(LSPF Section) This leaflet is only for members of the LSPF Section who were formerly members of the Hongkong Bank Group London Staff Pension Fund.

Transcription

1 This leaflet summarises the changes that were made to the Hongkong Bank Group London Staff Pension Fund Section (LSPF Section) of the HSBC Bank (UK) Pension Scheme (the Scheme) from 1 July Hongkong Bank Group London Staff Pension Fund Section (LSPF Section) This leaflet is only for members of the LSPF Section who were formerly members of the Hongkong Bank Group London Staff Pension Fund. Certain terms are shown in bold: you can find out what they mean on pages 2 and 3. And, if you have any questions about how the changes affect you, please contact the HSBC DBS Administration Team; their details are given on page 11. This leaflet is intended only as a guide and does not cover every aspect of the LSPF Section and confers no rights to benefits. It should be read together with your original member guide; if you would like a copy please contact the HSBC DBS Administration Team. Key changes From 1 July 2009 To keep your pension building up at a rate of 1/60 th (or, if different, the rate that applied to you immediately before 1 July 2009), you were given the option through My Choice to contribute 1% of your pensionable salary (increasing in phases to 5% by 1 March 2013). If you chose not to contribute, your future pension now builds up at a reduced rate of 1/80 th from that date. This will affect the benefits available to you and your dependants. Member contributions, including additional voluntary contributions (AVCs), will be made through salary sacrifice (with a few exceptions). Pensions in respect of service from 1 July 2009 will increase in line with the Retail Prices Index (RPI), up to a maximum of 3% a year. You have more flexibility in your benefit choices. You can make your flexible benefit choices through the My Reward website; see Your Guide to My Choice for more details. For members of the Hongkong Bank Group London Staff Pension Fund Section (LSPF Section) of the Defined Benefit Section (DBS) of the HSBC Bank (UK) Pension Scheme futurefocus HSBC Pensions Pension changes leaflet July 2009

2 From 1 April 2010 Normal retirement age will be 65. If you retire before age 65, the pension you build up from 1 April 2010 may be reduced by an early retirement factor (unless you chose to make an additional contribution of 3% of your pensionable salary as explained in the If you retire early section). Terms you need to know The following words and phrases are used throughout this leaflet; here's what they mean: Civil partner Your legally registered civil partner at the date you die. Dependant A person who, in the Trustee's opinion, is financially dependent on you at the date you die (or alternatively, if you die in receipt of benefits, the date your pension began to be paid). The Trustee has discretion to include certain other persons within the definition of Dependant who are dependent on you because of disability or financial interdependence with you. Employment Employment with the Principal Employer or any other participating employer in the Scheme. Final pensionable salary The annual rate of your last salary at the date of retirement (or leaving pensionable service, or death if earlier) excluding overtime pay and most allowances. This is subject to the Scheme earnings cap for members who joined the LSPF Section on or after 1 June Guaranteed minimum pension (GMP) The part of your pension that is broadly equivalent to the pension you would have received from the State Earnings Related Pension Scheme (SERPS), if any, between April 1978 and April 1997, had you not been in contracted-out employment. GMP date The age from which the GMP is payable, being 65 for men and 60 for women. Life Assurance Scheme The HSBC UK Life Assurance Scheme which is operated by the Group through a separate trust. LSPF Section The section of the Scheme that provides benefits for members who joined the Scheme as a result of a merger with the Hongkong Bank Group London Staff Pension Fund on 1 January Depending on the context, references to the date of joining the Scheme may mean the date of joining the Hongkong Bank Group London Staff Pension Fund. My Choice The Group s benefits package that you can tailor to suit your particular needs through a dedicated website (My Reward website). For more information please contact the My Reward Centre on My Reward website The website where most UK employees can change their pension contributions available at If you work for M&S Money, British Arab Commercial Bank or an Offshore team based in Jersey, Guernsey or the Isle of Man, you will continue to make changes to your pension contributions through your existing process. Please contact your HR team for more information. Normal Retirement Age The age at which you would normally retire. Normal retirement age for the LSPF Section increased to 65 from 1 April The Group HSBC Holdings plc and all subsidiary companies in the United Kingdom, Channel Islands and the Isle of Man that participate in the Scheme. Pensionable salary The salary on which contributions are paid by your employer and you (if you chose to contribute from 1 July 2009) in respect of your benefits as they build up in the Scheme. This is your rate of pay, excluding overtime pay and most allowances and is subject to the 2

