OMERS Pension Guide

Guide to Your Workplace Pension

References to OMERS throughout this Guide include the following employers: • OMERS Private Equity Europe Ltd (TK06630) • Oxford Properties Management UK Ltd (TK066813) • OMERS Infrastructure Europe Ltd (TK066831) • OMERS Europe Limited (formerly OMERS Capital Markets, TK576996) • OMERS Admin Corporation (TK070176)

Contents

Page

OMERS Workplace Pension Plan Overview (incl. Provider Details) Contributions Investment

5 7 8 9

Retirement Benefits Other Information Member Instruction Form

10 12

Salary Exchange & STIP Allocation (Bonus Exchange) Salary Exchange STIP Allocation (Bonus Exchange)

14 19

Tapered Annual Allowance Overview OMERS Cash in Lieu Allowance

25

Overview and Examples Lifetime Allowance Overview

28

34

OMERS Cash in Lieu Allowance Rules, Important Notes and Application Employee Forms

35 36

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This Guide is intended to provide an overview of the OMERS Workplace Pension and aims to answer some of the most asked questions. If you require further information on any aspect, the Guide directs you accordingly.

The Guide has been prepared by our Pension Advisers, James Murray Associates (JMA). Contact details for JMA are shown below.

For Servicing:

Angela Garcia corporate@jmurray.co.uk

For Advisory:

Nick Young nyoung@jmurray.co.uk

David Keary davidk@jmurray.co.uk

Contact No: 0208 6423680

Anyone who requires personal advice is welcome to contact JMA and discuss options. Before engagement, JMA will confirm the cost involved – fees incurred are payable by employees personally.

Important Notes

When considering the information contained in this guide:

1. The information is based on current UK Tax and UK Pensions legislation. HMRC can change this at any time in the future. 2. Whilst every effort has been made to ensure the accuracy of the information provided, it is for guidance only. It does not in itself confer any right or privilege. 3. OMERS reserve the right to change benefits at any time. 4. The information should not be construed as advice and you must decide if the Plan is suitable, affordable and meets your personal objectives. If you have any doubts as to whether the Plan meets your requirements, you should seek individual advice (any costs incurred would be payable by you personally).

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The OMERS Workplace Pension Plan

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Overview

What is this Plan?

It is a Group Personal Pension Plan.

This is a long-term savings arrangement that allows you to build wealth in a highly tax efficient manner. The objective is to accumulate as large a fund as possible by the time you retire. When you reach retirement age (currently, the earliest age is 55 but this rises to age 57 from 2028), you have a wide range of options and flexibility in terms of how you withdraw benefits. Please note that although the Pension provider is fully involved, the Pension is entirely owned by you personally. You decide how the value is invested (although there is a default fund). You decide when benefits are withdrawn (currently, at any age from age 55 onwards, rising to 57 from 2028) and you decide how benefits are withdrawn. We believe that this is exactly how it should be – maximum member flexibility. OMERS main ongoing involvement is restricted to paying a regular matching company contribution towards your Pension.

What are the Tax advantages?

There are three significant tax advantages:

Tax Relief on Contributions

➢ Personal contributions attract full income tax relief at your marginal rate. ➢ With the Salary Exchange option, personal National Insurance savings will also be enjoyed. ➢ In addition, the OMERS ‘boost’ to Salary and STIP Allocation Exchange related contributions further (and significantly) enhances the relief available.

Tax Free Growth

➢ Any investment growth achieved within the Pension is tax free (excluding any local withholding taxes on any overseas assets). Over the longer investment terms typically associated with Pensions, this is genuinely meaningful.

Tax Free Cash Lump Sum at Retirement

➢ When you decide to withdraw benefits, 25% of the accumulated value can be withdrawn tax free (up to a maximum tax free lump sum of £268,275).

It is these tax ‘breaks’ that give Pensions compelling advantages over any other form of mainstream investment.

Who provides the Workplace Pension Plan?

Aviva is the current provider.

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Why has Aviva been appointed as the provider?

Aviva are a high-quality provider and offer the key ingredients to any successful Workplace Pension arrangement:

➢ Low Charges – The only charge imposed by Aviva is the annual management charge of just 0.24% of the value of your fund (assuming the use of the Plan default fund*). These are highly competitive terms. ➢ A wide range of investment options. There is a large range of investment options, in addition to the Plan default fund. Members are free to switch between the range of funds. ➢ Financial Strength – Aviva are one of the largest Pension providers available in the UK . ➢ Online Functionality – Members have full online access to their plan details (values, transactions, plan information). Fund switches and beneficiary nominations can also be instructed online. For details of how to register for online access with Aviva, please click here. ➢ For the Key Features of the Aviva plan, please click here.

* Some of the other investment options available carry higher fund management charges.

When will membership start?

From April 2024 onwards, new members of staff on UK payroll (this includes staff on short term contracts) will be contractually enrolled into the Plan on the first day of your first full month’s employment.

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Contributions

What are the contribution rates?

New joiners will be contractually enrolled on the following default contribution basis:

➢ Personal Contribution – 5% of your Basic Pensionable Salary. ➢ OMERS Matching Contribution – 5% of your Basic Pensionable Salary.

