pension matters For BCSPF members of the Bayer Group Pension Plan December 2013

Transcription

1 pension matters For BCSPF members of the Bayer Group Pension Plan December 2013

2 2 PENSION MATTERS...the newsletter for Defined Benefit (DB) members of the Bayer Group Pension Plan (the Plan). Welcome to Pension Matters... Our aim for this newsletter is to bring you up to date with recent Plan developments as well as general pension related news that may affect you. Since our last edition there have been a number of significant developments to tell you about. We have made a decision to tailor Pension Matters so that you only receive information relevant to your DB membership, and it s more meaningful to you. As you will see from the Report & Accounts and Summary Funding Statement details, the Plan has enjoyed significant gains on its overall investments. When this is combined with the Company s contributions the overall funding position of the Plan has improved from 87% to 90%. The Trustee is pleased with this improvement but will continue to work closely with Bayer to ensure there is enough money in the Plan to pay benefits now and in the future. We recently launched our new website, which makes information about the Plan more readily available. You can now access forms and documents when you need to and find the answers to frequently asked questions. Having this website has also enabled us to go paperless for general Plan communications like Pension Matters. For active members going paperless is automatic.

3 3 PENSION MATTERS Our pensioner and deferred members can sign up on our website. Not only does going paperless make it more convenient for our members that prefer not to manage paper documents, but you ll be doing your bit for the environment by cutting down the amount of paper we send out. I hope you find this edition of Pension Matters useful and informative. As always, we value your feedback on our communications, so please do get in touch with your comments. If you require any further information about your benefits from the Plan please contact us using the details on the back page. Chairman of the Trustee If you haven t already, please consider if you could go paperless more details are provided on pages 6 and 7. Finally, I would like to make you aware of some changes to the Trustee Board. Following a review of the Board structure earlier this year the decision was made to reduce the size of the Board to nine Trustees. As a result the number of Member Nominated Directors (MNDs) has reduced from four to three to reflect the size of the Board.

4 4 PENSION MATTERS Check out our new website! We recently launched our new website to help you access information about the Plan online whenever you like. If you haven t been onto the website, take a few minutes to have a look at what it has to offer Clear navigation making it easy to find the information you want Answers to frequently asked questions Access to Plan literature including various forms Action! Visit the website at

5 5 PENSION MATTERS Pensioner member wins our ipad Mini competition One of our pensioner members has been selected as the lucky winner of our ipad Mini competition. Active members that gave us feedback, or deferred and pensioner members that went paperless on our new website, were automatically entered into a prize draw and a winner was selected at random. I am delighted to have won the mini ipad and I look forward to learning how to use it. Since retiring, I have started to paint and the ipad will be a brilliant help with my artwork as I will now be able to have images directly beside me.

6 6 PENSION MATTERS Go paperless With more people having access to the internet and using , and following a change in the law in 2010 allowing us to do so, we have decided to go paperless. Why? There are three main reasons why we want to go paperless: To speed up issuing documents and notices To reduce the amount of paper used To reduce printing and postage costs

7 7 PENSION MATTERS If you re an active member... you go paperless automatically and we issue any generic communications to your company address. or If you re a deferred or pensioner member... all you need is access to the internet and an address, then follow these three easy steps: Go to our website, Click on the go paperless button Follow the instructions to submit your details It s as simple as that. Next time we issue Pension Matters or make a general announcement, we will notify you by sending an . If you can t or don t want to sign up now, you don t need to do anything; we will continue to send you paper documents. If you want to sign up at any time in the future, visit our website. Action! Please note: you will need your full National Insurance number and date of birth to validate your identity.

8 8 PENSION MATTERS Annual Report for the year ended 31 March 2013 Below is a summary of the information contained in the Trustee Report and Accounts for the year ended 31 March You can obtain a copy of the full Report from Capita (see details on back page). Plan Finances Group DB Section BCSPF Section SHCL Section DC Section Total Membership 3,176 3,325 Active Pensioners Deferred Active Deferred 000 s 000 s 000 s 000 s 000 s Net Assets as at 1 April , ,396 83,258 47,571 1,054,956 Company and Member Contributions and Transfers In 5,819 21, ,615 36,544 Benefits and Administrative Expenditure Net Return on Assets Net Assets as at 31 March ,371 25,685 2,444 2,016 46,516 62,552 60,644 12,118 6, , , ,308 93,089 60,828 1,186, DB only DC switch DB only DC switch DB only DC switch Group DB BCSPF SHCL DC

