Mr ClientAddress line 1Address line 2Address line 3Post Code

21st March 2017

Dear Mr Client,

Further to our recent meeting on 15 March 2017, I am writing to confirm the advice I offer and explain the rationale behind my recommendation. As you will remember, I recorded a lot of information on your personal and financial circumstances, as well as discussing the future as you would like it to be. Having established the facts, we then considered the “softer” aspects, what you would like your future to look like, when you would like to realise these aspirations and who else might be affected.

I should warn you that this letter is somewhat detailed, by necessity. It is important that you fully understand the proposal contained and I would ask that you read it carefully and let me know if there is anything that you do not fully understand. Once read, I suggest you keep it with your policy documents once they arrive.

Scope

On a regular basis, your direct adviser is Adviser B and he holds a CF30 licence. Due to the complexity of a final salary transfer, I have provided the initial financial advice to transfer your final salary transfer as I hold the appropriate qualification and I am also authorised and regulated by the FCA. Myself and Adviser B, who were both present at our initial meeting both work for XYZ Firm. Going forwards, Adviser B will continue to provide the regular advice and fulfilling the on-going service to you, however as explained above, the initial advice to transfer your final salary has come from me directly.

You specifically asked me to exclusively focus on your retirement provision, at this time, with particular attention to making the most of your existing arrangements only. Although I stressed the importance of taking a holistic view of your financial position by completing a full financial review during our meeting, you did not want to review any other areas of financial advice.

One important aspect of this letter is that it does not analyse your financial objectives in full. Given the complexity of retirement planning in context of evaluating Final Salary Pension Scheme Benefits, which is detailed in full further, this letter will focus exclusively on retirement provision with attention to making the most of your existing Final Salary arrangements. Any other matters, for example, savings and investments or protection, will be addressed separately as we agreed.

Charges for Advice

We discussed and agreed the charge payable for this advice and we agreed that an initial charge of 3.25% would be payable for the transfer of your final salary pension. Based on the current Cash Equivalent Transfer Value of £190,723, this equates to a charge of £6,198.50.

This initial charge is for the advice to date and does not include the cost of any future servicing.

This charge will be paid through the product provider via a deduction from your investment.

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Break-down and justification of the fee

You, Adviser B, and myself have worked closely together over the past few months from the initial consultation to now. Furthermore, we have tracked, chased and discussed on your behalf all areas of your retirement plan to give you a clear indication of what you have and where, also conducting comprehensive research with annuity/drawdown providers to give you a detailed indication of future income.

On transfer to the AEGON ARC SIPP you are investing directly into the accumulation vehicle. As discussed, you plan to continue working and are currently not at the stage of taking your retirement income, we spoke extensively about retirement income and the best option for you. We agreed that when you choose to retire Adviser B will design the solution which fits your retirement income goals and objectives, whether that is an annuity, drawdown or a combination of both.

You appreciate that going forwards you will need to review your retirement objectives considering this pension plan and how your other assets will fit into your retirement income solution.

Review Service

We strongly recommend that your retirement plans are reviewed on a regular basis. Typically, this review will comprise the following services:

An assessment and review of investment performance and markets relative to your specific investments as well as a wider economic review

A review and appraisal of prevailing interest rates and annuity rate movements as may be applicable to your circumstances at your time

A summary of the impact of any legislative or statutory changes that might impact on your retirement strategy, for example, changes in taxation law or State pension benefits

An update and appraisal of your financial and personal situation, needs, circumstances and objectives A review of your attitude to risk and volatility linked specifically to the performance of your pension funds, to

ensure continued appropriateness. This will help to ensure that your risk tolerance continues to match the investment funds being used.

We have agreed that you would like your retirement plan to be reviewed on an annual basis. The costs of the Regular Review Service will be met by way of a deduction from your fund. For the services described above, an annual charge of 0.75% will be deducted each year. You should note that the rate is charged as a percentage of your funds’ value and as such the actual amounts payable will vary as the value of your fund fluctuates. For example, on a fund of £190,723 the charge would be £1,430.42 per annum.

After this transfer, has settled, at your first review, Adviser B will review your overall pension provision within its new money-purchase environment. You will need to consider that the final salary scheme would have provided a guaranteed level of income in retirement. This income guarantee will be removed because of transferring out of the scheme, and this is one of the key disadvantages when transferring out of a Final Salary pension. For this reason, I would ask you to be sure that the guaranteed income (explained later in this report) is worth foregoing for the other advantages that will be gained as a result.

Cancellation of Provider Facilitated Ongoing Charge

As outlined above, payment for the review service will be received by XYZ Firm from the provider. If, however you no longer wish to receive this review service you are at liberty to cancel this charge at any time by contacting the provider directly and confirming your wish for this payment to cease. Please be aware that should you do so I will no longer be able to review your affairs as agreed.

Your Current Situation2

You are aged 58 and married to your wife; Julie.

You do not have any financial dependants; however, you do have adult children.

We discussed your health and you confirmed that you do not have any adverse health conditions that will affect your longevity and you are a non-smoker.

You are employed fulltime as the Head of XXX at A Financial Services Investment Management Company and this provides you with an income of £160,000 per annum with discretionary bonuses of £85,000 per annum. This means that you are an additional rate taxpayer and you do not have any personal allowance remaining.

You have explained that you would like to retire at the age of 60.

Your current finances are:

Your net income is £96,350 per annum as per listentotaxman.com Your total outgoings are £52,800 per annum Your net disposable income is £26,172 per annum

Apart from your mortgages, you do not have any other debts or financial liabilities.

You explained that when you retire, you would like to take an initial income of £82,500 gross per annum, with £30,000 derived from your net rental income and the remainder from you pension provision, increasing to £61,372 per annum gross once you begin to receive the benefits from your An Insurance Company final salary pension at the age of 65. You will reduce your pension income once you begin to receive your State Pension income.

Also, as your mortgages become fully repaid, you will also look to reduce your pension income levels to help preserve them for your family. We also agreed that your income levels will naturally reduce as you grow later into retirement.

You are also aware that your estate is significantly higher than the joint nil rate band and you will more than likely look to reduce this by drawing on your investments and savings to help meet your income needs in retirement. You and Adviser B will review your income needs at your ongoing reviews.

We discussed how the significant drop in income would affect you and you reassured me that this level of income will be adequate for you as there will be less commuting costs for you and your outgoings will still be fully met.

You consider yourself to be highly experienced on how the financial industry and markets operate. You have worked in the financial industry for much of your career and thus you have built up a wealth of knowledge over all aspects of finance, financial markets and investing. You also hold your own investments, including a Stocks and Shares ISA, Direct Shares and a Defined Contribution Pension, so you have personal knowledge and experience in investing.

You have various pensions and you understand the correlation between risk and reward. You fully understand how various pension arrangement operate and the risks involved in moving guaranteed pensions, such as final salary pensions into a Defined Contribution arrangement, however this does not concern you and I have outlined your objectives later in my report.

You have confirmed that you have made a Will and you are happy with the intentions of this Will.

You have Fixed Protection 2016 which protects you against the Lifetime Allowance of £1.25m and you are not making any contributions towards any pensions or accruing any benefits that could jeopardise this protection.

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For the purposes of confirming your financial situation which will have a major factor on my recommendation for a final salary pension transfer, I have outlined your assets and pension provisions below.

Asset Value NotesMain Residence £800,000 Repayment Mortgage of £150,000 outstanding

£15,600 per annum repayments3 Investment Properties £1,000,000 Repayment Mortgages totalling £250,000 outstanding

Mortgage Repayments of £1,200 per monthRental Income of £3,700 per monthNet Rental Income of £2,500 per monthNet Rental Income will increase as mortgages reduce

Cash Savings £100,000 Emergency FundsDirect Shares £50,000 Deutsche BankStocks and Shares ISA £110,030 AEGON ISATotal £2,060,030 Net assets of £1,660,030

Pension Provision Income NotesYour State Pension £8,094 From age 66 - Annual income until deathAn Insurance Company Pension

£8,782 From age 65 - Annual income until deathFinal Salary PensionNot subject to transfer

Total £16,876

Alternative Income Income NotesRental Income £30,000 Net Rental Income after mortgage repayments

Gross of income tax

Pension Provision Value NotesAEGON ARC SIPP £1,090,267 Defined Contribution123 Final Salary Scheme Services Limited Staff Pension Scheme with XYZ Superannuation Fund

£190,325 Final Salary PensionCETVExpires 28/03/2017Subject to transfer

Total £1,280,592

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Your Needs and Objectives

In no particular order:

Reason JustificationDeath Benefits You would like the full value of your pension funds to be returned to Julie should

you die, with the overall aim of your pension wealth being passed through to your children. You consider your pension funds to be of a substantial value and you do not want them to be absorbed by the scheme in the event of second death.