Basic Pensionable Salary is defined as your full basic salary excluding any bonuses, commissions or any other agreed remuneration .

Key Advantage No 1 - OMERS will match Personal Contributions up to a maximum of 10% of Basic Pensionable Salary. This is a huge benefit for those where finances allow a higher personal contribution: ➢ If you choose to pay 6% of Basic Pensionable Salary, OMERS will pay 6%. ➢ If you choose to pay 7% of Basic Pensionable Salary, OMERS will pay 7%. ➢ If you choose to pay 8% of Basic Pensionable Salary, OMERS will pay 8%. ➢ If you choose to pay 9% of Basic Pensionable Salary, OMERS will pay 9%. ➢ If you choose to pay 10% of Basic Pensionable Salary, OMERS will pay 10%. ➢ If you choose to pay 11% (or more) of Basic Pensionable Salary, OMERS will pay 10% (the maximum match).

* Please note that the OMERS company contributions are subject to a cap of 50% of the prevailing HMRC Annual Contribution Allowance. This equates to £30,000 per year at present.

Key Advantage No 2 – OMERS operate the highly tax efficient ‘Salary Exchange’ method for the payment of your personal contributions. For full details, please refer to the Salary Exchange section of this Guide. But in short, increased tax savings are achieved, along with a generous OMERS boost of 15% to your Personal Contribution rate:

➢ If you elect to pay 5%, the actual amount invested will be 5.75%. ➢ If you elect to pay 10%, the actual amount invested will be 11.50%.

Clearly, the more you pay personally, the more benefit you will see from these two key advantages. All members should consider these aspects very carefully and set their contributions accordingly (taking into account your overall circumstances).

Can I pay additional personal contributions?

Yes, it makes very good sense to pay the maximum you can afford in excess of the minimum 5% rate. Clearly, the ‘OMERS matching’ aspect is highly attractive. But members should not stop at 10% - the efficiency of the Salary Exchange (with the generous OMERS ‘boost’) is compelling in many instances. Contributions can be paid up to the HMRC maximum Annual Allowance. This is up to 100% of salary with a cap of £60,000 per year (company contributions from OMERS count towards this allowance). HMRC place further limits on how much you can pay into your pension if your total annual earnings (from all sources) exceed £260,000. Please refer to the Tapered Annual Allowance section if you think you may be affected.

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Investment

What is the ‘Default’ Investment fund?

➢ The ‘default’ investment option is the Aviva Future Focus Drawdown Life Stage Approach. All contributions will be invested in this fund unless you instruct otherwise. For full details of the default fund, please click here. ➢ The ‘Life Stage’ part of this fund means that during the initial investment period, a growth based investment strategy applies (higher equity exposure). A ‘de-risking’ approach automatically starts 15 years from reaching your retirement age (the default retirement age of the Plan is 65). The objective is to gradually reduce equity exposure (and thereby, risk) in the period leading up to retirement. ➢ This default approach assumes that Income Drawdown will be used as the eventual method of pension withdrawal. Based on the profile of the OMERS workforce, this is considered most likely. However, it may not be right for everyone and therefore, you should consider changing to one of the other ‘Life Stage’ options if you think it more appropriate to your circumstances (please see the default fund guide for details). ➢ Likewise, age 65 has been selected as the default retirement age. This is relevant in terms of when the ‘de-risking’ process starts – one wouldn’t want this to be too early, or too late. If you wish to change your own specified retirement age, you can (please see the later ‘Member Instruction Form’ section).

What are the other Investment options?

There is a range of alternative options available with Aviva. For full details of the alternative funds, please click here.

How do I switch Investment funds?

If you wish to switch out of the default fund and choose your own investment funds, you will first of all need to register for full online access with Aviva. You will then be able to submit your instructions online. Please remember that you will be able to switch existing fund values, future contributions – or both. Please be careful to select the correct option so that you achieve what you want to do. To register for online access with Aviva, please click here.

Please remember that the value of the investment can fall as well as rise. You are not guaranteed to get back the full value of the overall investment.

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Retirement Benefits

When can I withdraw benefits?

The normal retirement age for the plan is 65 but benefits can be taken at any time from age 55. This minimum retirement age changes to 57 from 2028 with the Government’s intention to eventually link it to 10 years below the prevailing State Pension Age.

What are the benefits at retirement?

➢ The overall aim is to accumulate as large a pension fund as possible throughout your working lifetime. ➢ When you eventually retire, 25% of your accumulated fund value can be withdrawn as a tax free lump sum (up to a maximum tax free lump sum of £268,275). ➢ The remaining 75% is used to provide you with an income (which will be subject to income tax). ➢ Various income options are available to you – Income Drawdown and Annuity to name just two. Anyone nearing retirement should seek advice to establish what is most suitable based on the specific needs and circumstances.

What happens in the event of death before retirement?