9 9 PENSION MATTERS Plan Assets The Plan invests in three main asset types: Equities, Bonds and Property. We also hold Cash to meet the payment of benefits. The majority of assets are invested passively which means they broadly follow market movements. You will no doubt have heard of these asset types, but below is a brief explanation of each type: Equities involve buying stocks and shares in listed companies. Historically, investment in equities have delivered higher returns than other investment asset classes, however, they are also seen as the riskiest. Bonds are loans issued by companies or governments when they need to raise money. Bonds issued by the UK government are known as Gilts. The returns from bonds tend to be lower but more consistent than Equities. Property is traditionally bricks and mortar. There are five main types of property that can be invested in office, retail, industrial, leisure and residential. Returns represent any growth in the capital value of the properties, plus a share of the rent paid by tenants after costs. Cash investments include bank or building society accounts, bank deposit certificates and cash funds provided by investment management companies. They are the most secure of asset classes but offer the lowest level of returns. Asset allocation as at 31 March 2013 Total World Equities Value ( m) Plan (%) BlackRock L&G Total Bonds (all L&G) UK Corporates UK Gilts UK Index Linked Gilts Total Property CBREI L&G REITS Total Cash Total Assets 1,

10 10 PENSION MATTERS 2013 Summary Funding Statement BCSPF section The purpose of this statement is to explain how the money building up in the Plan compares with the funds needed to provide the benefits due to members. Legal requirements demand that we provide this information in a certain way so our aim is to comply with these requirements while still presenting the information in a helpful and understandable format. You do not need to take any action, but we hope you will find the information useful and be reassured about the security of your benefits during these unsettled economic times. Overview The past year has been a reasonably positive one for UK pension funds. Although the yields available on UK Government bonds have dropped slightly over the year which has meant that the amount of money we need to hold (the technical provisions ) has increased, the Plan s assets have grown strongly, particularly in the latter part of the period. As a result, the deficit at 31 March 2013 is lower than it was a year ago, although it is still rather larger than the deficit at 31 March Nevertheless, we are confident that, with the recovery plan in place and with the support of Bayer AG formalised through the guarantee highlighted in last year s statement, we remain in a good position to continue to provide all benefits in full as they fall due.

11 11 PENSION MATTERS Valuation results To check the Plan s funding position, the Actuary compares the amount needed to provide benefits due (technical provisions) against the assets (shares, bonds, property) it holds to pay them. If the value of the assets is less than the value of the technical provisions, the Plan is in deficit. If the value of the assets is more than the value of the technical provisions, the Plan is in surplus. The latest assessment of the Plan showed that, on 31 March 2013, the funding positions of the BCSPF Section, and the Plan as a whole, were as follows: BCSPF Section Plan Assets to meet benefits due 557m 423m 462m 1,124m 1,001m 924m Amount needed to provide benefits (technical provisions) 681m 650m 551m 1,299m 1,222m 1,025m Deficit 124m 157m 89m 175m 221m 101m Funding position 82% 76% 84% 87% 82% 90%

12 12 PENSION MATTERS Change in the funding position Since March 2012 (the date of the last Statement), the deficit has reduced from 157m to 124m. This means the funding position has changed from 76% to 82%. This reflects a positive return on the Plan s assets over recent months and the contributions paid by Bayer: these have more than offset the impact of continued falls in the returns available on Government bonds. 700m Technical provisions Assets 600m 551m 650m 500m 400m 462m 423m 681m 557m March 2011 March 2012 March 2013 What action is being taken to tackle the deficit? The Trustee and Bayer are required to review and agree the contributions payable to the Plan at each formal valuation. As part of the 2011 valuation, the Trustee agreed a revised Recovery Plan with Bayer to make up the deficit. How is this valuation calculated? To establish the value of technical provisions and, in turn the assets and contributions the Plan will need, our Actuary has to make a number of assumptions about the future. These include: future investment returns; life expectancy rates; future inflation expectations; and the demographics of the membership. A full set of assumptions is set out in the Statement of Funding Principles. How is the amount the Plan needs worked out? The Trustee has agreed a funding policy with Bayer which is intended to provide enough money to pay benefits as they are due. The amount of money which Bayer pays into the BCSPF Section may go up or down following the regular valuations by the Plan s Actuary. So long as the Plan continues and Bayer is willing and able to pay the necessary contributions, we expect to be able to pay benefits in full, even though we currently have a deficit. In March 2013, Bayer made a payment of 19.7m to the BCSPF Section and has committed to further payments of 19.7m each year until 2016.

