CHANGES ANNOUNCED IN THE SPRING 2023 BUDGET

The UK Government announced several changes relating to the tax relief limits on pension savings and the lifetime allowance tax charge applied on death benefits as part of the Spring 2023 Budget.

Summary of Spring 2023 Budget Changes

The following changes were announced and took effect from 6 April 2023:

• The abolition of tax charge imposed on pension savings built up throughout your lifetime which exceed £1,073,100 (the Lifetime Allowance).
• The annual limit on pension savings which receive tax relief (the Annual Allowance) increased to £60,000 per tax year.
• The annual limit on pension savings which receive tax relief for higher earners (the Tapered Annual Allowance) continues to apply, for individuals with Threshold Income of more than £200,000 and Adjusted Income of more than £260,000. The minimum level of pension contributions which receive tax relief increasing from £4,000 to £10,000 for an Adjusted Income of £360,000 or more.
• The Money Purchase Annual Allowance (which applies to individuals who have already started ‘flexibly’ taking their defined contribution pension benefits) will increase to from £4,000 to £10,000 per tax year.
• The maximum pension commencement lump sum (also known as tax-free cash lump sum) an individual can claim has been limited to 25% of the existing Lifetime Allowance, meaning a maximum of £268,275, except for individuals where existing HMRC protections apply.
• The Lifetime Allowance charge applied to death benefits provided through a registered arrangement has been replaced with a tax charge at the beneficiary’s marginal rate on benefits above the Lifetime Allowance.

Company policies to help colleagues with the impact of the tax limits

Partial Membership option

Colleagues who have been impacted by the Tapered Annual Allowance can opt to be Partial Members of the DC Section of the MMC UK Pension Fund (the Fund). Under the Partial Membership option, colleagues have been able pay employee contributions at a monthly rate between £1 and £3,333 (i.e. instead of the standard % monthly rates) to help manage the amount being paid into the Fund. Instead of an employer contribution being paid into the Fund, the Company pays the colleague a non-pensionable salary supplement of 10.5% of basic salary (capped at £250,000 p.a.).

With the increase to the annual allowance the monthly maximum contribution limit for the partial membership option has been increased from £3,333 to £5,000 to allow colleagues to contribute up to the increased annual allowance of £60,000 per year. This was made available from the April 2023 Prosper window. If you consequently wish to increase your pension contribution under Partial Membership, please log into Prosper via the ‘My Quick Links’ section in Colleague Connect.

Lifetime Allowance Opt Out option

The Lifetime Allowance opt out option has been available for colleagues with pension savings in excess of £858,480 (80% of the Lifetime Allowance that applied for tax year 2022/2023). Under this option, the colleague also receives a non-pensionable salary supplement, in lieu of the company pension contribution. No changes have been made to this option, it therefore remains in place for existing colleagues as well as new joiners to the Company.

Should colleagues currently in this option wish to commence contributions either via the standard membership with employee and employer pension contributions or the aforementioned partial membership please log into Prosper via the ‘My Quick Links’ section in Colleague Connect to make the change.

Life Assurance

For the purposes of HMRC’s Lifetime Allowance charge calculation on death, any lump sum life assurance benefit was included as well as any other lump sum benefits that would be payable from a Registered arrangement, such as the return of a DC account from the Fund, as well as any other DC accounts a colleague may have from previous employment.

The Company’s default approach to managing the death in service benefits has been to provide any lump sum life assurance benefit above £500,000 through a ‘non-registered or Excepted’ arrangement, benefits from which do not count towards the Lifetime Allowance.

As the tax charge applied on lump sum benefits received above the lifetime allowance remains higher than the potential for a tax charge on benefits provided through an excepted group scheme (i.e. broadly, marginal tax rate in comparison to 6%) no changes will be made to the current structure through which life assurance benefits are provided.

How to increase your contributions or opt in

Should you currently contribute via partial membership and wish to increase your contributions or have opted out for lifetime allowance reasons and now wish to opt in, these changes can be made via the benefits platform Prosper the link to which can be found in the ‘My Quick Links’ section in Colleague Connect. Please note changes can only be made during the monthly window which runs from 1st to 20th each month, your selected change will then be effective from the following month’s pay.