➢ In the majority of cases, the full value of the Aviva Pension fund will be payable to your beneficiaries as a tax-free lump sum. ➢ However, please note that only the first £1,073,100 of any lump sum payable from Pensions is tax free – any excess will be taxed at your beneficiaries’ marginal rates of income tax. Any lump sums previously withdrawn from Pensions (along with any ‘Registered’ Group Life benefits) count towards this £1,073,100. ➢ It is absolutely essential for all members to complete a Nomination form with Aviva. This is the only way you can ensure that your chosen beneficiaries receive the value. ➢ This can be done online with Aviva – and we urge all members to do so. ➢ Nominations can be updated online at any time with the latest Nomination automatically superseding any previous instructions.

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Other Information

Does membership affect my State Pension?

The State Pension is not affected by membership of the OMERS Workplace Pension Plan. The plan benefits are payable in addition to the State Pension.

Can I ‘opt out’ of the Workplace Pension?

➢ Yes, although you will miss out on valuable Pension contributions from OMERS if you do. ➢ Existing members of the Pension Plan will not receive a ‘Cancellation Notice’ although it is possible to request to leave the Pension. However, any contributions previously paid must remain within your Pension (they cannot be refunded). ➢ For new joiners, you will receive a ‘Cancellation Notice’ from Aviva shortly after first being contractually enrolled. This statutory notice will explain your rights. You will be given a 30-day period in which to ‘cancel’ your membership and receive a refund of any personal contribution already deducted from your pay. ➢ In the event of leaving the Pension Plan, legislation requires OMERS to reassess you broadly every three years and where applicable, to automatically re-enrol you back into the Pension Plan.

What happens if I take Maternity, Paternity or Adoption Leave?

Please refer to the relevant part of the Salary Exchange section of this Guide for full information.

What happens to my Pension contributions if I have to take medical leave?

➢ If you fall ill, and are unable to work, you may not be able to afford to continue to make Pension contributions. This could have a significant effect on the value of your future retirement benefits, but dependent on the contract of employment you have in place. ➢ During your absence, your employer continues to pay you when you are ill, they will also continue to pay their contributions into your Pension. They will also deduct your own contributions from your pay and pay these into the Pension. However, if pay reduces, or they stop paying you, after a certain amount of time, then the amounts paid into your Pension will reduce, or stop accordingly.

What happens if I am on a Group Income Protection claim?

➢ If you are on a Group Income Protection claim through your insurer, you should continue to make your own contributions for the duration of the claim, based on your actual earnings from the Insurer, as long as you wish to remain a member of the Workplace Pension Plan. ➢ Your Employer will match those contributions as it is contractually obliged to do. Your insured benefit will be paid to you through payroll in the usual way, so this will be done automatically. ➢ Pension contributions are not insured through the Group Income Protection scheme.

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What happens if I leave service?

It is important to remember that the Plan belongs to you. In the event of leaving service, any of the following options could apply:

➢ You can continue your Plan in full or at a reduced contribution level. ➢ You can stop all contributions – with the plan value remaining fully invested. ➢ A transfer value can be paid to any other approved pension arrangement. ➢ There are NO penalties for stopping contributions or for moving the Plan to another arrangement in the future.

Please note that contributions cannot be refunded to you on leaving service.

Can I switch the value of other existing Pensions to this Plan?

Yes - and it often makes good sense to consolidate pension arrangements. However, each existing plan should be carefully reviewed before making any final decisions. You should take advice before considering any pension transfer.

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Member Instruction Form

➢ If you wish to instruct any of the following, you will need to complete an onscreen fillable form:

1. Increase your personal contributions above the default 5% rate (remembering that OMERS match any contribution up to 10%). This only applies to new joiners. Existing members can only change salary exchange rates at the Salary Exchange review window in March.

2. Change the default retirement age of 65.

3. Opt-out of Salary Exchange (and switch to the commonly less efficient ‘net pay’ method of contribution).

➢ Please click here to instruct any of the above.

➢ If you think that you may be affected by the Tapered Annual Allowance (TAA), please ensure that you carefully read the later section specifically on the subject. Please remember that you need to personally take control of this issue if you are impacted. ➢ You should register for full online access as soon as you are invited to do so by Aviva. You will be able to monitor Plan valuations, view contribution histories and switch funds (if you wish to move away from the default fund). You can also complete your Nomination form online. Please click here for details of how to register.

Who do I contact for further information?

The Corporate Team at JMA corporate@jmurray.co.uk

Phone : 020 8642 3680

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OMERS Salary and STIP Allocation (Bonus) Exchange

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Salary Exchange

Salary Exchange (sometimes known as Salary Sacrifice) is quite simply the most tax efficient way to pay your personal contributions towards the OMERS Workplace Pension.

What is Salary Exchange and how does it work?

Salary Exchange is simply a different, more tax efficient way of paying personal pension contributions. Instead of paying your contributions from net salary (the conventional method), your salary is reduced by the amount of your gross pension contribution. This amount is then paid into your pension as an additional company contribution (the ‘exchange’).

This results in the following benefits:

1. You pay less National Insurance personally and consequently, your monthly take home pay increases. 2. If you are a higher (or additional) rate tax-payer, you will see immediate tax relief at the full rate (no requirement to separately claim back the additional relief owed – easing your personal administration). 3. Most notably, you will receive a particularly generous OMERS ‘boost’ to your personal contribution rate. This is currently 15% (but may change in future based on any legislation amendments).

