•   Taking a portion of their savings (typically 25%) as  a tax-free one-off payment

•   Withdrawing their remaining savings in stages (after the tax-free payment is taken) to provide a regular income that will be taxed at their personal tax rate

•   Withdrawing their remaining savings as a one-off payment that will be taxed at their personal tax rate

•   Withdrawing a specific amount from their savings.  A quarter of this sum will be tax free, with the remainder taxed at their personal tax rate

•   Converting some or all of their savings into an annuity that will provide a regular income payment and will be taxed at their personal tax rate

•   A combination of the above

•   Taking small pot amounts as a cash lump sum, with  a quarter of this amount being tax free

new options for U.K. Retirement Participants

Update for HR/Benefits Directors at multinational corporations

U.K.–U.S. Benefits translator

*Please note, these new retirement flexibilities are effectively optional – schemes can offer all, some, or even none of the new options.

The pension freedoms that came into effect in April 2015 have given participants in U.K. Defined Contribution (DC) schemes more options in how they take their retirement income.* Here is a quick overview of the key changes and their implications for those who have reached the minimum pension age (currently 55):

U.K. WORD/PHRASE U.S. EQUIVALENT

Pension income Retirement income.

Pension scheme Pension or retirement plan.

Plan member Retirement plan participant.

DC Occupational Trust plan Set up by a sponsoring employer under trust with a board of trustees which is independent from the employer. Similar to a 401(k).

Group personal pension plan Set up by a sponsoring employer who contributes to the plan. Policy is held in the name of the individual employee. Similar to a 401(k).

Stakeholder plan Set up by a sponsoring employer who contributes to the plan. Policy is held in the name of the individual employee. Charges are capped.

Self-invested personal pension plan (SIPP) Set up as an individual account with no plan sponsor. Similar to an IRA.

Flexi-access drawdown Ability to take pension benefits without buying an annuity.

Uncrystallised Funds Pension Lump Sum (UFPLS)

Ability to take single individual lump sums directly from their pension plan. 25% of any amount taken is tax free cash and the rest is taxed as income.  This can be done multiple times.

2

five Key changes in U.K. Pension Schemes – and How they may affect employers and employees WHAT HAS CHANGED? WHAT DOES THIS MEAN?

1. There is no longer a requirement to secure a retirement income. Anyone over the age of 55 can take as much as they want from their retirement savings, when they want it.

•   Normally a participant will only be able to take 25% of their total retirement savings as a tax-free lump sum. If they do take tax-free cash in this way, they must either buy an annuity with the remaining funds or designate the savings for drawdown (known as “flexi-access drawdown”). They can then take income payments from this pot and the income would be taxed at their personal rate.

2. There is more scope to pass retirement savings on to loved ones.

•  For participants who die before the age of 75:

– Beneficiaries can inherit a lump sum tax free or receive the money through drawdown tax free

– Alternatively, a spouse or dependent can use the money to buy a tax-free lifetime annuity

•  For participants who die after the age of 75:

  –  Beneficiaries can inherit a lump sum taxed at 45% (for deaths on  or after April 6, 2016, lump sum death benefits tax will be at the recipient’s marginal rate) or a drawdown income taxed at their personal rate

– Alternatively, a spouse or dependent can use the money to buy a lifetime annuity taxed at their personal rate

Please note, there are specific cases where tax may be due such as when the Lifetime Allowance is exceeded (see page 4).

3. Lump sums can be taken without having to do anything with the remaining retirement savings.

•   A participant may be able to take a lump sum from their retirement savings without entering into a drawdown arrangement. This is known as an “Uncrystallised Funds Pension Lump Sum.”

•   25% of any amount taken will be tax free and the remainder will be taxed at their personal rate. The more they take, the more tax they will pay.

4. There is a new annual allowance for anyone taking an income from their retirement savings and continuing to make contributions.

•   If a participant decides to take a payment using flexi-access drawdown  or an Uncrystallised Funds Pension Lump Sum, their annual allowance for any new DC pension contributions will reduce to £10,000.

5. The minimum age for taking small pot amounts has dropped from 60 to 55, though other rules remain the same.

•   Participants with pension savings plans that are valued at less than £10,000 can take the whole amount as cash, with 25% paid tax-free  and the remainder taxed at the basic rate.

•   For personal and stakeholder plans, participants are able to do this with up to three separate pension accounts.

•   Different, more complex, rules apply if small pots are taken from an occupational DC scheme.

3

fidelity worldwide investment

Established more than 45 years ago, with the opening of offices in Bermuda

and Tokyo in 1969, Fidelity Worldwide Investment is an independent and

trusted global leader in investment management. Since opening the London

office in 1973, the firm has created a global network of offices across Europe

and Asia Pacific, as well as India, the Middle East and Latin America. Today,

it employs over 6,700 people and operates in 25 countries and territories

around the world.

Fidelity’s retirement savings solutions for the workplace Fidelity’s Defined

Contribution (DC) business was launched in 1994 and offers retirement

savings solutions for the workplace in the U.K. These include employee

pension plans as well as a Retirement Service for when plan members

choose to access their retirement savings. Through their pension plan,

members have access and can invest their monthly contributions in a choice

of investment funds offered through Fidelity’s DC fund platform.

“the success of the new pension scheme freedoms hinges not just on enabling people to access their pension savings or offering new products, but on the ability of the industry to engage with their customers and help them make the right, informed choices on their options.”

Julian Webb

Global head of DC and Workplace Savings

Fidelity Worldwide Investment

foR moRe infoRmATion, conTAcT YouR fideLiTY RepResenTATive.

ABOUT FIDELITY WORLDWIDE INVESTMENT

•  Established in 1969. 

•  Employs over 400 investment professionals located in major financial centers around the world. 

•  Over £184 billion ($290 billion) assets under management, as of June 30, 2015.

•   Invests and administers employees’ pension assets for over 850 companies which include pension funds, life insurers, endowment funds, family offices, and sovereign wealth funds.

•   Serves millions of retail clients and intermediaries such as banks, financial advisers, and insurance companies  (i.e., advised direct investors).

ABOUT THE UK DC BUSINESS

•  Established in 1994.

•  Administers over 405,000 member accounts.

•  £21.9 billion ($34.4 billion) assets under management, as of June 30, 2015. 

•   Supports more than 450 corporate clients.

Data as of June 30, 2015.

Fidelity does not provide legal or tax advice. The information herein is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact investment results. Fidelity cannot guarantee that the information herein is accurate, complete, or timely. Fidelity makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Consult an attorney or tax professional regarding your specific situation.

Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917

© 2015 FMR LLC. All rights reserved. 727421.1.0

Lifetime aLLowance

The lifetime allowance (LTA) is the amount of tax-privileged pension savings you can build up over your lifetime (excluding your state pension). You can build up pension benefits above the LTA. However, you will generally be liable to pay a tax charge on the excess when you start taking pension benefits. The LTA is currently set at £1,25million but will be reduced to £1million in April 2016.

ResouRces foR ReTiRemenT pLAn pARTicipAnTsAll participants can access the U.K. Government’s free and impartial Pension Wise guidance service, which is designed to help them understand their pension options and is available online (https://www.pensionwise.gov.uk/), over the phone, or in person. Fidelity Worldwide Investment offers a range of services to U.K. residents, including financial advice and helping people make the most of their retirement savings. These services are not available outside the United Kingdom.