bankhall conference 2009 - scottish widows
DESCRIPTION
Pension change - opportunity or threat?TRANSCRIPT
As part of the Lloyds Banking Group, Scottish Widows is proud to be an Official Provider of the London 2012 Olympic and Paralympic Games
Pension Change – Opportunity or Threat?
Robert Cochran
Pension Development Manager
Adviser Value Proposition
2008 2009 2010 2011 2012
Equity Loss
(Value)
Value (£)
Time
Change in NRD
50% High Earners Tax
PA changes above £100k
Rise in Trust Tax
Increase to National Insurance
Lifetime & Annual Allowance
Freeze
20% Tax Relief for high earners
Personal Accounts
Auto Enrolment
Abolition of Contracting Out
Full RDR implementation
PCLS protection
Large pension contribution rules
Bed and Sipping
Removal of Safeguarded Rights
£20,000 Special Annual Allowance
Risks?
Opportunities?
Budget opportunity – clients earning around £150k
• Client earns £175k
• Wants to make a pension contribution of £50k
• How can they get higher rate relief on it all?
£20k Pension Reduction
Gift Aid£150,000
Income
£5,001 contribution
• Using £20k allowance and Gift Aid contribution can reduce Earnings below £150k
• Entire £50k contribution will now get higher rate relief
• Remember last 2 years definition
Why should high earners use their £20k allowance?
• Three different rates of tax relief for next three years
• £20k payments in next two years generate extra £10k tax relief compared to £40k after April 2011
£12k net cost
£10k net cost
£32k net cost
£20k £20k £40k
Budget opportunity – clients earning around £100k
• Earn £110,000
• Tax of 40% on all earnings above the threshold
• Personal allowance reduced by £1 for every £2 above £100k
• Personal Allowance reduced by £5,000 so pay 40% on this as well
• This means they will pay 60p on every £1 over £100k
• Earn £110,000
• Tax of 40% on all earnings above threshold
• Make contribution to pension of £10k
• Keep full personal allowance
• Effective relief of 60% on contribution
Higher rate tax payers – a sigh of relief?
• Higher Rate Relief – use it or lose it?
• The importance of regular premiums
• Bed and SIPPing/Pensioning for lump sums
• www.scottishwidows.co.uk/budget
Adviser value proposition
2008 2009 2010 2011 2012
Equity Loss
(Value)
Value (£)
Time
Change in NRD50% High Earners Tax
PA changes above £100k
Rise in Trust Tax
Increase to National Insurance
Lifetime & Annual Allowance
Freeze
20% Tax Relief for high earners
Personal Accounts
Auto Enrolment
Abolition of Contracting Out
Full RDR implementation
PCLS protection
Bed and Sipping
Removal of Safeguarded Rights
£20,000 Special Annual Allowance
Risks?
Opportunities?
Age 50 change gaining momentum in the press
• Baby boomers face tough decision on tax-free cash – 28 May 2009
• Ban until 55 for Tax Free pension Grab – 01 June 2009
• Time is running out for those wishing to take tax free cash early – 04 April 2009
• Economic gloom spurs rise in phased pensions – 23 May 2009
At retirement flexibility
Scheme & Master Trust
Simple Re-Registration of Assets through Designation
Retirement Account Offer
Support available
• Expert Account Managers
• Approach Letters for those affected
• Ideas for maximising tax relief
• Case studies
• Income Recycling calculator
• Bed and Sipping examples
• scottishwidows.co.uk/three
Adviser value proposition
2008 2009 2010 2011 2012
Equity Loss
(Value)
Value (£)
Time
Change in NRD
50% High Earners Tax
PA changes above £100k
Rise in Trust Tax
Increase to NILifetime & Annual Allowance
Freeze
20% Tax Relief for high earners
Personal Accounts
Auto Enrolment Abolition of Contracting Out
Full RDR implementation
PCLS protection
Bed and Sipping
Removal of Safeguarded Rights
£20,000 Special Annual Allowance
Risks?
Opportunities?
Why Personal Accounts?
• Engages just over 30% of the private sector workforce in workplace schemes
• 21% of Employers provided access to and contributed to a pension scheme
• 42% of eligible employees had joined an Employer sponsored pension scheme
• Average DC contribution is 6% Employer and 3.7% Employee but very much dependent on scheme type
The Current System
*Sources: DWP: Research Report No 545 - Employers’ Pension Provision Survey 2007 (page 2); DWP: Research Report No 546 - Employers attitudes and likely reactions to the workplace pension reforms 2007 (pages 2 and 3); Deloitte & Touche: Employer Pension Contributions and Pension Reform (page 18)
Personal Accounts vs. Private Provision
Personal Accounts
Private Provision
Wide choice of Investment Funds
Self Investment
Tailored communication material
One scheme for all employees
Maintain existing relationships
Recognisable Brand
Adviser Support
The value of Salary Exchange
• Assume client earns £30,000 per annum
• Employee Net £100.00
• Employee gross - £125.00
• Salary Exchange –
By adding in Employee NI saving £144.93
By adding in both Employee and Employer NI saving £163.48
31% increase in contribution over normal net pay method
Immediate HRT relief if applicable
Salary Exchange the range of benefits
Scottish Widows – Comprehensive support
Adviser value proposition
2008 2009 2010 2011 2012
Equity Loss
(Value)
Value (£)
Time
Change in NRD
50% High Earners Tax
PA changes above £100k
Rise in Trust Tax
Increase to NI
Lifetime & Annual Allowance
Freeze
20% Tax Relief for high earners
Personal Accounts
Auto Enrolment Abolition of Contracting Out
Full RDR implementation
PCLS protection
Bed and Sipping
Removal of Safeguarded Rights
£20,000 Special Annual Allowance
Risks?
Opportunities?
This presentation represents Scottish Widows’ interpretation of current and proposed legislation and HM Revenue & Customs practice as at the date of publication - these may change in future.
This material is strictly for internal use only. It is not intended for onward transmission to private customers and should not be relied upon by any other person.
As part of the Lloyds Banking Group, Scottish Widows is proud to be an Official Provider of the London 2012 Olympic and Paralympic Games.
Scottish Widows plc. Registered in Scotland no. 199549. Registered Office in the UK at 69 Morrison Street, Edinburgh, EH3 8YF. Tel: 0131 655 6000.
Scottish Widows plc is authorised and regulated by the Financial Services AuthorityOur FSA Register number is 191517.
33841 10/09