figures at each age represent the value of providing the spouse’s pension and any applicable lump sum. As the member gets older the amount needed to purchase the equivalent of the scheme benefits will be lower, as the member’s life expectancy decreases and therefore, the cost reduces. The personal pension fund value increases/ decreases over time in line with the fund specific growth rates.


13


Specim

enTVAS

Report


Wealth

PENSION PROTECTION FUND

The Pension Protection Fund (PPF) offers an “insurance scheme” to help provide a minimum level of pension should apension scheme get into serious financial difficulty. It is funded by a series of levies applied to all final salary pensionschemes. It should be noted that the management body of the PPF have the right to reduce the level of compensationbeing paid from the scheme should the PPF itself suffer financial hardship. The government does NOT underwrite thescheme.

Broadly speaking, those people below the normal retirement age of the scheme when the PPF is appointed will receive90% of their accrued benefits immediately before the assessment date (subject to a review of the rules of the scheme bythe PPF), whilst those past the normal retirement age of the scheme at this date would receive 100% of their accruedbenefits.

In the PPF, the Total Pension is revalued from the PPF assessment date to the normal retirement date in line withstatutory orders revaluation. GMP benefits do not receive separate revaluation. Benefits relating to Post April 1997service will increase in payment (in line with CPI capped at 2.5%), whereas no increase in payment will be made in respectof any pension accrued before 1997.

This compensation is subject to an overall cap (currently £39,006.18 for those retiring at age 65) which will be increasedeach year, and adjusted to the age at which compensation comes into payment (future increases to the cap are assumedin line with AEI increases).

The PPF is not applicable if your benefits are held within a Public Sector Pension Scheme. This type of scheme isdependent upon income from Local and/or Central Government for its funding. Generally, therefore, a greater degree ofsecurity is available.

The following pages compare the benefits that the Pension Protection Fund might secure against those that the existingscheme provide.

The comparison is performed assuming the scheme apply to the Pension Protection Fund as at the date of this report.Comparisons are provided assuming retirement at both age 65 and age 60.

if a long service cap applies the benefits will be uplifted and a more detailed explanation will automatically be included on this page.


14


Specim

enTVAS

Report


Wealth

PENSION PROTECTION FUND COMPARISONS

The Normal Retirement Age of the Scheme is 65 and these comparisons assume the scheme applies to the PPF on 13February 2019. 39% of your pension benefits relate to post April 1997 service and will receive escalation in the PPF.

Assuming retirement at age 65

FullPension: Pension Today Pension at 65

CapitalisedValue ofBenefits

Critical Yield inPersonalPension

ExistingScheme £27,705 p.a. £35,021 p.a. £1,418,232 7.9%

PPF £24,935 p.a. £30,901 p.a. £866,154 3.1%

(90%) (88%) (61%)

Alternatively:

Cash +ReducedPension:

Tax Free CashSum at age 65

+ ReducedPension at 65



ExistingScheme £145,372 + £21,806 p.a. £1,091,463 5.3%

PPF £172,783 + £23,176 p.a. £822,399 2.7%

(119%) (106%) (75%)

Commutation rates used to convert pension into tax free cash are 11.0 (Existing Scheme) and 22.366 (PPF).

Assuming early retirement at age 60

Any applicable early retirement factors have been applied on both the existing scheme and the PPF in the calculation ofthe pension at age 60.

FullPension: Pension Today Pension at 60



ExistingScheme £27,705 p.a. £23,645 p.a. £1,173,859 9.6%

PPF £24,935 p.a. £24,797 p.a. £810,281 2.9%

(90%) (105%) (69%)

Alternatively:

Cash +ReducedPension:

Tax Free CashSum at 60

+ ReducedPension at 60



ExistingScheme £104,198 + £15,630 p.a. £921,939 5.2%

PPF £163,326 + £18,598 p.a. £771,037 2.0%

(157%) (119%) (84%)

Commutation rates used to convert pension into tax free cash are 13.0 (Existing Scheme) and 26.346 (PPF).

Only the post 1997 pension benefits will increase in payment under the PPF.

Between the ‘Pension Today’ and ‘Pension at retirement Age’ all of the scheme pension in the PPF revalues in line with statutory revaluation orders including any gMP entitlement.

This value assumes the existing scheme enters the PPF on the date of this report. it may not be the same calculation as used by the scheme to calculate the current pension value.

The PPF benefits represent 90% of the existing scheme benefits unless the compensation cap applies.


15


Specim

enTVAS

Report


Wealth

OTHER MATTERS

Transfer Value Expiry Date

The transfer value quoted by the Existing Scheme is out of date and will need to be recalculated if a transfer of benefitsproceeds.