The higher the level of contribution you choose to make using Salary Exchange, the greater the savings become.

Why does OMERS offer Salary Exchange?

OMERS is absolutely committed to offering employees a market leading pension Plan. Salary Exchange is an efficient way of enhancing personal pension contributions.

How can I calculate my own contributions and tax savings?

A Salary Exchange calculator is provided for your use. This is available on the People Portal or by contacting JMA.

Do I have to pay my Pension Contributions using Salary Exchange?

The default option is Salary Exchange – this will apply in the absence of any other instructions. However, you can switch to the conventional method if you so wish. If you do so, you will miss out on the hugely valuable savings (and have the responsibility to reclaim higher rate tax relief if it applies to you).

Who is eligible to make Salary Exchange contributions?

You are eligible to make Salary Exchange contributions – if your post-exchange salary is greater than the prevailing National Minimum Wage.

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In addition, there is absolutely no advantage in reducing actual pay below the Tax-Free Personal Allowance. If earnings do reduce below this level, zero tax relief may apply.

How much can I contribute via Salary Exchange?

You can exchange as much as you wish, if the total Pension contributions are within HMRC limits, and your remaining salary is above the National Minimum Wage.

What will be shown on my payslip because of making Salary Exchange contributions?

Your payslip will show your full, pre-exchange Salary. It will also show the deduction for Salary Exchange, the reduced amount of tax and NI payable and your take home pay.

What are the tax implications for higher-rate taxpayers?

With conventional Personal contributions, to obtain the full amount of higher-rate tax relief (the difference between the basic rate and higher-rate of tax) on your contributions, you are required to complete a tax return or to submit a claim direct to HMRC.

With Salary Exchange contributions, you are not required to do this as you will immediately receive the full amount of tax relief due via your payroll.

Please note that if your tax code has previously been adjusted to credit higher rate tax relief linked to conventional Pension contributions, you should contact HMRC to advise that personal contributions are to stop.

Can I participate if I’m in the Cash in Lieu Arrangement?

Yes – but please be extra careful to check your accurate TAA position. The very fact that you are a Cash in Lieu participant means that you are impacted by the TAA to a meaningful degree. But if there is some spare contribution allowance that you wish to utilise, the Salary Exchange arrangement could be an ideal way to do so. Please also remember to factor in the OMERS enhancement in any calculations. For example, if you wish to see exactly £10,000 invested in the Pension, you will need to allow for the OMERS ‘boost’ to reach this target.

Will making payments using Salary Exchange represent a change to my terms and conditions?

Yes. This is because your contractual pay is reduced by an equivalent amount to the Pension contributions you wish to exchange.

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Will other salary related benefits be based on my reduced pay following Salary Exchange?

The benefits you receive as part of your package will be unaffected. However, the way they are calculated may change. Benefits which are non-pensionable such as Group Life and discretionary bonuses will continue to be based on your pre-Salary Exchange pay. Your pre-Salary Exchange pay will also continue to be used to calculate any pay increases.

To avoid a ‘double counting’ effect, items which are pensionable such as maternity, paternity, and adoption leave will be based on your post Salary Exchange salary.

Will my State Pension be reduced if I make Salary Exchange contributions?

Since April 2016 the State Pension has been calculated on a single, flat rate basis for all. Consequently, Salary Exchange should have no impact for anyone using this process.

Will other state benefits be reduced because of making Salary Exchange contributions?

As you will not be eligible to make Salary Exchange contributions if this would reduce your pay to less than the prevailing National Minimum Wage, we do not believe there will be any negative impact on other state benefits. In fact, as your earnings before tax and NI will be lower, you will be more likely to qualify for some state benefits and the value of your state benefits could actually increase.

What happens if I’m on maternity, paternity, or adoption leave?

If you take parental leave, you remain a member of the Pension and contributions continue (unless you decide to stop contributing).

The calculation of parental pay will be based on your reduced, post Salary Exchange salary. However, your Salary Exchange contributions will continue to be paid in full (at your pre-parental leave rate) by OMERS throughout the period of paid leave (unless you choose to stop participating in Salary Exchange before or during your parental leave).

If you decide to take a period of unpaid parental leave, Salary Exchange will stop – but so will the employer contributions.

As my pay is reduced because of making Salary Exchange contributions, will this affect the amount of mortgage or loan I could receive?

Not normally - but it depends on your lender. Reference letters provided by your employer for mortgage or loan purposes will refer to your pay before any adjustments to reflect Salary Exchange contributions. Historically, most lenders have been happy with this.

To request for a Reference letter, open a Workday case (select case type: A&S – Employment & Travel Letter Requests ).

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Will paying Salary Exchange contributions affect my student loan repayments as they are based on my earnings?

Yes. The amount you are required to pay in student loans may be lower as it is based on your pay after the Salary Exchange contribution reduction. If you pay off your loan at a reduced rate, you will end up paying it back over a longer period, so it may cost you more in interest.

How often can I change my level of Salary Exchange contributions?

