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[Audio] Introduction to Pensions Part I Legal Copy Helvetica Regular 8/9.6 AA Gray.

[Audio] Legal Copy Helvetica Regular 8/9.6 Black Here are the major topics to be discussed in the training..

[Audio] Retirement Landscape Income and assets are accumulated during the productive span of employee lifetime, and income gradually decreases once one enter their retirement. Risk exists for retirees because they may not have accumulated enough assets over their working tenure to have sufficient income in order to live comfortably after retirement Generally, the retirement income comes from following sources Employer-sponsored retirement plans/schemes (or pension plans/schemes) Government income streams Personal savings Income and assets are accumulated during the productive span of employee lifetime, and income gradually decreases once one enter their retirement. Risk exists for retirees because they may not have accumulated enough assets over their working tenure to have sufficient income in order to live comfortably after retirement Generally, the retirement income comes from following sources Employer-sponsored retirement plans/schemes (or pension plans/schemes) Government income streams Personal savings.

[Audio] Why Do Companies Provide Retirement Benefits? Though it’s a law to provide retirement benefits, but other reasons are: Reward employees for loyalty Provide employees with some economic security during employment and after retirement Recruit and retain employees Employer contributions to qualified plan are tax deductible Plan assets accumulate tax free Legal Copy Helvetica Regular 8/9.6 Black Though it's a law to provide retirement benefits, but other reasons are: Reward employees for loyalty Provide employees with some economic security during employment and after retirement Recruit and retain employees Employer contributions to qualified plan are tax deductible Plan assets accumulate tax free.

[Audio] What is a Pension? The payment of an income stream Starting when someone retires And usually ending on their death Pension is the payment of an income stream, Starts when someone retires and usually ends on their death..

[Audio] Overview of Retirement Income in UK “Three-Legged Stool” Retirement Income Government Sponsored Employee Sponsored Employer Sponsored Defined Contribution (Money Purchase/ pension pot) Investment in Equity, Shares, Bonds etc. (Like NPS in India) Defined Benefit (Final Salary/ Career Average) Lumpsum, Annuity, Deferred (Like PF in India) State Pension (Like Old age security – Sr. citizen/ widow pension in India) Retirement income can be viewed as a three-legged stool, where the three legs can be considered as Government Sponsored Pension, Employer Sponsored Pension and Employee Sponsored Pension.

[Audio] Types of Pension Plan/Scheme Defined Benefit (DB): Plan that defines the benefit payable to each member at the time of retirement, death, disability, or termination Employer Sponsored Registered Pension Plans Defined Contribution (DC): Plan that defines the contribution to be made by the employee. Employer contribution is not a necessary feature of DC(It may or may not be contributed by employer). Also called “money purchase” What is a Defined Benefit (DB) pension plan? A DB plan promises a determinable lifetime benefit commencing at retirement for participants who meet specified eligibility requirements The benefit does not vary based on the investment performance of the plan assets. In other words, the employer—not the employee—owns the risk associated with asset performance What is a Defined Contribution (DC) pension plan? A DC plan specifies an annual contribution(s) from the employer to each participant’s DC account The benefit varies according to the investment performance of the plan assets; the employee owns the risk associated with asset performance Legal Copy Helvetica Regular 8/9.6 Black Employer sponsored pension can either be one or both of Defined benefit of DB and Defined Contributions DC. Defined Benefit: A DC plan specifies an annual contribution(s) from the employer to each participant's DC account The benefit varies according to the investment performance of the plan assets; the employee owns the risk associated with asset performance Defined Benefit (DB) pension plan is a DB plan which promises a determinable lifetime benefit commencing at retirement for participants who meet specified eligibility requirements The benefit does not vary based on the investment performance of the plan assets. In other words, the employer—not the employee—owns the risk associated with asset performance.