Further Help

If you wish to discuss the options available to you or how to select them in Prosper please contact the benefits team at UKIBenefits@mmc.com

If you require advice on if you should increase or start pension contributions, you should consult an independent financial advisor. Help choosing one can be found here. You can also contact the Mercer Private Wealth team here.

July 2023

MARKET VOLATILITY: FREQUENTLY ASKED QUESTIONS

Throughout 2022, we have seen some significant volatility in investment markets, resulting in large movements in both equity and bond markets as well as other types of investments.

Please click here to see a range of frequently asked questions relating to the ongoing market volatility that we hope will be helpful to you.

November 2022

WILL YOU HAVE SUFFICIENT INCOME IN RETIREMENT?

The challenge for many is how do you know whether you are on track for the kind of lifestyle you would like when you come to retire and what can you do about it. In order to help with this the Pension and Lifetime Savings Association (the “PLSA”) has developed the Retirement Living Standards to explain what life in retirement looks like at three different levels and what a range of common goods and services would cost for each level. We have created this flyer to provide an introduction to the Retirement living Standards, to get you thinking about how much you will need in retirement and an explanation of the different sources of retirement income.

November 2022

CHANGE TO THE MINIMUM PENSION AGE

From 6 April 2028, the government is changing the minimum age from which you can take retirements benefits from age 55 to age 57.

Although this change is not for nearly 6 years, you should take this opportunity to review your retirement plans, to ensure that you are aware of any impact on them.

You can find more information about this change on the gov.uk website here.

April 2022

PENSIONS TAX ADVANTAGES AND LIMITS

There are many tax advantages of contributing to the Fund, including tax relief on contributions and investments. Further details can be found here.

Some of our members may be affected by the HMRC limits in place on tax relief. There are limits on tax relief for contributions made in the tax year and contributions made throughout your lifetime.

We have also produced a document which will help you understand if you are affected and what options MMC has to help you manage your tax position.

July 2023

PENSION SCAMS

If you are under age 55, you cannot draw pension benefits from the Fund (unless you are in serious ill health). If you are 55 or over, it may be possible to release funds from your pension and this makes you a more attractive target for scammers. Here are some common warning signs to watch out for:

• A cold call, text message, website pop-up or someone coming to your door offering you a ‘free pension review’, ‘one-off investment opportunity’ or ‘legal loophole’.
• Convincing marketing materials that promise you high returns on your investment (typically over 8% per annum).
• Paperwork delivered to your door by courier that requires immediate signature.
• A proposal to put your money in a single investment. In most circumstances, financial advisers will suggest diversification of assets.
• A claim that you can access your pension before age 55.
• Transfers of your money overseas.

You can also view a video on YouTube (skip the Ads) giving you further useful information about pensions scams, as well as this handy leaflet summarising how pension scams work, how to avoid them, and what to do if you suspect a scam.

For more information on how to avoid scams and useful resources, you can also visit www.fca.org.uk/scamsmart.

October 2021

RESPONSIBLE INVESTMENT

The Trustee is committed to focusing on sustainability in the management and monitoring of your savings.

• An example of this commitment in action is the Trustee putting their own Sustainable Investment Policy in place to clearly set out their climate change beliefs and approach to ensuring Environmental, Social and Governance (“ESG”) factors are considered as part of the Fund’s DB and DC investment arrangements.
• A further example of the Trustee’s commitment to sustainability is the inclusion of a sustainable global equity fund in the default strategy of the Fund’s DC section. This fund invests in companies that demonstrate strong ESG practices. Companies that fail to meet the set standards in low carbon transition and corporate governance standards may be excluded from the fund. This fund is also available to you directly as a self select option. More detail can be found in the Investment Guide.

The Fund’s default strategy has also set a target of net-zero absolute carbon emissions by 2050. The interim plan to achieve this target aligns with targeting a 1.5°C limit on global temperature increases and the Paris Agreement’s ambitions.

For more details on the Trustee’s beliefs and policies regarding sustainability, please read:

• The Statement of Investment Principles on this website's homepage
• The Sustainable Investment Policy found here.
• Our Responsible Investment Approach booklet in the Investment Section.