➢ The main Salary Exchange review will take place each March - during which time you will typically have a 2-week period to notify of any changes you wish to make. ➢ Any change instructed will be effective from the following month (April) onwards. ➢ Employees will receive clear information each March, confirming the process for those that wish to change their rate of Salary Exchange. In the absence of any employee instruction before the specified deadline, existing rates of Salary Exchange will continue for the following year. ➢ You can also make changes in the event of a ‘lifestyle change’ such as buying a new home, marriage/civil partnership, childbirth/adoption, divorce, promotion or significant changes to working hours. ➢ In addition, one ‘ad hoc’ change per year will also be permitted. This is to assist those who may need to make a change mid year. Please note the ad hoc change allows for an increase or decrease (to no lower than the minimum member contribution rate). Stopping Salary Exchange altogether can only be instructed at the main Review date in March.

What happens to my contributions in the event of a salary increase/decrease?

The amount you contribute is based on a percentage of salary chosen by you. This percentage will not change unless you instruct a change (as outlined above). Contributions will therefore increase or decrease automatically in line with your new salary.

I’m a new employee - what do I need to do to instruct Salary Exchange?

For brand new employees, the 5% default rate is contractual – by signing your contract of employment, you are accepting Salary Exchange at this default rate. If you are happy with this, there is nothing more that you need to do.

To increase the rate of Salary Exchange beyond the default 5%, please refer to the previous ‘Member Instruction Form’ section and return your form.

The increased Salary Exchange will start from the next available month.

How long will Salary Exchange contributions be an option?

The intention is for Salary Exchange contributions to remain in place indefinitely. However, as company circumstances and legislation may change, OMERS reserves the right to withdraw Salary Exchange contributions without notice or compensation and switch employee contributions to the conventional, net pay basis.

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What if I have any further questions?

Contact any of the following individuals at our advisers (JMA) who will provide you with the relevant guidance.

For Servicing: Corporate Team corporate@jmurray.co.uk

For Advisory: Nick Young nyoung@jmurray.co.uk Contact No: 0208 6423680

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STIP Allocation (Bonus Exchange)

Short Term Incentive Plan (STIP) Allocation Exchange (hereafter referred to as Bonus Exchange) gives you the opportunity to enhance Pension benefits in a highly tax efficient manner. If you receive a STIP award and you are an active member of the Aviva Workplace Pension Plan, you may elect to receive part or all of that STIP award as a contribution to your Pension. Bonus Exchange (sometimes known as Bonus Sacrifice) supports the Salary Exchange Plan. It is a highly tax efficient way to boost your retirement savings. Many of the previous notes on Salary Exchange equally apply.

What is the Bonus Exchange?

Quite simply, it is an arrangement where you may exchange all or part of your Bonus in return for a pension contribution payable by your employer. This normally generates a substantial tax saving.

Who is eligible to participate?

If you are a member of the Aviva Workplace Pension and you receive a STIP award, you are eligible to participate.

Participation in the Bonus Exchange Plan may not be appropriate for all employees and whether to participate or not will depend on your own individual circumstances.

Additional Enhancement for the OMERS Bonus Exchange

As a special feature, OMERS will generously increase any Bonus Exchange by 15% (please note that this enhancement can be changed at any time and at OMERS discretion). This is in addition to all other tax savings that you are entitled to – many employers offer no such enhancement.

Please use the Exchange Calculator (located on your intranet site or by contacting JMA) to see personalised tax savings on the level of Exchange you wish to consider.

As a very simple example, if you decide to Exchange a pre-tax Bonus of £1,000, you will see £1,150 added to your Aviva Pension.

Please note that this enhancement only applies to participants of the Bonus Exchange Plan – Bonus taken as cash through payroll will not be enhanced under any circumstances.

For those that currently contribute less than 10% of salary towards the Pension monthly, you are entitled to a further enhancement if you participate in Bonus Exchange. If so, this option becomes utterly compelling. Please see the later question ‘What about Employer Matching’ for full details. However, if you already pay 10% of salary (or more) monthly, you are already receiving the maximum Employer Match on a routine basis – and nothing more can be claimed.

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What are the advantages ?

The main advantages are the considerable tax savings and resulting ‘boost’ to your retirement plans. Again, please refer to the Calculator for personalised details of just how tax efficient this arrangement can be. If you are eligible to participate in the Bonus Exchange, you will also benefit from instant tax relief. Contributions towards the Bonus Exchange are treated as company payments and therefore, you do not need to claim any additional tax relief – it is allocated immediately. You do not need to mention the Bonus Exchange on your HMRC self-assessment tax returns.

How do I calculate my level of tax relief?

As you are probably aware, the UK tax bandings have become much more complicated over recent years. Working out what tax saving you could possibly receive has become very difficult indeed. The Calculator should provide the help you need and gives personalised details (if used correctly). Please note that this should be used for guidance only and any calculations cannot be guaranteed. Please ensure that you carefully read the guidance notes when you open the calculator and follow the specific instructions.

How much of my Bonus can I exchange?