Ill Health Retirement Benefits

The majority of final salary occupational pension schemes have the scope to pay enhanced benefits to members who wishto retire early due to ill-health. The level of enhancement, and indeed, whether any such enhancement will be paid isusually at the discretion of the scheme trustees on a case by case basis. This potential benefit will however be lost upontransfer to a Personal Pension.

Equalisation Issues

Male and Female retirement ages for the Existing Scheme were equalised at age 65 on 17 May 1990.

If the existing scheme benefits include GMP; it is important to note that the DWP has re-affirmed its intention to pressahead with regulations to make clear that there is a requirement on schemes to equalise GMPs. It is unclear, however,when the legislative changes will be made.

Scheme Status

The existing Scheme remains open to new members.

Funding Position

The Existing Scheme is known to be in deficit. The extent to which members benefits are being restricted should bediscussed with the trustees of the Existing Scheme.

Transfer Club

It is understood that the Existing Scheme is not a member of a transfer club, therefore, this is not an issue that needsfurther consideration.


16


Specim

enTVAS

Report


Wealth

ASSUMPTIONS

This report uses various assumptions which are prescribed by the Industry’s Regulators and are subject to regular review.

Valuing Scheme BenefitsThe Annuity Interest Rate is the annual rate of investment return used in calculating the Annuity Rates for the evaluationof scheme benefits and for converting the projected fund in the individual plan into a pension. The individual plan'spension amount assumes payments are made monthly in advance.

The mortality rates used to determine the annuity are based on the CMI tables PMA08 and PFA08 including mortalityimprovements and are derived from each of the male and female annual mortality projections models in equal parts.No allowance is made in these annuity rates for enhanced or ill health annuities.

Existing Scheme AssumptionsWhere benefit increases are linked to an Index, the actual historic increases are used where known and assumptionsabout the future growth in the index are applied for future increases.

For pre-retirement increases, a separate check is made to ensure that the revaluation over the whole period from date ofleaving to retirement is at least equal to any minimum rate and not greater than any maximum capping rate.

The following table includes the assumptions used for the most common types of increases.

Scheme Projections Critical YieldsAnnuity Interest Rate n/a 1.3%Retail Price Index 2.5% 3.58%Retail Price Index capped at 2.5% 2.5% 2.5%Retail Price Index capped at 3% 2.5% 3%Retail Price Index capped at 5% 2.5% 3.58%Consumer Price Index 2% 3.05%Consumer Price Index capped at 2.5% 2% 2.5%Consumer Price Index capped at 3% 2% 3%Consumer Price Index capped at 5% 2% 3.05%Statutory Orders 2% n/aNational Average Earnings Index 4% 4%

Personal Pension AssumptionsLow Mid High

Annuity Interest Rate -0.5% 1.5% 3.5%Fund Growth Rate 2% 5% 8%

Life ExpectancyThe mortality rates used to determine life expectancy and survival probabilities are based on the UK 2016-based NationalPopulation Projections life tables publish by the Office for National Statistics.

The life tables for 2017 onwards are based on projected mortality rates from the UK 2016-based National PopulationProjections. Projections are uncertain and become increasingly so the further they are carried forward in time, but inprinciple, are allowing for future improvements in mortality based on your gender and year of birth.

Transfer Value ComparatorProduct Charge 0.75% p.a.Discount Rate 1.41% p.a.

These are the assumed mid rate post retirement escalation rates used to calculate the critical yield.

These will be specific to the fund selection made.

This is set by the FCA for use in the TVC calculation.

These are the mid rate assumptions set by the FCA for future revaluation purposes.

This is the GROSS discount rate based on fixed coupon yields and the outstanding term back to the current date.


17



Specim

enTVAS

Report


Wealth

Data Used

Personal InformationClient Name Mr C YieldDate of Birth 1 January 1965Gender MaleMarital status MarriedPartner date of birth 1 February 1967Same partner as at date of leaving Yes(Assumed)Joined Scheme 1 April 1985Left Scheme 31 March 2005Final Pensionable Earnings £60,000Cash Flow Model Basis Member Pension ThroughoutTax Rate in Retirement 20%(Assumed)

Scheme Information

Scheme Name Example Pension SchemeScheme CategoryContracted Out Pre 4/97 YesGMP Bridge Yes (Assumed)Contracted Out Post 4/97 YesBasis of Post 97 Contracting Out Reference Scheme S9(2b) RightsAccrual Rate 60thsScheme Status Open To New MembersFunding Position In DeficitPensionable Service Basis Years and Months Rounded Down(Assumed)Transfer Club Member NoScheme Benefits have money purchase underpin No(Assumed)