You recognise that your final salary pension is restrictive in its death benefits and you understand that the pension income will pay an income to your wife in the event of your death. I have covered the death benefits in full detail later in my report.

A Personal Pension arrangement will return the full value of any unused pension funds to your estate upon death. I have covered the death benefits in more detail later in my report as there are potential LTA Charges and income taxation consequences to consider.

Flexibility in Retirement

You would like to retire at the age of 60 and take an income of £50,000 gross per annum from your pension funds with the flexibility to reduce this in accordance to your State Pension and your financial circumstances, especially as your net rental income will increase over time in correlation to your mortgage reductions. You will also like to reduce the value of your estate and will draw upon your savings and investments to meet your retirement needs. Therefore, although we have agreed an income of £50,000 from your pension funds would be needed, this will be subject to fluctuations to help preserve the fund and mitigate tax.

Your overall wealth means that you do not have any specific need for your tax-free cash and this could be used in various ways, for example, to help mitigate income tax on your income or to meet ad-hoc expenses.

You recognise that by taking your final salary pension, you will be restricted to the income levels prescribed by the scheme, which will vary at various retirement ages. This could be used to meet your needs and used in tandem with your other pension provisions however the death benefits do not suit you and you do not want a guaranteed income which cannot be tailored to your circumstances.

A Personal Pension arrangement will allow you access to Flexi-Access Drawdown which in return will provide you with the option on how much income you wish to take and when. This can mitigate income tax and preserve your pension funds as death benefits.

Control of Fund You would like to take control of your pension funds and invest in a matter that is in accordance to your Attitude towards investment risk. This will result in potential fund growth which could maximise your pension funds in retirement and death.

You recognise that you do not have control over the value of the fund within your final salary pension and that the levels of income are prescribed and only increase annually in accordance to governed rules.

A Personal Pension arrangement will allow you to choose from a wide range of multi asset funds that match your attitude towards risk so that you can benefit from potential growth. This does increase the element of risk dramatically when compared to a guaranteed income as the risk is borne by the Trustees in a final salary scheme, whereas any drop-in fund performance will have an impact on the size of your pension funds in a Personal Pension arrangement which may impact on your capacity for loss.

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Inheritance Tax Planning

You would like your pension funds to accumulate in an environment that will not be subject to an Inheritance Tax Liability on death.

Aside from the tax-free lump sum, you recognise that your final salary pension would remain outside of your estate for IHT purposes as this will simply die on death and will therefore have no value. However, the tax-free cash and extra income that your final salary will provide will be paid to your bank account, thus increasing your estate and could be liable to Inheritance Tax on death.

A Personal Pension arrangement will allow you to take or retain as much income as you wish, which helps form a protection against any potential Inheritance Tax Liability of 40% above the joint nil rate band of £650,000.

Inheritance Tax Considerations

We considered the impact that transferring your final salary pension could have on your estate. At this moment in time, your estate is valued more than the joint nil rate band which means that your beneficiaries are liable to an Inheritance Tax Liability.

The government will introduce an additional nil-rate band when a main residence is passed on death to direct descendants i.e. children and grandchildren. We will see a phased introduction of this additional allowance:

£100,000 (2017-2018)£125,000 (2018-2019)£150,000 (2019-2020)£175,000 (2020-2021)                         It will then increase with CPI from 2021-2022 onwards.

The suggestion is that it will also be available when a person downsizes or ceases to own a home on or after 8th July 2015 and estates of an equivalent value up to the value of the additional nil-rate band are passed on death to direct descendants – but we will need to see how the technical reality of all cases of this nature play out.

Taking this into account, steps need to be taken to ensure any potential Inheritance Tax Liability is managed and kept to a minimal level.

Therefore, for this reason alone, I believe that your pension funds will be better off in an environment which remains outside of your estate and free from any Inheritance Tax Liability.

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Your Attitude towards Investment Risk

In considering an investment strategy of any type, it is critical that you establish how you feel about investment risk in relation to the investment objective and that you are comfortable with the risk attaching any proposed investment vehicle.

To help you understand what risk means, we completed the 12 question Risk Profiling Questionnaire, and I illustrated the meaning of risk in six broad categories. Details of these categories and the process can be found in the Intrinsic Guide to Investing that I left with you.

We discussed your circumstances in relation to the principles of risk and reward in respect of your pension planning both near and in the long term and agreed your risk profile is Moderate.

Moderate

In general, Moderate investors understand that they should take investment risk to be able to meet their long-term goals. They are likely to be willing to take risk with a high proportion of their available assets.

Moderate investors typically have a good level of knowledge about financial matters and they usually have some experience of investment, including investing in products containing higher risk assets such as equities.

Moderate investors will usually be able to make up their minds on financial matters relatively quickly, but still suffer from some feelings of regret when their decisions turn out badly.

Risk attitude is only one factor in determining a suitable investment strategy. You must also consider your ability to withstand short term losses, and your need to take risk to achieve your financial goals.

We discussed expected volatility of the strategic asset allocation expected of your risk profile and your capacity for loss in respect of your pension plan and concluded that:

We discussed your capacity for loss and agreed that in retirement:

You will have an unencumbered Main Residence in retirement which can be used to release equity, although this would be the last option considered.

You will receive rental income in retirement which will be used towards meeting your retirement needs.

You have three unencumbered investment properties, currently valued at £1m which could be used to release equity to help fund retirement.

You will have your State Pension to draw upon from age 66 which will be used to supplement your income in retirement.

You will also have your An Insurance Company final salary pension to provide you with guaranteed benefits from the age of 65 to help subsidise your income.

You will have a large sum of pension funds held in defined contribution arrangements which could be used to meet your retirement income needs.

You have a large sum of savings and investments which will be used in retirement.

Taking the above points into consideration, I am happy that you have capacity to absorb the losses that could be associated with a Moderate Investor. I am also satisfied that you are not reliant on the guaranteed income that your final salary pension can provide.

You have a good understanding of the financial industry and you fully understand the risks involved with transferring from a guaranteed income to an investment approach. Therefore, this provides me with reassurance that you recognise the impact of taking a Moderate attitude towards risk.

You are comfortable with the risk levels that accompany that of a Moderate attitude towards risk.

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Existing Pension Arrangements

I have summarised in the table below the details of your existing defined contribution pension plan:

Provider Fund Value (£)AEGON ARC SIPP £1,090,267

Your Preserved Final Salary Scheme Benefits:

Scheme name Joining date Leaving date Pension at age 65

Transfer Value (£)

An Insurance Company Final Salary Pension

Unknown Unknown £8,782.01 Unknown

Your An Insurance Company Final Salary Pension is not subject to transfer.

Scheme name Joining date Leaving date Preserved Pension as at 20/04/2017

Transfer Value (£)

123 Final Salary Scheme Services Limited Staff Pension Scheme with XYZ Superannuation Fund

08/12/1997 20/04/2000 £5,579.04 £190,325.24

For the purposes of this report, the 123 Final Salary Scheme Services Limited Staff Pension Scheme with XYZ Superannuation Fund will be referred to as the 123 Final Salary Scheme Pension Scheme.

*Income before provision of tax free cash.

The Features of Final Salary Pension Schemes

Defined Benefit Pension Schemes are more often referred to as Final Salary Pension Schemes, as benefits in retirement are expressed as a percentage of your final salary, at retirement if still in service or on leaving if earlier.

The benefits under Final Salary schemes can be very valuable and in many cases, are guaranteed as the Scheme Rules stipulate by guarantee an amount of pension in retirement. This is normally linked to length of service and the employees “Final Salary” at the time they retire. The benefits, both before and during payment, are normally linked to inflation (subject to maximums). This gives the member valuable protection against the effects of rising costs of living.

One of the most important aspects in considering a transfer of preserved benefits is that of the ‘risk’ involved (refer also to Attitude toward Investment Risk above). Under the Final Salary scheme, the investment risk lies entirely with the scheme whereas should you elect to transfer your preserved benefits out of the scheme and into a personal pension arrangement, the investment risk lies entirely with you. A personal pension scheme will not provide the guarantees or known benefits that your final salary scheme can offer. Therefore, any decision you make in this regard must be a reliable and properly informed one. There will be disadvantages and disadvantages to consider, and you need to be satisfied that on balance you believe the transfer to be in your best interests.

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Transfer Analysis – Comparing Final Salary Scheme Benefits with Personal Pension Schemes.

It is essential to make a comparison of the mechanics, features and benefits of the two different types of pension before making a recommendation. To assist with this, I have used an external provider to prepare a Transfer Value Analysis (TVAS). This has been prepared using details collected from the scheme Trustees in order to prepare their comparison report, the results of which I have made full use of.