3 Scheme earnings cap for those who joined the Scheme on or after 1 June Pensionable service If you joined the LSPF Section on or after 6 April 1988 this means the number of years and complete months of LSPF Section membership after your 20th birthday, during which you are employed by the Principal Employer, or another participating employer. If you joined the LSPF Section on or after 1 April 1978 but before 6 April 1988 this means the number of years and complete months of LSPF Section membership after your 25th birthday, during which you are employed by the Principal Employer, or another participating employer. Scheme The HSBC Bank (UK) Pension Scheme. Scheme earnings cap The Scheme earnings cap is equal to 7.5% of the Allowance (see page 6) for the tax year 2006/07 up to the 2010/11 tax year. In following tax years it may increase as agreed between the Principal Employer and the Trustee. For the tax year 2009/10, the Scheme earnings cap is 131,250 and for 2010/11 it is 135,000. State Pension age Before 6 April 2010 this age was 65 for men and 60 for women, but is to be equalised at 65 over a 10-year phasing-in period starting on 6 April At its discretion, the Principal Employer may make service before your 20th/25th birthday pensionable. Principal Employer HSBC Bank plc, the Principal Employer of the Scheme. Qualifying child A dependent child who is under age 18 (or is in full-time education or vocational training or is mentally or physically incapacitated). Surviving spouse/civil partner Your spouse/civil partner at the date you die. However if you die as a pensioner, you must also have been a spouse or civil partner of that person at the date your pension began or, if not, you must also have been the spouse or civil partner of that person for at least a year at the date when you die. Spouse Your legal spouse at the date that you die. Salary sacrifice You give up a proportion of your basic salary and an equivalent amount is paid, by your employer, into the Scheme. Trustee HSBC Bank Pension Trust (UK) Limited, the Trustee of the Scheme. The reduction in your basic salary means you pay lower National Insurance contributions. When calculating pensionable salary and final pensionable salary, the reduction in salary resulting from any salary sacrifice is ignored and benefits are based on your notional salary (pre- sacrificed salary), so your benefits under the Scheme are not affected. Please note that salary sacrifice does not impact on pay increases, bonuses and overtime. 3

4 Important information about tax relief Pension tax changes In his 2009 Budget, the previous Chancellor (Alistair Darling) announced that the tax relief available on all pension savings for individuals whose annual total income is 150,000 or higher would be restricted. These changes were intended to apply from 6 April In anticipation of the change, the Government introduced measures that apply now to prevent such individuals bringing forward pension savings to obtain additional tax reliefs for the 2009/10 and 2010/11 tax years. These transitional measures (commonly known as anti-forestalling measures) restrict higher-rate tax relief for individuals: whose income is 130,000 (reduced from 150,000 with effect from 9 December 2009) or more in any tax year from 2007/08; whose total pension savings exceed 20,000 in that tax year (or 30,000 in certain limited circumstances), and; who change their ongoing regular pension savings. What now? The anti-forestalling measures have been included in the Finance Act You can find out more in HM Revenue & Customs' Guidance for Individuals 'Pensions: Limiting Tax Relief for High Income Individuals', available at: In the meantime, if you have an annual total income of 130,000 or more in any tax year from 2008/09, you should consider the anti-forestalling measures before making any changes to your pension savings (for example: changing your regular contributions or by making a bonus or redundancy payment sacrifice). Please note that income is defined very widely for this purpose. Does the new Government plan to change this? The anti-forestalling measures for the 2010/2011 tax year will not change. However, the new Chancellor announced his plans to review the 2011 changes and replace them with an alternative provided that tax revenues are not reduced. He has suggested that this may mean a reduction in the Annual Allowance from 255,000 for the 2010/11 tax year to an amount between 30,000 and 45,000. This would apply to everyone and not just high earners as referred to above. Further details are expected to follow. If you think that you could be affected by these changes, we recommend that you seek independent financial advice. 4

