August 2019

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August 2019

SHOOSMITHS GROUP PERSONAL PENSION UPDATE 2020

Welcome to the latest newsletter from Shoosmiths, bringing you practical help and useful information to keep you on track with your later life savings.

Here’s a reminder of your Committee Members:• David Thompson (Chair)• Peter Duff• Lynne D’Arcy• Heather Chandler• Sarah Jenkins• Simon Fennell• Louise Hadland• Nick Mallett

Members are welcome to contact any of the Committee Members at any time if they want to discuss matters relating to the Group Personal Pension Plan (the Plan). However, if your question relates to your individual pension benefits, or the administration of the Plan, you should contact the Benefits Team.

As a member of the Plan you have a wealth of information at your fingertips to help you manage your retirement planning; from your annual statement to online resources, you can check on your pensions savings, organise additional one-off payments as well as withdrawals (from age 55), at any time.

Your annual statement is normally sent to you in January and is a great starting point for keeping informed about the level of your pension savings, but logging in to monitor your pension account regularly can really help to keep you focused on your end goal.

It’s also important to look over your personal details to make sure that things such as your target retirement age and Beneficiary Nomination form are up to date, as well as reviewing the performance of your investment fund(s), to see if you are on track to achieve the retirement you want.

You can manage all of this online (details below)

https://www.direct.aviva.co.uk/ MyAccount/login

WELCOME

Getting to know your pension

We’re running webinars in May to help you get to know your pension. Our pension adviser Barnett Waddingham will be leading these sessions to give you an overview of how your pension works, how your money is invested, your options at retirement and where to get more information.

They’re also offering one-to-one sessions where you can specifically discuss your pension and what your options are. We’ll be sending out the email invites shortly, so look out for more details.

Although Barnett Waddingham cannot give you financial advice during either the webinar or one-to-one discussions, they will aim to provide information that is helpful and relevant to you.

August 2019

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Who are Barnett Waddingham?

At the end of 2019 we appointed Barnett Waddingham as our Pension Adviser. Barnett Waddingham is a leading

independent UK professional services consultancy at the forefront of risk, pensions, investment and insurance. With over

1,200 people in eight offices across the UK, they have a wealth of experience in looking after pension schemes like the

Plan.

Your pension plan will continue to be operated by Aviva, so this change won’t affect you. You should continue to contact

Aviva for any information about your benefits

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August 2019

Hot on the news trail...

important to make sure this is the right option for you if you haven’t previously made an active investment choice.

For more details of all the investment options available to you, or information about investment performance and associated risks, visit https://www.direct.aviva.co.uk/MyAccount/login.

And remember, how your pension account is invested will have an impact on how much you will have in your pension savings when you come to retire.

Whether you remain in the default or pick your own investments, the value of your pension savings can go down as well as up. You should not rely on past performance as this is no guarantee as to what may happen in the future.

There are three distinct choices open to you when you come to access your pension savings:

- a cash lump sum

- a guaranteed income for life (annuity)

- flexible withdrawals (drawdown)

Or you could choose a combination of all three.

The increasing number of people accessing their benefits via drawdown, without taking advice, has prompted the Financial Conduct Authority (FCA) to introduce ‘Retirement Pathways’. Due to come into force from 1 February 2021, the FCA will require that scheme members are presented with four options if they’re entering drawdown and haven’t taken financial advice. The decision comes following research that found around one in three consumers who have gone into drawdown recently were unaware of where their money was being invested. This will also apply to members who are transferring their assets already in drawdown.

Please note that there are two default investment arrangements operating in the Plan as follows:

- For members that joined the Plan before September 2017, this is the Default 10 Year Lifestyle Investment Approach.

- For members that joined the Plan on or after 1 October 2017, this is Aviva’s My Future Focus ‘universal strategy’ (formerly the Future Focus 2 Drawdown strategy).

Changes to the Default As part of their ongoing governance, Aviva may occasionally make changes to its default investment arrangements. In October 2019 Aviva replaced its Future Focus 2 Drawdown Strategy (the Plan’s default) with Aviva’s My Future Focus Universal Strategy. If you were invested in the Future Focus 2 Drawdown Strategy, Aviva would have written to you in August 2019 to explain the changes in detail; their Q&A document can be found here: https://www.aviva.co.uk/adviser/documents/view/sp99731.pdf

How your money is investedThe My Future Focus Universal Strategy targets a flexible approach to retirement i.e. it assumes that you haven’t formed a view as to how you will take your pension pot at retirement.

The Default 10 Year Lifestyle Investment Approach targets purchasing an annuity at retirement i.e. it assumes that you will use your pension pot to secure an income for life (annuity).