Some Limitations of the TVAS Report

It is a Financial Conduct Authority requirement that a TVAS is produced to compare the benefits of the two schemes assuming that the eventual benefits are taken in the same way. However, since the introduction of the new “Pension Freedom” rules it is acknowledged that many people may not want to take the benefits in exactly the same format as that offered by the scheme. The TVAS report assumes that the member will eventually buy an annuity which will mirror the benefits offered by the scheme. In practice, however, many people may prefer to take their pension benefits in a more suitable and tailored way, than that which is offered by the scheme.

For example, some people may not require a spouse’s pension. Others may prefer to have a higher initial starting level of income, rather than having a significantly lower level of income, even though this would have increased by inflation. Some people, particularly those in poor health may be concerned that the death benefits offered by the final salary scheme are not particularly generous.

Finally, there is no longer any compulsion to buy any annuity at all. This extremely significant change was introduced by the Chancellor George Osborne, and it took effect from 6th April 2015.

For these reasons, I would stress that the true relevance of the following figures from the TVAS may be limited.

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Differences if you choose an income only (with NO tax-free cash) - Figures based on Mid-Rate Assumptions from the TVAS report.

Assuming 2.5% for inflation, at age 60 your final salary scheme is projected to pay an initial pension of £5,748 per annum. Once in payment this income will increase in line with inflation.

Should you elect to transfer to a personal pension arrangement, the amount of pension payable is projected to be £4,187, assuming the mid-range figure of 5% for investment growth.

If the personal pension arrangement is to achieve the same amount of income at age 60, it will need to grow at 30.5% per annum. This is referred to as the ‘Critical Yield’ figure, which put simply means the critical level of growth required on the transferred fund to at least match the pension payable under the scheme you are leaving.

This critical yield figure is significantly higher than the mid-rate assumption figure and we have both agreed that growth levels of this region would not be possible.

Differences if you chose an income AND tax free cash - Figures based on Mid-Rate Assumptions from the TVAS report.

One of the most attractive features of UK pension legislation is the ability to take part of your accrued pension fund as a cash lump sum at retirement – tax free. The limit differs between occupational and personal pension schemes. Within the personal pension environment, the tax-free cash is 25% of the fund. This is often higher than the amount which may be taken from the Final Salary scheme.

Under the 123 Final Salary Scheme Pension Scheme, you could take a lump sum of £26,527 and a reduced pension thereafter of £3,979 per annum at age 60. You should note that this corresponds to a reduction in income of some £1,769 per year. You should therefore give the option of a tax-free lump sum from the scheme proper consideration mindful of the income fall.

If you transferred your preserved fund into a personal pension scheme arrangement, the tax-free cash sum available is projected to be £48,555 with the pension thereafter being £3,140 per annum. The maximum amount of the fund that can be taken as cash under personal pension rules is 25%.

If the personal pension arrangement is to achieve the same amount of income at age 60, it will need to grow at 18.6% per annum.

This critical yield figure is significantly higher than the mid-rate assumption figure and we have both agreed that growth levels of this region would not be possible.

The scheme administrators are unable to provide commutation factors and therefore the TVAS has assumed a commutation factor of 15:1 for the purposes of this report. This means that the critical yield of 18.6% can only be used as a guidance rather than a definitive figure.

We discussed this and you confirmed that the critical yields have no relevance to your decision to transfer.

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Critical Yields Vs Fund Performance  I have used Trustnet to research up to the previous 5 years’ annual performance levels from my recommended multi-asset fund, the Cirilium Moderate Fund. These are as at 21 March 2017.  As with all medium to high-risk funds, the fund performance can drop significantly as well as increase and this is reflected in the discrete year performance levels below.  

0-12m    12m-  24m 36m  48m Cirilium Moderate Acc Fund   +26.8%  -5.6%  +13.3%  +5.3%  +15.4% 

These figures highlight the volatility and difference in performance levels each year, which compounds how future performance cannot be predicted.  Please note that past performance is not an indication to future performance and I have provided them to give you an insight to the growth levels that can be achieved when compared to the critical yields outlined above. It also shows that taking a Moderate attitude towards risk increases the level of volatility dramatically and gains can be offset by losses and vice versa. 

The fund performance levels above show that growth levels more than the critical yields can be met, although not on a consistent basis. Therefore, over the term until age 60, I do not believe that you will obtain enough consistent growth to meet these yields.

Transferring your pension is not an exercise to obtain a higher level of income however.

You wished to keep control of your income levels so that you can manage your tax affairs. This includes income tax and any potential Inheritance Tax Liability. You are aware that there will be Excess LTA charges in the future and I will outline this in further detail later in my report.

Although you are in good health and still relatively young, you view the Cash Equivalent Transfer Value of your pension funds as a substantial asset, which you believe would provide your wife and children with an extra level of protection on death.

You wish to take control of your pension funds and invest them in a multi-asset environment. You are comfortable with the risks involved and understand how multi-asset funds differ from the guaranteed levels that a final salary pension will provide.

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The “Annuity Test” - An alternative way of measuring the “Value” of the Cash Equivalent Transfer Value offered by the scheme.

As part of my analysis, I have asked the Trustees the level of benefits that you could receive if you retired now.

If you took benefits directly from the scheme now, you could take £4,365.36 of income each year, and this would increase in line with inflation. You would also receive £29,102.31 of tax free cash. Alternatively, the scheme will provide a Cash Equivalent Transfer Value of £190,723.

To give you some sort of “perspective” on the value of what taking these benefits could be now, I have calculated how much it would cost to buy an annuity (and provide the same tax free cash) that would match these benefits directly. This would cost £302,621.10 to replicate by purchasing an annuity.

As you can see, it would cost significantly more to purchase an annuity of on a like for like basis when compared to the transfer value that your final salary is offering. Therefore, from this perspective, you can understand that your final salary pension is of significant value and I would invite you to lend a high amount of consideration as to whether you believe the transfer of your final salary funds is the correct option for you.

If you purchased an annuity now, you would be able to take 25% of the Cash Equivalent Transfer Value (CETV). This would be £47,680.75. With the remaining 75% of the fund you could potentially buy an annuity more in line with your requirements. You could have a level income of £4,926. This would be on a joint life basis with a 50% spouses pension and 100% capital protection.

As you can see, by taking an annuity more in line with your circumstances, the permutations are:

You could receive a higher tax-free lump sum You could receive a slightly immediate higher level of income albeit on a level basis

We discussed the annuity route however this did not appeal to you as the immediate income levels do not meet your needs and you do not like the inflexibilities and un-advantageous death benefits.

Having discussed these points, you fully understand the level of guaranteed income that you are giving up should you transfer your final salary pension. You have confirmed that a guaranteed income and the limitations that accompany a final salary pension do not meet your objectives that I have highlighted in my report.

Again, I would reiterate that I have made this comparison just to inform you of what your other guaranteed options could have been now. Although an annuity does not give you the flexibility you require, it is important to be clear that there was potentially this improved guaranteed option open to you. Please do consider this point carefully, and be sure that this is not an option you wish to take up.

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Increases to your Pension – both Before and After Retirement in your Final Salary Scheme

The table below outlines how each element of your scheme will increase, up to and after retirement.

Income type Value (£GBP) at 28/12/2016

Revaluation rate (Pre-retirement)

Escalation rate (Post retirement

Post 97 Pension £5,470.56 RPI (max 5%) cumulative cap RPI (max 5%)

The revaluation rate shows the extent to which the pension could increase in value, before you retire. If you were to retire from the scheme, the escalation rate shows how much the income could potentially increase by once it is in payment. RPI is the Retail Clients Index.

It is important to have an understanding of these “guarantees” which you will be leaving behind when you move your money away from the scheme. The various revaluation and escalation figures have been taken into account and included in the “Critical Yield” figures explained in the previous sections of this letter.

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Differences between the schemes in the Death Benefits BEFORE Retirement

Depending on individual circumstances, the death benefits payable under a pension scheme can represent an important consideration, more so when considering that there are significant differences in the rules surrounding the payment of death benefits under occupational and personal pension schemes.

If you were to die immediately, in other words whilst still a member or deferred member of the scheme, the scheme would provide a spouse’s pension of 2/3rds of your pension, revalued to the date of your death and paid each year until your spouse dies.

As at today’s date, Additional Life Cover of £36,224.36 would also be payable and this would increase by 3% each April.

If, on the other hand, you elected to transfer your preserved pension benefits to a personal pension scheme and subsequently died, the benefits on your death would be a return of the pension fund to your beneficiaries. These benefits will alter, hopefully increasing, as your pension fund achieves investment growth over time.

