Pensions Update. Mitchells & Butlers Pension Plan. Autumn 2011 Edition. In this Edition: Defined Contribution (DC) and Defined Benefit (DB) Sections

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1 Autumn 2011 Edition Pensions Update Mitchells & Butlers Pension Plan Defined Contribution (DC) and Defined Benefit (DB) Sections In this Edition: 02 DC Annual Accounts 05 DC/DB Legislative Changes 07 Eligibility to Join DC Choice 08 Summary of Improved Benefits 08 Review of Investment Options 08 Your Pensions Online 09 DB Annual Accounts 12 DB Summary Funding Statement 16 DB Closure to Future Accrual 16 Levelling Option 17 CPI or RPI 17 Pension Overpayments 18 Member Nominated Trustee Director 19 Plan Pension Increase

2 DC Annual Accounts The Annual Report for the Mitchells & Butlers Pension Plan for the year ended 31 March 2011 is available on the pension website or on request from the Pensions department, Mitchells & Butlers plc, 27 Fleet Street, Birmingham B3 1JP. Chairman s Report The following is an extract from the Chairman s Report relevant to the DC section. 2 When I wrote my last Chairman s Report in August 2010, the world economic situation was showing positive signs of recovery, with major fiscal initiatives in place throughout the world to kick start economic activity from the depths of a severe recession. However, towards the end of the financial year (to 31 March 2011), there were a number of shocks to the economic system, as significant levels of political unrest in the Middle East coincided with a major earthquake and tsunami in Japan which precipitated a nuclear power crisis. However, despite these events, equity markets were remarkably resilient as corporate profit performance remained strong, returning over 7% during the year. With similarly positive investment returns from bonds and property, most DC members made positive investment returns building on the strong returns in 2009/10. The following provides a summary of the Annual Report, as it relates to DC Choice members. Assets The total value of DC Choice at 31 March 2011 was 10,851,000 an increase of 1,577,000 (17.0%) during the year. This increase in funds is broken down as follows: Increase / (decrease) in fund value ,286 (756) (608) (351) 27 Company Contributions Return on investments Members' Contributions Transfers in Leavers Transfer to DB Section Benefits payable (1,000) (500) ,000 1,500 2,000 2,500 '000

3 The increase in the fund value was the result of additional member and Company contributions, and from the positive return on investments. Company contributions include 831,000 paid under the NICwise scheme, and 2.5% of active DC Choice members salaries to meet the costs of life assurance, incapacity benefits and administrative and investment charges until closure of the DB Section on 12 March On closure of the DB section to future accrual and segregation of the DB and DC sections assets, 608,000 of non member specific assets within the DC section of the Plan were transferred to the DB section of the Plan. Investment returns for the year were positive by 815,000, after investment management costs of 27,000. How members invest There were no changes to the funds available to members, during the year. These comprised 10 index tracking funds managed by Legal & General Investment Management and BlackRock Asset Management, and 6 actively managed funds (i.e. those where the manager is attempting to outperform the index). BlackRock Asset Management manage the following actively managed funds: DC Balanced Growth Fund a multi asset class fund 50:50 Global Growth Fund investing in UK and global equities UK Growth Fund investing in UK equities Sterling Bond Fund investing in UK government and corporate bonds DC Property Fund investing in UK property A sixth actively managed fund, an overseas equity fund, is managed by Newton Investment Management. Whilst all funds had some investments in them at the year end, most DC section members invest via the default LifeStyle option in the Index-Tracking Global Equity Fund, before switching to bonds and cash as retirement draws closer. As a result, 92% of DC Choice funds were invested in that fund at the year end, with 96% of DC Choice funds invested in equities. 3 At 31 March 2011, 3.3% of total investments were held in actively managed funds (2.8% as at 31 March 2010). DC Section members held AVC (Additional Voluntary Contribution) investments of 456,000 at the year end.

