Introduction to University of Salford Pension Plan February 2019 Katy Hayes Barnett Waddingham LLP

Regulatory information The information in this presentation is based on our understanding of current taxation law, proposed legislation and HM Revenue & Customs practice, which may be subject to future variation. This presentation is not intended to provide and must not be construed as regulated investment advice. Returns are not guaranteed and the value of investments may go down as well as up. Barnett Waddingham LLP is a limited liability partnership registered in England and Wales. Registered Number OC307678. Registered Office: 2 London Wall Place, London, EC2Y 5AU Barnett Waddingham LLP is authorised and regulated by the Financial Conduct Authority and is licensed by the Institute and Faculty of Actuaries for a range of investment business activities.

Defined Benefit & Defined Contribution - an overview

Final Pensionable Salary Defined Benefit (DB) Final Salary Accrual Rate i.e. 1/80 Final Pensionable Salary Final Salary Pension Career Average – calculated in “year” segments Accrual Rate i.e. 1/80 Total Pensionable Pay Career Average Pension

LGPS – GMPF* ‘Career Average’ pension calculated as: Accrual Rate (1/49) Total Pensionable Pay Career Average Pension Trustee and Company may agree to give discretionary increases to Pensionable Pay records For service before 1 April 2014 a ‘Final Salary’ pension applied * Source: https://www.gmpf.org.uk/benefits.htm

The basics of Defined Contribution (DC) Timeframe how long employee is in it Payments amount going in from employee/employer/taxman Net investment return potential growth of investments less charges Pot of money what is the value of the pot/likely income levels

‘New’ retirement options Member can usually take 25% of their DC pot tax free. The remaining 75% can be taken as: Guaranteed income for life Cash lump sum Flexible withdrawals

University of Salford Pension Plan (UoSPP)

Master Trust Provider (Aviva) University of Salford Other employers UoSPP Other Plan A Master Trust is a large DC pension plan that is used by multiple employers, with each employer having their own section within the Master Trust. A Master Trust is run by a Trustee Board. The Trustees’ are in charge of ensuring the Master Trust is governed well, administered efficiently and that the investments available through the Master Trust remain appropriate for members to use.

Employee contribution* University contribution* Auto-enrolment minimums Employee contribution* University contribution* Total contribution Until 5 April 2019 3% 6% From 6 April 2019 5% 4% 9% The University is offering a contributions structure which goes beyond the requirements of the legislation (see next slide) * Contributions are to be based on Pensionable Pay. - Pensionable Pay = basic pay plus overtime, acting-up allowances and various other allowances. Further details are available from HR/Payroll.

Employee contribution* University contribution* University of Salford Pension Plan: contribution structure Employee contribution* University contribution* Total contribution Default level 0% 9% 1% 10% 11% 2% 13% 3% 12% 15% 4% or more 17% or more * Contributions are to be based on Pensionable Pay. - Pensionable Pay = basic pay plus overtime, acting-up allowances and various other allowances. Further details are available from HR/Payroll.

How are contributions made up? £1,350 (total payment) £1,350 (employer payment) £0 (employee payment) (Assumptions: annual pensionable income of £15,000, employee contributes 0%, Company contributes 9%) £1,950 (total payment) £1,650 (employer payment) £60 (tax relief) £240 (employee payment) (Assumptions: annual pensionable income of £15,000, employee contributes 2%, Company contributes 11% and pension payments will receive basic rate tax relief of 20%)

Salary Sacrifice An alternative way to pay pension contributions Employee payment method Employee pays University pays 2% pension payment 11% pension payment 13% total pension payment Salary Sacrifice method Employee gives up University pays Advantage 2% of your salary 13% total pension payment Employee (and University) make a National Insurance saving

Salary Sacrifice example Earnings of £15,000 per year: employee pays 2% and University pays 11% Take home pay Before Salary Exchange After Salary Exchange Gross pay £15,000 £14,700 Tax -£570 National Insurance -£789 -£753 Pension payment -£300 £0 Net pay £13,341 £13,377 Pension payment Before Salary Exchange After Salary Exchange Company £1,650 £1,950 Employee £300 £0 Total Employee NI saving: £36 p.a. Rates based on 2018/19 tax year (net pay method)