[Audio] Introduction – Defined Benefit Administration Depending on the life circumstance of the Member, (the Event e.g., Termination, Retirement, Death) and on certain other criteria, a pension benefit may be paid in a variety of ways: Cash Transfer of a lump sum to a “Locked-in” or “Not Locked-in” account Some form of a monthly amount (annuity), or Ongoing payments to a surviving spouse upon the Member’s death. A defined benefit (DB) pension scheme is one where the amount member pay is based on how many years, they have been a member of the employer’s scheme and the salary they’ve earned when they leave or retire. They pay out a secure income for life which increases each year in line with inflation. Employer contributes to the scheme and is responsible for ensuring there’s enough money at the time you retire to pay your pension income. Employee can contribute to the scheme too, and, depending on the scheme, this may be a requirement. Depending on the life circumstance of the Member, (the Event e.g., Termination, Retirement, Death) and on certain other criteria, a pension benefit may be paid in a variety of ways: Cash Transfer of a lump sum to a "Locked-in" or "Not Locked-in" account Some form of a monthly amount (annuity), or Ongoing payments to a surviving spouse upon the Member's death. A defined benefit (DB) pension scheme is one where the amount member pay is based on how many years, they have been a member of the employer's scheme and the salary they've earned when they leave or retire. They pay out a secure income for life which increases each year in line with inflation. Employer contributes to the scheme and is responsible for ensuring there's enough money at the time you retire to pay your pension income. Employee can contribute to the scheme too, and, depending on the scheme, this may be a requirement..

[Audio] Defined Benefit Plans (DB) Characteristics & Feature: Participants either register or are automatically enrolled in a DB plan by their employer The Promise is a benefit calculated using a formula based on member’s service, earnings, or both Upon termination, retirement, or death, benefits payable are calculated for the member Can be contributory (employee) or not Actuary calculates the contribution required to finance the promised benefit Plan sponsor sets money in pension fund Surplus/ deficit may arise Legal Copy Helvetica Regular 8/9.6 Black Non-Contributory Plans: They are completely funded by the employer (most of the plans in USA) Contributory Plans: They require employee contributions (typically some small percentage , 1% to 3%, of the participant's compensation). The employers are responsible for the remaining funding (most of the plans in UK and Canada).

[Audio] How are Defined Benefit pensions managed? Typically, defined benefit schemes are run by a Board of Trustees, on behalf of the employer. Trustees are responsible for all aspects of the scheme. This includes paying out benefits to retired members. Daily management of the scheme is typically done by the scheme administrator, who reports to the Board of Trustees. The way pension benefits are calculated depends on whether member is in a Final Salary Scheme or a Career Average Scheme. When can you take your Defined Benefit pension? Defined benefit schemes have a normal retirement age that will usually be 65 or the State Pension age. It could be different, depending on your defined benefit pension scheme’s rules. Depending on the scheme, member might be able to take their pension from the age of 55. They might also be able to delay taking their pension. This might mean they get a higher income when they do take it. When member start drawing their pension, it will usually increase each year for the rest of their life. Pension income will be taxable – but you won't pay National Insurance on it. When you die, it might continue to be paid to your spouse, civil partner or dependents. This is usually a fixed proportion – for example, half (50%) – of your pension income at the date of your death..

[Audio] Who all are involved in DB? Participant Pension Plan Administrator Employer Trust Payroll can be internal or external Here is the DB lifecycle. Please go through the it before moving to the next slide..

[Audio] What are different stages of DB plan cycle? New joiner/Transfer in Money managing Retirement/Transfer out/ Death Contribution Employee joins a DB plan DB plan may be transferred to another DB plan Lumpsum/Partial Annuity Deferred Early retirement Employer contribution This depends on age, earnings and tenure of employee Accrual rate formula used to determine defined payment at retirement Here are the different stages of Defined Benefits life Cycle.

[Audio] Defined Contributions With a defined contribution pension (sometimes called money purchase) members build up a pot of money that they can use to provide an income in retirement. Unlike defined benefit schemes, which promise a specific income, the income member might get from a defined contribution scheme depends on factors including the amount member pay in, the fund’s investment performance and the choices they make at retirement. Defined contribution pensions can be: workplace pension schemes set up by employer, or private pension schemes set up by member. If member is part of a pension scheme through their workplace, then their employer usually deducts their pension contributions from their salary before it is taxed. If they’ve set the scheme up for themselves, they arrange the contributions their self. The money in their pension is put into investments (such as equity, shares, bonds etc.) by the pension provider. The value of their pension pot can go up or down depending on how the investments perform. Some schemes move their money into lower-risk investments as they get close to retirement age. A defined contribution pension, also known as a money purchase plan, allows members to accumulate a pot of money for retirement. The income from this type of pension depends on several factors, including the amount contributed by the member, the performance of the fund's investments, and the choices made at retirement. Unlike defined benefit schemes, which guarantee a specific income, the defined contribution scheme's income is variable and influenced by these factors. Pension schemes can be set up by employers as workplace pensions or by individuals as private pensions. In workplace schemes, employers typically deduct pension contributions from employees' salaries before tax. In private schemes, individuals manage their own contributions. Pension funds are invested in various assets like equities, shares, and bonds, and their value can fluctuate based on investment performance. Some schemes shift investments to lower-risk options as retirement approaches..