Differences between the schemes in the Death Benefits AFTER Retirement

Under your Final Salary scheme, your pension once in payment is payable for your whole life. If you were to die within 5 years, then the scheme would pay a lump sum equivalent to the remaining 5 years unused income. Of course, should you survive beyond this guarantee period, it will no longer apply.

If you were to die immediately, in other words whilst still a member or deferred member of the scheme, the scheme would provide a spouse’s pension of 2/3rds of your pension, revalued to the date of your death and paid each year until your spouse dies. This is before commutation of tax free cash.

Under a personal pension scheme, you have greater flexibility in terms of death benefits after your date of retirement. This is because after retirement you will have various options open to you, including Flexi Access Drawdown or purchasing an annuity. If an annuity was considered appropriate for you, you would be able to choose the level of spouse’s benefit payable, for example 50%, 67% or 100% as preferred. Similarly, you can choose your preferred ‘guaranteed period’ which can be any period you like, although most providers have a limit of 30 years. You should be aware that the level and type of benefits selected will affect the pension payable, for example, an annuity with a 20-year guaranteed payment period and a 100% spouse’s pension will pay you less than one with no guaranteed payment period or spouses pension.

Under the new Pensions Freedoms rules, there is now no compulsion to buy an annuity at all. Money can be taken from the fund under the new “Flexi-Access-Drawdown” rules. If you died before age 75 while taking money from a Flexi-Access-Drawdown plan, the remaining fund would be paid tax free to your beneficiaries. If you died after the age of 75, tax would be paid by your beneficiaries at their highest marginal rates of tax. (Under current HMRC rules, which may be subject to change).

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In the event of your death whilst in drawdown your beneficiaries will have the following options under current rules:

Death before age 75

Taking the pension as a lump sum, tax-freeAny beneficiary can inherit some or all your remaining fund, tax free. They can do what they like with it. I must make it clear that any lump sum taken over your Fixed Protection of £1.25m will be taxed at 55%.

Continuing with drawdown, with income paid tax free A dependent or nominated beneficiary can continue to receive your fund as drawdown. They will not be taxed on this income.

Converting your drawdown fund to a lifetime annuity, with income paid tax freeYour spouse or any other dependent can use your remaining drawdown fund to purchase a lifetime annuity. The pension pot is not usually subject to inheritance tax, and the income is tax free.

Death at or after age 75

Taking the pension as a lump sumAny beneficiary can inherit some or all your remaining fund as a lump sum. The payment will be taxed at the beneficiary's marginal rate. I must make it clear that any lump sum taken over your Fixed Protection of £1.25m will be taxed at 55%.

Continuing with drawdownA dependent or nominated beneficiary can continue to receive your fund as drawdown, income from which will be taxed at the beneficiary's marginal rate

Converting your drawdown fund to a lifetime annuityA dependent or nominated beneficiary can use your remaining drawdown fund to purchase an annuity. The pension pot is not usually subject to inheritance tax, but any income taken from this annuity would be taxed at the beneficiary's marginal rate.

These benefits will alter, hopefully increasing, as your pension fund achieves investment growth over time.

Final Salary Scheme - Possible Early Retirement Enhancements in the event of Poor Health

The Trustees of most final salary pension schemes will pay enhanced benefits to members who retire early under circumstances of ill-health and may pay benefits as a single tax free cash lump sum for members who are terminally ill. The level of enhancement if any, is discretionary, and tends to be considered on an individual, case-by-case basis. An enhancement under these circumstances is not (generally) guaranteed although many schemes do have specific rules in place setting out their approach.

There are no ill health benefits under this scheme.

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The Pension Protection Fund

As your previous employer’s scheme has been wound up, your eventual benefits have already been secured in a deferred annuity with an Insurance Company. This means that the PPF is not applicable to your scheme.

Should the Insurance Company go into liquidation, your benefits would fall within the Financial Services Compensation Scheme (FSCS), which is sourced by a levy upon all participating UK Insurance and Investment Companies. As such, the level of security offered to you falls primarily upon the Insurance Company that provides the plan itself and the prevailing limits within the FSCS.

Plan Funding Levels

As your previous employer’s scheme has been wound up, your eventual benefits have already been secured in a deferred annuity with Legal & General. This means that the Scheme Funding Levels are not applicable to your scheme.

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Your Pension and the Lifetime Allowance

There is no limit on the benefits an individual can receive “or crystallise” from registered pension schemes.  There is, however, an overall limit of tax privileged pensions funds a member can accrue during their lifetime – called the Lifetime Allowance (LTA).

The lifetime allowance has reduced to £1 million in the tax year 2016/17 and is set to increase in line with the Consumer Clients Index for the 2018/19 tax year onwards. It applies to the total of all the pensions you have, including the value of pensions promised through any defined benefit schemes you belong to, but excluding your State Pension.

Making a transfer to a personal arrangement (rather than taking a scheme pension) will increase the value of your pensions that are counted towards the total LTA as detailed below.

The Lifetime Allowance within your Final Salary Pension

If you choose to receive a Scheme Pension from a Final Salary pension, the Capital Value that will be tested against the LTA will be the value your Scheme Pension at that time, multiplied by 20 plus any Tax-Free Cash Taken. The exact calculation for this can only be made at the point when you retire from the scheme fully, and many of the variables that will determine this (including the LTA itself) are currently unknown. However, there is a more useful measure, based on HMRC rules that require each final salary scheme to calculate how much of the LTA had been used as at 5th April 2016. This reference date is very relevant and is required if applying for one of the HMRC Lifetime Allowance Protections (explained in more detail below).

The Lifetime Allowance within the Personal Pension

If you transfer your Final Salary benefits into a Personal Pension the Capital Value that will be tested against the LTA will be the value each time you “crystallise” part of the fund. It would be possible for you to crystallise all of the fund at once, were you to take the full 25% tax free cash and buy annuity (for example). Alternatively, (and this is more common since the introduction of pension freedoms), it would be possible to “phase” the crystallisation events over many years, for example by choosing to take tax free cash and income in a tax efficient and controlled way. This approach won’t necessarily reduce the overall Lifetime Allowance tax charge of course, and the future fund value and LTA thresholds will be unknown factors.

The Day One impact of your Transfer on your Lifetime Allowance

I asked the scheme Trustees to confirm the value of your benefits for LTA purposes as at 5 th April 2016, however they could not provide this. For this reason, I am not able to make a direct “Day 1” comparison of how much LTA will be utilised by your scheme.

However, the TVAS report has provided a revalued “pension today” figure of £5,748 per year from age 60. This figure can be multiplied by 20 to give a broad current value for LTA purposes, and this is £114,960 which based on your Fixed Protection of £1.25m is 11.5%.

By comparison the transfer value being offered is £190,325 which is 15.2% of your Fixed Protection. You can therefore see, that by transferring your final salary pension now, you will already have utilised more of your Fixed Protection when measured against a likely pension at age 60.

You also have a defined pension provisions totalling £1,090,263 which will continue to grow. This represents 87% your Fixed Protection at this moment in time.

We also need to consider your An Insurance Company pension, due to pay £8,872 per annum from the age of 65. This equates to £177,440 and utilises 14.2% of your Fixed Protection.

Therefore, either way, you will still be subject to an Excess LTA Charge on a Benefit Crystallisation Event, however you will likely be subject to a higher charge on transfer of your final salary pension into my recommended pension.

It is important that you accept that while taking the higher transfer value does have a number of advantages, there is this potential disadvantage. The increase for LTA purposes makes it more likely that an increased Lifetime Allowance charge could apply in future.

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Please note, in the event of taking all your tax free cash upon the Age of 60 your Final Salary income will decrease due to taking into consideration your overall Lifetime Allowance. Subsequently, using all your Lifetime Allowance before accessing your Final Salary benefits.

Another point to consider is that if you were to retain the scheme benefits, then it would all have to crystallise at once, on the day you retire and take benefits. Alternatively, if you were to take benefits in the form of “phased drawdown” then it would be possible for you to crystallise segments of your pension over many future tax years. (And under current legislation the Lifetime Allowance figure is due to rise in line with inflation).

We discussed the points of the Lifetime Allowance you use will be higher, but we agreed that overall the advantages of the transfer outweigh this potential disadvantage.

Protecting your Lifetime Allowance at a Higher Level

There are some circumstances whereby individuals can apply to have a higher Lifetime Allowance than the current £1m limit. For conciseness, I will not spell out the full technical details of each, however Fixed Protection 2016 and Individual Protection 2014 and 2016 are still possible to apply for. (The deadline for Individual Protection 2014 expires on 5th April 2017). The key points of each are:

Fixed Protection 2016 can only be applied for if no further contributions have been received since 5 th

April 2016, and where there has been no active membership of a Final Salary scheme since this date. No further money can ever be paid into a pension or the higher level of protection (£1.25m) will be lost.