October 2023

ENHANCED SUPPORT IN YOUR RETIREMENT JOURNEY

The Trustee has introduced the Pension Decision Service (PDS) from Mercer to support members of the Fund in making informed choices in the lead up to their retirement.

When members are provided with a retirement quotation from the Fund setting out their options, they will now also be sent details of the PDS. This is a free service for members.

PDS provides members with a dedicated Retirement Relationship Manager to help with any questions they may have when planning their retirement. A call with a Retirement Relationship Manager is designed to:

• Provide members with factual information about all of the options available from the Fund
• Talk through the retirement quotation
• Validate member’s understanding of the available options
• Build confidence and knowledge to enable members to make an informed decision
• Help members understand their next steps with a view to making it easier to understand and navigate the options at retirement.

More information on PDS can be found here, and you can also view an introductory video overview of the PDS here.

October 2021

DEATH IN SERVICE BENEFITS AND THE LIFETIME ALLOWANCE

For active members of the Fund life assurance, which forms part of your overall Marsh McLennan benefits package, provides additional financial security for your family and other dependants should you pass away whilst employed by the Company. The lifetime allowance could affect your death in service benefits. The Lifetime Allowance is a limit set by HM Revenue & Customs (HMRC) on the amount of benefit that can be paid through a Registered arrangement without triggering a tax charge. The Lifetime Allowance is currently set at £1,073,100 and benefit above this would be taxed at the beneficiary’s marginal rate.

For more detail on how you may be impacted by this please find further resources below:

LIFETIME ALLOWANCE – POTENTIAL TAX IMPACT

The Lifetime Allowance is a limit set by HM Revenue & Customs (HMRC) on the amount of benefit that can be paid through a Registered arrangement without triggering a tax charge. The Lifetime Allowance is currently set at £1,073,100 and benefit above this would be taxed at the beneficiary’s marginal rate.

For the purposes of the Lifetime Allowance charge calculation, on death your lump sum life assurance benefit would be included as well as any other lump sum benefits that would be payable from a Registered arrangement, such as the return of your Defined Contribution (DC) account from the MMC UK Pension Fund, as well as any other DC accounts you may have such as from any previous employment.

EXAMPLE 1: SALARY – £60,000

EXAMPLE 2: SALARY – £180,000

For the avoidance of doubt, in the event of death, benefits through membership of MMC’s Defined Benefit (DB) arrangements are paid as pension income to beneficiaries rather than lump sums and do not count towards the Lifetime Allowance calculation.

If the default approach does not work for you then you can request to have all of your lump sum life assurance benefit provided via the Excepted/non-registered arrangement. Completion of a form is required to make the request; this can be found on our Forms page. If you are unsure of the approach you should take, you should take advice from an independent financial advisor. You can also contact the Mercer Private Wealth team here.

There are some circumstances where UK inheritance tax could be payable on benefits provided via a non-registered arrangement. Based on inheritance tax rates, law and HMRC confirmations applicable to deaths occurring prior to 1 April 2022 this tax charge would not be more than 6% of the lump sum death benefit paid. If any such UK inheritance tax were payable, it would be deducted from the lump sum benefit at or before the time of payment.

COLLEAGUES WITH LIFETIME ALLOWANCE PROTECTION / WHO HAVE OPTED OUT OF THE MMC UK PENSION FUND DUE TO PENSION SAVINGS TAX LIMITS

If you have been granted any form of HMRC protection from the Lifetime Allowance, such as Fixed Protection, and have already informed the MMC Benefits Team then no action is required. All lump sum life assurance benefits are automatically insured via MMC’s Excepted/non-registered arrangement if you have opted out of the MMC UK Pension Fund for pension savings tax reasons and currently receive a Non Pensionable salary Supplement (NPSS).

If you have not previously informed MMC that you have HMRC protection then you should do so immediately as inclusion in the MMC UK Pension Fund gives rise to the potential for protection from the Lifetime Allowance to be lost. Please send a copy of your HMRC protection certificate to UKIBenefits@mmc.com.

For any further questions, please click here to access FAQs or contact UKIBenefits@mmc.com.

July 2023