[Audio] Characteristics and Features of DC Plan Accumulate savings for retirement Funded with individual accounts Option to save through different funds Employer defines the contribution (employer and employee) based on legal limits Beneficial for both employer and employee Designed to be permanent and non-discriminatory Provides Tax benefit to the employees Cost-effective for employers Relatively simple to administer Here are the characteristic features of DC plan: Note that in the sixth bullet , Non – discriminatory – operates withing government guidelines, tax-free contributions and withdrawals have limit.

[Audio] How a defined contribution pension scheme works? This is a type of pension where the amount you get when you retire depends on how much you put in and how much this money grows. Your pension pot is built up from your contributions and your employer’s contributions (if applicable) plus investment returns and tax relief. It helps to think of defined contribution pensions as having two stages: While member is working When member retire A defined contribution pension is a retirement plan where the final amount depends on personal and employer contributions, investment returns, and tax relief. It consists of two stages: accumulating funds while working and utilizing them upon retirement..

[Audio] Stage 1 – While member is working The size of your pension pot when you retire will depend on: how long you save for how much you pay into your pension pot how much, if anything, your employer pays in how well your investments have performed what charges have been taken out of your pot by your pension provider. The fund is usually invested in stocks and shares, along with other investments, with the aim of growing the fund over the years before you retire. You can usually choose from a range of funds to invest in. But be aware that the value of investments might go up or down. Stage 2 – when member retire You don't have to stop work to begin taking money from your pension pot, but you must normally be at least age 55 (57 from 2028). When you start to take money, up to a quarter (25%) of your pension pot can be taken as a one-off tax-free lump sum. The rest can be used to provide a taxable income, or one or more taxable lump sums. While member is working: The size of your pension pot when you retire will depend on: how long you save for how much you pay into your pension pot how much, if anything, your employer pays in how well your investments have performed what charges have been taken out of your pot by your pension provider. The fund is usually invested in stocks and shares, along with other investments, with the aim of growing the fund over the years before you retire. You can usually choose from a range of funds to invest in. But be aware that the value of investments might go up or down. When Member Retires: You don't have to stop work to begin taking money from your pension pot, but you must normally be at least age 55 (57 from 2028). When you start to take money, up to a quarter (25%) of your pension pot can be taken as a one-off tax-free lump sum. The rest can be used to provide a taxable income, or one or more taxable lump sums..

[Audio] Who all are involved in DC ? Participant Client Payroll Trust Investment Manager Daily Valuation Services You can C the Cycle of DC pension and who all are involved..

[Audio] What are different stages of DC plan cycle? Must be eligible to enroll Criteria may vary for each client Eligibility Contribution Managing Money Taking Money Retirement/ Termination Enrollment Lumpsum/ Partial Annuity Deferred Sign-up for contribution Make fund choices In-service withdrawals Loans Employee Contribution Employer Contribution Change investment fund Change contribution amount These are different stages of DC Plan Cycle. Please wait and understand the cycle before moving to the next slide..

[Audio] DB Vs DC Pension Plan/Scheme DC Investment Risk is on the Employee Employer promises specified contribution Mortality Risk is on the Employee Contribution is independent of the investment return Benefit is dependent on the investment return: Greater than expected increases the benefit Less than expected decreases the benefit DB Investment Risk is on the Employer Employer promises specified benefits Mortality Risk is on the Employer Benefit independent of the investment return Contribution is dependent on the investment return: Greater than expected reduces future contributions Less than expected increases future contributions Defined Benefit; Investment Risk is on the Employer Employer promises specified benefits Mortality Risk is on the Employer Benefit independent of the investment return Contribution is dependent on the investment return: Greater than expected reduces future contributions Less than expected increases future contributions Defined Contributions: Investment Risk is on the Employee Employer promises specified contribution Mortality Risk is on the Employee Contribution is independent of the investment return Benefit is dependent on the investment return: Greater than expected increases the benefit Less than expected decreases the benefit.