5 Contributions Ahead of the changes which came into effect on 1 July 2009, you were given the option to keep the rate at which your pension benefits build up by making regular contributions to the Scheme, normally through salary sacrifice. If you chose to contribute, you will make the following contributions based on your pensionable salary: Date (from) Contribution rate 1 July % 1 March % 1 March % 1 March % 1 March % If you chose to contribute, your pension will continue to build up at your current rate of your final pensionable salary for each year of future pensionable service. If you chose not to contribute, the rate at which your future pension builds up will be reduced to 1/80 th of your final pensionable salary for each year of future pensionable service. You can stop contributing to the Scheme at any time. The rate at which your benefits build up would be reduced to 1/80 th of your final pensionable salary from the date you stop contributing. You would not be able to choose to switch back to the rate of build up that applied to you before you stopped contributing. If you work key-time and your pensionable salary full-time equivalent is less than 14,000 a year, your contributions will be capped at 2%. Salary sacrifice You give up a proportion of your basic salary (before tax) and in return your employer pays an equal amount into the Scheme. Because your basic salary is reduced, you pay lower National Insurance contributions and your take-home pay may increase. However, if you earn less than 6,500 a year, and/or less than 10% over the National Minimum Wage, you will be opted out of making contributions through salary sacrifice and any contributions you choose to make will continue to be deducted as they were before 1 July In certain circumstances it will not be possible for your AVCs to be made through salary sacrifice. You will be notified if this is the case so that you can make them in another way. 5

6 Benefits: what will you get when you retire? When can you retire? Normal retirement age is the age that you would normally retire from the Scheme. From 1 April 2010, this increased from 60 to age 65. This change will only affect the part of your pension that builds up from 1 April You can still retire at 60, but the part of your pension that builds up from 1 April 2010 may be subject to an early retirement reduction (unless you chose to make an additional contribution of 3% of your pensionable salary as explained in the If you retire early section). If you retire at normal retirement age Pension The amount of pension you receive when you retire depends on how many years pensionable service you built up before and after 1 July 2009, your final pensionable salary and the rate at which your benefits build up. If you chose to contribute from 1 July 2009, when you retire you will receive a pension equal to: Your current pension build up rate x your final pensionable salary x your pensionable service. Your pension will not be less than a minimum amount: currently 1,294 a year if you have completed less than 10 years pensionable service or 2,138 a year if you have completed over 10 years pensionable service. These minimum amounts may be changed from time to time. Lifetime Allowance This is an allowance for the total value of pension benefits you can build up tax efficiently during your lifetime. When you take any benefits from the Scheme, their value will be checked against your available Lifetime Allowance. The Lifetime Allowance for the 2010/11 tax year is 1.8 million and it will remain at this level until 2015/16. After that, the Government intends to review it every five years. Benefits built up above the Lifetime Allowance will be taxed, currently at an overall tax rate of 55%. When your benefits are checked against the Lifetime Allowance, the value of your Scheme benefits will be calculated as the value of any lump sum you take, plus the annual amount of your remaining pension multiplied by a factor of 20. The value of any pensions in payment at the time will be calculated by multiplying the amount of the annual pension by a factor of 25. The value of any money purchase benefits (such as an AVC fund if you have one) will simply be the fund value of your pension account. Different rules may apply if you: joined the Hongkong Bank Group London Staff Pension Fund before 1 April 1978, or were a member of the Hongkong Bank Group London Staff Pension Fund or the BBME (1965) London Staff Pension Fund on 30 October 1973, or are designated a Senior Executive member of the LSPF Section. In this case, if you chose to contribute from 1 July 2009, the rules for calculating your initial retirement pension will remain unchanged please see your original member guide for full details. For all members, if you chose to stop contributing from 1 July 2009, or stop contributing at a later date, your future pension will build up at a lower rate of 1/80 th from the date that you choose to stop contributing. Pension increases Once in payment, the Scheme will increase your pension each year. For benefits built up before 1 July 2009, pensions in excess of the GMP will normally increase in line with RPI, subject to a maximum of 5% a year. The Trustee, with the consent of the Principal Employer, may, at its discretion, award a higher increase. For benefits built up from 1 July 2009, pensions will increase in line with RPI, subject to a maximum of 3% a year. Please note: different rules apply to the guaranteed minimum pension (GMP) part of your pension. 6

