Additional Voluntary Contributions (AVCs)

Contributions over and above any normal contributions that were paid to the Defined Benefit Section in order to secure additional benefits.

Annual Allowance

Annual Allowance is the maximum value of pension savings you can build up each tax year subject to receiving tax relief at your highest marginal rate. In a Defined Contribution arrangement this is calculated as the total contributions paid to your Pension Account plus any investment return. In a Defined Benefit arrangement this is calculated as the increase in your accrued benefits over the course of the year.

The current Annual Allowance is £40,000 (2017/18) but from 6 April 2016 for those individuals who are deemed to have high incomes there are tapering down measures in place which reduced the Annual Allowance that applies.

Your Annual Allowance will be reduced from the current £40,000 if both of the following apply:

1. Your ‘Threshold Income’ is over £110,000; and

2. Your ‘Adjusted Income’ (which includes the value of your

pension savings) is over £150,000.

‘Threshold Income’ for these purposes is effectively your full taxable income less the value of your pension contributions. It therefore equals your full HRG Salary, any P11D benefits such as medical benefits and car allowance, and any bonuses. As mentioned above, it also includes any income from any other source – e.g. property, rents, or income from personal savings and investments.

‘Adjusted Income’ equals your Threshold Income plus the value of your own and HRG’s pension contributions over the year.

If you meet both of the criteria above, your Annual Allowance will be reduced by £1 for every £2 that Adjusted Income exceeds £150,000, down to a minimum of £10,000 for Adjusted Income of £210,000 and over.

It is important to note that income for this purpose must include any income in addition to that derived from your employment at HRG. Such income could be from property, rents, personal savings and investments plus any income from any other source.

If you exceed the AA you will have to pay tax at your highest marginal rate on the excess. For most high earners, this means the tax charge will be at 45% of the excess amount. For example, if your reduced Annual Allowance is £10,000 and you have exceeded this by £15,000, you would expect to pay additional tax of 45% x £15,000 = £6,750. Note that the residual pension income will be taxable when ultimately paid.

Annuity

An Annuity is a lifetime income provided by an insurance company, and is bought with a defined contribution benefit. The Annuity option is available for members with benefits in the Defined Contribution Section.

Authorised payment

Authorised payments are defined in Part 4 of the Finance Act 2004. They can be either authorised member payments, or authorised employer payments. Most authorised payments are taxable, although some authorised payments, such as a Pension Commencement Lump Sum, may be paid tax free.

Basic State Pension

For those reaching SPA prior to 6 April 2016, this is the flat rate pension provided by the State Pension Scheme (the pension scheme operated by the United Kingdom Government, under which a State Pension is payable). This provides benefits to persons having made National Insurance Contributions for the required minimum number of years, upon reaching State Pensionable Age.

Capital Value

This is the value, for Lifetime Allowance purposes, of providing the annual pension shown. For pensions in payment prior to 6 April 2006 each £1 of pension per annum has a capital value of £25. For pensions coming into payment after 5 April 2006 each £1 of pension per annum has a capital value of £20.

Company

Hogg Robinson Plc, and any subsidiary or associated company which participates in the Scheme.

Consumer Prices Index (CPI)

The government’s principal measure of price inflation and used for the up-rating of pension benefits accrued from 2011.

Contracting Out

The process whereby up to 5 April 2016 both members and the sponsoring employers of Contracted-Out pension schemes paid lower rates of National Insurance Contributions because they were not contributing to the State Second Pension Scheme (S2P) formerly the State Earnings Related Pension Scheme (SERPS), by virtue of their participation in the contracted-out scheme.

Contribution Salary

Contribution Salary is your Final Pensionable Salary as calculated at 1 April each year for the purposes of your historic Defined Benefit Section benefits; your Pensionable Salary remained fixed for the whole of each year.

Defined Contribution Section

The Defined Contribution Section opened for active members on 1 July 2013, when the Defined Benefit Section closed to future accrual.

Under the Defined Contribution Section, both you and the Company will contribute to a Pension Account, held in your name. The contributions will be invested in funds chosen by you from the fund range offered by the Scheme.

Defined Benefit Section

Under the Defined Benefit Section, benefits are based on contributions, Final Pensionable Salary, and service. The Defined Benefit Section closed to future service on 30 June 2013.

Defined Benefits Lump Sum Death Benefit

A lump sum, defined under paragraph 13, schedule 29 of the Finance Act 2004. Examples could be a multiple of salary, a refund of contributions or a payment under a pension guarantee. Further information may be found at; http://www.hmrc.gov.uk/manuals/ptmanual/ptm073100.htm

Final Pensionable Salary

Final Pensionable Salary is the lesser of:

• your ‘Old’ Final Pensionable Salary; and

• your ‘New’ Final Pensionable Salary

which, in respect of Pensionable Service before 31 March 2003, will never be less than your ‘Old’ Final Pensionable Salary revalued in accordance with legislation, as if you had left service on that date.