4 How did investments perform? The annual return made by each of the funds during the year ended 31 March 2011 is shown below: Index Tracking UK Long-dated Gilt Cash Active Sterling bonds Index Tracking Index-linked Gilt Active Property Index Tracking Japan Active Overseas equity Active Balanced Index Tracking US equity Index Tracking Continental Europe equity Active Global equity Index Tracking Global equity Index Tracking World (ex UK) equity Index Tracking UK equity Active UK equity Index Tracking Pacific ex Japan equity 0.7% -3.8% 5.9% 7.1% 6.8% 7.4% 8.1% 8.3% 7.6% 9.5% 9.6% 8.9% 10.2% 11.4% Benchmark Return Actual Return 11.6% 14.8% (5%) 0 5% 10% 15% 20% 4 The performance of active managers was generally positive during the year, with notable out-performance of 3.0% from the Overseas equity fund and 2.9% from the UK equity fund. Japanese markets suffered in the wake of the earthquake and nuclear disaster. Plan membership Plan membership increased from 1,019 to 1,961 during the year. This includes 457 members (286 last year) who are no longer contributing, but whose funds remain within the Plan. 1,950 1,961 1, , Members 31 March 2010 New Members -31 Leavers Members on Retirements Deaths Members DB Section Closure 31 March 2011

5 Legislative Changes HM Revenue & Customs (HMRC) Allowances Annual Allowance n The Annual Allowance is set by HMRC and is the maximum annual amount that can be saved each Pension Input Period in registered pension schemes and receive tax relief. n The Pension Input Period for the Plan is the same as the tax year, i.e. 6 April to 5 April. n Savings above the Annual Allowance will result in the individual paying tax at their marginal rate on any excess. The Finance Act 2011 implemented the following: n For the tax years 2011/12 until at least 2015/16, an Annual Allowance of 50,000. n Any unused Annual Allowance can be carried forward for 3 years (but the Annual Allowance for this purpose will be deemed to be 50,000 for the tax years 2008/09 to 2010/11). n The Annual Allowance applies in each year pension savings are made including the year in which benefits are drawn. 5 Lifetime Allowance n The Lifetime Allowance (LTA) is also set by HMRC and is the overall ceiling on the total amount of savings that any one individual can accumulate in registered pension schemes without becoming liable to an additional tax charge. n Benefits will be tested against an individual s Lifetime Allowance when they become payable. Benefits already taken from other registered pension schemes will be taken into account when calculating the Lifetime Allowance remaining for Plan benefits. Savings above the Lifetime Allowance taken as cash will currently be taxed at 55%. Savings above the Lifetime Allowance taken as pension will currently be taxed at 25% plus pension income will be taxed at an individual s marginal rate. n For the tax year 2011/12 the standard Lifetime Allowance is 1.8m. n For the tax year 2012/13 the standard Lifetime Allowance is 1.5m. n The capitalisation factor for DB benefits is 20. (For example if your annual DB pension is 5,000 the value for LTA is 5,000 x 20 = 100,000). n There will be a new form of protection called fixed protection. Anyone who has pension savings in a registered pension scheme, and who does not have primary or enhanced protection, can apply for fixed protection. You are only likely to need fixed protection if you think that your benefits from all registered pension schemes will be more than 1.5 million when you take your benefits. If you want to apply for fixed protection this is your responsibility. There is a prescribed form which you need to complete and return to HMRC by 5 April 2012 (form APSS227 available on the HMRC website) if you wish to apply for this protection.

