Name

Address

Address

Address

Address

(This letter, particularly italics & sections in red can (& should) be amendedas appropriate)

Date

Dear Name

Your employers Group Pension Scheme

The purpose of this letter is to provide you with sufficient information in order that you can make an informed decision as to whether to apply or otherwise for membership of the scheme and should not be considered as advice.

Whilst we are happy to provide you with advice from ourselves (at no additional expense), we appreciate that you may well be sufficiently familiar with the various aspects of pensions and do not require specific advice from ourselves. If having read this letter you wish to join the pension arrangements without the need for any specific advice from us you should follow the application procedures referred to at the end of this letter. If advice is required or you wish to arrange a meeting please telephone me.

Please note that the information given in this letter is specific to your employer’s group scheme only. It does not give advice specific to your own personal circumstances, attitude to risk and other existing pension arrangements that you may have.

Background

You are invited to participate in the company’s pension arrangements with effect from XYZ date. The company’s pension arrangements consist of a Product Provider Group Scheme under which you will be provided with your own individual pension plan.

Your employer would like us to draw your attention to the fact that if you wish to receive the benefit of their contribution this is the only plan to which they will contribute and to which you must contribute accordingly (see Contributions).

For those employees who are not members of a pension scheme, State Pension benefits are likely to be wholly inadequate to provide a reasonable standard of living in retirement. The Government are keen to encourage individuals to fund for their own retirement. As a result, the tax regime applicable to pensions is extremely favourable and pensions provide a highly tax efficient method of building up a fund that can be used to produce a lump sum and an income during retirement.

Pension scheme provider (amend this paragraph to suit the circumstances – wording shown is specimen only)

Product Provider (is part of the Parent Group), manages/managing funds in excess of £assets billion world-wide. They are one of Europe’s largest insurers considered by independent financial analysts as being financially strong. They are a leading provider in the Group Pensions field. Their pension plan will allow you to invest into a comprehensive range of funds suitable for both the low, medium and high-risk investor.

Contributions

The basis of contributions is that providing you contribute ABC% of your monthly scheme salary a similar amount / an amount of £ / %of your salary will be contributed on your behalf by your employer. Your own personal contribution will be deducted from your gross monthly salary. Your scheme salary is defined as your basic salary plus/excluding location allowances, shift allowances, bonus / overtime. etc. ORBased upon your scheme salary of £salary this would amount to £exact contributionafter deduction of basic rate tax.

If you are a higher rate taxpayer, you may be eligible for further higher rate relief and this is claimed via your Inspector of Taxes. Once your membership is formalised you will be provided with a certificate to support your claim.Total contributions are subject to Inland Revenue limits.

Eligibility

You may become a member of this scheme even if you are already contributing to another personal pension and wish to continue to do so, subject to certain tax limits. If as a result of your previous employment you are also a member of a previous pension scheme, you may wish to check with me if there are any implications in regards to you current employers scheme.

Contribution Limits

Her Majesty’s Revenue & Customs (HMRC – formerly the Inland Revenue) impose a limit on the total amount of money you may invest into pensions in any one tax year. While quite generous, these are subject to annual and lifetime limits, which you may need to check.We are presently unaware of any other pensions which you may hold and you must ensure that you do not exceed the annual and lifetime limits. If you wish to check whether you may be affected by any of the above restrictions, please do contact me.

You may increase your personal contributions above the minimum at any time either on a regular monthly or single premium payment basis. If you wish to take advantage of this facility please contact me in the first instance.

Affordability

As previously indicated the net monthly cost to you will be XYZ% of your salary OR£specific. I do strongly suggest that you take this and all other outgoings you have into account before committing yourself, although your contributions may be voluntarily suspended or discontinued at any time without penalty.

Benefits

The investment fund which underpins the plan is substantially exempt from tax - this means that the investment build up is likely to be significantly higher than most other forms of investment.

Benefits may normally be taken at any time after age 55. Up to 25% of the fund may be taken as a lump sum, which is currently free of all personal taxes. It should be borne in mind that legislation and rates of tax can change from time to time and this may affect the value of the tax advantages that are currently available.

The balance of the fund is usually taken as pension, although recent budgets have introduced considerably more flexibility regarding pension withdrawal. On retirement pensions can be bought from the same company, which has administered the pension, or from another insurer. This ‘shopping option’ frequently results in better terms being achieved. Pension income and withdrawals (other than tax free cash) is taxable in the same way as earned income.

The majority of modern plans allow benefits at retirement to be phased so that segments of the pension fund can be used to generate income, whilst the remainder stays actively invested, for further growth. This is an important option on which we can advise at your request, as you approach retirement.

An alternative to annuity purchase at retirement is also available, namely pension income “drawdown”. In essence your pension fund remains invested (either before or after you have withdrawn any tax free cash entitlement), and you are able to draw an income from it. However drawdown is not without risks and limitations, and is not generally for those with small funds, or who do not wish to take any risk.

Benefits in the event of death before retirement

In the event of your death before retirement, the full value of your fund at the date of death will be paid as a lump sum to your nominated beneficiary. We would recommend that you nominate a beneficiary(ies) with regard to the pension fund payment (see notes in the application form and key features document). In the absence of a nominated beneficiary any payment will be made to your estate and may result in a charge to Inheritance Tax.

