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INTRODUCING

INTRODUCING . PRIVATE 3 rd PARTY PENSION SPONSORSHIP PLEASE MIND THE GAP For Professional Advisors, Employers & Trustees Only. IMPORTANT QUESTIONS. Excluding the reliance on 2 nd generation wealth, how does the pension industry plan to solve the widening savings gap?

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INTRODUCING

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  1. INTRODUCING PRIVATE 3rd PARTY PENSION SPONSORSHIP PLEASE MIND THE GAP For Professional Advisors, Employers & Trustees Only

  2. IMPORTANT QUESTIONS • Excluding the reliance on 2nd generation wealth, how does the pension industry plan to solve the widening savings gap? • How will the industry re-engage consumers who have lost all faith and trust in pensions? • Has there been any real benefit from pension ‘improvements’ (switches) made in the last decade? • Were these ‘improvements’ necessary and did any valuable practical advice & education occur?

  3. PAST vsFUTURE • Final Salary schemes are closing • DC Trust based schemes restrictive (admin) • GPP’s impacted by impending RDR changes • Is NEST really the answer or simply destined to deliver yet more of the same? • Is NEST a complete waste of £1bn?

  4. INEVITABLE CONCLUSION • In reality, successes are too few to identify • Consumer confidence at an all time low • Trust has to be rebuilt • Consumer must be put first • Innovation is essential; not more of the same • Focus on the real enemy – ‘cost of delay’

  5. KEY PENSION ANALYSIS • Average Employer contribution 5.5% • Average Employee contribution 3% • Average term to NRD 22.8yrs • Average pension fund value (1) £26,000 • Average pension fund value (2) £55,000 • Average scheme turnover 2-3 years • Default fund cash flow 85% to 100% • All pension plans, any size (2) Pension plans £1,500 and above Source AEGON DC Group Pension Data

  6. INCOME SHORTFALL ANALYSIS ALL THINGS BEING EQUAL, THE VAST MAJORITY OF PEOPLE WOULD LIKE TO RETIRE WITH 50% OF THEIR PREVIOUS WORKING INCOME ON AVERAGE, WE ASSUME THAT A SHORTFALL OF AROUND £250,000 OF PENSION FUNDING PER CLIENT WILL OCCUR ASSUMING CURRENT TRENDS CONTINUE

  7. A DECADE OF RESTRUCTURING COMMON JUSTIFICATIONS FOR PENSION PLAN RESTRUCTURES • Reduce charges • Poor investment performance (default fund) • Poor administration • Lack of technology • Legislation changes • Providers withdrawing from the market

  8. SCHEME DESIGN ANALYSIS TYPICAL “90’s” SCHEME TYPICAL “00’s” SCHEME Single priced No initial charges No bid offer spread Default fund – Lifestyle Tracker Over 100 fund links AMC’s – 0.35% to 1.5% p.a. Deferred Member Penalties Effective RIY 0.35% to 1.5% • Initial charges 5% to 40% • 5% bid/offer spread • Loyalty units • Default fund - With Profits • 10 – 20 unit linked funds • AMC’s – 1% to 1.5% p.a. • Early encashment penalties • Effective RIY 1.4% to 3% EARLY LEAVER PERIOD MOST PROFITABLE PERIOD

  9. THE SAVINGS X FACTOR • But what are the key factors that influence long-term savings success MOST? How much is paid in i.e. Premium The length of investment term i.e. Term Asset allocation i.e. Modern Portfolio Theory Contract charges i.e. AMC THE REAL FOCUS HAS TO BE ON GETTING SUFFICIENT PREMIUMS INVESTED ASAP

  10. CONFIDENCE CRISIS? MOST COMMON REASONS GIVEN BY EMPLOYEES FOR NOT JOINING A PENSION SCHEME • No spare income • My home is my pension • No access • Benefit too far off • Not worth doing • Too complicated • Don’t trust greedy pension/investment firms

  11. KEY CONSUMER POINTS • Ideal pension at retirement 50% of income • Limited risk preferred • Target investment returns agreed at outset • Protection if something goes wrong • Fees should not apply if investments fail • Access to savings in an emergency • Investment freedom

  12. TACKLING THE BIG ISSUES • Pensions on their own will in most cases fail to deliver the ideal income based on DC averages currently operating • Employers cannot afford more • Employees cannot afford more • Society cannot afford more • Only pensions people think pensions are great A revolutionary, innovative approach is required

  13. 3PPS CORE FOCUS • Extra funding support critical • Consumer focused to win back trust • Has to be more than just a pension involved • Practical advice and education programme • Empower small investors in DC schemes • Long-term view will help to reduce risk • Practical lifestyle solutions are essential

  14. 3PPS POTENTIAL BENEFITS • Improves financial outcome for savers • Reduce savings gap • Tackles consumer negativity • Provides extra flexibility • Helps with Employer budgets • Shifts liability to private sector • Improves workforce positivity • Provides opportunity for financial education

  15. 3PPS BASIC STRATEGY RISK

  16. FOR MORE INFORMATION EMPLOYEE BENEFIT CONSULTANTS / WORKPLACE DC SCHEMES / TRUSTEES Please contact Darren Say, Chief Executive 07966 069 829 INVESTMENT GROUPS / NETWORKS / IFAS / ACCOUNTANTS Please contact Pierre Coussey, Pension & Investment Strategist 07907 917 133 COMPLIANCE / OPERATIONAL SUPPORT / TECHNICAL Please contact Ian Bullock, Technical Director 07896 252 061 South East Regional Office T: 01279 899 002 E: info@wealthconne ction.co.uk

  17. IMPORTANT NOTICE This document does not constitute personal advice. Should you have any doubt as to the suitability of an investment for your circumstances you should contact one of our advisors. All information and particulars contained in this presentation are for indicative purposes only. They are provided in good faith and are not intended to form part of any contract at this stage. Calculations and assumptions are provided to the best knowledge of Wealth Connection Ltd but can not be guaranteed and may be subject to change. No liability will be taken for any inaccuracies, changes or damages arising out of or in connection with the use of information in this presentation. All information regarding potential returns are examples only and are in no way guaranteed. The value of investments can fall as well as rise and past performance is no guarantee of future performance. No advice is given as to the suitability of purchasing a 3PPS investment solution and we strongly recommend the use of an independent authorised professional advisor who can advise you on finance, pensions and investments. No tax advice is given and it is recommended that investors consult a tax specialist regarding their personal circumstances. Any tax reliefs referred to are those currently applying, but levels and the basis of, as well as reliefs from, taxation are subject to change. Their value depends on the individual circumstances of the investor. Before transferring a pension you should ascertain whether any penalties will apply and carefully consider the overall impact of any investment you make. The materials and information contained herein do not constitute an offer or a solicitation of an offer for the purchase or sale of any securities in Wealth Connection Ltd or any of its affiliates. Although this information was believed to be accurate as of the date prepared by Wealth Connection Ltd or its affiliates, Wealth Connection Ltd and its affiliates disclaim any duty or obligation to update such information. This information is not intended to make any investment representations about Wealth Connection Ltd or its affiliates and should not be viewed as such. No representation or warranty is made by Wealth Connection Ltd about the accuracy, reliability or suitability of the information, material, systems, services or products contained or discussed here above. Wealth Connection Ltd, Phoenix House, Hastingwood Road, Hastingwood, Essex CM17 9JT Registered in England & Wales number 6529747. Wealth Connection Ltd is authorised and regulated by the Financial Services Authority (533106). The FSA register can be found at www.fsa.gov.uk/register/.

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