6 Monitoring Your Allowances It is your responsibility to monitor all your registered pension scheme benefits (including any benefits from the DB Section and DC Section of the Mitchells & Butlers pension plans) against your Allowances. If you have substantial pension savings it is recommended that you seek independent financial advice. Pension Annuity Requirements 6 n With effect from June 2010, legislation raised the age at which members of defined contribution pension schemes must secure an annuity from 75 to 77. n With effect from 6 April 2011, the Finance Act 2011 has removed the requirement that members of defined contribution pension schemes must secure an annuity instead they can draw down income from their savings while leaving them invested. There is a limit to the amount that can be drawn down in any year, except for those who have a secured annual income of at least 20,000 from other sources. Such members can withdraw the balance of their funds whenever they choose. Any such withdrawal is subject to tax. The Trustees are currently considering the impact of these changes on Plan benefits. State Pension Age Current State Pension Ages are shown in the table below Gender When were you born? State Retirement Date State retirement age Male Born on or before 5 April 1959 By 5 April Female Born on or before 5 April 1950 By 5 April Female Female Male or Female Born on or after 6 April 1950 but before 6 April 1955 Born on or after 6 April 1955 but before 6 April 1959 Born on or after 6 April 1959 Between May 2010 and March 2020 Between 6 April 2020 and 5 April 2024 Rising from 60 to Increase from age 65 to 68 The 2011 Pensions Bill proposes bringing forward the timing of equalisation of state pension age between men and women and the rise in the State Pension Age from 65 to 66 for both men and women. Under this proposed legislation (which remains subject to change): n women s state pension age will reach 65 by November n the rise from 65 for both men and women will begin in December 2018 and reach 66 by October 2020.

7 Auto-Enrolment The Pensions Act 2008 requires employers to auto-enrol eligible workers into a workplace pension scheme that meets certain standards (a qualifying scheme ). This change will be introduced in stages over four years starting on 1 October Each employer will be allocated a staging date from when the duties will first apply to them; Mitchells & Butlers staging date is anticipated to be 1 January We set out the key principles of this legislation below (but please note this information is subject to change). Employees meeting the following criteria must be auto-enrolled into a qualifying scheme: n Not already an active member of a qualifying scheme n Aged between 22 and State Pension Age n Working in Great Britain n Earning above 7,475 a year (this figure may change). Employers may choose which qualifying scheme they use to meet auto-enrolment legislation. The National Employment Savings Trust (NEST) has been established by Government to help employers meet their new duties. Employers can use NEST if they wish; if they do use it, they can use it on its own or alongside other qualifying schemes. One of the criteria for a money purchase scheme such as DC Choice to be a qualifying scheme is the level of contributions. The contribution requirements are being phased in over several years as follows: n October 2012 to September total minimum of 2% of qualifying earnings with at least 1% from the employer. n October 2016 to September total minimum of 5% of qualifying earnings, with at least 2% from the employer. n From October 2017, total minimum of 8% of qualifying earnings, with at least 3% from the employer. The Company is currently considering its approach to meeting auto enrolment legislation. 7 Eligibility to Join DC Choice The eligibility criteria for joining DC Choice changed on 8 May From that date the following employees may apply to join DC Choice: n All Corporate employees. n All Licensed House Managers. n Other Retail Management who joined the Company on or before 7 May 2011 and have continuous employment since that date. n Retail Staff who joined the Company on or before 5 April 2006 and have continuous employment since that date. Employees not eligible to join DC Choice may join a Personal Pension arrangement with the Prudential. For Assistant Managers, Kitchen Managers and Other Retail Management employees the Company will match on a 1 times basis employee contributions of 1%, 2% or 3% of Base Salary. For Retail Staff there is no matching Company contribution.