Flexible Accessed Benefits

This relates to benefits under a defined contribution arrangement. It allows you to withdraw retirement income as and when you like, while keeping your remaining money purchase pension savings invested. Available from age 55, you may draw as much or as little as you like (depending on the provider).

Accessing benefits in this way might reduce your subsequent Annual Allowance from £40,000, and you should ensure that you understand how this might be affected before making any decisions.

You may not take flexible retirement options from the Scheme, but you can transfer your benefits out to another arrangement that offers these options if this is more appropriate for your personal circumstances.

Guaranteed Minimum Pension (GMP)

The minimum pension which an Occupational Pension Scheme must provide as one of the conditions of Contracting Out for pre 06/04/1997 Service. It is broadly the amount of pension that would have been provided from the State Second Pension Scheme (S2P) had the member not been contracted out via their membership of the contracted out Occupational Pension Scheme. GMP ceased to be earned with effect from 06/04/1997, but Occupational Pension Schemes are still responsible for paying the GMP already earned in their schemes. The Scheme must ensure that the pension they provide is at least the amount of the member’s GMP when the member reaches GMP Payment Date i.e. age 60 (female) or age 65 (male).

Her Majesty’s Revenue and Customs (HMRC)

Her Majesty's Revenue and Customs (HMRC) is a non-ministerial department of the UK Government primarily responsible for the collection of taxes, some forms of state support, and import controls. HMRC was formed by a merger of the Inland Revenue and Her Majesty's Customs and Excise and came into formal existence on 18 April 2005.

HMRC National Insurance Contributions Office (HMRC NICO)

This office is responsible for the collection and recording of national insurance contributions. This involves the following: ensuring compliance with national insurance related legislation, the collection of national insurance contributions, the administration of the Contracted Out system, the maintenance of accurate national insurance accounts and the provision of national insurance information.

Lifetime Allowance

The Lifetime allowance is an overall ceiling on the amount of tax privileged pension savings that any one individual can usually draw. In most cases a Standard Lifetime Allowance will apply set each year by Government. In some cases a higher personalised allowance may apply.

Lifetime Allowance Declaration

The form used by Administrators to enable the member to inform them of their benefits in payment or which will come into payment on the same day as the benefits in question. This is also used to provide information about any Lifetime Allowance Protection or Enhancement the member may hold.

Lifetime Allowance Enhancement

When the Lifetime Allowance was introduced it was possible to apply for an enhancement to the Standard Lifetime Allowance if you already had pension savings in excess of £1,500,000 as at 5 April 2006. It is also possible in some other limited circumstances to obtain an enhancement. If you have received such an enhancement then you will be in receipt of a Certificate or Reference number from HMRC.

Lifetime Allowance Protection

When the level of the Lifetime Allowance was introduced and when it was subsequently reduced from £1,800,000 at its highest (currently it has been reduced to £1,000,000) the government recognised that it would not be fair to apply the new LTA to savers who already have pension values in excess of the new proposed limit and therefore have offered savers who may in excess of the lower limit protection from the new limit. If you have received such protection then you will be in receipt of a Certificate or Reference number.

Lifetime Allowance Tax Charge

A charge to income tax that arises on the value of any benefits in excess of your Lifetime Allowance. The rate of charge is either 25% or 55%, depending on whether the 'event' giving rise to the charge was the payment of a lump sum. The scheme administrator and member are jointly liable to the charge, except where the chargeable amount arises following the death of the member (in which case the recipient of the payment giving rise to the charge is solely liable).

‘New’ Final Pensionable Salary

‘New’ Final Pensionable Salary means:

• if you were in Pensionable Service on 31 March 2003, your ‘Old’ Final Pensionable Salary as at 31 March 2003 revalued by the lesser of RPI and 5% (Limited Price Indexation or LPI); and

• for all other members, an amount notified by the Company when your Pensionable Service began, revalued by the lesser of RPI and 5% (Limited Price Indexation or LPI).

Normal Retirement Date

Normal Retirement Date is the earliest date on which you can retire voluntarily to receive immediate and unreduced benefits. It is the fifth day of the calendar month which either is (or next follows) your 65th birthday. In certain cases, special arrangements apply; you will be notified personally, if you are affected.

‘Old’ Final Pensionable Salary

‘Old’ Final Pensionable Salary is the greater of:

• your highest Pensionable Salary in any one of the preceding five years; and

• the highest annual average of Pensionable Salaries received over any period of three consecutive years in the preceding ten years.

Pension Account

Pension Account is a notional account made up of your contributions and those of the Company to the Defined Contribution Section and any transfer payment received under that Section in respect of you, together with investment gains and losses, less any share of relevant expenses.

Pensionable Salary

Pensionable Salary is your Salary less an amount equal to the Lower Earnings Limit (LEL) applicable on the previous 6 April. The LEL is currently fixed each April by the Government for the purpose of determining National Insurance Contributions. Scheme Limits may restrict your Pensionable Salary to a lower amount.

Pensionable Service

Pensionable Service is the number of years and complete months of service as a contributing member of the Scheme plus the following:

• for those who joined at the inception of the Scheme, the Pensionable Service completed under the Hogg Robinson Retirement & Death Benefits Plan;

• any other period of service notified to you as ranking for pension.

