These are thoughts which we have discussed already.

This section is not to be given to the client it is

just different ideas that you may wish to discuss with the client to help with your final
recommendation. You should still do your usual report which highlights their circumstances,
recommendation, costs of this plan etc. Then mention an additional analysis has been carried out for
the clients protection as we take matter seriously etc(or however you feel best to present this as an
additional benefit for the client and how important we value that the correct decision is made for the
client.

Don't forget the final salary process is a little longer. Needs a UK FCA report. - So I have also sent
the documents we need for the next stage. This is a UK rule, they categorically can't get the plan
transferred without this.

Although Derek works at Spectrum, this goes through his UK company and therefore the risk is on
him. He has to pay for his insurance, his compliance costs etc, so this is why there is the fee of
£1600. Many IFA's ask for £3k or 1% of the transfer value if higher, so we think we have negotiated
well for clients.

If the report goes through then I receive a report fee from the advisers commission. This is 250
Euro for a standard Personal Pension Plan and 400 Euro for a Final Salary or safeguarded rights
pension. No fee if nothing goes through.

Vodafone - TV - £139,590.33

Retirement age - 65

 Age 65 - Critical Yield 10.03% - the hurdle rate is, 3.53%.

 The FCA have changed the focus to also look at cash flow analysis, not just the yields.

 Before based on the yields the hurdle rate above this would help be very positive towards a
transfer as its below 5% .

 The critical yields put people off, but remember its because its based on buying an annuity
with inflation at record lows and the system uses a rate of 1.3%! which they have to use
thanks to the FCA and I can't amend that. So the yield is high as you need a higher capital
amount. So it is highly skewed.

 The FCA focus in now changing on cash flow analysis and affordability in retirement.

 I haven't really got much information about the client so I need this. If he has no other assets
and is short of cash, limited income in retirement, maybe unemployed and ltd assets then
the recommendation will be no to transfer. Plus the value, whilst ok, is still slightly low
because of the fixed charges.

 If they have many other assets and in particular fixed income in retirement in the future
then it would be ok for this to continue.
 Also if he is happy to take on risk and has financial experience that helps.

 If he needs access now, my initial inclination is therefore that he needs the money, which
would often suggest that he doesn't have other assets and therefore more likely he will take
too much out now too early and therefore the recommendation is likely to be no to transfer.

 BUT I need to see the client profile and my client information page to see their situation.

 If in the end we decide that its best not to transfer given his client situation (ie if he has ltd
other assets and is likely to therefore spend this quickly and then end up with nothing by the
time he is 65-70) then we may be able to still transfer, but they would need to sign a
disclaimer saying they are transferring against our advice. But as noted below we need to run
this past Michael Lodhi and Jonathan Goodman first to make sure we can still continue.

 If you show them the report and solution and they come back and say they really want to go
ahead, with strong reasons we would have to send them to Michael Lodhi and Jonathan
Goodman first to make sure they are happy to carry on with a disclaimer. Please do not go
ahead and sign this up without coming back saying what the client wants to do and why as
we must run it past Michael and Jonathan.

 We also need the funding information so need authority to order that.

 If you were to transfer your pensions of £139,590.33 now and wanted to replicate the same
income options with your current pension then to obtain the same income of £3,727.20 pa or
a lump sum of £18,436.44 and a reduced income of £2,765.52 pa then you would need to
draw 2.67% pa & 2.28% respectively. (The figure reduces as there is a cost to taking the lump
sum, they have a commutation rate that usually isn't that favourable. So it can be expensive
to receive the capital in terms of the income you lose. To be fair to the scheme this
commutation amount is not that bad compared to many which are usually higher than this).

 Although as noted below the income from the current plan would increase by inflation with
caps on the maximum increase and provides a spouse's pension. However a QROPS would
pay out the remaining benefits to any beneficiary and the investment growth could be higher
than inflation, although this is not guaranteed. There would also be charges within the solution
which is not factored into the amounts that would need to be withdrawn from the policy above.

 You could of course also take a higher lump sum of 25%, ie £34,590 if it was important at the
moment that you require a higher amount of cash. But of course the more you take out now
the quicker there is the potential that the pension could deplete over the longer term.