You can exchange as much as you wish, up to the current HMRC maximum pension contribution allowances. Please remember that you do not have to exchange your entire STIP award – you can nominate a chosen amount and take the balance as cash through the payroll in the normal way. Please also remind yourself of the Tapered Annual Allowance (TAA) legislation (especially if your total income from all sources exceeds £260,000 per year). The following section explains this in detail. If you are in any doubt as to how the TAA impacts you, specialist financial advice should be sought.

Can I participate if I’m in the Cash in Lieu Arrangement?

Yes – but please be extra careful to check your accurate TAA position. The very fact that you are a Cash in Lieu participant means that you are impacted by the TAA to a meaningful degree. But if there is some spare contribution allowance that you wish to utilise, the Bonus Exchange arrangement could be an ideal way to do so.

What are the potential disadvantages of the Bonus Exchange Plan?

If you are interested in participating, you must bear in mind the following:

Accessibility – Remember that any Bonus is being exchanged for an enhanced pension contribution and normal pension rules will apply. Consequently, you would have no access to the money until at least age 55 (the earliest age that pension benefits can be withdrawn). This minimum withdrawal age will rise to 57 from April 2028.

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As rules stand, when you reach age 55, the first 25% of your total pension fund can be taken as a tax free lump sum (up to a maximum of £268,275). The remaining 75% must be used to provide income which is subject to income tax. This must be considered before you choose to participate – there will be absolutely no opportunity to “unwind” the arrangement later. Mortgages and Other Borrowings – Lenders sometimes include a percentage of Bonus income when assessing affordability for a mortgage. If you elect to exchange Bonus, the maximum loan from a subsequent mortgage application may be affected. In saying this, most lenders accept an employer’s reference as proof of income. Here, your employer may have the opportunity to disclose Bonus entitlements.

How will the Pension contribution be invested?

Any Bonus Exchange related contribution will be invested as per your existing instructions with Aviva. If you wish to invest an Exchange in different funds, please log in to your Aviva account and instruct accordingly. Please always remember that the value of your pension investment can go down as well as up .

What about Employer Matching?

To remind, OMERS generously matches any personal contributions you choose to pay over the 5% minimum monthly contribution. Personal contributions are matched up to 10% of Pensionable Basic Salary. Please refer to the previous ‘Contributions’ section for full details. For those that pay less than 10% monthly and who participate in the Bonus Exchange, your employer will match the contribution – up to a maximum of 5% of Pensionable Basic Salary (with an overall annual ‘cap’ of £30,000 employer contribution). This is best explained in the following examples:

Example Member 1 – Pensionable Basic Salary of £60,000, paying 5% monthly contribution, Exchanges £4,000 Bonus:

➢

£4,000 pre-tax bonus exchanged.

➢ £600 - standard Bonus Exchange enhancement ➢ £3,000 - Employer Match (as member qualifies for a maximum ‘match’ of 5% of basic salary) ➢ £7,600 - Total Pension investment (from a £4,000 pre-tax relief Exchange) ➢ £2,320 – Cost of Bonus Exchange to member after 42% tax and personal National insurance relief.

Example Member 2 – Pensionable Basic Salary of £80,000, paying 8% monthly contribution, Exchanges £5,000 Bonus:

➢

£5,000 -pre-tax bonus exchanged.

➢ £750 - standard Bonus Exchange enhancement ➢ £1,600 - Employer Match (as member qualifies for a maximum ‘match’ of 2% of basic salary) ➢ £7,350 - Total Pension investment (from a £5,000 pre-tax relief Exchange) ➢ £2,900 – Cost of Bonus Exchange to member after 42% tax and personal National insurance relief.

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Example Member 3 – Basic Salary of £90,000, paying 10% monthly contribution, Exchanges £10,000 Bonus:

➢

£10,000 - pre-tax bonus exchanged.

➢ £1,500 - standard Bonus Exchange enhancement ➢ £0 - Employer Match (as member already receiving the maximum ‘match’ monthly) ➢ £11,500 - Total Pension investment (from a £10,000 pre-tax relief Exchange) ➢ £5,800 – Cost of Bonus Exchange to member after 42% tax and personal National insurance relief.

All of the above examples are highly attractive – but when Employer Match is involved, it makes the proposition compelling.

How do I participate?

➢ Employees will initially receive emailed communications announcing the STIP Allocation Exchange (usually January each year). ➢ The email will contain clear instructions of what you need to do to participate – and the strict deadline that applies for you to confirm your requirements. ➢ Any member instructions received by the deadline will be processed accordingly – with the chosen level of Exchange invested in their Aviva Pension.

Please note, it is not possible under any circumstances to ‘un - wind’ a Bonus payment after it has been instructed and processed.

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The following section of the Guide is only relevant to those genuinely affected by the Tapered Annual Allowance (TAA).

In brief, the TAA impacts any individual with total annual income (from all sources) that exceeds £260,000. Any member with total income around this level (or higher) should read on.

Anyone not currently affected by the TAA does not need to read on – the following detailed section does not apply to you .