8 Summary of Improved Benefits The following improved DC Choice benefits were implemented with effect from 13 March 2011: n DC member contributions of 4% or 5% of Plan Pay will be matched by the Company on a 1.5 times basis (previously 1 times). This will deliver a combined member and Company matched contribution of 10% or 12.5% of Plan Pay. Plan Pay is your basic salary plus any Pensionable DC Supplement Pay. Members who currently make pension contributions of 3% Plan Pay may continue to contribute at this level and will also receive matching Company contributions of 1.5 times. n Members may continue to pay additional voluntary contributions (AVCs) but these will not be matched by the Company. AVCs will be credited to the members DC Choice account. n Life assurance cover for members contributing to the Plan each pay period will be six times Benefit Pay (previously four times). Benefit Pay is annual rate of basic pay at the date you die, or your total Plan Pay for the previous twelve months if greater. n 1 times Benefit Pay life cover will continue to apply to those employees who are eligible to join the Defined Contribution section of the Plan but who elect not to do. Review of Investment Options Your DC Choice account is invested by the Trustee in accordance with your investment choice. One of the responsibilities as Trustee is to offer you appropriate investment choices for your DC Choice account. The Trustee is currently reviewing the investment options available to DC Choice members and the LifeStyle investment pattern. Should the review result in any changes the Trustee will write to all members. Please note that any investment changes will not affect the benefit structure of DC Choice. 8 Your Pensions Online BlackRock Pensions offers you the opportunity to access your pension account 24 hours a day. This allows you to: n Monitor your account balance, transactions and contributions. n Review your investment funds and submit switches between funds. n Obtain quarterly fund fact sheets and daily fund prices. n Access current pensions news. n Use BlackRock s online calculators and tools to plan for your retirement. n Change your contact details. You have automatically been registered to use Your Pension Online and a letter informing you of your password has been sent to you. If you have problems accessing your account call the BlackRock helpline

9 DB Annual Accounts Chairman s Report An extract from the Chairman s Report is set out below: This has been an historic year for your Plan, with the cessation of future accrual for employee members of the DB section on 12 March 2011 and the coincident introduction of replacement DC arrangements. Following a three month Company / employee consultation period in the summer of 2010, the Trustee Directors considered carefully the Company s proposal in the context of the professional advice received, noting in particular that members past benefits were protected and that the Company had met its statutory obligations. On this basis, the Trustees agreed to amend the Trust Deed & Rules to implement the proposed changes. A substantial amount of work ensued which was undertaken by the pensions team, the DB section administration team at Mercer and the DC section administration team at BlackRock. As I write it appears that a smooth transition has been achieved and I thank them all for their hard work and professionalism. 9 Earlier in the year, the March 2010 actuarial valuation was completed, and a funding recovery plan agreed with the Company designed to achieve full funding of the Plan by When I wrote my last Chairman s Report in August 2010, the world economic situation was showing positive signs of recovery, with major fiscal initiatives in place throughout the world to kick start economic activity from the depths of a severe recession. However, towards the end of the financial year (to 31 March 2011), there were a number of shocks to the economic system, as significant levels of political unrest in the Middle East coincided with a major earthquake and tsunami in Japan which precipitated a nuclear power crisis. However, despite these events, equity markets were remarkably resilient as corporate profit performance remained strong, returning over 7% during the year. With similarly positive investment returns from bonds and property, the Plan s DB section assets made a 7.4% return, building on the 25% return achieved in the previous year. Payments in respect of DB section member benefits exceeded income by 8.0 million during the year, but this was outweighed by the positive investment returns, resulting in the DB Section s assets growing by 64.4 million, adding to last year s million growth. As detailed in last year s Report, the actuary undertook a full triennial actuarial valuation as at 31 March 2010, which was finalised in July The Trustee agreed two significant changes in the funding assumptions from those applied in the 2007 valuation. The available evidence points to continued improvements in life expectancy of the Plan members. As a result the actuarial valuation adopted more prudent life expectancy assumptions than previously, which increased the Plan s liabilities. The government bond markets continued to anticipate a historically low interest rate environment, following the government s policy of quantitative easing. The Trustee agreed that, whilst the value of the liabilities should be determined using an investment return which reflects UK government bond rates, the valuation would include a one off adjustment to the forecast return to recognise the potential for rates to recover to more normal levels in future years. Using these assumptions, the estimated funding deficit at 31 March 2010 was 296 million.