Retirement Ages

Scheme Retirement Age 65Earliest Retirement Age allowed by scheme 55Latest Retirement Age allowed by scheme 75 (Assumed)Retirement Ages Equalised YesDate Retirement Ages Equalised 17 May 1990 (Assumed)

Report illustration age A 65Report illustration age B 60

Cash by Commutation

Does the scheme allow cash by commutation? YesDoes Scheme pay HMRC Post A Day maximum? YesProtected Cash @ 5/4/2006 £0(Assumed)Escalation applied to Pension before Commutation? No(Assumed)Bulk Transfer Cash Protection? No

Specim

enTVAS

Report


Wealth

NOTES AND DATA USED FOR THE REPORT

Scheme Information

Transfer Analysis Basis

This report has been produced for illustrative basis only and the annuity rate is a 'dummy' amount.

18



Specim

enTVAS

Report


Wealth

Pension Benefits

Pre 6/4/97 Excess£11,000 as at 31 March 2005.'Pre 97 Excess Pension' slice that revalues by Statutory Orders (5% cap) and escalates by RPI (max 5%).Full franking is applied before age 65 with franking of escalation only applied on or after this age.On retirement at age 60 the slice is revalued to this age (assumed) and a factor of 0.75 is applied.Commutation factor at age 65 is 11 and at age 60 is 13.

Post 5/4/97 Pension£7,926.25 as at 31 March 2005.'Post 97 Pension' slice that revalues by Statutory Orders (5% cap) and escalates by RPI (0% min, 5% max).Full franking is applied before age 65 with franking of escalation only applied on or after this age.On retirement at age 60 the slice is revalued to this age (assumed) and a factor of 0.75 is applied.Commutation factor at age 65 is 11 and at age 60 is 13.

Pre 88 GMP£250 as at 31 March 2005.'Pre 88 GMP' slice that revalues by GMP Fixed Rate 4.5% and escalates by Statutory Minimum (GMP).This slice starts at age 65.Revaluation basis is 'Tax Years'This slice is non-commutable.

Post 88 GMP£750 as at 31 March 2005.'Post 88 GMP' slice that revalues by GMP Fixed Rate 4.5% and escalates by Statutory Minimum (GMP).This slice starts at age 65.Revaluation basis is 'Tax Years'This slice is non-commutable.

GMP Bridge£1,000 as at 31 March 2005.'GMP Bridge' slice that revalues by GMP Fixed Rate 4.5% and escalates by RPI (max 5%).Revaluation basis is '6th Aprils'On retirement at age 60 the slice is revalued to this age (assumed) and a factor of 0.75 is applied.This slice is non-commutable.

Specim

enTVAS

Report


Wealth

Death Benefits

Is the Spouses Pension only payable to the spouse towhom the member was married at date of leaving? No

Death Before RetirementReturn of Members Contributions £26,400Return of Members Contributions interest 3% fixedSpouse's Pension - Percentage of Total Pension 50%

Death After RetirementGuarantee Period 5 yearsSpouse's Pension – Percentage of Total Pension 50%Spouse's Pension based on Pension Before Commutation? Yes

Transfer Value

Total Transfer Value £787,000Date of Transfer Value 1 November 2018Transfer Value Guaranteed Until 1 February 2019Transfer Value Basis Standard TV OnlyMembers Contributions £26,400Additional Money Purchase AVCs £0

Pension Providers

Personal Pension Product Old Mutual Wealth (Self Select) CRAInitial Adviser Charge Basis Initial PercentageInitial Charge Percentage 2%Ongoing Adviser Charge Basis Ongoing PercentageOngoing Charge Percentage 0.5%Ongoing Charge Frequency MonthlyCharges Facilitated by Product Provider YesFund 100% Old Mutual Cirilium Moderate R

Discretionary Increases

Discretionary Increases Before RetirementBenefits before retirement are not subject to discretionary increases.

Discretionary Increases After RetirementBenefits after retirement are not subject to discretionary increases.

19 This has been produced for guidance only

PdF18824/219-0232/March 2019

The value of your client’s investments may fall as well as rise and they may not get back what they put in.

www.oldmutualwealth.co.ukPlease be aware that calls and electronic communications may be recorded for monitoring, regulatory and training purposes and records are available for at least five years.

Old Mutual Wealth Life & Pensions Limited is registered in england & Wales under number 4163431. registered Office at Old Mutual House, Portland Terrace, southampton sO14 7eJ, United Kingdom. Authorised by the Prudential regulation Authority and regulated by the Financial Conduct Authority and the Prudential regulation Authority.

Financial services register number 207977. VA T number 386 1301 59.

if you have any questions...

Please contact ourTVAs Team0808 171 2596

your guide to understanding the old mutual wealth pension … · scheme pension overall. the...

Documents