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Tapered Annual Allowance

Workplace Pension Plan

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Overview

➢ Tapered Annual Allowance (TAA) is a complex piece of legislation (effective from April 2016) that only affects higher earners. ➢ In most circumstances, individuals whose total taxable income (plus the value of company pension contributions) is less than £260,000 per year will not be affected. ➢ Individuals whose total income is more than £260,000 are impacted and should be fully aware of the changes. ➢ The Annual Allowance (AA) is the maximum pension contribution that can be paid in a year (tax charges apply to any excess). ➢ The standard AA is £60,000* per tax year. This includes both personal and employer pension contributions. ➢ For higher earners, the AA is reduced by £1 for every £2 of income over £260,000 in a tax year. ➢ AA reduces to an absolute minimum of £10,000 per year. ➢ If income is £360,000 or more, AA will be reduced by £50,000 to the £10,000 minimum (£100,000 ‘excess’ income divided by two).  It may be possible to pay more than this using the 3-year carry forward facility. Individuals potentially impacted should calculate their available carry forward allowance. ➢ Adjusted Income consists of an individual’s income from all sources before tax (salary, bonus, benefits in kind, profits from self-employment, rental income, investment income). o PLUS ➢ The value of any employer pension contributions. If the Adjusted Income figure exceeds £260,000 in a tax year, the tapering of AA will apply. If the Adjusted Income exceeds £360,000 the AA will be just £10,000. Test 1 – Adjusted Income

Test 2 – Threshold Income

In a small number of situations, an individual that fails the Adjusted Income test may not see their AA reduced:

➢ Threshold Income uses the same starting point (income from all sources before tax). ➢ Personal pension contributions can be deducted. ➢ Employer pension contributions are not added.

If the Threshold Income is £200,000 or less for the tax year, the AA will not be reduced.

How to Value Employer Pension Contributions

➢ Money Purchase Pension arrangements are valued by the monetary amount that an employer contributes to an individual’s pension plan over the course of a tax year. ➢ OMERS Workplace Pension Plan with Aviva is an example of a Money Purchase Pension arrangement.

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AA Tax Charge

➢ If an individual exceeds their AA (and has zero carry forward allowance from previous years), the excess amount is included in their taxable income for the year. ➢ In most instances, this will mean a 45% tax charge on the excess contribution over the AA. ➢ As an example, if an individual who earns more than £360,000 receives an employer pension contribution of £20,000, this will be £10,000 above their tapered AA. The tax charge will be 45% on the £10,000 excess over the AA (£10,000 x 45% = £4,500 tax bill). It may be possible to instruct the pension provider to pay the tax charge from the underlying pension fund (as opposed to paying the tax personally). However, this depends on meeting certain time restrictions and other conditions. Impacted individuals should refer to the pension provider or their personal advisers for further details. ➢ Be aware of how much carry forward allowance exists and how long this will last (see following example). ➢ Where possible, take advantage of the Threshold Income rules by paying personal pension contributions. ➢ Consider reducing your personal pension contributions if this protects your employer contributions (but be aware of any valuable ‘matching’). ➢ Undertake all sensible tax planning strategies to reduce taxable investment income. ➢ Consider any alternative options, such as OMERS Cash in Lieu arrangement, that may be available. Things to Consider

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Carry Forward – An Example

➢ Any unused pension AA can be carried forward from the previous three (3) years to help accommodate any excess contribution above the AA. ➢ The current year’s AA must be used first (before any carry forward). Thereafter, any unused AA from the third year back is used, followed by the second and finally, the previous year. ➢ The following simplified example explains more:

Total Pension Contributions Paid (Company and Personal)

Annual Allowance in Year

Spare Allowance for ‘Carry Forward’

Tax Year

Total Income

2016/2017

£100,000

£20,000

£40,000

£20,000

2017/2018

£110,000

£20,000

£40,000

£20,000

2018/2019

£120,000

£40,000

£40,000

£0

2019/2020

£360,000

£30,000

£10,000

£0

2020/2021

£360,000

£24,000

£4,000

£0

2021/2022

£360,000

£24,000

£4,000

£0

2022/2023

£360,000

£4,000

£4,000

£0

2023/2024

£360,000

£10,000

£10,000

£0

2024/2025

£360,000

£10,000

£10,000

£0

• Please note that between 2016/2017 and 2019/2020 inclusive, tapering started when incomes exceeded £150,000 - and ended at £210,000. The minimum tapered contribution was £10,000 in these years. • Between 2020/2021 and 2022/2023 inclusive, tapering started at £240,000 and ended at £312,000. The minimum tapered contribution was £4,000 in these years. • From 2023/2024 onwards, tapering starts at £260,000 and ends at £360,000. The minimum tapered contribution is £10,000. 1. The individual is a consistent higher earner. Full tapering has applied from 2019/2020. 2. The individual was working within the AA until 2019/2020 when the AA was exceeded by £20,000. However, there was £20,000 of unused AA from 2016/2017 (the third year back). This was carried forward into 2019/2020 to justify the excess contribution and legitimately avoid any AA tax charge. 3. In 2020/2021, the AA was again exceeded by £20,000. The spare AA from 2017/2018 was carried forward to justify the excess contribution. 4. In 2021/2022 the AA was again exceeded by £20,000. There is no remaining AA that can be carried forward. This meant that an AA tax charge of £9,000 was due (£20,000 x 45%). 5. From 2022/2023, contributions have been deliberately limited to the minimum level so not to exceed the AA. Please note that you must have had a UK approved pension arrangement in place during the previous three (3) years to carry forward although there does not have to be any contributions made during these years.