10 In order to safeguard the benefits of the DB Section members, the Trustee Directors and the Company agreed a deficit recovery plan, targeting full funding of the Plan by 2020, whereby the Company will make annual payments of 29.6 million from August During the financial year to March 2011, the Company made deficit contribution payments of 27.9 million. Despite this, and the positive investment performance, as a result of continued low gilt yields the estimated funding deficit had increased slightly to 299 million by 31 March Summary Report A summary of the Trustee s Annual Report for the Year Ended 31 March 2011, as it related to DB section members, is laid out on these pages. A full copy, which includes both DB and DC sections of the Plan is available on the Pensions website or on request from the Pensions Department, Mitchells & Butlers plc, 27 Fleet Street, Birmingham B3 1JP. 10 Assets At 31 March 2011 the Plan held assets of 1,087.3 million relating to the DB section. The vast majority of the Plan s assets are held as units within the Mitchells & Butlers Common Investment Fund (CIF), which combines the investments of the Plan with those of the Mitchells & Butlers Executive Pension Plan. At 31 March 2011, the Plan owned 75% of the CIF by value, amounting to 1,081.5 million. In addition to the CIF holdings, the Plan held AVCs valued at 4.9 million and had Net Current Assets of 0.9 million. 28.7% 0.4% 1.4% 27.9% Overseas equities UK equities UK bonds Overseas bonds UK Index Linked bonds Property Cash and other 6.2% 5.5% 29.9% The allocation of the CIF s assets by asset class at 31 March 2011 is shown above.

11 Increase in Fund during the year to 31 March 2011 The 65.0 million increase in funds during the year is broken down on the chart below. Whilst benefit and other payments exceeded the amounts received into the Fund (primarily contributions) by 7.4 million, the increase was driven by positive investment returns. Increase / (decrease) in fund value (38.3) (1.4) (3.1) 0.5 Return on investments Contributions receivable Transfer from DC Section Other income Administrative expenses Leavers Benefits payable (60) (40) (20) m Fund Investment Performance 11 The chart below shows how the CIF s investments have performed over the last 1, 3 and 5 years. In addition to showing the investment return against inflation (RPI), the chart shows how the CIF has performed in relation to the overall benchmark return (which reflects the return expected from the strategic asset mix) for each time period Fund Benchmark Inflation %age return p.a year 3 year 5 years

12 Membership Numbers Overall DB section membership numbers continued to decline slowly, the closed nature of the Plan resulting in a 1.3% fall in overall membership to 26,576. The DB section was closed to future accrual on the 12 March 2011 and all members in service at that date became employed deferred members and eligible to join the DC section of the Plan Members in Service Employed Deferred Deferred Pensioner 16,536 16, ,389 9, , Summary Funding Statement What is the purpose of this statement? This statement deals with the financial security of the Defined Benefits (DB) section of the Mitchells & Butlers Pension Plan (the Plan ). It has been produced by the Plan s Trustee in order to: 1) Provide a summary of the results of the latest actuarial valuation. 2) Set out the Trustee s funding objectives for the Plan. 3) Outline the steps being taken to improve the funding of the Plan. How does the Plan work? The benefits of DB section members are set out in the Plan s rules and are based on the member s final salary at retirement or earlier leaving, or on the member s salary at 12 March 2011, when the DB section closed to future accrual. Benefits are paid to members from the Plan s assets. For management purposes, the Plan s DB section assets are combined with those of the Mitchells & Butlers Executive Pension Plan to form a Common Investment Fund (CIF). The assets of the CIF are held entirely separately from those of Mitchells & Butlers plc (the Company ), in the care of a corporate trustee Mitchells & Butlers CIF Limited whose role is to ensure that the CIF is administered according to the Rules of the participating pension plans and to safeguard the Plans assets. The assets are not held in separate funds for each individual member. The Company pays contributions into the plan but member contributions have ceased from 12 March 2011.