Individual Protection 2016 can only be applied for where pension benefits are valued at more than £1m as at 5th April 2016.

Individual Protection 2014 can only be applied for where pension benefits are valued at more than £1.25m as at 6th April 2014.

Given your circumstances, you have already applied for Fixed Protection 2016.

Fixed Protection 2016 (FP2016)

This type of protection allows you to lock in the Lifetime Allowance of £1.25m for your pension, rather than being subject to the reduced £1m limit. This can be done no matter what the current value is, however this can only be applied for if no contributions have been made since 5th April 2016. No further contributions can ever be made either, or else the protection will be lost. This means that any further increase in the value of the fund can only come from investment growth alone. In your own situation, you are happy and understand that you cannot make any further contributions ever.

The Lifetime Allowance Tax Charge at 75

The value of your benefits will also be tested when you get to age 75. At this point, any amount over the Lifetime Allowance at that time (called the Excess Amount) that you take as a lump sum will be taxed at 55%. Any amount over your Allowance that you take as a regular income will attract a Lifetime Allowance charge of 25% (on top of any income tax payable on the income).

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The Lifetime Allowance Tax Charge on death

On death before 75, the Excess Amount would be subject to a LTA charge of either 55% if taken as a lump sum or 25% if retained in the scheme. If the beneficiaries, then take out their own Nominee Drawdown plans then any income further withdrawals will be tax free.

On death after 75 there would be no further LTA test as this will have taken place at age 75 and a Lifetime Allowance Charge (if due) would have been paid at that time. If the beneficiaries, then take out their own Nominee Drawdown plans then any further income withdrawals would be taxable at their marginal rate.

Please note that in the “Annuity Test” section explained earlier in the report, the estimated annuity figures and the Personal Pension and the Scheme projections from the TVAS report do not include the impact of any future Lifetime Allowance Tax Charge, although a charge could still apply. There are too many unknown variables for any future tax charge to be calculated with any certainty. So, for simplicity, and to be consistent with the FCA rules on transfer analysis reports, no assumptions for a tax charge have been included.

You will need to be aware however that the maximum tax free cash will be limited to 25% of the LTA applicable in that tax year. (Unless you have applied for one of the LTA Protections explained above, in which case your tax-free cash will be limited to 25% of the protected figure). Were you to seriously consider purchasing an annuity in future, we would give full consideration to your fund value and to the LTA that will apply in that future tax year.    At present the plan is for you to use the Flexi Access Drawdown facility, as this will allow for careful and controlled tax planning, and where the crystallisation events will probably be taken out over a number of different tax years.

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Your Recommendation

Considering your current situation, circumstances, and objectives, I am recommending that you effect a transfer of your preserved benefits under the 123 Final Salary Scheme Pension Scheme to a personal pension plan arrangement.

Before I give a detailed overall summary of why this course of action is sensible for you, I would first like to detail and discuss the key points of advice below that have lead me to reach this decision. 1. The Critical Yield

The ‘Critical Yield’ figure, means the critical level of growth required on the transferred fund to at least match the pension payable under the scheme you are leaving. If the personal pension arrangement is to achieve the same amount of income at age 60 it will need to grow at 30.5% per annum.

Of course, the most tax efficient conduct would be to tax the maximum tax free lump sum from the scheme and an annual income, which would require a critical yield of 18.6%. As the scheme cannot provide the commutation factors for this scheme, this critical yield can be considered just a guidance based on the commutation factor of 15:1.

I have demonstrated the fund performance of the Cirilium Moderate Fund and you are aware of past fund performance and how volatile the returns can be, but you recognise that meeting these critical yields will not be possible.

We have discussed the critical yields involved and I have outlined in detail earlier in my report why you still wish to proceed with the transfer of your final salary funds.

2. The Death Benefits

We discuss the death benefits that accompany your final salary pension and although an income is offered to your wife you do not see this as an attractable benefit.

You would like your pension funds to be passed to your wife and children as a lump sum on death and not be re-absorbed by the scheme at any point.

Thus, the death benefits from the 123 Final Salary Scheme Pension Scheme are not attractive to you as you do not want such a high value of your hard-earned pension funds to be re-absorbed by the scheme at any point.

If, on the other hand, you elected to transfer your preserved pension benefits to a personal pension scheme and subsequently died, the benefits on your death would be a return of the pension funds to your children. These benefits will alter, hopefully increasing, as your pension fund achieves investment growth over time.

Your wife will be adequately covered in the event of your death preceding hers as she will inherit your pension funds, receive a spouse’s pension from your An Insurance Company final salary pension, inherit your estate as well as receive her own State Pension.

3. Your State of Health

You are in good health and expect to lead a full and healthy life.

Therefore, the reasons to transfer are not health related.

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4. Your need for Greater Flexibility in the format by which benefits can be taken.

You would like to retire at the age of 60.

The full flexibility on how you manage your income is essential to you as we will carefully plan your income so that it is derived in the most tax efficient manner, taking into consideration your Rental Income, An Insurance Company Pension and your State Pension as well as your savings and investments.

You do not believe that you will access all your pension funds in your lifetime and therefore your funds can accumulate for your wife and children.

As you grow later into your retirement years, you may well reduce your income levels and my solution will help you achieve this.

Although your immediate needs could be met by your Defined Contribution arrangement at the age of 60, at which point you could take your final salary pension and benefit from the full revaluations, you do not like the inflexible nature of this product and again, the death benefits are unattractive to you.

5. The Funding Level and Financial Strength of the Final Salary Scheme

I have established that the Scheme Funding Level and Financial Strength are irrelevant as the final salary scheme has now been taken over by Bulk Buyout Annuity in the form of a Deferred Annuity.

6. The Differences in the Tax-Free Cash Entitlements under both Schemes.

I have outlined below the differences in tax free cash should you take your pension now.

Age Personal Pension Final Salary Pension Difference58 £47,680.75 £29,102.31 +£18,578.44

You see the extra tax-free cash as a benefit as this will help you mitigate income tax if you chose to take this as income.

You could also use this to meet ad-hoc lump sums in a tax-free manner.

7. Your Attitude to Risk

You have a Moderate attitude towards investment risk and you recognise that you have no investment control over your final salary pension funds as this responsibility is taken up by the scheme trustees. You would like individual control over how your funds are invested so that you can take advantage of market upturns or downturns.

You consider yourself to have knowledge of how the financial markets work and appreciate that your funds will be fully exposed to daily fluctuations within my recommended fund.

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8. Other Pensions, Assets and Income

After my advice, your finances will be:

Asset Value NotesMain Residence £800,000 Current Value3 Investment Properties £1,000,000 Current ValueCash Savings £100,000 Emergency FundsDirect Shares £50,000 Deutsche BankStocks and Shares ISA £110,030 AEGON ARCTotal £2,060,030 Net assets of £1,660,030

Pension Provision Income NotesYour State Pension £8,094 From age 66 - Annual income until deathAn Insurance Company Pension

£8,782 From age 65 - Annual income until death

Total £16,876

Alternative Income Income NotesRental Income £30,000 Net Rental Income after mortgage repayments

Gross of income taxWill increase as mortgages are repaid

Pension Provision Value NotesAEGON ARC SIPP £1,274,406 Defined Contribution

Uncrystallised Pension FundsCan be accessedAfter my initial fee

I have also used the LV= Pathfinder Tool to create a Retirement Options Report to establish if there is a risk that after transferring your final salary pension funds your overall pension provision will not be able to fully meet your income needs in retirement.

My report suggests that your average life expectancy is 83, however 25% of people live longer than 89.

Based the assumed worst case scenario that you:

Take tax free cash of £312,500 at the age of 60 Take £50,000 gross per annum until exhaustion of your funds

It predicts that you will have a total remaining pot at your average life expectancy age of 83 totalling £185,940.

Of course, you could live longer and therefore your income of £50,000 will exhaust your pension funds not long after the age of 83.

However, this report is based on you taking the full tax-free cash at age 60, which is not your intention

It also does not factor in that you will reduce your pension income as you grow into your retirement years to consider natural reduction in expenditures, especially as your mortgages become fully repaid and that you will look to reduce your pension income levels later in retirement to consider your State Pension and the extra net rental income that you will receive.

You also have substantial amounts of savings and investments that will be used in retirement and will have an effect in your income levels.

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Based on the above, I am happy that you will not have a financial shortfall in retirement. You also agree with my assessment.

I also consider you to be financially astute for the following reasons:

Other than your mortgage, you do not have any other debts You earn much more than you spend and I believe you can manage your affairs carefully You have contributed towards various pensions during your lifetime in readiness for retirement You class yourself to have a good understanding of the financial industry

Tenancy Risks:

As with all investment properties, there is always a risk that you are unable to find suitable tenants and there may be periods of unoccupied accommodation which will affect your income levels. You are aware of these risks however you still have substantial savings to see you through any difficult periods.

