1 YOUR JOURNEY InTouch Defined Contribution Section

Travel back in time... 4 Changes to pension tax relief for higher earners 6 Helping you save for the future 7 Take a better route to a better destination 8 What’s happening with members 9 Following the investments 12 The Ernst & Young Retirement Benefits Plan Money movements 14 Newsletter issued by E&Y Trustees Limited Get online 15 YOUR JOURNEY 2

It’s your journey, but we’ll help you get there – a message from the Chairman of the Trustee Board Once again, and on behalf of the Trustee Board, I am very pleased to send you the latest annual edition of the Trustee newsletter ‘In Touch’. In line with the approach adopted in previous years the Trustee will continue to provide a separate annual newsletter for the Defined Contribution (DC) Sections and the Final Salary Section (FSS). Members with benefits under the FSS will therefore receive an additional newsletter that relates to these benefits. A new look for our newsletter This newsletter has undergone something of a ‘facelift’ from previous versions as part of our continuing desire to improve the look and appeal of the information we send to members. However, the content remains very important of course and there is no shortage of issues on which to update you this year. Once again, you will find in these pages a wide range of information about the Plan and updates on recent developments. Some of the facts and figures are taken from the Trustee’s most recent annual Report and Accounts (for the year to 30 September 2009), copies of which are available from the Plan Secretary on request, but most reflect more up to date information, such as that relating to Plan investments.

Barry Nichols Chairman of the Board of Directors of E&Y Trustees Limited 3 YOUR JOURNEY

Improving your investment options The benefits available from the DC Sections of the Plan are a function of a number of factors, not least amongst them being the investment returns achieved by your funds over the course of your membership. With this in mind, the Trustee recently completed a review of the investment options made available to members and decided to implement some fundamental changes which were recently communicated to members. The principal driver for these changes was the Trustee’s desire to provide members with a more diversified Lifestyle Option, which has exposure not just to equity markets but also to other alternative asset classes, together with the opportunity to benefit from active rather than passive investment management. Our over-arching objective has been to maintain the return potential of your investments in the Plan whilst reducing the potential for the significant volatility in returns that we have seen in recent years. The introduction of the new investment platform via Zurich will also allow the Trustee to change investment managers more readily should their performance consistently disappoint over a reasonable time period. Keep your pension on track online I would encourage you to continue to review your Plan investments on a regular basis and we have a new Investment Guide and Fund Factsheets available through the OneView system to assist you in doing so. OneView also enables you to keep up to date with the performance of your fund and change your investment options if you so wish. In addition, we have recently launched MyView, an online benefit modelling tool which is available via OneView, and which should help you better plan for your retirement by allowing you to assess the impact of changing contribution levels and investment returns on your retirement benefits. We have also taken the opportunity in this issue to update you on other important developments in the world of pensions that have an impact on the Plan. What you’re saying about In Touch This is your newsletter, produced for you, the members, so the Trustee Directors are keen to hear your comments and suggestions for future issues. A mark of quality for Last year we included a questionnaire in this newsletter to find out what you your pension think about it. We’re pleased to report that over 65% of our members agreed The Ernst & Young (or strongly agreed) that In Touch was helpful, interesting and relevant. Most Retirement Benefits members also stated that they would prefer to receive In Touch in hard copy, Plan has been awarded so we will continue to post these newsletters to you once a year. a Pension Quality Mark We will send another survey shortly via email to all of our active members. PLUS by the National Alternatively, you can contact us using the address details on the back page. Association of Pension Funds. Judged by an Yours faithfully independent panel of consumer, employer and industry experts, this award recognises best practice in pension Barry Nichols scheme governance, contributions and communications. YOUR JOURNEY 4 Travel back in time...

Do you remember how much a pint of milk cost back in the 1980s – what about a pint of beer? You might be surprised to hear that in 1980 milk cost just 17p. Today it’s more than 45p – and that’s not the only thing that’s changed over the years…

1980

Food craze Hamburgers Curry Pint of milk 17p 45p Pint of beer 35p £3.20 Basic rate of tax 30% 20% Interest rates 16% 0.5% Life expectancy at age 63 14.23 years 19.13 years

Over time, rising prices decrease the value of your pension savings. This is because the money that you saved 10 years ago won’t buy as much as it had in the past. And, as we’re all living longer, it’s important to take this into consideration when you’re planning your retirement. Think about whether you’re saving enough for retirement. Are your chosen investment options helping your savings grow enough to cover the rising costs of living? 5 YOUR JOURNEY