13 What is an actuarial valuation? How is it used? Periodically the Plan s Actuary assesses the financial position of the Plan by carrying out an actuarial valuation. The main purpose of the valuation is to help determine the contributions payable into the Plan. It also helps the Trustee to set the investment strategy for the Plan s assets. An actuarial valuation must be carried out at least once every 3 years and an actuarial valuation was completed as at 31 March The next triennial valuation is planned for 31 March As part of the valuation, the Actuary estimates the cost of providing the benefits earned to date, taking into account members life expectancy, the effects of future salary growth capped at 2% per annum and inflation. These are the Plan s liabilities. The value of the assets which are needed to meet those liabilities partly depends upon the anticipated returns from those assets. The Trustee has decided to set the target value of those assets using a prudent valuation method, which assumes that the Plan continues in the long term and will make investment returns in line with those achieved by investing in government bonds (gilts), plus 0.45% per annum. This adjustment recognises the historically low bond yields in place at 31 March 2010, following the government s policy of quantitative easing. 13 The results of the Plan s valuation at 31 March 2010 on this basis were: million Assets held 988 Funding target 1,284 Shortfall (296) Funding level 77% How does the Trustee intend recovering this funding shortfall? The Trustee takes the financial strength of the Company into account when agreeing the contribution and recovery plan with the Company. It has therefore been agreed with the Company that the funding shortfall as at 31 March 2010 would be recovered within 10 years of the valuation date (the recovery period ). This is planned to be achieved by a combination of additional contributions by the Company and achieving above gilt investment returns from the assets held.

14 How does this affect the level of Company contributions? In order to achieve the Plan s funding objectives additional contributions are necessary. The Trustee and Company have agreed rates of Company contributions to the DB section of the Plan of: 1) million by 30 September ) million per month from 1 October 2010 to 31 March ) The cost, if any, of members retiring under Early Retirement Facility ( ERF ). The above contributions include ERF costs should the combined costs of the Plan and the Mitchells & Butlers Executive Pension Plan not exceed 5.0 million in the year ended 31 March 2011 or 10.0 million in the three years ended 31 March Any ERF costs in excess of these limits and all ERF costs after 31 March 2013 will also be funded by additional Company contributions. 4) An additional contribution equal to the Pension Protection Fund (PPF) levy if met by the Plan in the first instance. These contributions are unaffected by the closure of the DB Section to future accrual on the 12 March In addition, in order to fund future service benefits the Company contribution rate was established at 19.9% of the pensionable salaries of DB section members, effective from 1 August 2010 until March As a result of the decision to close the DB section of the Plan to future accrual, employer contributions in respect of future service benefits ceased on 12 March The Plan rules require that no payments can be made by the Plan to the Company and no such payments have been made. We are obliged by law to tell you whether or not the Pensions Regulator has intervened to modify the Plan or impose a schedule of contributions. The Pensions Regulator has not taken any such action in relation to the Plan. How are the Plan s assets to be invested? The Trustee has completed the process of formulating an investment strategy with the investment consultant, designed to achieve the Statutory Funding Objective by March The target asset allocation at 31 March 2011 was 65% bonds, 34.6% equities, 0.4% property.

15 How has the funding position changed during the period to 31 March 2011? At 31 March 2011 the funding shortfall was calculated at 299 million ( 296 million in 2010), using the assumptions within the March 2010 actuarial valuation. The benefits of strong investment returns and additional contributions received during the year have been offset by the continuation of low gilt yields. What is the current solvency position? As at 31 March 2011, the actuary provided an estimate of the cost of an insurance company taking on the Plan s liabilities ( buying out the Plan) at 1,650 million. The estimated buy out liability at 31 March 2010 was 1,473 million. Over the last year there has been an increase in the cost of buy outs due to a reduction of capacity in the buy out market and a strengthening of the terms charged by insurers. 31 March 2010 million 31 March 2011 million Assets held 1,017 1,081 Buy out cost 1,473 1,650 Shortfall (456) (569) Funding level (%) 69% 66% What happens if the Company is unable to meet its commitment to the Plan? The Trustee monitors the Company s ability to continue to support the Plan and developments in the funding position. The Trustee appointed independent experts to assess the strength of the Company, and the outcome of this review was taken into account in determining the recovery plan. There is a safety net for members of occupational pension schemes that have to wind up in the form of the Pension Protection Fund (PPF). To benefit from the PPF the employers must generally be insolvent and the assets of the Plan insufficient to secure the pensions covered by the PPF. 15 Briefly, the PPF will provide DB members and pensioners below normal pension age with 90% of their accrued pension, subject to a cap. This cap currently limits compensation to around 29,897 per annum at normal pension age. Pensioners over normal pension age and incapacity pensioners will receive 100% of their uncapped pension. However, in all cases, future increases to pensions in payment will be lower than the rates applicable under the Plan and there are some other differences compared with Plan benefits. Further information and guidance is available on the PPF website at Alternatively you can write to the Pension Protection Fund at Knollys House, 17 Addiscombe Road, Croydon, Surrey, CR0 6SR.