Rental income is also correlated to supply and demand as well as tenant sentiment and your rental income may reduce or not be as much as you expected, especially in times of market downturns. Again, you believe that you have enough capital reserves and investments to draw upon to meet your income needs.

There is also the cost of maintaining the properties, however again you believe that you have enough capital reserves and investments to draw upon to meet these needs.

9. Your Investment Knowledge and Experience

You consider yourself to be highly experienced on how the financial industry and markets operate. You have worked in the financial industry for much of your career and thus you have built up a wealth of knowledge over all aspects of finance, financial markets and investing. You also hold your own investments, including a Stocks and Shares ISA, Direct Shares and a Defined Contribution Pension, so you have personal knowledge and experience of investing.

You have various pensions and you understand the correlation between risk and reward. You fully understand how various pension arrangement operate and the risks involved in moving guaranteed pensions, such as final salary pensions into a Defined Contribution arrangement, however this does not concern you and I have outlined your objectives later in my report.

You will of course have Adviser B’s continuing advice to ensure that your retirement goals are on track. I am comfortable that you know the risks involved with transferring a final salary pension, as well as the guaranteed benefits that you are giving up. I am happy that although I have recommended the transfer of your final salary pension, you will not take the consideration of transferring this lightly and you will make the best decision that is right for you and your family.

10. Your Term to Retirement

You aim to retire at the age of 60.

11. The Pension Protection Fund

The Pension Protection Fund was established to pay compensation to members of eligible defined benefit pension schemes, when there is a qualifying insolvency event in relation to the employer and where there are insufficient assets in the pension scheme to cover Pension Protection Fund levels of compensation. This benefit will be lost on transfer of your funds to another provider.

We discussed the loss of this benefit and what protections would be in place should my recommended provider cannot meet its liabilities.

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My recommended solution is protected under the Financial Services Compensation Scheme which would cover payments up to 100% of your fund value with no upper limit.

In Conclusion - Why you should transfer your Final Salary Scheme

After an assessment of your overall pension wealth, I have concluded that you will not be reliant in the income and tax free cash that your final salary pension can provide.

My recommended solution will allow you to take an income which is flexible enough to mitigate income tax in retirement by the addition of more income tax. It will also allow you to tailor your income to meet your needs as you progress through your retirement journey. We have established that you may not need as much income from your pension funds once you are in receipt of your State Pension, Shares, increased net rental income and the utilisation of any savings and investments to reduce your estate.

Although you are deemed young and healthy, no one knows their longevity and your objective is to maximise the death benefits from these pension funds to ensure that your wife and children benefit from your pension wealth in the event of your death. Under no circumstances should any funds be retained by the scheme on your death. I have explained whole of life cover to the value of your Cash Equivalent Transfer Value could be a solution to ensure that your wife and children are covered in the event of your death, however we discounted this as you do not wish to pay an expensive premium for life cover as you deem this to be a waste of money.

My Retirement Options Report suggests that you could meet your income target of £50,000 gross per annum for the remainder of your life and still have approximately £185,940 remaining at your life expectancy age of 83. In effect, you are having your cake and eating it as not only will your pension serve to provide you with a suitable level of income, you will also have the compounded effect of a large death benefit for your children, although you are fully aware that this is largely dependent on fund growth and this could be a lot more or less than predicted. You also must factor in Excess LTA Charges, however my Retirement Options Report was based on the worst-case scenario that you take the full tax free cash at 60 and make no reductions to your pension income, when in reality this will not be the case and therefore, your pension funds should last longer than what I have outlined in this report.

I have made you aware of the potential Excess Lifetime Allowance Charges and you believe that your objectives far outweigh these charges.

Alternative Considerations

I have considered retaining your final salary pension in its current environment with the view of transferring your funds when you retire. This option would mean that you would still benefit from the revaluations and subsequent potential increases to the Cash Equivalent Transfer Value. However, should you die before you transfer your final salary funds, the scheme will pay an income to your wife, however nothing will be paid to your children. This does not meet your need as you want a lump sum to be left on death to your wife and children. You do not want your hard-earned pension funds to be absorbed back into the scheme.

You have been in the financial industry for many years and understand the fluctuations in various asset classes which are driven by various factors, such as sale and demand or how the Brexit has resulted in a surge of investors looking to secure their money by paying high bond Clients which in turn has naturally driven gilt yields down phenomenally. This in affect normally increases the CETV and you would like to take full advantage of this, especially as gilt yields are slowly rising again. Although the CETV may have increased and the transfer of your final salary pension may suddenly look a more attractive, you are aware that the critical yields paint the true reflection of the value of your pension funds in the future.

You are extremely comfortable with investing and fully understand the risks and correlation between risk and reward. You wish to take control of your pension funds and invest them as per your attitude towards risk. I have explained that the critical yields are not favourable in the sense that there is a little to no chance that

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over the medium to long term these can at least be met. However, the final salary in its current format does not meet your needs as outlined in my report and therefore the critical yields do not bother you.

Based on the above summarisation, you have confirmed that you understand the risks involved and you confirmed that the transfer of your 123 Final Salary Scheme Pension Scheme is the most appropriate option for you.

Based on your current situation and objectives, I am also happy to recommend that transfer of your 123 Final Salary Scheme Pension Scheme into a Personal Pension arrangement

Disadvantages of Transferring the Final Salary Scheme

Although a transfer will allow your key requirements to be met, there are possible disadvantages that I need you to understand fully, before we agree to proceed. Not all aspects about moving to a money purchase arrangement will necessarily result in an improvement, and in reality, only time will tell whether this transaction will produce a better outcome for you or not. There are numerous complex considerations that need to be made, but I need you to be satisfied that on balance you believe that the benefits outweighing the disadvantages. For this reason, I have set out below what I believe the key disadvantages could be.

Fund performance over the coming years may be lower than anticipated, resulting in lower benefits for you. In the final salary scheme the risk of underperformance would have been for the Trustees to address. In the new pension, however, the investment risk will be yours.

You will be losing the absolute guarantee of a fixed income that would have increased in line with inflation, and this would have been guaranteed to last your whole lifetime. The TVAS report shows that you would have received £3,979 per annum at the age of 60 as well as a tax free lump sum of £26,527. This is the key guarantee that I would like you focus on, and be aware that you will be giving up, when the plan is transferred.

You are not subject to any charges within your final salary scheme, however you will be subject to product, fund and adviser charges within my recommended solution which will be deducted from the fund and will have an impact on the fund and your final benefits. Please see the illustration for further details on charges.

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Your Recommendation for a Personal Pension

This section outlines my recommendations and how they meet your retirement needs and objectives.

Product Recommendation: AEGON ARC (Retirement Choices) SIPP

AEGON ARC

Intrinsic Financial Services believe that this platform account is an efficient cost effective solution to a client’s investment needs over the long term based on centralised research. A platform offers a range of ‘tax wrapper’ accounts that support the different tax treatments available for invested money including ISA's, Pensions, General investments (such as in OEIC's and Unit Trusts) and Bonds. These tax wrappers provide you with access to a wide range of investments funds with a simple charging structure. Rather than holding your investments in different places a platform can bring your investments and pension arrangements together so you can view everything at a single glance, giving you a clearer picture of your entire portfolio and its performance.

AEGON are one of the UK’s leading providers of pensions, protection, investments and annuities. Their history goes back to 1831 when Scottish Equitable was founded, giving them over 175 years’ experience in the UK market. In 1994, Scottish Equitable joined the AEGON Group, one of the world’s largest listed insurance companies.

Scottish Equitable are now an integral part of AEGON’s family of businesses in the UK, which cover life and pensions, asset management and advice. And in a changing and uncertain world, their customers can rely on their resilience and expertise to help them plan their financial futures.

AEGON have combined their financial services experience with new technology solutions, to create AEGON Retirement Choices (ARC). ARC is an online service, providing you with a variety of product and investment choices designed to help you make more of your savings. ARC offers:

Product wrappers – a range of products – including a SIPP, ISA, the non-tax wrapped General Investment Account, including access to an offshore bond.

Investment solutions – choose from AEGON’s insured fund range or access to a broad range of other investments, including alternative investments.

Clear charges – ARC has three simple charges – the fund charge, platform charge and any adviser charges.

Portfolio management– ARC allows online portfolio management, giving you greater visibility of your total portfolio.