7 Tax-free lump sum If you think a lump sum would help you at retirement, you can give up some of your pension, and take it as a tax-free lump sum instead. This would reduce your annual pension, and we strongly recommend you take independent financial advice if you are considering this option. The maximum tax-free lump sum you can take at retirement will be broadly 25% of the value of your benefits (up to 25% of your available Lifetime Allowance). If you have made Additional Voluntary Contributions (AVCs), you will have a choice of: using your AVCs/bonus sacrifice lump sum to provide some or all of the lump sum (provided you take all your benefits at the same time); and/or giving up some of your Scheme pension to provide some or all of the lump sum. If the maximum lump sum that you could have received for membership up to 5 April 2006 is greater than 25% of the value of your benefits at that time, you will be able to receive this amount plus broadly up to 25% of the value of your benefits built up from 6 April Specific provisions, subject to the rules of HM Revenue & Customs (HMRC), apply for members relying on primary or enhanced protection. You should notify the HSBC DBS Administration Team if you have registered with HMRC for this protection. Please note: if you want to take some of your benefits as a tax-free lump sum, your reduced pension cannot be less than your GMP at the GMP date. If you would like to know more about taking a tax-free lump sum at retirement, please contact the HSBC DBS Administration Team. If you retire early Pension If you chose to make member contributions from 1 July 2009, then in 2009 you were also given a single opportunity to choose to make an additional contribution of 3% of your pensionable salary from 1 April If you chose to make the additional 3% contribution, it will enable you to take an unreduced pension from age 60 for all your benefits or, if you stop making the additional 3% contribution at a later date, for all your benefits earned up to the date you stop making it. If you chose to make the additional 3% contribution: Your benefits would be calculated as shown in the If you retire at normal retirement age section. If you retire before age 60, your pension may be reduced for the period between your actual retirement date and age 60. If you did not choose to make the additional 3% contribution: Your benefits would be calculated as shown in the If you retire at normal retirement age section, although: for benefits built up before 1 April 2010, if you retire before age 60, your pension may be reduced for the period between your retirement and age 60, and for benefits built up from 1 April 2010, if you retire before age 65, your pension may be reduced for the period between your retirement and age 65. Flexible retirement Under the flexible retirement policy it is possible for you to: take your pension and lump sum from the LSPF Section (with the Principal Employer's consent) at any time after age 55 but remain in employment, or stop building up and defer taking your LSPF Section benefits. In either case, so long as you are in employment, you may be able to continue to build up benefits through the Defined Contribution Section of the Scheme (known as the DCS). 7

8 For more details about the flexible retirement options, please see the Flexible retirement options guide. You can get a copy from the pensions website or the HSBC DBS Administration Team. State Pensions The State Pension is currently made up of two parts: 1. Basic State Pension This is a flat-rate pension paid to all employees at State Pension age who have an adequate record of National Insurance contributions. It is increased each year by the State. 2. State Second Pension The State Second Pension replaced the State Earnings Related Pension Scheme (SERPS) in April 2002, and currently provides three levels of benefits based on an individual s earnings. Contracting out SERPS and State Second Pension The LSPF Section contracted out of SERPS from 6 April This means you pay a lower rate of National Insurance contributions. Because of this, the Scheme has to pay a pension that is broadly no less than what you would have received from SERPS. This is known as the GMP. If a company s pension scheme benefits are good enough, it can contract out of the State Second Pension as long as its benefits exceed the Reference Scheme Test, a quality of benefits test set by the Government. Your employment is contracted out of the State Second Pension which means that you pay lower National Insurance contributions and do not build up State Second Pension. 8

9 Protection: what happens when you die? If you die before your normal retirement age The following benefits would be paid: a lump sum of four times your pensionable salary (unless you chose a different level of lump sum through My Choice using the My Reward website), payable through the separate Life Assurance Scheme the contributions that you have made to the Scheme including the value of any AVCs and (normally as a lump sum benefit) any bonus sacrifices held for your benefit under the Scheme, adjusted to reflect investment performance a pension for your surviving spouse/civil partner a qualifying children s allowance if you do not have a surviving spouse/civil partner, a discretionary dependant s pension may be paid. If you die after you retire The following benefits would be paid: a lump sum if you die within five years of retiring a pension for your surviving spouse/civil partner a qualifying children s allowance if you do not leave a surviving spouse/civil partner, a discretionary dependant s pension may be paid. If you die having chosen a flexible retirement option If you die after having chosen flexible retirement, then different benefits may apply in respect of yourself and your dependants, depending on your chosen option; see the Flexible retirement options guide for more information. You can get a copy from the HSBC DBS Administration Team. You can find out more about death benefits in your original member guide. Again, you can get a copy from the HSBC DBS Administration Team. Keeping your nominations up to date Please make sure you complete an Expression of Wish form to notify the Trustee how you would like your death benefits to be paid in the event of your death. And, if your circumstances change, ensure your Expression of Wish form is up to date. Although your wishes will be considered, the Trustee will have the discretion to decide who receives the death-in-service lump sum payable from the Scheme (or the trustee of the Life Assurance Scheme will have the discretion in the case of lump sums payable from that scheme.) If you are not married or have not registered a civil partnership, you need to consider whether to complete a Nomination of Specified Dependant form. This is to inform the Trustee if you would like them to consider using their discretion to grant a dependant s pension if you do not leave a surviving spouse/civil partner. There is now an option under the Scheme to restructure how your total death benefits are paid by completing a Request to Restructure Death Benefits form. However, the Trustee will continue to have discretion as to who receives any death-in-service lump sum payable from the Scheme (or the trustee of the Life Assurance Scheme in the case of lump sums payable from that scheme). 9