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ie Cash in Lieu Allowance

wance Program Overview

To help individuals genuinely impacted by the TAA, OMERS offers the Cash In Lieu Allowance (CIL).

An individual should carefully check to see if they are impacted by the TAA. It is important to remember that standard pension membership is most likely to be the best of the available options. Only if standard pension membership is negatively impacted by the TAA can an individual consider applying for the CIL. Rules are in place to prevent non-essential requests for participation.

How Does CIL Work and What Are the Rules of Participation?

TAA Impacted Individuals

➢ The key objective is to help individuals facing sufficiently restricted annual pension contribution allowances (because of the TAA). ➢ For qualifying individuals, the OMERS employer contribution allocation will be 10% of your Basic Pensionable Basic Salary. ➢ For individuals that qualify for (and opt-in to) CIL, the OMERS employer pension contributions continue at the minimum level. This is £10,000 per year (the amount of pension contribution that can be paid, no matter how severely an individual is impacted by the TAA). A CIL allowance (pre deductions) provides the remainder of the entitlement. ➢ For maximum payroll simplicity and ease of operation, there will be no mandatory personal contribution. The minimum £10,000 annual contribution allowance will be used in full by OMERS. Employer contributions are optimised with the CIL Allowance. ➢ For individuals who are only partially affected by the TAA (where standard pension contributions are still within the partially tapered allowance or where sufficient carry forward allowance remains to justify full pension membership for at least another year), CIL should not be selected (you can elect to switch to CIL at a subsequent review point). ➢ Individuals with total taxable income of £260,000 or greater can request to participate in the CIL Allowance. ➢ The CIL allowance: • Qualifying participants in CIL will receive a flat rate OMERS employer pension contribution of £833.33 per month (equivalent to £10,000 per year – using up the entire minimum TAA). • Zero mandatory employee pension contributions. • CIL monthly allowance payment equivalent to the OMERS employer pension contribution entitlement that exceeds £10,000 per year. ➢ The CIL allowance payment will be reduced by 15% to take into account the current level of corporate National Insurance OMERS must pay on this type of allowance (i.e. cash payment). Please note that if the rate of corporate National Insurance changes, this deduction will change accordingly. ➢ The CIL allowance payment will be subject to personal National Insurance and income tax in the normal way (the same as basic salary). ➢ Examples of how the CIL allowance works in practice are shown on the following pages.

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Example – Member A Fully Impacted by the Tapered Annual Allowance

➢ This member has an annual salary of £250,000. They also receive rental income of £15,000 per year and interest of £10,000 per year. When STIP allocations are added, the income exceeds £360,000. ➢ The employer contribution rate is 10% of Basic Pensionable pay. ➢ The member has invested heavily towards their pension over recent years and has no carry forward allowance available. ➢ The total income means that they are fully impacted by the TAA. The maximum annual contribution that can be efficiently paid into their pension is £10,000. With standard pension membership, they would be entitled to routine employer contributions of £25,000 (£250,000 x 10%). If the standard matched 10% employee pension contribution is also included, the member would exceed their TAA by an even greater amount. ➢ The member therefore applies for the CIL allowance (instead of standard pension membership), to ensure that they do not face an unwanted tax charge on any excess pension contributions. This works as follows: • Ongoing employer pension contributions of £10,000 per year (£833.33 per month). • Zero personal pension contributions (the main objective is to optimise the employer contributions). • Pre-deduction CIL allowance of £15,000 per year (£25,000 entitlement - £10,000 continuing pension contributions) • Corporate National Insurance is not payable on employer Pension contributions. It is, however, payable on CIL allowance since they are considered ‘cash’ payments. • Consequently, this needs to be deducted from the CIL allowance as follows: • (£15,000/115%) = £13,043 • This CIL allowance of £13,043 per year (£1,086.92 per month) is added to the member’s pay. This CIL allowance will be subject to income tax and personal National Insurance in the same way as salary. ➢ OMERS provide the same level of member entitlement, just in the form of CIL and employer pension contributions. ➢ The member is advantaged that they have the CIL allowance now (albeit less tax and personal NI). In contrast, if they continued with standard pension membership, they would have to pay 45% tax on the excess contribution over the TAA in the very short term plus marginal rate income tax on the eventual pension income when they reach their pension withdrawal age.

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CIL Example Member A

£250,000 Basic Salary

On £250,000 Basic Salary

Standard Routine Employer Contribution to Pension

10%

£25,000

Personal Contribution 0% £0 Applies for TAA Cash in Lieu Allowance Employer Contribution to Pension £10,000 Pre-deduction monthly CIL Allowance £15,000

CIL Allowance of £15,000 per year (£1,250 per month)

£10,000 (£833.33 per month) added to Pension

Corporate NI (15%) must be paid on a Cash in Lieu

£15,000 ÷ 115% = £13,043 Annual CIL

£13,043 ÷ 12 months = £1,086.92 added to monthly pay

Subject to Income Tax and personal NI in the same way as Salary

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