Keeping pace with the cost of living Up to now, the measure used to make these increases was the Retail Prices Index (RPI). However, earlier this year the Government announced its intention to change this to the Consumer Prices Index (CPI). Although both the CPI and RPI measure the change in the price of goods and services over time, the CPI is generally lower than the RPI. This is because it uses a different calculation to measure prices and doesn’t include things like council tax and housing costs. The impact of the Government’s proposals on increases to pensions in payment will only be clear once they have been finalised. However, as the CPI is generally expected to be 0.5% less each year than the RPI, this may reduce the overall rate of future pension revaluations. We will provide more information once further details are announced. Payment to employers when there is a surplus We have reported a number of changes to pensions legislation in the previous In Touch newsletters. A new issue highlighted in pensions legislation recently relates to payments to employers from pension schemes where a surplus exists. In a DC scheme surplus may arise from assets which are not directly allocated to members, for example, as a result of a member leaving and taking a refund of their own contributions or where an employer pays additional contributions to cover administration expenses. Under the current rules of the Plan, and subject to certain qualifying conditions, a surplus may be paid back to the firm at wind up. However, in line with subsection 3 of section 251 of the 2004 Pensions Act, the Trustee is required to pass a resolution to allow the firm to retain this right in the future. If such a resolution is not passed prior to 5 April 2011, the firm might lose this right forever. A surplus payment would only be made to the firm if the Plan Actuary certifies that the assets of the Plan, after members’ benefits have been bought out in full, would be sufficient to pay the surplus. The Trustee therefore intends to pass a resolution to retain the power to pay surplus to the firm. The Trustee believes that this will not impact the level or security of members’ benefits within the Plan.

DID YOU KNOW In 1980, the top selling car in the UK was the Ford Cortina. This car made a recent appearance in pop culture when it featured in the time travelling BBC series ‘Life on Mars’. YOUR JOURNEY 6 WHAT DO WE MEAN? Annual allowance – The limit on how much you can contribute to your pension each year and receive tax relief for. Lifetime allowance – The limit on the amount of retirement benefits you can draw from your pension before tax penalties apply.

Changes to pension tax relief for higher earners

The Treasury recently published the details of revised plans to restrict pension tax relief for people considered to be higher earners. This includes the following key changes: • From 6 April 2011, the annual allowance will reduce from £255,000 to £50,000. Tax relief on pension savings up to the annual allowance will still apply, but anything above this will be taxed at your marginal rate – making pension saving above this threshold less tax efficient. • If you exceed the annual allowance in a particular year, any unused allowance from the previous three years can be used to offset the excess. • From April 2012, the lifetime allowance will also be reduced from the current £1.8 million to £1.5million. Clive Ward Keep in mind that ‘anti-forestalling’ measures have Chief been introduced to prevent people affected by the Executive changes from increasing their contributions before April 2011. For more information, visit the HM Revenue & Customs website at www.hmrc.gov.uk. If you are concerned about the impact of the tax changes, The Government is changing you should consider talking to an independent financial adviser. pension tax relief for higher earners. Make sure you understand whether this impacts you. 7 YOUR JOURNEY

Three minutes with

Kevin Miller Employee Nominated Director The Directors of E&Y Trustees Limited play an important role in running your Plan. There are eight Directors – four nominated by the firm and four elected by the membership (including one elected by pensioners). Our most recently elected member Director is Kevin Miller, who works in National Tax Quality and Risk Management. Here are his thoughts on retirement savings, the challenges he has faced to date and how he uses his drum kit for stress relief. EY: What made you want to become a Trustee? EY: Do you have any tips for members? KM: I have a strong financial background and KM: Understanding your pension can be a used to be an Audit Technical Partner, so have challenge, but this is the only way you future

dealt with pension schemes a lot in my career. can make the right choices. If you don’t I’d been with the firm for just over six years understand it, remember that we provide and thought I had something to offer the a lot of resources to help you – like the pension schemes and our members. Pensions Department, our Trustee website, Mercer OneView and, of course, us! I’m also at an age where retirement is the looming, so I felt it was time I took a more EY: Do you have a plan in place for your own active interest in pension matters. retirement and are you on track to achieve it? KM: With four children, I can foresee considerable EY: What do you like best about the role? financial demands extending way into the KM: As Trustees we deal with very complex and future! Being at the firm for six years has challenging issues, but there is a real sense for made a significant contribution to my plan, of purpose in what we do. The decisions but I wouldn’t say I’m on track as I always we make affect all of us at the firm, so it’s planned to retire at 55 and that target has important to our colleagues and to us that long since passed! ve we do the best for our members. EY: What do you want to do when you retire? EY: Would you recommend becoming a Trustee? KM: I’m really interested in the property market KM: I would highly recommend it to anyone with