Whichever default you are in – or if you have self-selected your investment strategy - how you intend to take your benefits when you reach retirement should be a key consideration in your investment choice. There are different lifestyle options available under the Plan that target taking your benefits in a certain way, such as if you intend to buy a guaranteed income for life (an annuity) or take your benefits as cash. It is

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Investment matters

FCA retirement pathways

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Members will be presented with investment solutions that broadly meet their objectives for how they might want to use their pot, otherwise known as ‘investment pathways’. These will be:

• Option 1: I have no plans to touch my money in the next 5 years

• Option 2: I plan to use my money to set up a guaranteed income (annuity) within the next 5 years

• Option 3: I plan to start taking my money as a long-term income within the next 5 years

• Option 4: I plan to take out all my money within the next 5 years

We will communicate further details around investment pathways, and how Aviva will implement this, when information is available.

GOOD TO KNOW

Pension limits (tax year 2020/21): The Lifetime Allowance (LTA) (the limit on the to-tal value of pension savings that can be built up without incurring a tax charge) is £1,073,100.The Annual Allowance (AA) (the total payments that can be made in any tax year without incur-ring a tax charge) remains at £40,000. The Money Purchase Annual Allowance (MPAA) (the reduced Annual Allowance if you have tak-en any pension benefits using one of the flexible options – cash sum or flexible withdrawals) remains at £4,000.

The Annual Allowance can be reduced for higher earners. This is the Tapered Annual Allowance and broadly speaking, if your “ad-justed income” is greater than £240,000 a year (adjusted income generally covers all taxable income, including salary, interest on savings, income on rental property, as well as pension contributions), your Annual Allowance may be reduced. The Allowance is reduced by £1 for every £2 of income over £240,000, but will not go below £4,000 per tax year.

State Pension Age

The State Pension Age is increasing gradually as follows:

By 2020 – age 662026 – 2028 – age 672037 – 2039 – age 68

Brexit

The UK officially left the European Union on 31 January 2020. Throughout 2020 there will be a transition period in place until the end of the year while negotiations between the UK and Europe are settled. During this period of transition all current rules in place in relation to trade, business and travel will stay the same and any new negotiations reached between the UK and the EU will come into effect from 1 January 2021.

How much Brexit will impact pensions and retirement saving in general is still uncertain. Providers and the wider industry are monitoring the impact of Brexit on pensions, but it may be that returns are not as strong as they have been in recent years throughout this period of transition.

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Danny increases his payments by 1%

£596kPension fund at 68 (in future terms)

Chris doesn’t increase his payments

£800kPension fund at 68 (in future terms)

0% increase

1% increase per year from age 30-35

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Brexit

Assumptions: both Chris and Danny start on an annual salary of £24,000 at age 22; 2.5% p.a. salary increases; 5% investment return (net of charges); 5% employee contribution and a 4% employer contribution (total 9%) until age 35, and then increasing to 10% (5% employee and 5% employer) from age 35 in line with the Shoosmiths ‘Staff’ contribution structure.

Danny increases contributions by 1% per year from 5% to 10% then continues to pay the new contribution until retirement at age 68.

Looking ahead

You may be wondering why saving for retirement is so important, especially if you’re still young. But any delay now can have a considerable impact on your Plan.

Look at the example below, with Alex and Jordan both earning and paying the same amount into their pension, but where Jordan started paying in five years later than Alex:

The cost of delay Paying in more

£436k

£596k

RETIREMENT AGE 68

Figures projected forward to State Pension Age: based on a salary of £24,000 with a total of 9% contributions (5% employee and 4% employer) until age 35, and then increasing to 10% (5% employee and 5% employer) from age 35 in line with the Shoosmiths ‘Staff’ contribution structure. Salary increases assumed to be at 2.5% p.a. and investment returns of 5% p.a. (net of charges),

It can be tricky to find that little bit extra to save, especially with so many things competing for a share of your finances. Take a look at the example below which highlights how your Plan value can be impacted if you just keep paying in the same rate through to retirement. You can see how it would be improved by increasing contributions by 1% pa, even if just for a set time.

GOOD TO KNOWOur AVC window is now open! If you’d like to change your contribution levels and pay in additional mon-ies to your Plan then log in to Orbit and follow the instructions for AVCs. The AVC window is open until 30th June. If you’d like to model the impact of making a change to your contributions, please have a look at Aviva’s interactive modelling tool ‘Shape My future ‘.