 Then a very basic test to see how good or bad the transfer value is you can also look at the
multiple of income to transfer value on offer. (very basic, but gives a very quick idea). The
deferred income if taken now with early exit penalties would be £3,727.20 (with a large early
retirement reduction). This divides into the transfer value of £139,590.33 37 times. So this
shows that they are offering a good transfer amount in relation to the income on offer. Many
are lower than this, in the28 to 32 region. A few years ago 24 was a good value as transfer
values have gone up so much recently.
 Therefore this shows that the transfer value is pretty good in relation to the income. Its
mainly therefore the client situation that will determine on whether the recommendation
should be yes to transfer or not.

 Below is a summary of the pension benefits:

 Client left on 31 May 2009.

 The deferred income at date of leaving was £4,545.28 pa.

 The Post 97 - £4,475.35, Post 09 £69.93 pa.

 In deferment - The Post 97 pension will increase by CPI up to 5% pa. The Post 09 pension will
increase by CPI up to 2.5% pa

 In payment - The Post 97 and Post 09 will increase by RPI up to 5% pa.

 DEATH BENEFITS - before retirement its 50% of the spouse's revalued pension.

 In payment its also 50%, but of the pre-commutated amount. - ie of the initial income rather
than the reduced income after taking the lump sum. ie £1,863.60 pa even if he took option 2
as its always 50% of option one regardless of which income option is taken.

 Funding - We have not been provided information about the funding of the scheme. The
client should have a yearly report from the scheme which informs them of this information.
If in deficit then this is another reason to think about a transfer.

 Points to think about

The client is 55, so you need to think about the exit penalties. They need to take their
benefits either now upon transfer or after transfer or after the 5 or 8 year initial period.

With OMI and SEB, although you could invest it all and take the lump sum out then the
charges are on the initial premium so that is not the best way forward there as the charges
will be top heavy and reduce the overall performance.

With Pru also remember to add on the form about max income of 7.5% just in case, so it isn't
capped at 5% pa. Although no cap after the exit penalties anyway.

Also note about the Budget changes, they have to be abroad for 10 full UK tax years and
the pension has to be transferred out for 5 full tax years to get a 30% lump sum rather than
25%.

Also if they move to a non EEA country within 5 full tax years then they would face a 25%
tax charge.
 So the pensions do provide guarantees that are good, no worry about investment risk
there and they know what they are getting.

These are reasons why the client might consider a transfer,

 Transfer values are at a real high at the moment - if they are thinking they want to transfer
at some stage, then really they should now as they are highly likely to go down in the future
and who knows, one day transfers may be blocked and then the benefits watered down. The
deficits are meant to have just recently decreased a lot and so that is likely to mean the
transfer values really will be coming down soon as gilt rates going up help reduce the deficits
but also reduce the transfer values.

 Funding - We have not been provided with the funding information as they are in the middle
of calculating this.

 Currency risk – wants to reduce currency risk.

 Fund Management –how well are the schemes funds managed, so they have no say in how
the schemes invest the funds, if they transfer then with you they can make their own
decision on how the funds can be invested against their risk profile.

 Death Benefits – The spouse's benefits are the standard 50% on death, both before and after
retirement. After retirement its on the pre commuted value with a 5 year guarantee. Would
they prefer the whole amount to pay out instead.

 Larger Lump Sum - Can take 30% instead of 25% – as long as lived abroad for over 10 full UK
tax years, once they are 55 or over. Also the pension needs to be transferred for at least 5
years as well.

 Flexibility - If the client wanted more flexibility, so for instance they wanted the lump sum, to
pay off a mortgage, buy a car etc, but 0 income as perhaps she will work a little longer, then
they have this flexibility. So delay the income payments from the actual scheme. With the DB
scheme they would have to take both the lump sum and the income at the same time.

 Domicility – Trying to transfer all assets out of UK to help with domicility status.

 Worried about pension changes in the UK – wants to get out now while still can.

 Consolidation – bring the plans together to make them easier to manage. -

 Transfer now whilst still able to as could this be blocked after Brexit (if it happens).