sa and when I retire I would like to build a house. an interest in pensions. Being a Trustee gives France would be nice, but I’d like to stay near you the ability to give something back to the kids so I have a feeling it’s going to be benefit you and your colleagues. It’s also a somewhere within easy reach of London. great way of helping you understand the scheme and its challenges. I’ve also played the drums since my teens – or at least I’ve tried. If nothing else, they will There are a lot of people within Ernst & Young you remain a great stress reliever for me! that have a lot to contribute to this role. However, we’re currently an all male Trustee group, so I would really like to encourage More information about the Trustee Board some of the female staff members to get and its ongoing governance programme can involved and think about being put forward be found at www.eytrustees.co.uk for a Trustee position. EY: What feedback have you had from members? KM: I don’t get as much feedback from members as I thought I would. I’m sure this reflects the elping fact that we have an excellent pensions team who deal with most of the queries. I suspect it H may also reflect the fact that, even though we all work in the financial world, we often don’t get the time to think about our own finances – even when we know we should. I also hope our members know we’re working in their best interests. YOUR JOURNEY 8

Some of the feedback we had was that you’d like to know what fellow Plan Take a better members have to say. Here your pensions team talk about the importance of saving route to a better for retirement. destination

Understanding your pension You are a member of a defined contribution plan and this means the pension you will get from the Plan when you retire is based on: • how much you pay in; Will Murray • where you choose to invest the money you pay in; NominatedPensioner Director and

• how much it will cost to buy a pension. It’s basically a savings account. If you pay money into a bank, building society, ISA or buy shares, you probably keep an eye on how this money performs to make sure you’re comfortable with your choice. You need to treat your pension in the same way. Get your savings back on track with the MyView retirement planner Whether retirement is 30 years away – or just around the corner – our new online modelling tool MyView is a great way to see whether your savings are on track. MyView will show you what you could get when you retire based on your current savings. And if you notice a gap between what you want and what you’ve got, it shows you how changing your investment return or the amount you contribute to your pension could improve your outcome. AndrewEmployer McIntyre Simply login to Mercer OneView at www.merceroneview.co.uk/eypension Nominated Director

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74 When you stop working your earnings are replaced with a 69 pension. This will include some money from the State and any benefits you have built up in your own pension accounts. You have access to a good quality pension plan through Ernst & Young. Take some time to think about how much you’ll need in retirement. Could you afford to save a bit more each month? 9 YOUR JOURNEY ’s

Pensions team interview with Tim Carney & Julianna Oladipo Pensions Manager & Manager – Pensions Secretary to the Trustee The Trustee has considerable support to enable it to run the Plan effectively. The support is led by Tim Carney and his colleague Julianna Oladipo. Here they talk further about their roles: EY: What made you want to work in pensions? EY: Why is saving for retirement important? TC: Working in pensions you have a lot of insight into the TC: Putting money away for a rainy day is always way the business works commercially and financially. important, and pensions provide a really tax You cross functions with HR and finance, but you also efficient way to do that. The advantages may not be get the external perspective working with solicitors so apparent for a person in their 20s, but it becomes and actuaries, and it’s really interesting from that much more evident in your 30s and 40s when you perspective. Though getting into this industry was pay more tax. almost a complete accident to be frank! For me, having a balanced portfolio is important. JO: I really enjoy working in pensions, as Tim says it’s the You often forget how much you contribute to variety that comes from working in it. You get exposure your pension and how important it is, but as to various aspects including the financial side and your fund grows you really start to appreciate the people side of savings. Since joining the firm I’ve that more. As it gets bigger you certainly start taken a particularly keen interest in communications – engaging with it more and thinking more helping members engage with their pension, helping proactively about the investment options them understand their retirement goals and the available. benefits the firm has provided for them. JO: As a member of the spending generation or the EY: What sort of member queries do you get? credit card generation, I admit it’s a struggle to think JO: Joining a firm like ours, I expected everyone to be about saving for something that feels like such a a pensions expert. But it’s fair to say that that’s not long way away. But you have to consciously think necessarily the case. You can go from answering the about starting early because the earlier you start, most basic question around pension contributions the less of a burden it will be. That’s the challenge to the most complex questions around tax relief. we face in the industry – to try to convince people EY: Where should a member go when they need help? – particularly the younger generation – to change JO: We have an internal HR helpline that we would their outlook and start to think about putting some normally encourage people to go to as a first port money aside for a rainy day. of call. They can answer some of the basic questions TC: We understand pensions can be confusing, around how to join and contribute to your pension. especially as there are always so many changes If it can’t be answered, they would refer them to our to pension legislation. But the tax advantages are Pensions Team or to Mercer’s helpline (details on still there for a vast majority of people and it’s a the back page). basically a sound thing for many people to do. EY: What feedback have you had recently from members? EY: What are you planning for your retirement? JO: Feedback has been a key area for us over the last TC: To go on one cricket tour after another to very hot, 12 to 18 months. Last year we completed a survey warm places! on our newsletters and got a really good response. JO: Early retirement is the goal for me. I want to We’ve also looked at our benefit statements and be young enough to be able to go back into how our retirees are finding the retirement process. performing arts and do some amateur work in the Some members have given us some really good ideas theatre on a voluntary basis. about how we might do things differently in our next round of communications, so it’s been really useful. YOUR JOURNEY 10