10 Leaving employment: what happens to your benefits? If you leave Deferred pension If you leave employment before age 60, and do not receive an early retirement pension, you will be entitled to receive a deferred pension, provided you have completed at least two years pensionable service. If the Trustee agrees, you can ask for your deferred pension to be paid at any time on or after age 55, or earlier if you are suffering from ill health or disablement. It will be reduced because it is being paid early. You can also choose to delay taking your deferred pension up to age 75. And you may take part of your benefits as a tax-free lump sum. Transfer value Instead of a deferred pension, you may choose to have the cash value of your deferred pension paid to a new employer s pension scheme (if you leave your employer) or a personal pension scheme. If you die with a deferred pension If you die before age 60 and before you take your benefits, having left employment or opted out of the Scheme with a deferred pension, the following benefits would be paid: a lump sum made up of: o contributions made on your behalf from 1 July 2009 through salary sacrifice, or otherwise; plus o any member contributions that were transferred into the LSPF Section from any previous pension schemes you may have belonged to; plus o any AVC fund held for your benefit under the Scheme (adjusted to reflect investment performance); plus o (normally as a lump sum benefit) any bonus sacrifice fund held for your benefit under the Scheme (adjusted to reflect investment performance), and a GMP payable to your widow, widower or surviving civil partner in some cases, a further pension for your surviving spouse/civil partner or dependants and your qualifying children. If you die on or after age 60 and before you take your benefits, having left employment with a deferred pension, you will be treated as if you had started to receive your benefits on the day before you died and your benefits will be calculated as shown in the section If you die after you retire on page 9. If you die after you have taken your benefits, your benefits will be calculated as shown in the If you die after you retire section on page 9. If you die after having chosen flexible retirement, then different benefits may apply in respect of yourself and your dependants, depending on your chosen option; see the Flexible retirement options guide for more information. You can get a copy from the HSBC DBS Administration Team. You can find out more about benefits on leaving in your original member guide. Again, you can get a copy from the HSBC DBS Administration Team. 10

11 Further information If you want more information about the changes or a copy of your original member guide, please contact HSBC DBS Administration Team. Phone: HSBCDBS@towerswatson.com Web: Post: The HSBC DBS Administration Team Towers Watson PO Box 652 Redhill Surrey RH1 9AL My Reward website Log on to the My Reward website if you want to: stop making contributions to the DBS; in which case the rate at which your future benefits build up will reduce to 1/80 th make changes to your AVCs opt-out of the DBS (you will not be able to rejoin in the future). If you have any questions about your DBS contributions, contact the My Reward Centre: Phone: Web: Please note: if you work for M&S Money, British Arab Commercial Bank or an Offshore team based in Jersey, Guernsey or the Isle of Man, then you will continue to make your pension changes through your existing process. Please contact your HR team for more information. My Retirement modeller The My Retirement modeller is an interactive tool that may help you work out how much income you might need in retirement, and the amount of benefits you could get depending on the decisions you make. Web: Contact the My Reward Centre if you have any questions about using the modeller. September 2010 Copyright HSBC Bank Pension Trust (UK) Limited 2010 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC Bank Pension Trust (UK) Limited. Members of the pension scheme may, however, copy appropriate extracts in connection with their own benefits under the Scheme. HSBC Bank Pension Trust (UK) Limited, 8 Canada Square, London, E14 5HQ Registration number: