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PENSION SCHEME NEWSLETTER 2017

Welcome to the 2017 edition ofthe Annual Newsletter formembers of the Petrofac PensionScheme.We have structured this year’s Newsletter slightlydifferently to reflect the many changes that havetaken place throughout the world, but also to givesome context to specific developments withinPetrofac, Munro Partnership Ltd and the world offinancial planning.

We hope that you find the usual reference pointsand annual updates helpful in addition to thereminders on the online options, services andsupport that are available.

David R Hughes FPFSChartered Financial PlannerManaging Director, Munro Partnership LtdPension advisers to Petrofac since 1989

• 2016 Update

• POM to PFM Restructure

• Investment Updates

• On-Going Service

• 1825

• Legislation Update

• Nomination Form

• Website Update

• Carry Forward Rules

• Inheritance Tax Planning

[email protected]

01292 269909

www.mypetrofacpension.co.uk

What’s inside the 2017 edition?

munro partnership ltdCHARTERED FINANCIAL PLANNERS

Financial advice that’s worth knowing

KEY LINKS

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2016 – The year the world changed directionIn 2016 we saw financial markets struggle to navigate through a series of shockwaves asa result of many high profile political events. The Brexit vote and the US PresidentialElection have presented more questions than answers at the time of writing.Looking at the UK, after the quick reshuffle within the Government following the Brexit vote, the new chancellor’s firstAutumn Statement didn't contain any major tax or pensions changes that have any immediate impact for you. Thismeans that you can plan for 2017 and the end of the tax year with confidence and clarity.

In light of the many months of uncertainty in the UK’s oil industry, companies have also restructured to try to keep ontrack and some employees will have noticed this change within Petrofac with the restructuring to Petrofac FacilitiesManagement (PFM).

There are a number of political events that will have the media’s attention over the course of 2017 and if 2016 wasanything to go by, it is hard to say how the world will look in 12 months’ time.

POM to PFM: Pension Consolidation OpportunityAs part of the restructuring from POM to PFM, some employees may have been enrolledinto a new pension policy and have two Petrofac pensions.We sent an email to let affected employees know and Standard Life emailed employees about the option to consolidatetheir two Petrofac pension schemes without cost on the 18th of January 2017.

The option to do this simply and without cost ended on the 15th of February 2017. However, you can go onlineanytime and elect to consolidate the plans without charge in the future – it will simply require some more informationon your part.






If you joined the pension scheme before April 2016

Your Default Fund is the Standard Life Multi-Asset Managed (20-60% Shares) FundThe majority of Petrofac pension scheme members invest in this fund.

The fund aims to provide long term growth whilst investing in a diversified portfolio of assets (including equities,bonds, property, cash deposits and money-market instruments) in order to reduce the risk associated with beingsolely invested in any one asset class. These assets can be from both the UK and overseas.

KEY FACTS

11.79%Fund performance in 2016

0.37%The fund’s Annual ManagementCharge

69.20%Fund performance over past 10 years

If you joined the pension scheme after April 2016

Your Default Fund is the Standard Life Active Plus III Strategic Lifestyle Fund.The new default fund is designed to reduce the risk of your pension fund gradually as you get closer to yourselected retirement age.

As a member of the pension scheme, you benefit from the same 0.63% discount onthe standard charges applicable to all investment funds

New employees since April 2016 will have been enrolled into this fund.

KEY FACTS

8.83%Fund performance in 2016

0.48%The fund’s Annual ManagementCharge

42.17%Fund performance over past 10 years

Investment Update: Do you know your investment fund options?In April 2016, the requirements for those being enrolled into a Workplace pensionscheme changed which resulted in a change to the pension scheme default fund




Reminder: OngoingService & SupportLast year we announced thatfollowing changes to legislation,Munro Partnership Ltd now providesa standard defined service tomembers of the pension scheme at adirect cost to Petrofac.

Petrofac has agreed to fund the costs ofproviding the following core pension services:

• Petrofac Pension Website

• Annual Newsletter

• Pension Seminars

• New Joiner Communications

• Approaching Retirement Communications

• Contribution & Investment Advice for New Joiners

Very few employees in the UK receive any kind ofPension Scheme support and even fewer getaccess to the above services without any cost tothe member at all. This demonstrates Petrofac’scontinued commitment to provide education andsupport to its Pension Scheme members.

A fee may be payable if you require individualadvice or assistance out with the above. Any feescan be deducted from your pension fund andyou will always be advised in writing before anyaction is taken.

Munro Partnership Ltd – Part of the 1825 GroupIn March 2016, an announcement wasmade that Munro Partnership Ltd werejoining the 1825 Group, the financialplanning arm of Standard Life.

What does this change mean?

We are still the same people and our clients will stillexperience the same high level of service they are usedto. On top of that, as part of 1825 we will benefit fromadditional technical expertise, knowledge and experiencewhich we can harness on behalf of our clients.

Both businesses are dedicated to doing the right thing forclients, and together we will be able to bring moreresources and investment into our business, andultimately provide a better service for our clients.

1825 is supported by Standard Life, which allows us toleverage the strength of a FTSE 100 organisation whilestill maintaining a personal approach to advice, deliveredat a local level.




Pension Tax Frameworksstill under reviewThe Government continues to a review of thepension tax framework on its agenda to ensure itremains fit for purpose, and sustainable, for achanging society.

Introduced in 2016Lifetime allowance is now £1 millionThe Lifetime Allowance (the maximum amount youcan save in pension arrangements and get tax relief)reduced from £1.25 million to £1 million from 6 April2016.

For anyone who had pension savings in excess of £1 million on the 5thof April 2016, there is an option to apply for Individual Protection 2016.

If you think you may be affected by this change, it is important to seekfinancial advice.

Tapered Annual Allowance for High Earners

The annual allowance determines how much you can save into apension and receive tax relief in a single year. The Governmentintroduced the tapered annual allowance from 6 April 2016 forindividuals with income (including the value of any pensioncontributions) of over £150,000 and who have an income (excludingpension contributions) in excess of £110,000.

The rate of reduction in the standard annual allowance of £40,000 is £1for every £2 that the adjusted income exceeds £150,000 up to amaximum reduction of £30,000 i.e. once total income reaches£210,000, the annual allowance reduces to £10,000.

Personal savings allowance

The ‘Personal Savings Allowance' was introduced in April 2016. Forbasic rate taxpayers, the first £1,000 of income from savings is tax free -a tax saving of up to £200 a year. Higher rate taxpayers can enjoy thesame tax saving from a reduced allowance of £500 (£500 x 40% =£200). There's no allowance for additional rate taxpayers.

And in another positive note, savers will have receive their interest fromdeposits gross, with no deduction of 20% tax at source by their bank orbuilding society.

New dividend allowance

The £5,000 annual dividend allowance was introduced in April 2016.Higher rate taxpayers could be better off by up to £1,250 this tax year(£1,530 for additional rate taxpayers) but some basic rate taxpayerscould be worse off by as much as £2,025. It was announced in theMarch 2017 Budget that this will reduce to £2,000 from April 2018.

Coming in April2017Here’s a reminder of what wealready knew was coming in2017/18 which you may needto consider:

IHT residence nil rate band.

From April 2017, you may be entitledto an extra £100k IHT nil rate bandwhere the family home passes to directdescendants on death (see page 7)

Lifetime ISA introduction.

Under 40s will have a new savingsoption which can help them to get afoothold on the property ladder. Up to£4,000 a year can be paid into theLifetime ISA and receive a 25%Government Bonus. First time housebuyers can access their fund tax freeprior to age 60.

£20k ISA Allowance.

The ISA savings allowance is set toreceive an above inflation increase.Savers will be able to enjoy anadditional £4,760 of tax free savings.

2017/18 income tax rates and bandsconfirmed.

The increase in the personal allowancein 2017/18 is confirmed as £11,500and the higher rate threshold will riseto £45,000. Increases are planned to£12,500 and £50,000 respectively by2020 (Different bands will apply inScotland as a result of devolvedpowers).

Why do I need to complete a nomination form?

One of the benefits that your pension provides you with is the ability for the funds held in your pension to be passed toothers after your death.

If you die before the age of 75, the funds can be passed on free of tax. If you die after you have reached 75, they willnormally be taxed at the recipients marginal rate.

Can I update my nomination if my circumstances change?

Yes – it is important that you consider your wishes and make changes as appropriate. You can obtain an up to datenomination form via the Petrofac pension website www.mypetrofacpension.co.uk or can complete this by logging intoyour pension online.

Can I nominate subsequent beneficiaries?

Yes – it is important to record alternative beneficiaries to cover the instance your main beneficiary predeceases you. For example:

“The main beneficiary in the event of my death is my wife _________, however in light of the new pension flexibilityrules and in particular, the changes to death benefits, I would like you to note on your records that in the event of eithermy wife pre-deceasing me or a joint calamity that _________ would replace my wife as my nominated beneficiaries.

Therefore, in the event of my wife predeceasing me or a joint calamity,I would ask you to allocate ____% to:

- List of nominations as applicable”

Will the nomination form have any impact onmy will?

Your pension assets are held in trust out withyour estate and most people try to reflecttheir preferences for their estate in theirnomination form. However, carefulplanning is often required to keepeverything up to date.

It’s extremely important to have yourwishes recorded with your pensionpolicy as doing so means that in theevent that something was to happento you, the pension scheme can paythe funds from the pension to yourfamily typically within 10 workingdays.

Naturally it makes sense to keep yourwill and legal matters under review tocater for changing circumstances.

The key to financial planning is not just tohave a plan, but to also protect the plan thatyou have.


Providing security for your familyUpdate your Death Benefit Nomination FormWhen you first joined the pension scheme, you had the option to complete a nominationfor the death benefits from for your pension plan. It is now more important than ever tohave a list of your named beneficiaries on file.






Pension ‘Carry Forward’Rules: a reminderThe maximum most savers cancontribute to their pension in a tax-efficient way is limited to £40,000 pertax year. However, you may be ableto invest a larger amount before theend of the tax year by ‘carryingforward’ unused allowances fromprevious years. Are there any carry forward rules I need to beaware of?

You can potentially ‘carry forward’ any unusedannual allowances from previous tax years. Inaddition, the 2016 Budget created a ‘double taxyear’ opportunity where some individuals mayhave been able to tax-efficiently contribute up to£80,000 to their pensions for the tax year.

You can only carry forward any unused allowancefrom a previous year if you meet the conditionslisted below. Please also note that if you havealready started accessing your pension andtherefore subject to what is called the moneypurchase annual allowance (MPAA), carry forwardmay not be available to you.

1. You must have paid in the maximum amount toyour pension(s)* in the current tax year (thisbegins on 6 April 2016 and runs through to 5April 2017).

2. You must earn at least the amount you wish toinvest in the tax year you are making theinvestment (so if you want to make totalcontributions of £100,000 in 2016/17, youmust earn at least £100,000 in this tax year).This would not apply if your employer is makingthe contribution on your behalf.

3. You must have been a member of a UK-registered pension scheme (this does notinclude the State Pension) in each of the taxyears from which you wish to carry forward anallowance (you do not need to have paid anymoney in).

4. You must use any unused allowance from theearliest year first (you can only go back three taxyears).

*Pensions being all the pensions you have andremember to include any benefits accrued in anactive final salary scheme – your provider can giveyou details. Bear in mind that contributionspaid by a third party or an employer alsocount towards your annual allowance.

Inheritance Tax Planning - The Residence Nil Rate BandThe new Inheritance Tax (IHT) Residence Nil RateBand (RNRB) will be introduced in April 2017. It isin addition to an individual's own nil rate band of£325,000, and conditional on the main residencebeing passed down to direct descendants (e.g.children, grandchildren). By 2020/21 families could escape IHT on up to £1 million of theirwealth. Each parent will have a nil-rate band of £325,000 plus aRNRB of up to £175,000.

How much will it be? The RNRB will be introduced from April2017 and will be phased in over 4 years, with the full £175,000allowance available from April 2020.

Who can benefit? The RNRB is only available where the mainresidence passes to children (including adopted, foster or stepchildren) or linear descendants on death. However, the rules havebeen extended to accommodate situations where the family homepasses into the joint names of the deceased's child and theirspouse.

What about downsizing? The family home doesn't need to beowned at death to qualify. This is of help to those who may havedownsized or sold their property to move into residential care or arelative's home.

The RNRB will still be available provided that:

• The property disposed of was owned by the individual and itwould have qualified for the RNRB had the individual retained it;

• The replacement property and/or assets form part of the estateand pass to descendants.

Downsizing or the disposal of the property has to take place after8 July 2015. But there is no time limit on the period between thedisposal and when death occurs.

Multiple Residences. Only one residential property will qualify. Itwill be down to the personal representatives to nominate whichresidential property should qualify if there is more than one in theestate.

A property which was never a residence of the deceased, such asbuy-to-lets, cannot be nominated.

Basic IHT threshold frozen. While people may be getting someadditional nil rate band to set against the family home, the basicIHT nil rate band will be frozen at £325,000 until the end of2020/21 tax year.

Maximum residence nil rate band

2017-18 £100,000

2018-19 £125,000

2019-20 £150,000

2020-21 £175,000

cont.......

Please note that theseare the maximumamounts. The availableallowance will bereduced if the value ofthe property is less thanthis

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Munro Partnership Ltd is a leading firm of Chartered Financial Planners with a highly qualified team of consultants and staff. The ongoing development of our services and systems are geared towards creating quality advice and service for individual clients. The Company wasestablished in 1982 and has offices in Ayrshire, Lanarkshire and Glasgow. Munro Partnership Ltd is regulated by the Financial Conduct Authority.


234 West George Street, Glasgow G2 4QY T 0141 248 5921E [email protected]

Citadel House, 6 Citadel Place, Ayr KA7 1JNT 01292 269909E [email protected]

50 Orchard Street, Hamilton ML3 6PBT 01698 429333 E [email protected]



Chairman’s StatementWhen people think about their finances, plans and objectives, generally they consider theirproperty as their biggest financial asset. However, through a combination of contributionsand strong investment growth (like we have seen in 2016), your pension can very quicklybuild up to become a significant personal asset.The most important asset that we all have is time and, equally, from a financial point of view, there is no doubt that thebiggest assets that we have (and often forget) is our health and ability to earn an income.

We live in a world with so much information and newspaper headlines that often our priorities can be clouded by thelatest and loudest events. At such times, it is worth remembering that today’s news will not be the sole, and probablynot even the most important, determinant of our world over the coming few years. The most important focus is to thinkabout your goals and priorities in an ever-changing world. Take time to reflect, retune and focus on your health, familyand essential finances is key to moving forward.

Options upon leavingemployment• Leave your pension fund unchanged,held in your own name with StandardLife. You can continue to receive advicefrom Munro Partnership Ltd if requested.

• You can continue to pay contributions toyour plan, as can your new employer

• You can transfer your fund to your newemployer’s scheme or to an alternativeprovider (assuming it is in your bestinterest to do so)

The good news is that even uponleaving service you retain the discountof 0.63% on your pension fund. Thereare no additional charges or fees forany of the above.

Tax Relief on Pension ContributionsYou receive 20% tax relief at source on your pension contributions e.g. for every £100 employee contribution, £80 is deducted from your net pay. The remaining £20 is added to your contribution by Standard Life, whothen claim it back from HMRC. The best way to remember this is the netcontribution is deducted from your net pay (after tax and NationalInsurance).

For higher or additional rate taxpayers, you are entitled to claim higher oradditional rate tax relief via your self-assessment form or by writing toHMRC.

Tax Benefits from the Pension SchemeAll investment growth within your pension fund is free from Capital Gains Tax.

At retirement (from age 55), you can access up to 25% of your fund as atax free lump sum

cont....... When combined with the full RNRB of £175,000 in 2020/21 this would provide a married couple with the

promised £1M nil rate band.For example, a father dies in 2020/21 and his will gifts his 50% share in the family home to his children. If this share isvalued at £140,000, the extra £35,000 of nil rate band will go unused (but may be transferred to his widow).

When the RNRB can be transferred? The Residence Nil Rate Band will be transferable between spouses and civilpartners on death, much like the standard nil rate band. It is the unused percentage of the RNRB from the estate of thefirst to die which can be claimed on the second death.

This is irrespective of when the first death occurred or whether they owned residential property at their death. There willalways be an additional 100% RNRB unless the first spouse's estate was greater than £2million.

Tapering the residence nil rate band. Those with large estates may not see any benefit from the extra nil rate band. The residence nil rate band will be reduced by £1 for every £2 that the deceased's net estate exceeds £2 million.

This will mean that on its introduction there will be no RNRB available if the deceased holds assets of more than £2.2 million. This will rise to assets of £2.35 million in 2021/22 when the full £175,000 allowance kicks in.

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