Could you be our next Director? We will soon be holding an election for one of our Member Nominated Director positions – does this sound like you? You can also nominate a fellow active member. More details will be announced later in December. 11 YOUR JOURNEY How many members were in the Plan on 30 September 2009?

Members with preserved benefits (Money Purchase 1990 Section)

512

Members with preserved benefits (Pension Plan Section)

5,701

Members with preserved benefits (Money Purchase 1997 Section)

2,734

Active members (Pension Plan Section)

2,719

Active members (Money Purchase 1997 Section)

14 What type of member are you? There are two different types of members of the Plan: Members with preserved benefits – members Active – members currently working for who no longer work for Ernst & Young and are not Ernst & Young and paying contributions contributing to the Plan. These members’ benefits into the Plan. are held in the Plan until they retire. YOUR JOURNEY 12

Hunting bears and Following the bulls on the markets Using ‘bulls’ and ‘bears’ to investments describe markets comes Investments play a big role in the success of any defined from the way they attack contribution pension. That’s because the money you – the bull driving its horns get when you retire will be based (in part) on the up and the bear clawing its performance of the investment options you choose. The paws down. performance of our investments to 30 June 2010 are So, whereas a bull market shown opposite. describes optimism and growth in investment prices, What’s happening in the financial a bear market describes markets? pessimism and drops in While the financial sector was saved from disaster in performance. 2009, global economic activity has been slow. Domestic economies were strengthened by government stimulus packages and by the March quarter of 2010 the US, China and the UK started to show signs of economic growth. However, in the June quarter of 2010 economic uncertainty returned. Equity markets suffered a particularly turbulent quarter, as investor concerns about debt in Greece, Spain and other European countries remained. Recent economic indicators have been mixed, and the mood of the markets has been described as ‘bearish’. The US, UK and German governments have announced plans to cut their deficits and tighten the regulation of financial markets. Commentators hope that this will provide the necessary stability for economic growth to continue, and we remain cautiously optimistic about the future. Although it may take some time to recover from the losses experienced during the financial crisis. A new look for your investment options The Trustee recently changed the investment options available to members. This means that your pension (both existing funds and future contributions) would have been automatically transferred to an equivalent fund in the new range – unless you selected otherwise.

MalcolmEmployee Kerr You would have received an information pack in the

Nominated Director mail outlining the changes, but here’s a quick overview.

Your investments changed in October (see page 13 for details). More information about the investment performance of our new funds will be given in next year’s newsletter. 13 YOUR JOURNEY

How the investments performed to 30 June 2010

1 year % 3 years % per year 5 years % per year Plan Benchmark Plan Benchmark Plan Benchmark L&G UK Equity Fund 21.3 21.1 -5.5 -5.7 3.6 3.5

L&G Overseas Equity 23.3 23.0 -0.3 -0.6 5.6 5.3

L&G Global Equity (70/30) 21.9 21.7 -3.9 -4.1 4.2 4.1

L&G Global Equity (60/40) 21.3 20.9 n/a n/a n/a n/a

L&G Fixed Interest 8.0 8.0 8.4 8.4 4.5 4.5

L&G Index Linked 8.5 8.4 n/a n/a n/a n/a

L&G Active Corporate Bonds 15.4 15.9 7.6 5.5 5.0 3.6

L&G Cash Fund 0.5 0.5 3.0 2.9 3.8 3.7

Baillie Gifford UK Equity 28.5 21.1 -4.3 -5.7 3.9 3.5

Baillie Gifford Overseas Equity 28.4 24.0 2.1 -0.9 7.7 5.4

RCM UK Equity Fund 20.1 21.1 n/a n/a n/a n/a Capital International Global 21.1 21.3 -5.0 -2.4 n/a n/a Equity Fund BlackRock (ex BGI) Global Equity 20.3 21.0 -5.1 -3.9 n/a n/a (60/40) Fund Clerical Medical Unitised With 4.0 n/a 4.0 n/a 4.0 n/a Profits Fund

n/a refers to periods where the Plan was invested for only part of the period or not at all.