Leaving your present Employment

Should your employment be terminated, the Company will pay no further contributions. Depending upon your new employment it may be possible for contributions to be reinstated either by you personally and/or your new employer, as your pension is fully portable.

The charging structure of your plan ensures that if contributions are discontinued no penalties will be incurred. A transfer of funds away from the scheme is available without penalty (although please note a Market Value Adjuster could be applied to With Profits funds, reducing the fund value in certain circumstances, usually if equity markets have dropped).

Fund Selection

One of the reasons for selecting Product Provider is their comprehensive range of funds. We appreciate that not everyone has the same attitude towards investment risk and the range of funds available should enable everyone to select appropriate fund(s) commensurate with the level of risk they are prepared to accept.

Whilst not giving specific advice the Global Managed, Managed and Retirement Distribution funds are considered as being medium risk and should suit the investor who is prepared to take a medium to long term view with an investment of predominantly UK and International stocks and shares. For the more risk averse investor the Bonds, Property, Deposit funds could be considered. Full fund details are enclosed.

Important Risk Warnings

You should understand that the value of investments can fall as well as rise and as a result you may not recover the full amount invested. Past performance is not necessarily a guide to the future, and investments of this nature should not be considered short term.

In the case of with profits funds, a Market Value Adjuster may be applied, reducing the value of your fund in certain circumstances, especially if equity markets have performed poorly. Terminal bonuses are not guaranteed.

With regard to Property funds, in certain circumstances the fund managers can delay encashing or switching units for a protracted period (up to 12 months) if there is a high withdrawal demand. The value of properties held in such funds, is a matter of valuer’s opinion.

If you are in any doubt as to the appropriate fund selection or you wish to invest into funds outside those mentioned above we would recommend that you seek advice from either your existing professional adviser if you have one, or ourselves.

Key Features Document and Illustration

Enclosed with this letter you will find a Key Features document and personalised illustration, together with a copy of our Client Agreement (if not previously given to you).

The Key Features document highlights the most important aspects of your pension plan and you should read this carefully. The illustration is based upon your scheme salary and takes into account the charges specific to this particular plan. It details the plan charges and is also designed to give you a rough idea of what your benefits may be worth at retirement if contributions are maintained all the way through to your selected retirement age.

The illustration assumes contributions are invested 100% into the Managed fund with a selected retirement age of 60.

For arranging this plan, our fee amounts £456 which you are paying to us / directly / by a deduction of X % of each regular contribution over X months (max 12) and paid to us by Product Provider, so for a regular contribution of £123 we will receive a fee of £456.

(Note for firms – taking a fee by more than twelve instalments will require a Category A (lending) Consumer Credit Licence)

OR

Where employer is meeting setting up costs. Amend appropriately

The costs of setting up and administering this scheme are being met entirely by your employer and as such no commissions will be received by ourselves from Product Provider either now or in the future. The plan charging structure has been amended to reflect this. The only charge which you will be expected to meet is Product Provider’s annual investment management charge of DEF% which is deducted from the fund. As previously mentioned there are no penalties for early discontinuance, nor for a transfer of funds away from Product Provider. If your application varies from these standard assumptions a revised illustration will be provided for you in due course.

Application Procedure

If having read this letter and studied the various enclosures you feel that you require further advice specific to your personal circumstances then we would be delighted to meet with you. Please telephone me to arrange an appointment.

So that I may check the best course of action for you, please complete the attached questionnaire. This is to help me make sure the funds you have selected suits your requirements and that if you have any existing pension arrangements - whether still being currently funded or not – these are taken into account. Please answer every question.

You may be aware that nowadays identification documents are necessary to prove identity in respect of any new financial transaction. For this we will need to have two pieces of documentation – one can be an original recent utility bill (gas, electric, home telephone (not mobile) etc) and the other your passport or driving licence. With regard to the latter items, if you are dealing with us purely through the post, it would be preferable if you arrange for certified copies to be sent to us. You can arrange this at your local bank, post office, or perhaps a solicitor or accountant can do this for you. They should certify that the copies are “certified a true copy of the original, and any photograph is an accurate likeness of the holder”. If you do not have a passport of driving licence, please contact me.

If, after reviewing the information you have given, we have queries concerning your application we will contact you for further information and will not allow the proposal to proceed in the meantime. If you wish to join the pension scheme without any specific advice from ourselves then you should:

  1. Complete the application form (may not be required if electronic)
  2. Complete the Member Questionnaire
  3. Complete the Nomination of Benefits Form.
  4. Enclose a recent utility bill and certified copy passport or driving licence.

Please return all the items to me, in the envelope provided.

Conclusion

We would recommend that you seriously consider joining your employer’s pension scheme for the following reasons:

  1. A pension plan provides you with the benefits of personal ownership, control and investment choice.
  2. The insurer, Product Provider, has been chosen by your employer because of their sound financial strength, the choice of investment funds and the good past performance of the majority of these.
  3. This is the only pension arrangement to which your employer will contribute
  4. Add other recommendations relevant to the scheme.

The benefits that you will receive from your pension plan at retirement are dependant upon a number of factors, the level of contributions that you and your employer pay into the plan, the investment returns achieved by your investment fund(s), the age at which you wish to retire and prevailing economic factors (including annuity rates), at the time of your retirement.

Should you require any further information, please do not hesitate to contact me.

I look forward to hearing from you.

Yours sincerely

Adviser’s Name
Title

SIGNED:

Client’s Name