Flexibility - ARC adapts to suit your changing needs, subject to product limits you can pay by lump sum or direct debit, take regular or partial withdrawals, and switch funds

Benefits associated with wrap platforms include;

Access to Institutional investment fund charges. Access to up to date portfolio valuations online. Access to an extensive range of investment funds. Consolidated reporting enabling accurate calculation of CGT liability (provided all chargeable assets

are administered on the Wrap platform). The ability to apply an asset allocation across the portfolio. Timely rebalancing of the entire portfolio.

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Easy fund switching within a number of different tax wrappers. Ability to diversify holdings without increasing the administration to keep track of them. Simpler and more flexible management of on-going changes to existing investments in line with

changing personal circumstances or market conditions.

Use of a Platform solution will assist me as your Adviser, as well as you, in that once set up it will be simpler and faster for me to provide you with a service support across the Platform investments. It is possible that the value of my business will be improved, as it might with any tools that support an efficient operation to look after the needs of its clients. I think it is important to acknowledge the potential benefits for my business but assure you that they are not a driver in my recommendation.

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Your Investment Requirements

We discussed your Attitude to Risk report and you said that you understood the likelihood of your portfolio going up or down in any given year and the range of likely returns. We also discussed how a pension investment that could go up and down more in any given year (known as volatility) is likely to produce a larger pension pot at retirement; you were comfortable with the Moderate approach shown in your Risk Report.

As you are happy with this approach, it is essential that the investments in your pension are continually monitored to ensure that they do not start to go up and down too much for you and that they continue to give you the best possibility of receiving the expected return. There are a number of methods can be used to achieve this for you: -

Asset Allocation

Equities, Gilts (& Fixed Interest), Property and Cash all perform differently in different situations by having a mixture it reduces the amount that your Pension Investment can go down by, having the right mixture it can increase the amount your pension pot will eventually grow to. An example of the kind of asset allocation suitable for you is shown in your risk profile.

Management Type: Passive Strategic or Active Tactical

1. Passive StrategicSome of our clients do not believe that a fund manager can beat the market over time. They are unwilling to pay more for the chance that they could earn more and would rather invest in the right asset allocation at the lowest cost. If you choose this strategy, you will get average performance; you may look back and see fund managers who have done particularly well and question why you didn’t invest with them. Clients who choose this strategy are happy to save charges and avoid the risk of underperformance. They understand that it is impossible for their passive fund to be a top performer in any given year. This option would simply follow the asset allocation shown in your Risk Profiler

2. Active TacticalSome of our clients like the idea of a fund manager working on their behalf to try and beat the market. The fund manager would make a charge and you would therefore be paying more for the chance that you would earn more from their skill. If you choose this strategy, you may look back at the charges and question what you have paid, particularly if there has been no enhanced performance. Clients who choose this strategy are happy to pay more for the chance of enhanced performance and understand that it is not guaranteed.

Using more Asset Classes

We discussed how the right mixture of Equities, Gilts, Property and Cash can reduce how much a fund will go up and down while increasing the size of your eventual pension fund, the effect of this is increased if you also invest in other investments, often referred to as Wider Asset Classes. These are typically Commodities, Hedge Funds and private equity. Evidence has shown that including these in your pension fund can further reduce how much it will go up and down and further increase the eventual pot. Recent examples of this were seen in Jan 1990 to Sep 1990, Sep 2000 to Mar 2003 and Nov 2007 to Feb 2009 where these investments went up while traditional asset classes went down. There is little to be gained by investing in two things that go up and down the same amount at the same time.

Re-balancing

While it is vital to have different types of investments, or assets, a problem can occur if one of them does particularly well and your pension, while benefiting, finds itself over exposed to that type of investment just before it falls. It is therefore vital that when one of the assets does well some of the gains are sold and the proceeds used to but more of the assets that have gone down. This can be done automatically with either a passive Strategic or by an expert manager with tactical active.

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Taking this into account you decided that you would like to invest tactically and actively using wider asset classes.

You also agreed that you would want to ensure that the pension investment was monitored and rebalanced to make sure that it stayed within the Moderate risk profile.With this kind of investment, the actual mix of investments won’t necessarily match that shown on your risk profile report but it will be closely monitored to ensure that it remains within your risk profile with the potential for improved returns. You felt that this level and type of investment is acceptable for your pension because you understand the correlation between risk and reward and therefore you would like to take a medium level of risk with your pension funds to reach your retirement income objective. You are also concerned about the risks of inflation and therefore taking a Moderate attitude to risk should provide enough growth to outstrip inflation. That said, you understand that investment performance is not guaranteed and the value of your funds can go down as well as up.

Your Investment Strategy

We also need to consider your expectations of future investment performance. One of the main benefits of the AEGON Flexi-access Drawdown plan is that it provides access to a range of external fund managers offering institutional style investment opportunities to private investors. To achieve your objectives and to meet both your requirements in relation to investment risk and, just as importantly, investment strategy.

Fund Selection

When making my fund recommendations I have followed the process I explained during our meeting. Intrinsic Financial Services operates an Investment Committee, whose role is to review the process of fund selection and to ensure that recommended funds are appropriate for the needs of our clients. The Committee works closely with the independent investment analysts, Old Broad Street Research Ltd (OBSR) and all of the funds which have been chosen are considered best of breed within their sector or investment type. When assessing whether a fund is best of breed and likely to meet its objectives over the longer term the following factors are considered:

• The fund objectives and aims • Fund performance is in line with expectations and is consistent with the investment objective • The fund volatility profile • Strategic asset allocation in alignment with the manager’s view of changing market conditions • Quality of fund manager and their individual investment process • The experience, skills and strength of the investment team • The organisation’s attitude to risk • The fund manager’s appreciation of the trade-off between risk and reward

The funds contained in the Intrinsic recommended fund matrix have been chosen on the basis that the Investment Committee, with expert input from OBSR, believe that the investment teams responsible for each fund have the relevant skills and experience to manage funds of this nature.

You would like to incorporate a diversified portfolio base approach with your investment capital to achieve diversification across many different asset classes within a single portfolio, you envisage that by investing across a variety of asset classes you will benefit from the potential for more constant returns over the long term than investing in only one asset class such as cash investments.

We have discussed that Multi Manager Funds are managed by a specialist individual who selects single managed funds from the whole of the market and blends them to meet specific risk profiles and asset allocations. This manager is responsible for actively managing the asset allocation and achieving the performance expected, the Multi Manager will switch between funds and sectors in response to market changes and research/analysis. The aim of these funds is to give you access to a wide range of different fund managers through a single investment.

This approach provides you with an expert to make and manage investment decisions on your behalf to ensure that you have peace of mind that your investment is professionally managed. There is no requirement for input into the selection of the underlying holdings by you and this investment proposition is sophisticated yet simple to operate so that our review meetings can focus on a review of your overall financial position and appetite for risk.

I have therefore recommended Multi Manager funds for your pension funds.

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Fund Recommendation

Having discussed your personal attitude to risk and investment objectives I have recommended the following to meet your needs:

Fund Name Amount InvestedCirilium Moderate Acc Fund 99.75%Cash 0.25%

This fund is consistent with your agreed attitude to risk profile.

0.25% of your funds will remain in cash.

Please see the Illustration, Key Features Document and Fund Factsheet provided for details of how the charges and risks may impact on your investment. It is important to note the value of your investment can go down as well as up and past performance will not necessarily be repeated.

The key to effective investment management is asset allocation. Diversification of assets is the over-riding principle in the management of an investment portfolio. Successful long-term investors tend to favour holding broad portfolios of assets such as equities, bonds, cash and commercial property as well as commodities and funds of hedge funds.

The key to balancing investment risk and reward is maintaining an appropriate mix between the various asset classes and investment sectors. The proliferation of funds accessing diverse investment areas adds to the complexity of achieving suitable balance. It also makes the task of building an appropriate and effective portfolio all the more important. The Cirilium Multi-Manager Portfolios are truly multi-asset class investment portfolios.

Research suggests that the selection of investment sectors, referred to ‘asset allocation’, has a much greater impact on overall returns than pinpointing individual securities or funds. From an investment fund perspective, it has often been better to choose a fund boasting average investment performance in the best performing sector than it has been to choose a top performing fund in an under-achieving sector. The difference in returns between the best and worst sectors can be substantial.

Intrinsic understand the importance of asset allocation, fund selection and portfolio construction. With this in mind, they have joined forces with Old Mutual Global Investors, one of the UK’s most established and well-reputed investment managers to create a range of funds, the Cirilium Multi-Manager Portfolios. The fund portfolio is made up of a range of Institutional Funds, Electronic Trading Funds etc, and importantly, this portfolio is not put together by myself, but is built by an Investment Committee Managed by Old Mutual Global Investors.

Having established your appetite for and attitude toward investment risk and volatility, I am pleased to recommend the Cirilium Moderate Fund for your pension investment.

You are not committed to these funds and at any time I can arrange for you to switch to the cheaper alternative fund within your AEGON pension at no cost to you.