Salary Sacrifice considerations Not necessarily suitable for everyone: low salaries close to threshold for state benefits can impact on student loans could reduce statutory maternity/paternity pay (SMP/SPP) May increase working tax credits Previously an individual’s entitlement to a state second pension could have been slightly reduced – now the new flat rate pension is introduced, this is unlikely to have much impact

£1.03million* £40,000* £4,000* Know the limits There are limits on how much an individual can save into their pension during each tax year, and in their lifetime without having to pay tax. £1.03million* £40,000* £4,000* is the total amount an individual can take from all pensions without facing a tax charge This is called the Lifetime Allowance is the most an individual can save into their pension in an year and still get tax relief This is called the Annual Allowance is the lower limit Annual Allowance for anyone who has ‘flexibly’ accessed their pension savings on or after 6 April 2015 This is called the Money Purchase Annual Allowance *2018/19 tax year

University of Salford Pension Plan - Projected benefits Basis 1: Employee 0%/University 9% Basis 2: Employee 2%/University 11% Age 25 Age 35 Age 45 Basis 1 Basis 2 Average salary £15,000 Projected fund at 65* £89,800 £129,700 £58,700 £84,800 £34,300 £49,500 Projected pension (male) at 65** £3,600 £5,190 £2,350 £3,400 £1,370 £1,980 * All figures rounded to the closest £100, and provided in today’s terms ** All figures rounded to the closest £10, and provided in today’s terms Assumptions for fund projections: Assumptions for projected pension: Salary increase/inflation: 2.5% p.a. Rule of thumb - 4% conversion rate. Net investment return: 5% p.a. Existing DC funds: nil

The default investment strategy Aviva’s My Future Lifestyle Profile Aviva’s My Future Lifetime strategy will gradually move your pension savings from the My Future Growth Fund to the My Future Consolidation Fund as you approach your target retirement age.

The default investment strategy – more detail My Future Growth Fund This Fund is invested in a combination of equities, UK government bonds and UK investment-grade corporate bonds. The expected split is around 70% equities and 30% bonds although the asset allocation can vary over time. My Future Consolidation Fund This Fund is also invested in a combination of equities and bonds, but the allocation is typically closer to 20%-30% global equities and 70%-80% bonds (UK government bonds and corporate bonds). What are the charges? The charge of the default fund is 0.75%. This means if your plan was worth £1,000 it would equal an annual charge of £7.50. If you invest outside of the default, you may pay a different charge to the one above. Further details will be available from Aviva.

Additional features The University is intending to provide the following features within, or to complement, the UofSPP: Governance Through establishing a Pensions Governance Committee (PGC) Group Life Assurance A multiple of salary will be provided in the event of death This is in addition to a return of the member’s fund in the UofSPP Pensions Quality Mark Independently verified

What are your options No action required Remain in GMPF Review your options Currently a member of GMPF Remain in GMPF No action required Move to UofSPP Complete form in information packs* Not currently a member of GMPF Join GMPF Join UofSPP Key: UoSPP = University of Salford Pension Plan * Later this month, you will receive an information pack providing more information regarding the options available to you. This pack will also include a form to return to Payroll if you wish to re-join GMPF, or join the UofSPP.

Where to get more information

Additional information – February 2019 Later this month, you will be provided with a pack of information containing: A letter from the University of Salford outlining more details of the UofSPP, and the options available to you A summary document outlining the key features of Greater Manchester Pension Fund (GMPF) and the UofSPP A form to complete, either to join GMPF, or to join the UofSPP

Additional information – UofSPP From April 2019, employees who join the UofSPP will have access to the following: Aviva’s website and ‘MyAviva’ Information and tools Change contact details View your fund value, and other pension plan details Change you investment choices Barnett Waddingham’s member helpline – for information only

Online www.pensionwise.gov.uk Free impartial guidance (from age 50) www.moneyadviceservice.org.uk Information on financial issues www.pensionsadvisoryservice.org.uk Information about pensions www.fca.org.uk/consumers/finding-adviser Find a financial adviser N.B. Pension Wise, MAS and TPAS have recently merged to form the Single Finance Guidance Body (SFGB) https://singlefinancialguidancebody.org.uk/, although their individual websites continue to be in use for the time being.

MyAviva

MyAviva You can find lots of useful information about your plan by using Aviva’s online service, MyAviva: https://www.direct.aviva.co.uk/MyAccount/login