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The following table provides a summary of the past investment performance for the component

funds in the Plan’s current default investment arrangement, Future Focus Universal Strategy. The

figures are presented against the relevant benchmark. We also show Consumer Prices Index (CPI) +

4% for the purposes of assessing real long-term growth.

Investment performance to 31 December 2019

1 Year 3 Year 5 Year

My Future Growth 16.3% 6.3% 7.2%

Benchmark 13.7% 6.3% 8.3%

My Future Consolidation

9.1% 3.1% 3.5%

Benchmark 9.3% 4.2% 4.2%

CPI + 4% 5.3% 6.1% 5.6%

Source: Aviva

We’ve all recently seen significant disruption in the world’s investment markets due to Covid-19 and know that short-term changes are understandably worrying for members of Defined Contribution (DC) pension arrangements, like the Plan. If you are have any questions relating to your investments, please see Aviva’s website where they have a dedicated Covid-19 section.

Notes:• The past investment performance information assumes an annual management charge of 0.51%. However, in practice

each of the investment funds actual investment performance will be net of the Annual Management Charge (AMC) which is 0.60%.

• Please note the value of funds is not guaranteed and can fall as well as rise.• You should not rely on past performance as this is no guarantee of future investment returns.• Please also refer to the risk warnings in the literature from Aviva.

GOOD TO KNOWIf your religious beliefs affect your

investment strategy or if investing

in ethical funds is really important

to you, then you should take time

to check. Contact Aviva directly.

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Do you know what the Money Purchase Annual Allowance (MPAA) is? And do you know what triggers it?

The MPAA only applies to contributions to defined contribution pensions like the Plan and is set at £4,000 for the

2020/21 tax year.

Currently you can pay up to £40,000 a year (or 100% of your salary) into a pension scheme and get tax relief on your

contributions. This is known as your Annual Allowance. But, if you start to take money from a defined contribution

pension, the amount you can pay into that pension, or any other defined contribution pension, and still get tax relief

reduces. This is known as the Money Purchase Annual Allowance or MPAA.

You’ll trigger the MPAA if:

• You take your entire pension pot as a lump sum or start to take ad-hoc lump sums from your Plan.

• You put your pension pot money into a flexi-access drawdown scheme and start to take an income.

• You buy an investment-linked or flexible annuity where your income could go down.

• You have a pre-April 2015 capped drawdown plan and start to take payments that exceed the cap.

The MPAA won’t normally be triggered if:

• You take a tax-free cash lump sum and buy a lifetime annuity that provides a guaranteed income for life that either

stays level or increases.

• You take a tax-free cash lump sum and put your pension pot into a flexi-access drawdown scheme but don’t take any

income from it.

• You cash in small pension pots valued at less than £10,000.

Hot topic - Money Purchase Annual Allowance

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There is flexibility in choosing how and when you retire – you may decide to

work longer to build up more in your pension account or phase from full-time to part-time work. There is also greater scope than ever before in how you access your pension savings, and you should ensure you fully understand these options before making any decisions.

What is my selected retirement age?This is the date that you selected when you joined the Plan, and when you can expect to retire. If you didn’t make a selection, it is normally set at your 65th birthday, but can be any time up until your 75th birthday. You may decide to work for longer, but it’s worth noting that making any change to your selected retirement age may potentially affect how your pension savings are invested. You should contact Aviva and consider taking financial advice.

When can I access my pension savings?In line with current legislation you can access your pension savings any time after your 55th birthday (57 from 2028). You can do this whether you stop working completely or continue to work full or part-time. HMRC may allow you to take your pension savings earlier if you are unable to work due to certain circumstances of ill-health.

If you’ve been working for a number of years and moved jobs during that time, you may have accumulated several pensions from your previous jobs. It can be tricky and time-consuming to keep a track of your various pension accounts, particularly if some are small, and it might also make more financial sense (perhaps reducing the annual charges you pay) to consolidate all of these separate plans into one savings account.

You should always take financial advice before you make any decision regarding transferring your pension, and you should also consider:

• whether any transfer will result in penalties, loss of valuable guarantees or other adverse consequences such as the need to cash out of investments to transfer, which could be detrimental especially during periods of market turmoil

• the administration costs of transferring• charges • if they need to be a certain value to consolidate• if there are advantages in keeping them separate

Please also refer to the ‘Important links’ section at the end of this newsletter to find out where you can access free and impartial help if you are considering transferring your pensions.

When can I put the breaks on and retire?

Combining your pensions

GOOD TO KNOW

You can delay taking your State Pension and you may get extra State Pension when you eventually come to claim it.

You will need to defer for at least nine weeks but your pension will increase by 1% for every nine weeks you delay in claiming (around 5.8% per year).