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Product Costs and Charges

There are costs incurred in establishing this arrangement. I have considered the implications of product costs and taken account of them in making my recommendation. The initial plan costs are clearly indicated in the attached illustration, see pages 4 to 6 and the effect of the plans’ charges on your investment are explained. You should make sure that you have read and understood the other investment charges that apply such as the annual management charge, any bid/offer spread and allocation rates. Full details are provided in the product brochure.

Fund Risk Warnings

Some of the following fund specific risk warnings may apply and should be inserted as appropriate:

Fund performance may go down as well as up.

The New Pensions Regime – An Informed Choice

The legislation giving effect to the new pension freedoms was passed on 17 th December 2014. It is called the Taxation of Pensions Act 2014 or (TOPA).

This brings new flexibility to pensions in that individuals aged 55 or over are now able to draw funds directly from their money purchase pension fund with no upper limit. 25% of the fund will normally be available as Tax Free Cash, with any income from the remaining 75% being subject to income tax in the tax year in which it’s taken. This approach is known as “Flexi-Access Drawdown”.

There has been a great deal of media interest and debate following the announcement of the new rules. The most publicised feature is the new ability for individuals to draw out their entire fund as a taxable lump sum. We feel strongly that this course of action would not be sensible for the vast majority of our clients, because:

It could potentially result in very large tax bill arising, if it’s taken in just one or over a small number of tax years.

This approach wouldn’t allow for a sustainable income to be provided in later years. Taking money out of a near “tax perfect” pension environment should be considered very carefully, as

it cannot easily be put back in due to limits on contributions. It is difficult to see where the money could otherwise be invested that would be as favourable as the pension environment from which it came.

However, depending on the fund size, tax position and personal circumstances, taking withdrawals in an accelerated way may be suitable for customers who already have an alternative and safe level of baseline income to fall back on.

Where it seems, an individual would prefer the guarantee of an income for life, with no risk of the money running out, an annuity product could be more suitable. As an annuity generally provides a more consistent level of income for life, there will be less chance of a one-off large tax bill to pay. This is because the income will be spread out over many years.

There are also various “3rd Way” pension products that attempt to mix some of the features of both Annuities and Flexi-Access Drawdown. Broadly speaking however any retirement product will fit into one of these two categories.

Pension freedoms are especially important to you as this allows you the opportunity to access your funds in a more flexible manner as well as the more advantageous death benefits, especially the ones associated with Flexi-access drawdown.

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Stakeholder Pension

I have not recommended a Stakeholder pension for you as the fund I have recommended for you is not available in this type of plan. A Stakeholder doesn’t make have access to the latest clean share-class investment funds either, and it would not allow you to take money out of the scheme under the new Pension Freedom Rules recently introduced on 6th April 2015. There is a charge cap of 1.5% on a Stakeholder pension, however the new platform would be just as cost effective as a Stakeholder plan, on a like-for-like basis if the same investment fund was used.

Taxation Implications

In making my recommendation, I have as mentioned earlier, endeavoured to make sure that any recommendation is as tax efficient as possible. The tax treatment of the Flexible Personal Pension arrangement recommended is as follows:

Your investment fund will grow free of UK Capital Gains Tax

You are permitted to take up to 25% of the pension fund as a tax-free cash lump sum, however in your case this is restricted to the current Lifetime Allowance of £1,250,000.

Your dependants will not usually have to pay any tax on benefits paid to them if you die before age 75, however in your case there will be LTA charges which I have outlined previously in my report.

Your regular income, in other words, your pension once it becomes payable, will be taxed as earned income and could be subject to LTA charges.

I must clarify of course, that this information is based on my understanding of current HMRC (Inland Revenue) law and practice. As you appreciate, taxation law is subject to future change. Similarly, the value and availability of a relief will depend on individual circumstance.

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IMPORTANT CONSIDERATIONS – PLEASE READ CAREFULLY

There are several important considerations, or “risk warnings” that you must consider before acting on my recommendation.

Firstly, please refer to the section immediately above in respect of the taxation treatment of the pension arrangement.

Next, I would remind you that this letter concentrates only on your stated objective of transferring your funds, to benefit from the potential for superior investment prospects and access an ongoing review service provided by me. It quite intentionally, and with your explicit agreement, does not address any other areas of your personal financial circumstances that either I, or you, may consider warrants further attention.

My recommendation is logically based on the information you provided to me at our meeting and as recorded by me. You should appreciate that any changes in your circumstances might impact on my recommendation and that as such you should advise me immediately of any changes.

Your risk tolerance is described previously. Accordingly, you understand that the value of investments, and the income from them, can fall as well as rise. It is also important to remember that past performance must not in any way be an indication of likely future performance.

There is no guarantee that you will achieve a higher fund value at retirement by transferring your pension funds.

By effecting an exempt approved pension arrangement, you understand and accept that under current HMRC rules you can only have access to your fund, and the benefits thereof, from age 55, unless under circumstances of early retirement granted due to ill-health.

I appreciate that you have been provided with a lot of detailed information as part of this process. I would ask nevertheless that you read carefully the following documents I have provided:

• Product brochure • Key Features Document • Your personalised illustration

You should make sure you fully understand these documents.

To assist, generally, ask yourself these questions:

• What is being recommended to me? • Is it clear why it is being recommended to me? • Do I understand how it works? • Do I understand the risks involved? • How much is it going to cost me?

If you are unable to answer any of these questions, or are unclear on any aspect, please contact me and I will clarify fully.

Once satisfied, please complete and return the application form to me whereupon I will arrange for submission to AEGON ARC who will set up your pension.

Wills and Estate Planning

Although not an area of regulated financial services, the matter of wills is nevertheless a very important

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consideration. It might have relevance to the benefits payable on death (explained in full above) and I strongly recommend that you and your legal adviser review your will in order to ensure that your estate and beneficiaries are as well catered for as possible in full accord with your wishes. As I have confirmed, I am more than happy to work with your other professional advisers in this regard and if you do not have a legal adviser, I am more than willing to recommend.

Supporting Documentation

Please refer to the Illustration(s), Key Features Documentation and Fund Factsheets (where applicable) that I have provided you with. These documents contain important information including full details of the aims, your commitment, the charges and the risks of the product(s) recommended along with any relevant exclusions or limitations. Please ensure that you have read and understood these fully.

Periodic Contact

It may be that we contact you at times other than those specified at outset, for example to draw your attention to investment matters or provide an update on current markets however we are not obliged to do so.

Next Steps

Once we have submitted your application form and it is accepted by AEGON ARC, they will request the transfer monies from the 123 Final Salary Scheme Pension Scheme. On receipt of the transfer payment they will send the policy documents to you directly. At the same time, you will receive a notice setting out your right to change your mind within 30 days. In practice, however, once pension monies are transferred the Trustees are under no obligation to accept a return of the fund should you change your mind as reinstatement is time-consuming and extremely costly. It is not usual for Trustees to permit reinstatement.

FOR THIS REASON, YOU SHOULD DOUBLE-CHECK THAT YOU FULLY UNDERSTAND EACH AND EVERY ASPECT OF MY RECOMMENDATION NOW, AS ONCE THE TRANSFER HAS TAKEN PLACE, IT WILL NOT BE REVERSABLE AND YOUR ENTITLEMENT TO ANY BENEFITS UNDER THE 123 FINAL SALARY SCHEME PENSION SCHEME WILL BE LOST. I would ask you to note that transfers can take a period of months to complete fully. During this time the transfer value from the 123 Final Salary Scheme Pension Scheme could change, upwards or downwards. This means that the transfer value received by AEGON ARC could differ from that figure provided by 123 Final Salary Scheme Pension Scheme and used in the illustration provided.

I will continue to provide you with a personal service, including the efficient processing of your application and dealing with AEGON ARC on your behalf. Please ensure that when you receive your policy documents, if there is anything that is not completely clear that you let me know as soon as possible. Your policy documents represent your legal contractual ownership of the Flexible Personal Pension and the benefits under it. If any of the information in this letter differs from your understanding of our discussions then again, please let me know.

Conclusion

I appreciate that this letter is a rather cumbersome presentation of my recommendation. Nevertheless, it is an important document and I would again encourage to you read it thoroughly and ensure that you fully understand the content. The decision as to whether or not to transfer your final salary scheme benefits is one of the most important decisions you will make. Be sure that you have weighed up all relevant considerations in making your decision.

If anything is unclear to any degree, please do not hesitate to contact me.

I look forward to speaking with you again in the future.

Yours sincerely

Adviser AXYZ Firm

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Attachments:1. Product Risks2. Glossary of Terms3. ATR Report4. Fund Fact Sheets5. Key Features Documents

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