Please note however, that no service completed after 30 June 2013 will give rise to the accrual of further benefits under the Defined Benefit Section (this does not affect the calculation of ‘Old’ Final Pensionable Salary and ‘New’ Final Pensionable Salary

Pension Commencement Lump Sum (PCLS)

A lump sum benefit paid to a member of a Registered Pension Scheme in connection with an arising entitlement to a pension benefit. Currently this benefit is paid tax free.

Pension Credit

Pension sharing on divorce was introduced from December 2000 under the pension sharing provisions in the Welfare Reform and Pensions Act 1999 (WRPA) and Schedule 10 of the Finance Act 1999. This introduced the 'pension credit' and 'pension debit'. The 'pension debit' is the amount by which the original member's pension is reduced and the ‘pension credit' is the corresponding amount by which the ex-spouse's pension rights are increased.

Pension Protection Lump Sum Benefit

A lump sum, defined under paragraph 14, schedule 29 of the Finance Act 2004. It is a lump sum payable on the death on a member within a guarantee period.

Further information may be found at; http://www.hmrc.gov.uk/manuals/ptmanual/ptm073300.htm

Qualifying Recognised Overseas Pension Scheme (QROPs)

A Qualifying Recognised Overseas Pension Scheme, or QROPS, is an overseas pension scheme that meets certain requirements set by Her Majesty's Revenue and Customs (HMRC). A QROPS can receive transfers of UK Pension Benefits without giving rise to an unauthorised payment and scheme sanction charge, although may in some circumstances be subject to a 25% tax charge.

Rectification

On the 28 January 2016 the High Court granted an order rectifying the Scheme documents. The principle issue corrected by the Order concerned the rate of increase applied to pensions for members who had already left (or will in future leave) pensionable service before reaching normal retirement age although a small subsidiary issue relating to the rate of increase in pensions in payment was corrected. Members affected by rectification were written to during 2016/17 confirming the impact on their benefits.

Registered Pension Scheme

A pension scheme is a Registered Pension Scheme at any time when, either through having applied for registration and been registered by the Her Majesty’s Revenue and Customs (HMRC), or through acquiring registered status by virtue of being an approved pension scheme on 5 April 2006.

Retail Prices Index (RPI)

An index of price inflation in the UK used by Pension Schemes.

Salary

Salary is your annual rate of basic pay and, if approved by the Company, the annual average of your bonuses and commission in the three years to the previous 31 March. Any reduction in your earnings resulting from Smart Pensions will be ignored in calculating Salary

Small Lump Sums

If the lump sum value of all your benefits within the Scheme is less than £10,000 then this pension can be taken as a Small Lump Sum.

Smart Pensions

The payment of contributions (including additional contributions) will be made under a salary sacrifice arrangement called Smart Pensions. Smart Pensions will reduce your pay by a reduction in your basic salary equivalent to the amount you wish to pay to the Scheme. This reduction in your pay is known as salary sacrifice and will mean a small change to your terms and conditions of employment. This also means that all Scheme contributions take the form of Company contributions. Making pension contributions in this way may also reduce your National Insurance Contributions.

Standard Lifetime Allowance

The overall ceiling on the amount of tax-privileged savings that any one individual can accumulate over the course of their lifetime without taking any special factors into account that may increase or decrease the tax-privileged ceiling.

The Standard Lifetime Allowance for both the 2016/17 and 2017/18 tax years is £1,000,000. For subsequent tax years it will be specified by an annual order made by the Treasury.

You can find more information through the following link:

https://www.gov.uk/tax-on-your-private-pension/lifetime-allowance

State Pensionable Age (SPA)

The age from which pensions are normally payable by the State Pension Scheme.

You can check your State Pension Age and obtain a pension forecast online through the following link: https://www.gov.uk/calculate-state-pension.

State Pension Scheme

The pension scheme operated by the United Kingdom Government, (under which a State Pension is payable). This provides benefits to persons having made National Insurance Contributions for the required minimum number of years, upon reaching State Pensionable Age.

The government has introduced a new Single Tier State Pension with effect from 6 April 2016, for those reaching State Pensionable Age on or after that date, which replaces the Basic State Pension and S2P.

Trivial Commutation

If the Capital Value of your pension, taking into account all your other pension entitlements, is less than £30,000 then this pension can be taken as a Trivial Commutation.

Unauthorised Payment

The tax rules specify the conditions that need to be met for payments to be authorised (see definition above). Any payment that doesn’t meet these conditions is an unauthorised payment.

Uncrystallised Funds Pension Lump Sums (UFPLS)

From 6 April 2015, you may be able to access some or all of your money purchase pensions savings as one or more lump sums without designating funds as available for drawdown or buying an annuity or scheme pension. To qualify for an UFPLS you must have some Lifetime Allowance remaining, and have reached normal minimum pension age (currently 55).

The UFPLS option is not available from the Scheme, but you may transfer out to another arrangement that does offer this if it is appropriate for your personal circumstances.