[Audio] Comparing DB Plans v. DC Plans Defined Benefit (DB) Advantage Defined Contribution (DC) Disadvantage Employee Risk Employer makes investment decisions and assumes risks Predictable benefits – pension at retirement is known Employee has investment options and assumes risks Benefit at retirement is unknown Ancillary Benefits Easily accommodated Cannot accommodate Employer Risk Uncertain and higher costs Costs are lower and simpler Employee Understanding Low: plan is frequently too complicated for most participants to understand, employer contributions are “hidden” High: easier to communicate idea of “account”, employer contributions are “visible” (but payout amounts, and options are cloudy) You can see the comparison of Defined Benefit and Defined Contributions. Please go through each point before moving to the next side.

[Audio] Comparing DB Plans v. DC Plans (cont’d) DB Plans DC Plans Investment/Annuity Purchase Risk Employer Employee Employer Costs Variable Known Benefit Amount Determinable Variable Member Communication Difficult Simpler Administration Complicated; Costly Simpler ; Less Expensive Past Service Benefits Easier to Provide Difficult to Provide Ancillary Benefits Common Difficult to Provide Inflation Protection Ad Hoc or Contractual Difficult to Provide Winners Older Employees Younger Employees Losers Mobile Employees Mid-Career Hires Fast Trackers Unfunded Liabilities Can Occur N/A Surplus Ownership Controversial N/A You can see the comparison of Defined Benefit and Defined Contributions. Please go through each point before moving to the next side.

[Audio] Pension Introduction – Examples of Clients at AON Here are a few clients at Aon.

[Audio] Offices administering ME - Pensions India – Bangalore & Gurugram Category A Category B Poland – Krakow Category C,D UK – Birmingham, Shefield Category C,D.

[Audio] Introduction – Pension Administration What is the work we do? At the Client level: We administer the defined benefit pension plans for many clients. This work encompasses: Many different types of calculations under different scenarios Data management Regular processing activities done, daily, monthly, quarterly, or annually Applying legislative and regulatory requirements Generating various member statements, packages and other communications for the members and the client And overall, ensuring for the client and the member that the plan is administered properly and that the pension benefit is calculated correctly. Legal Copy Helvetica Regular 8/9.6 Black At Aon : We administer the defined benefit pension plans for many clients. This work encompasses: Many different types of calculations under different scenarios Data management Regular processing activities done, daily, monthly, quarterly, or annually Applying legislative and regulatory requirements Generating various member statements, packages and other communications for the members and the client And overall, ensuring for the client and the member that the plan is administered properly and that the pension benefit is calculated correctly..

[Audio] Introduction – Pension Administration At the Individual level: We are directly responsible for calculating the pension benefit of a Plan Member: We rely on data provided to us by the client; We apply the plan’s formula to determine benefit amounts using actuarial assumptions; and Integrate with UK government Regulations and Rules For defined benefit pension plans, we are concerned with different types of service, earnings, and contributions as inputs to determine a member’s pension benefit. As a fixed-income earner, during their retired life, the Retired Members rely on the amount we calculate for their pension income from their employer. We are directly responsible for calculating the pension benefit of a Plan Member: We rely on data provided to us by the client; We apply the plan's formula to determine benefit amounts using actuarial assumptions; and Integrate with UK government Regulations and Rules For defined benefit pension plans, we are concerned with different types of service, earnings, and contributions as inputs to determine a member's pension benefit. As a fixed-income earner, during their retired life, the Retired Members rely on the amount we calculate for their pension income from their employer..

[Audio] How Aon help Here are some of the many services we offer: Actuarial valuations and scheme funding advice Scheme benefit design and liability management advice Training / education about the ever-changing regulatory environment Investment advice Asset-liability studies Cash flow modelling Governance and risk control Planning towards the long-term future Day-to-day administration of members’ benefits Assisting with communication exercises (scheme members, employees, etc) Advice on risk products like life insurance policies And of course we don’t just advise DB pension schemes, we provide Occupational DC scheme advice Advice on DC providers Advice to companies on executive pay and remuneration Advice to public sector pension schemes The services offered include actuarial valuations, scheme funding advice, benefit design, liability management, training on regulatory changes, investment advice, asset-liability studies, cash flow modeling, governance, risk control, long-term planning, and administration of member benefits. Additionally, assistance is provided for communication exercises and advice on risk products like life insurance. The services extend beyond defined benefit (DB) pension schemes to include occupational defined contribution (DC) scheme advice, advice on DC providers, executive pay, remuneration, and public sector pension schemes..

[Audio] Thank You!. 27. Legal Copy Helvetica Regular 8/9.6 Black.