16 Is there anything else that I need to know? Further information on the Plan s funding and investment principles can be found in the documents listed below, which are available on request from the Pensions Department, Mitchells & Butlers plc, 27 Fleet Street, Birmingham, B3 1JP. The Plan Accounts for the year ended 31 March 2011 also provide investment and funding information and are available via the website or on request. Similarly, the Handbook is available on the website or on request from the Pensions Department. If you are thinking of leaving the Plan for any reason, you should obtain professional advice (e.g. consult an independent financial advisor) before taking any action. Additional documents available on request Statement of Funding Principles this explains how the Trustee manages the Plan with the aim of continuing to provide the benefits that members have built up. Statement of Investment Principles this sets out how the assets of the Plan are invested. Schedule of Contributions this confirms the contributions being paid into the Plan by the Company and members. Report on the Formal actuarial valuation as at 31 March 2010 and the latest actuarial report as at 31 March 2011 these contain details of the funding position of the Plan. 16 Closure to Future Accrual In the last edition of Update we reported that the Company had commenced consultation on the future of the Defined Benefit section of the Plan. In November 2010 the results of the consultation and the announcement of closure to future accrual from 13 March 2011 were communicated to active members by the Company. All members of the DB section of the Plan who are still employed by the Company are now classed as employed deferred members. An employed deferred member is defined as a member of the Plan who was in DB Pensionable Employment on 12 March 2011 and has been employed continuously by the Company since that date and is still employed by the Company. On 13 March 2011 all employed deferred members, unless they requested otherwise, were transferred to DC Choice. DB closing statements and handbooks have been issued to employed deferred members. Levelling Option The Plan has a levelling option which, subject to Trustee consent, enables you to have a higher Plan pension up to an age determined at your date of retirement in return for a lower pension thereafter. The age to which you level would not necessarily be your State Pension Age; your levelling age is determined by the Trustees after taking into account relevant information including your expected State Pension Age and legislation. At retirement, before you select the levelling option, you will be notified of the age at which your Plan pension will reduce. Regardless of any changes to your State Pension Age, the age to which your higher pension will be paid will not change after you have started to receive your Plan pension. This means your pension may reduce before you are entitled to your State Pension.

17 There are currently potential tax issues if the levelling supplement of your pension is stopped after age 65. The Trustee will monitor legislation and update members when further changes are made. The Trustee has written to all pensioners who were in receipt of the higher (unreduced) levelling pension on 1 September If you think that you may be affected and haven t received a letter, please contact the Administrator. CPI or RPI The Government is now using the Consumer Prices Index (CPI) instead of the Retail Prices Index (RPI) as the measure of inflation when increasing pensions in payment, and as the measure for revaluation for deferred pensions. The Plan s DB Rules confer increases (in payment and deferment) based on RPI, for the part of your pension that exceeds your Guaranteed Minimum Pension. These RPI increases will therefore continue to be provided despite the Government s change in policy. 17 Your increases and revaluation will not be less than any applicable statutory minimum required by legislation. Pension Overpayments Any pension instalment paid after a pensioner s date of death is reclaimed from the recipient of the pensioner s estate, usually the next-of-kin. If there are further benefits payable, for example a spouse s pension or a lump sum, these benefits may not be paid until the overpayment has been returned. Payments made after your death are made to your estate which makes the Plan s Trustee a creditor of your estate. Your next-of-kin / Executor / legal representative therefore has a legal obligation to return the overpayment to the Plan. If the funds in the estate are misapplied (for example by improperly paying the overpaid pension to anybody other than the Trustee) your next-of-kin / Executor / legal representative may be held personally liable for the sums which are incorrectly paid. The Trustee will take legal action to recover overpayments to the maximum extent permitted by law. It is important that your family, particularly your next-of-kin, is made aware of their duty to return any payments made by the Plan after your date of death. They should also be made aware that the Administrator should be notified as soon as possible in the event of your death. See back cover for contact details of the Plan s administrator.

