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ORBIT BRIEFING : A-DAY

A-Day Summary for Employees

With the A-Day pension changes now in force, UK employees have greater flexibility than ever before in how they save for their future and when they take benefits.

Key Facts

'Registered pension scheme' — there is no limit on the amount you can accumulate in registered pension schemes and you can belong to as many as you like. Your current scheme with Orbit and all approved pension plans are automatically registered.

'Lifetime Allowance' — the maximum amount you can have in all pension plans when you take benefits without incurring a tax liability (see Recovery Charge) unless you register for Protection (see below). Starts at £1.5m in 2006, rising to £1.8m by 2010/11 and reviewed every five years.

'Annual Allowance' — the maximum amount you and your employer can invest in registered pension schemes in each year without you incurring a tax charge at 40%. Subject to a monetary ceiling of £215,000 pa (increasing to £255,000 pa by 2010), you are eligible for tax relief on your pension contributions up to 100% of UK earnings or £3,600 pa, whichever is greater.

Tax free cash — take up to 25% of the accumulated value in any of your pension plans as tax free cash (subject to the Lifetime Allowance, before age 75 and the rules of the scheme allowing it).

Flexible retirement — take pension only, cash and reduced pension or cash now and pension later. The age range is 50 (rising to 55 from 2010) to 75 and you can continue working whilst drawing benefits.

Investments — invest in a wider range of assets, including property through the proposed Real Estate Investment Trust.

'Recovery Charge' — the amount of tax you pay if the value of your pension funds exceeds the Lifetime Allowance when you start taking benefits. The charge is 55% of the excess when you take it as cash.

Protection — protect your current pension rights by registering for:

'Primary Protection' — your total pension funds must be over £1.5m at A-Day and this higher amount becomes your personal Lifetime Allowance to reduce the Recovery Charge payable. You have until 6 April 2009 to register.

'Enhanced Protection' — your total pension funds at A-Day can be above or below £1.5m and no Recovery Charge is payable at any time BUT you and/or your employer cannot make any pension contributions after A-Day. You should have done this by 6 April 2006.

Planning after A-Day

Collect data on existing plans — to plan properly you need an up-to-date summary of all your pensions, including any from previous employments. If a valuation or statement of entitlement is more than six months old, ask your adviser or the scheme administrator for current figures.

Use the Orbit A-Day calculator — with our new pension calculator you can work out how much you need to invest to meet your pension expectations. Because it's pre-populated with your personal details and automatically updated, the Orbit calculator is a valuable tool you will want to use frequently in your pension planning.

Review your finances and cashflow — from A-Day you have a lot more scope for investing into your pension, not only from salary but using other assets and savings too. The minimum you should contribute is the level that secures the maximum amount from your company. If you can afford to invest more, sacrificing some of your salary or a bonus is highly tax-efficient for both you and your company. Contact Orbit for more information.

Check your pension regularly — A-Day gives you the opportunity to achieve your retirement goals if you understand how to take advantage of the changes and put your plan into action. Use the Orbit system and A-Day calculator to monitor progress regularly and ensure you remain on track.

For help with your pension planning, contact Orbit

www.orbitbenefits.com

info@orbitbenefits.com Tel: +44 (0)20 7204 1212 Fax: +44 (0)20 7204 1313

Important — this summary is based on Orbit's understanding of the Pensions Simplification legislation as at March 2006. It is not intended as investment or legal advice and does not represent the full detail of any particular aspect of the Pensions Simplification legislation or its relevance and application for a particular employee, employer, Trustee or scheme. Orbit Benefits Limited is authorised and regulated by the Financial Services Authority and is a member of the SBJ group.