OVERVIEW OF THE ROSSBOROUGH GROUP PERSONAL RETIREMENT PLAN (JERSEY RETIREMENT ANNUITY TRUST)

OVERVIEW OF THE ROSSBOROUGH GROUP PERSONAL RETIREMENT PLAN (JERSEY RETIREMENT ANNUITY TRUST)

Contents 1. Introduction 3 2. Personal Retirement Plan 3 3. Structure & Administration 6 4. Monitoring Investment Performance 6 5. Member Communication 7 6. Plan Charges 7 7. Summary 8 2

1. Introduction Steve Warner, Managing Director of Rossborough Financial Services Limited, was one of the founding members of the Pensions Working Party set up at the beginning of 2007 to help advise the Comptroller of Income Tax and States of Jersey on changes to Jersey's pension legislation and in January 2008 Article 131CA became effective which saw the introduction of Retirement Annuity Trust Schemes (RATS). However, this initial amendment fell short of what was required to enable the local Jersey pensions market to develop and deliver a truly flexible and cost effective RATS accumulation pension vehicle so in January 2009 further changes to Jersey's Pension and Income Tax Law's were introduced. Two key changes introduced were: 1. An amendment to the Income Tax Law to permit the Comptroller to recognise employer contributions to RATS. 2. Abolishing the age related limits on an individuals annual contributions to Retirement Annuity Contracts (131B) and RATS (131CA) and replacing these with a new limit of 100% of earned income to a maximum of 50,000 per annum aggregated across all Jersey approved pension arrangements. The combination of these changes created the legislative and regulatory framework to enable a more simple and cost effective RATS pension solution to be delivered to the corporate market through a genuine 'Group Personal Pension Plan'. 2. Group Personal Pension Plan This is simply a group of individual pensions plans administered as a single arrangement and are ideally suited to the modern workplace due to their simplicity and flexibility. The Rossborough Group Personal Retirement Plan (GPRP) has been several years in development, pending changes in Jersey s pension legislation and Income Tax Law and at all times our vision has been to deliver a low cost, flexible pension savings vehicle with a comprehensive, co-ordinated, added value retirement planning and investment advisory service to meet the needs of both the corporate and individual Jersey pensions market. The GPRP is a personal RATS and can be administered either as an individual or group pension plan. The principle features and benefits of a GPRP to Jersey employers and their staff can be summarised as follows: 3

The Employer As each member of staff has their own individual personal plan the only responsibility on the employer is to make contributions on behalf of the members. Beyond that, neither the employer/trustees have any obligation to the members: No employer/trustee responsibilities i.e. o Monitoring members investment decisions o Monitoring investment performance o Approving transfers o Approving early retirement etc. o Maintaining trust deed & rules o Auditing scheme o Annual tax returns Simple and cost effective administration, the employer is only required to confirm details of the monthly member contributions and any change in membership via a standard spreadsheet, thereafter the employer has no further responsibilities to the members. The Members Members retain control and ownership of their pension arrangements under the administrative umbrella of the Rossborough GPRP, and benefit from the following: A very low cost and transparent charging structure. It is our understanding that the GPRP offers the lowest overall cost of any RAT pension accumulation vehicle in Jersey. A fundamental principle of the GPRP is to keep the Plan charges as low as possible thereby minimising the impact on the value of a member s pension fund and benefits in retirement. Please see section 6 below and page 11 of the Members Guide for details of the GPRP charges. Investment Funds Members have access to a broad range of investment funds managed by Threadneedle Asset Management together with an expanding range of funds managed by other leading fund managers. Details of the range of investment funds available and performance is shown in Appendix II of the Members Guide. The Plan also offers a pre-set investment strategy designed for those members who do not wish to make ongoing investment decisions regarding their pension arrangements. The Strategy provides members with the opportunity to benefit from the growth potential of an actively managed fund investing in a well diversified and broad range of assets and then, over a period of 120 months leading up to the members retirement age, will automatically switch both the members future contributions and existing unit holdings into lower risk funds. 4

To our knowledge, no other RAT provider offering pre-set investment strategy employs an administration system which is able to phase the switching process on such a smooth basis. Other platforms either do not offer this facility at all, or at best will only switch unit holdings and alter a member s investment allocation annually either on the policy anniversary date or the member s birthday. It is also worth noting the performance of the Threadneedle Managed Fund, which forms the foundation of the pre-set strategy, has been the top performing fund in its sector since launch in 1987. Details of the pre-set strategy are shown on page 6 of the Members Guide. Note RFSL is responsible for advising the members on their investment decisions and monitoring these to ensure they are appropriate. Members Information On-line access to up-to-date details of their pension plan includes: Contributions paid and units purchased Current valuation Projection of benefits at retirement Members Control On leaving service, members retain ownership of their benefits in the plan and importantly, are able to maintain contributions independent of their employment, enabling continuity of contributions. Members can decide when and how they access their pension benefits at retirement independent of an employer s normal retirement age and without the requirement of an employer s or trustee s consent. On death, prior to retirement, the full value of the fund is paid to the member s estate in accordance with the member s Will, enabling the member to control their succession planning as opposed to the distribution of funds being at the discretion of the pension scheme trustees. Security & Flexibility at Retirement The GPRP currently provides members with the option to purchase an annuity at retirement through Zurich Assurance Limited which could prove valuable if there are no alternative annuity providers available in Jersey when the member retires. Note Whilst we fully recognise, and advise our clients on, the flexibility and benefits under the RATS regime of retaining control of one s pension fund in retirement, it must be recognised that for many members this can be a high risk and worrying option at a time when they are most financially vulnerable. Given balanced and considered advice it is our experience that many individuals still prefer the peace of mind, security, and certainty associated with a regular and guaranteed annuity income in retirement. However, members of the GPRP still have the option to transfer their pension fund to another RAT at retirement if they wish to retain control and draw an annuity equivalent Income directly from their fund. 5