The New State Pension =

£175.20 per week for the 2020/21 tax year

How can I find out how much my State Pension is likely to be?

If you’ve paid enough National Insurance (NI) contributions (a minimum of ten years’ worth), you should qualify for some State Pension. To qualify for the full New State Pension you’ll need to have 35 years’ worth of NI contribution records. The Government provides a State Pension forecast service where you can check to see how much State Pension you might receive. Make sure you have your NI number handy and log in to www.gov.uk/check-state-pension. You can also check when you will be eligible to access your State Pension.

During the Covid-19 pandemic it’s even more important to carefully consider any decisions relating to potential pension transfer arrangements, as issues such as market volatility and potential delays in completing a transfer could negatively affect your pension fund. If you’re considering transferring any Defined Benefit entitlements into the Aviva arrangement just now it would be prudent to review your decision to ensure you’re comfortable to continue in the current economic conditions.

Please also refer to the ‘Important links’ section at the end of this newsletter to find out where you can access free and impartial help if you’re considering transferring your pensions.

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Retirement paths - Accessing your pension savings

There are three distinct choices open to you when you come to access your pension savings:- a cash lump sum- a guaranteed income for life (annuity)- flexible withdrawals (drawdown)- or you could choose a combination of all three

Let’s take a look at Tom, for example. He is going to use all three options to suit his specific needs at various points in his retirement journey:

What can I do with my pension savings?

Age 63 He takes flexible withdrawals as and when he needs it to supplement his reduced salary.

Age 63 He continues to work full-time until he is 63 when he goes part-time.

Age 60 He takes 25% of his pension savings as a tax-free cash lump sum to pay off his mortgage.

A combination of all three

Jenny takes 10k p.a from her DB pension

(because she can without it being

reduced) and carries working part-time

Bill carries on working full-time

Bill takes 25% tax-free from his DC savings to pay off the mortgage and

goes part-time

Bill is now eligible to take his State Pension. He

takes a smaller flexible withdrawal taking into

account her State Pension and stops working

Bill considers using the rest of his DC fund on

buying a joint life annuity

Bill takes £10k p.a. from his DB pension and a £25k flexible withdrawal

Jenny takes a 25k flexible withdrawal. They want a total of 50k and taking 25k each ensures they

stay in lower earnings tax bracket

Jenny is now eligible to take her State

Pension. She takes a smaller flexible

withdrawal taking into account her State

Pension

Jenny takes 25% tax-free from

her DC savings to pay off the

mortgage

Jenny takes the rest of her DC

savings as cash and spends it on

a world trip

60 63 65 67 70

If you’re married or have a partner, then it’s worth taking a look at your pension savings as a whole. Jenny and Bill have worked out how to make the best of their combined income and savings in the illustration below:

GOOD TO KNOWYou don’t need to stop working to access your pension savings and you can normally continue to pay in (subject to certain limits such as the MPAA). For further details on the MPAA, see the Hot Topics section. You should also check with your provider to make sure all these options are available under your plan.

Highway code

Pension terms can sometimes be a difficult code to crack. We’ve explained the most common words and phrases you’ll come across along the way.

Annuity – an insurance contract that will pay a secure regular income for life. Defined Benefit (or Final Salary or DB) – retirement income based on your salary and how long you have worked for your employer. Defined Contribution (or Money Purchase or DC) – a pot of money built up based on contributions from you and your employer as investment returns. The amount in your pension account at retirement is based on how much has been paid in, investment returns and charges. The Plan is a DC pension scheme. Drawdown (or flexi-access drawdown) – an option that enables you to take money from your pension scheme whilst leaving the pension account invested. You may take 25% as a tax-free lump sum but the remainder will be taxed at your marginal rate. The income isn’t guaranteed for life but you will have the flexibility to make changes on how much to take. Life expectancy – a statistical measure of how long a person will live, based on their date of birth, current age and other demographic factors such as gender. Salary Exchange (or salary sacrifice) – a method of saving where you ‘give up’ part of your salary which your employer then pays into your pension, along with their own contributions. Both you and your employer pay lower National Insurance contributions due to this reduction in salary. State Pension (or SP) – if you are entitled, money you receive regularly from the government when you reach State Pension Age. Tax relief – This is the amount of tax you save upfront when contributing to a pension. If you are a basic rate tax payer, tax relief will be applied automatically to your contributions. If you are a higher rate tax payer and don’t pay in via Salary Exchange you can claim the tax relief back, although you’ll need to do this directly with HMRC. Uncrystallised Funds Pension Lump Sum (or UFPLS) – where a cash sum is taken from a pot that has not paid out any retirement income. The first 25% drawn out will be tax free and the rest will be taxed at your highest rate. your local area.