18 Member Nominated Trustee Director The management of the Mitchells & Butlers Pension Plan, which comprises both DC and DB benefits, is the responsibility of the Trustee Directors. There are 9 Trustee Directors, three of whom are Member Nominated Directors (MNDs). 18 The pensioner member MND position will become available in June The Trustee Directors are currently considering the nomination and selection process for this vacancy and will write early next year to pensioners who are eligible to apply. What are the responsibilities of the Trustee Directors? The trustees are responsible for all aspects of the administration of the Plan and looking after the financial assets that provide the benefits. Trustees have to act according to general trust law and must observe detailed legislation and regulations governing pension schemes. Trustee Directors are not responsible for negotiating benefit changes or pension increases. Each Trustee Director needs to be conversant with the Trust Deed and Rules and the many other legal documents relating to the Plan. Legislation sets out specific areas of knowledge and understanding which all Trustee Directors are required to demonstrate including knowledge of the principles of investment. The Board requires that all Trustees complete the Pensions Regulator s Trustee Toolkit within 6 months of being appointed ( What is the time commitment? Normally there will be a minimum of 4 Board meetings each year which are generally held in central Birmingham. Additionally each Trustee Director will be a member of at least one committee; this is likely to increase the number of meetings each year to 10 or more.

19 Where can I find more information? The Pensions Regulator has produced Guidance for Trustees which provides more information about what being a trustee involves and outlines trustee responsibilities. You can access a copy of this document at Plan Pension Increase Under the Rules of the Plan your pension is subject to an annual review each October. The rate of the review for the part of your pension in excess of any Guaranteed Minimum Pension (GMP) is the percentage change in the Retail Prices Index (RPI) during the year ending the previous 31 May, up to 5%. The increase in RPI in the year to 31 May 2011 was 5.2%; therefore pensions in payment, deferred pensions and employed deferred pensions at 12 March 2011, in excess of the Guaranteed Minimum Pension (GMP), were increased by 5% with effect from 1 October

20 Keeping in touch DC Choice (DC) Section If you have any questions about the DC Choice subjects covered in this Update or if you have any general queries about your DC pension, please contact the DC Choice administration team at: BlackRock Pensions Administration Centre, PO Box 704, Peterborough PE1 1WL Telephone: Please help us to keep you informed by letting BlackRock know if you change your address. You can also find lots more information about the Plan and copies of recent newsletters on our website at Defined Benefit (DB) Section If you have any questions about the Defined Benefit subjects covered in this Update or if you have any general queries about your DB pension, please contact Mercer, the Administrator, at: Mitchells & Butlers Pensions, Mercer, Stratford Court, Cranmore Boulevard, Solihull, West Midlands B90 4QT Telephone: (Helpline) +44(0) (Switchboard) Beneficiary and Partner Nomination Forms Beneficiary/Dependant Forms (DC) and Beneficiary and Partner Nomination Forms (DB) should be updated every 3 years. Forms are available from the appropriate Administrator or on the pension website. More information on whether you need to complete a form has been included in previous editions of Update which can be found on Important Note The benefits provided by the Plan are governed by the Plan s Trust Deed and Rules (copies of which are available on request). Nothing in this Update confers any right to benefits save as provided by the Trust Deed and Rules and in the event of any inconsistency between this Update and the Trust Deed and Rules, the Trust Deed and Rules prevail. This Update does not constitute legal or financial advice and should not be relied upon as such. The descriptions of legislation in this Update are intended as a basic guide only, not a comprehensive or exhaustive guide to the legislation.