3. Structure and Administration The GPRP is administered by Rossborough on the Zurich Assurance Limited (ZAL) platform which provides access to a broad range of investment funds managed by Threadneedle Asset Management and other fund managers. ZAL has developed an extremely efficient and robust web-based pension administration platform and now administers over 6,000 occupational pension plans in the UK, many of which are leading UK companies and was recently appointed by the Royal Mail to administer its new defined contribution plan. Article131CA (under which the GPRP is approved) requires that the members pension funds are held by a Jersey trust company, this function will be performed by Zurich Trust (Jersey) Limited (ZT), part of the Zurich Group. Rossborough, ZAL and ZT will assume all the responsibilities and function associated with managing and maintaining the plan on behalf of the members and that the sponsoring employer will not have any liability or responsibility to its staff in respect of their benefits under the GPRP. Simplified Application Process Rossborough have worked hard to keep the process of setting up and members joining a GPRP as simple as possible for both the employer and the employees. There is no application or set up documents to be completed by the employer. All that is required is confirmation that the employer wishes to establish a GPRP together with direct debit mandate to enable ZAL to collect the contributions directly from the employer and a simple service level agreement confirming contribution collection dates etc. Members are required to complete a single application form confirming the basis on which they wish to join the GPRP signed by both the member and the sponsoring employer. To keep paperwork to a minimum and ease the application process, Rossborough has also agreed with the Comptroller of Income Tax that we can complete and submit the RAT Establishment Certificate to the Comptroller on behalf of the Member. 4. Monitoring Investment Performance Rossborough s depth of resource extends to include an in-house investment team headed by a dedicated investment specialist providing a level of investment knowledge and expertise not ordinarily associated with local financial services practitioners. This enables our service to include the ongoing monitoring of the scheme s underlying investment funds and review of the pre-set investment strategy. Our analysis looks at the major investment areas and compares the performance of the funds available under the GPRP with their respective peers. Members have access to fund information and performance data through ZAL s web-site and Rossborough produce a detailed investment report and analysis which will be updated regularly. This can either be held on an employer s internal intranet site or provided to members upon request. 6

5. Members Communications Rossborough can make presentations to members introducing the features and benefits of the GPRP, incorporating an overview of the options at retirement and an update of recent changes in Jersey s pension regulations. If required, Rossborough can also provide individual member consultations to deal with more personal issues and questions which members to do not wish to raise in an open forum i.e. advice on level of contributions, transfer of existing pensions funds, options at retirement etc. 6. Plan Charges Establishment Charge Nil Rossborough will not make any charge for establishing the GPRP Fund Based Charge The GPRP fund based charge is an all-inclusive charge covering the investment management, Zurich s administration and the trustee s fees and is deducted directly from the funds held in the members plan. The charge is very competitive and is between only 1.15% and 1.45% per annum for the funds managed by Threadneedle Asset management depending upon which Funds the member s plan is invested. Annual Fees For administering the GPRP and providing financial/investment advisory services to members, as required under Sections 4(b) & 5 of the RAT Guidance Notes issued by the Comptroller of Income Tax, Rossborough will charge a flat annual fee per member. The annual fee per member varies depending on the number of members and ranges from 150 down to 85 per member. The annual fee can either be paid by the sponsoring employer (paid 6 monthly in advance) in addition to the employer s pension contributions, or deducted monthly from the contributions prior to investment into the members plan. It is possible that members holdings RATS through alternative providers may incur further costs for financial and investment advice, either levied as an additional charge against the funds held in their RAT or invoiced separately. This is not the position in respect of the GPRP where this service is included in the annual fee. 7

7. Summary The Rossborough GPRP administered on the ZAL pension administration platform has been developed specifically for the corporate pensions market and it is the ideal pension accumulation plan for both Jersey employers and their staff. The GPRP sets a new standard in retirement provision in Jersey: Low cost and flexible RATS pension accumulation vehicle Allows members to retain control, and maintain contributions, to their personal pension plan on leaving service Access to an expanding range of investment funds managed by leading fund managers Members have web access to up-to-date pension data Members have the option to secure an annuity income at retirement or transfer their pension fund at nil cost (through Rossborough) to a full RAT The plan is supported by ZAL, a major UK/Global financial services operation and administered on their market leading web-based pension administration platform Simplified application and administration requiring minimal input from employer Removes the employers from any responsibility or obligation to the plan members Rossborough can provide members with a full advisory service on all pension related matters i.e. investment advice, transfers, retirement options etc. Steve Warner Dip PFS Managing Director Rossborough Financial Services Limited 8