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GOOD TO KNOW

If your personal circumstances have changed it’s important to keep your Beneficiary Nomination form up to date! Log in to MyAviva to complete a new Beneficiary Nomination form.

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Streets ahead

Beneficiary nomination formYou can nominate a person/people to receive a lump sum payable in the event of your death by completing a Beneficiary Nomination form. You can get the form from Aviva and return it to them once you’ve completed it. You can also complete the form online by logging in to MyAviva.

The form is not legally binding. However, your wishes will be taken into account should a payment need to be made.

Pension tracingLost track of one or more pension pots due to moving house or employer? The Pension Tracing Service is free and can help you trace a pension, even if you don’t have the contact details of the provider. All you need to know is the name of your previous employer or pension scheme.

To find out how, visit www.pension-tracing-service-uk.co.uk/

Personal details

It’s important to update Yourspace if you change address, as the Benefits Team will automatically update Aviva on your behalf. Please note you will need to contact Aviva directly if your personal details change if you leave the Firm.

Pension scamsYou can’t access your pension before the age of 55. However, there are increasing incidents of people being tricked into transferring their pension savings into an arrangement offering access to their money before age 55. Unfortunately, once you’ve moved your money into a scam, it’s too late. You could end up losing all of your money and in some cases face a huge tax bill of up to 55% as well as extra fees.

You may see pension scams of this sort being described as:• pension loans• early pension release• pension selling• cashing in your pension• pension liberation

Be on the look-out for:• being contacted out of the blue via phone, text message or

sometimes even approached at your front door• the lure of cash upfront• a ‘free’ pension review or enticements of a ‘one-off’ investment opportunity• paperwork delivered to your door requiring an immediate signature

If you think you are being targeted by a pension scam, contact: Action Fraud on 0300 132 2040

Financial adviceIf you do not have a financial adviser then visit www.thepfs.org/yourmoney/find-an-adviser to find a financial adviser in your local area.

You should take financial advice before making any decision regarding your pension.

Remember – if it sounds too good to be true, then it probably is!

Disappointingly, Covid-19 has also resulted in a significant increase in pension scams and fraud.

With that in mind and alongside The Pensions Regulator, we’re urging everyone to be more vigilant and exercise extreme caution at this time. There is information about scams particularly related to Coronavirus as well as more general guidance, available on the Government backed website: www.fca.org.uk/scamsmart

There is help if things go wrong. If you have a complaint concerning the Plan or its pension advisers, please raise this with the Benefits Team. If your complaint specifically relates to service from Aviva, please raise this directly with them, but also make the Benefits Team aware.

If you have a complaint or dispute with your pension provider that they haven’t resolved to your satisfaction, you should contact The Pensions Ombudsman. The Pensions Ombudsman is an independent body set up by the Government that has legal powers to settle complaints and disputes. Its service is free – visit its website to find out more. The Pensions Ombudsman will investigate your concerns and, if it believes there are grounds, it will attempt to mediate between you and the other party.

The Pensions OmbudsmanTelephone: 0800 917 4487 Website: www.pensions-ombudsman.org.uk

If you need information and guidance concerning your pension arrangements contact The Pensions Advisory Service.

Telephone: 0300 123 1047 Website: www.pensionsadvisoryservice.org.uk

Important links and contacts Further information on:

• Pension Wise - free and impartial guidance service to help you understand your retirement choices www.gov.uk/pensionwise

• State Pension - to find out how much State Pension you might get and when www.gov.uk/state-pension

• Financial matters - for general financial matters such as saving and debt www.moneyadviceservice.org.uk

• Free guidance - on pension savings www.pensionsadvisoryservice.org.uk

• The Plan’s provider Aviva, Po Box 520, Norwich, NR1 3WG | 0800 145 5744 | contactus@aviva.com

• The Firm’s pension advisers Barnett Waddingham | 0333 11 11 331

shoosmithshelpline@barnett-waddingham.co.uk

PLEASE NOTE

This newsletter does not constitute

financial advice, only information. The

figures included in this newsletter

are relevant to the 2020/21 tax year

and are likely to change from year

to year. Figures in the examples

are for illustration purposes only.

Shoosmiths’ pension advisers,

Barnett Waddingham LLP, helped

in the preparation of this newsletter.

Barnett Waddingham are authorised

and regulated by the Financial

Conduct Authority (FCA).

What happens if things go wrong?

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Would you like to see any more information? If you have any feedback or if there is something we can improve on, please contact the Benefits Team.