How have my investments changed? Our investment range now includes a more diversified range of investments to help you target better returns over the long-term. For example: • We’ve introduced alternative investments and corporate bonds to our Lifestyle Option and it now uses a broader range of managers who actively manage the fund. • We’ve changed the range of Freestyle funds available and added two new diversified funds. Why have you changed my investments? The last three years have been difficult for investors everywhere. Recognising the impact this has had on your pension, we wanted to enhance the way your investments are managed and structured, and help improve your prospects for the future. For full details of the changes download a copy of the investment announcement from Mercer OneView at www.merceroneview.co.uk/eypension. While you’re there, you may also want to download the new Investment Guide. YOUR JOURNEY 14

Money movements Pension Plan Section Money in £000s

Contributions (from Ernst & Young and members) 34,128 - 38 Transfers in 92 - - Other income 51 - 1 Total money in 34,271 - 39

Money out

Members’ benefits paid 1,367 - - Payments to leavers 1,566 - 176 Administration expenses 1,409 - - Other payments 1,590 - - Total money out 5,932 - 176

Total

Money in the Plan on 1 October 2008 236,240 7,269 27,216 Money in 34,271 - 39 Money out (5,932) - (176) Net return on investments 32,624 854 3,196 Cost of transfers between sections of the Plan (2,285) - (1) Money in the Plan on 30 September 2009 294,918 8,123 30,274

The Plan grew by more than 20% over the last year, thanks in part to positive investment returns and more members topping up their pensions. Take a look at this highlight from the Report and Accounts for the year to 30 September 2009.

Peter O’Neill Employer Nominated Director 15 YOUR JOURNEY

Andrew Grace Employee Nominated Director

Pension Plan Money Purchase Money Purchase Section (1990) Section (1997) Section £000s £000s £000s If you want to find out more about pensions therecan are help some you great do so.websites which Contributions (from Ernst & Young and members) 34,128 - 38 Transfers in 92 - - Get online Other income 51 - 1 Total money in 34,271 - 39 www.merceroneview.co.uk/ eypension – your one stop shop for your pension plan.

5.2 Use it to check your personal 41 details and investment choices and if your details have changed, you can Members’ benefits paid 1,367 - - update them here. Payments to leavers 1,566 - 176 www.unbiased.co.uk – if you need access to an Administration expenses 1,409 - - independent financial adviser. Other payments 1,590 - - 2.3 There may be a charge for Total money out 5,932 - 176 29 this service which you will be responsible for paying.

www.direct.gov.uk – for information about retirement planning and tax, as well as Money in the Plan on 1 October 2008 236,240 7,269 27,216 10.1 general public services. Find out what state benefits might Money in 34,271 - 39 56 be available to you when Money out (5,932) - (176) you retire, how to plan for Net return on investments 32,624 854 3,196 retirement and much more by clicking on the ‘Pensions Cost of transfers between sections of the Plan (2,285) - (1) and retirement planning’ tab. Money in the Plan on 30 September 2009 294,918 8,123 30,274 www.dwp.gov.uk – for useful information on the range of benefits and

74 services that the Department 69 for Work and Pensions (DWP) provides.

Have we missed something? If you think there are any other websites that would be helpful for our members let us know and we can include them in the next newsletter. YOUR JOURNEY 16 Contact details

EYhelp For member and general pension queries: Tel: 0141 626 5555 (ext. 65555)

Plan administration If you have any questions about your pension and benefits records, you can get in touch with Mercer, the Plan Administrator: Tel: 0870 240 0569 Email: [email protected] Address: Mercer Limited, 26 Blythswod Square, Glasgow, G2 4BP

Getting in touch with the Trustee You can speak to Tim Carney (Pensions Manager and Secretary to the Trustee) on: Tel: 020 7951 8669 (ext. 18669 or ext. 11454)

Our advisers Running a pension scheme requires specialist knowledge. The Trustee is responsible for making the decisions which affect the day to day running of the Plan, but we also use the help and support of a team of professional advisers when we need it. Plan Actuary James Todd, Mercer Limited & Administrators Mercer Limited Investment Consultants Mercer Limited Legal Adviser Cameron McKenna Auditors LLP This newsletter was designed and produced by Hymans Robertson LLP.