13 13 PENSION MATTERS The importance of Bayer s support The Trustee s continued aim is for there to be enough money in the Plan to pay benefits now and in the future, but this depends on Bayer continuing to contribute to the Plan. This is partly because we have a deficit. Last year we also reached an agreement with our parent company Bayer AG which commits them to making payments to the Plan should Bayer plc and Bayer CropScience not be able to do so. However unlikely, we are legally obliged to inform you what would happen if Bayer and now Bayer AG was unable to pay further contributions and the Plan was to wind up. In this situation, you might not get the full amount of pension you have built up. This is because benefits would need to be secured by buying insurance policies. Insurers would take a very cautious view of the future and need to make a profit, which means they require more money to provide benefits than if the Plan were continuing on an on-going basis. As at 31 March 2011 (the last valuation date), it was estimated the assets of the BCSPF category of the Plan would cover 62% of the cost of securing benefits with an insurance company. If the Plan were to wind up, Bayer would be required to pay enough money into the Plan for benefits to be secured in this way. If Bayer or Bayer AG were not able to pay this amount in full, the Pension Protection Fund (PPF) might be able to take over the Plan and pay compensation to members. As this is unlikely, we only review this at the formal valuation every three years. This will next be reviewed at 31 March Information about the PPF is available on their website at How is your pension paid for? As well as contributions paid by you, the Company also pays contributions into the Plan so that there is enough money available to pay pensions to members when they retire. The money to pay for members pensions is held in a common fund for members of the BCSPF Section and not in separate funds for each individual. What else do we have to tell you? We are required to notify you that Bayer has not taken any money out of the Plan in the last 12 months. We are happy to confirm this. Want to know more? If you have any questions, or would like more information on anything covered in this announcement, please contact the Plan administrators using the details on the back page.

14 14 PENSION MATTERS Pensions in the spotlight This year saw the biggest change in pensions for over 100 years with the introduction of Automatic Enrolment. In his March budget, the Chancellor announced plans to bring forward the State Pension reforms, with the move to a flat-rate State Pension now due to take place in 2016 instead of There will also be further reductions to the tax relief available on pension savings. So what do all these changes mean to you? Automatic Enrolment Active members of the Plan will already have received a letter from Bayer explaining that the Plan meets the requirements set by the Government and, as an active member, you are not affected by this legislation.

15 15 PENSION MATTERS Flat-Rate State Pension The new State Pension, based on 144 a week, was due to be introduced in 2017, but the Government is now proposing this begins from April The aim of this new approach is to simplify what is currently a complicated system and, in doing so, provide a firmer foundation for people to plan their finances for retirement. If you are already receiving your State Pension or are due to receive it before April 2013 then this will not impact you. If you are due to reach State Pension age after April 2013 then this will impact on the State Pension you receive. Further Tax Relief Limits Reductions There are two types of tax relief limits placed on pension savings: 1 2 The Annual Allowance (AA), limits the value of pension savings you can make each year on which you can receive tax relief. From 6 April 2014 this will be reduced from 50,000 to 40,000. The Lifetime Allowance (LTA) limits the overall value of pension benefits you can build up in your working lifetime on which you can receive tax relief. From 6 April 2014 this will be reduced from 1.5 million to 1.25 million. AA LTA If you are concerned then check your Benefit Statement which tells you how much of the AA and LTA your Retirement Account pension savings have used up. You will need to add this to any other pension savings arrangements you may have in place. For more details on the State Pension go to:

16 Communication Feedback We continue to focus on providing high quality and useful communications to members. To help us achieve this aim, we would really like to hear from you. In particular, we are keen to find out: Do you find Pension Matters useful? How else would you like to access information or receive communications from us? Are we providing you with enough information to help you understand and plan your retirement saving? If not, what else would you like to receive? Please let us know your thoughts by using the feedback facility at Contact details If you have any questions about the Plan in general or about your benefits, the administration team are available to help you. You should also keep them informed of any changes in your circumstances, such as a change of address or a change in your marital status. The team can be contacted using the details below. Capita Limited, Hartshead House, 2 Cutlers Gate, Sheffield S4 7TL bayergroup@capita.co.uk Tel