Jaguar Land Rover pensions consultation

Transcription

1 Jaguar Land Rover pensions consultation Useful questions and answers Final update 22 March 2017 Notification (28/02/2017) Following on from our notification on 17/02/2017 regarding the circulation of a website, we have subsequently received a petition document, connected with the website, which posed a number of questions, suggestions and objections relating to the consultation proposals and process. We have reviewed the petition document and responded to the key points, in detail. We strongly encourage you to read our response document, which you can download from the Library section of the consultation website as it clarifies a number of points that we feel have been misrepresented by the petition document and website. In particular, the petition suggests there is an effect on Transfer Values calculated immediately before any changes are introduced compared to the Transfer Values calculated immediately after any changes are introduced. This is not the case and we have provided further clarification of this point. Please review this response before making any decisions based on the contents of the petition document. Notification (17/02/2017) We are aware of circulation of a website, which provided access to an unofficial calculator. Members should be extremely cautious about relying on unofficial benefit projections. Whilst the unofficial calculator has been removed from the website, if you have previously downloaded or used this, please note: The unofficial calculator does not enable members to illustrate their potential benefits allowing for their preferred tax-free cash and early retirement options The unofficial calculator does not allow for the impact of inflation and so may give an incorrect impression of the level of benefits The unofficial calculator provides transfer value quotations of benefits which are uncertain using financial conditions which cannot be known. Without clearly setting out assumptions and providing broad caveats, this information is likely to be highly misleading The Company has used pensions professionals to build the Calculator tool which provides illustrations of potential projected benefits Any projections rely on assumptions about the future and therefore, cannot be guaranteed In addition, statements made on the website are not correct, in particular future increases to benefits in service are not guaranteed and do not constitute subsisting rights under the Pensions Act. In summary, in our view, some of the calculations exaggerate the negative effect of the proposals for those who may retire earlier or take a tax-free cash sum. 1

2 These useful questions and answers have been collated following feedback received from all members since the launch of the pensions consultation on 9 January The questions are divided into four sections relating to the consultation proposals; the online personalised calculator; the consultation process; and any issues with registering to use the consultation website. The initial set of questions released on 13 January 2017 are not dated, whereas all questions updated since then show the date when they were released. All questions are numbered sequentially, in their section, according to when they were added to the document. Given the range of questions it may be a good idea to use the PDF search function and look for keywords (as the question may not be worded in the same way as your question). We have been updating these questions on a regular basis throughout the consultation. This version (dated 22 March 2017) is the final update, following the close of the consultation at midnight on 9 March A majority of the questions included in this document have been covered in some way in your member booklet, your consultation information pack or the consultation website. The purpose of the questions and answers is to highlight information you may not have seen already, to address members who would like further information on a particular point or to go into more detail on certain issues to help your understanding. Index of questions Consultation proposals 1/ In light of Brexit, especially if inflation increases substantially, would it not have been better to keep RPI for future annual increases to the CARE blocks and to annual pension payments? And is the Company going to look again at the use of CPI, to fall in line with the Government and use of CPIH? (UPDATED 22/03) 2/ I am a younger member. Why are there no Meet people in a similar situation to you examples relevant to people in my age group? 3/ How will accrued pensions be affected? (UPDATED 10/02) 4/ What do the proposed changes mean for transfer values? And how long does it take to get a transfer calculation/value? (UPDATED 03/03) 5/ Would closing the scheme be more transparent and fair? Wouldn't it be better if I just left the DB scheme, so that my benefits are protected in the same way as deferred members? (UPDATED 22/03) 6/ Do I have the option to leave the defined benefit scheme and join the DC Fund or can I be a member of both at the same time? (UPDATED 17/02) 7/ How can I object to these proposed changes? 8/ Is there any intention to make further changes in the future? (UPDATED 10/02) 2

3 9/ How can you reduce the value of the benefits that I have already built up? Doesn t the pension scheme actuary need to provide a certificate stating that changes are not detrimental? (20/01, UPDATED 22/03) 10/ Would the negotiated pay increase apply in my final salary calculation? (20/01, UPDATED 10/02) 11/ If conditions improve, will the Company consider improving benefits? (20/01) 12/ If I leave my defined benefit scheme before I retire, how do the benefits I ve built up increase up until my retirement? (20/01) 13/ I understand that under the new CARE benefit structure there is a cap on revaluation whilst I build up benefits; what is this? (20/01) 14/ Is it worth paying extra contributions for the higher tier? (20/01) 15/ Are any changes being made to deferred or pensioner members? (20/01) 16/ What happens to other benefits, such as those payable to dependants? (20/01) 17/ Would there be any change to the way that the final salary benefits I have built up before April 2017 will increase in retirement? (27/01) 18/ How would service be calculated under the proposed CARE benefit structure? (27/01) 19/ Would the Variable Pension Option still be available to Halewood members? (27/01) 20/ Would I have an opportunity to top up the final salary benefits I have built up before April 2017? (27/01) 21/ How would my take-home pay be affected if my pension contributions increase? For example, how can I work out how much extra I will have to pay if I join the higher tier of the CARE benefit structure? (27/01, UPDATED 03/03) 22/ The information pack says that commutation factors may change in the future; can you tell me how often they would be reviewed and how they are likely to change? (27/01) 23/ Would senior employees of Jaguar Land Rover be affected by the proposed changes too? (27/01, UPDATED 03/03) 24/ Why are the defined benefit schemes underfunded? Are active members contributing towards the deficit? (27/01, UPDATED 22/03) 25/ Is there any data available on the reasons behind the proposed changes? What impact is this likely to have on the Company contributions? (27/01, UPDATED 03/02) 26/ How many employees are affected by the consultation? (03/02, UPDATED 28/02) 27/ Would salary sacrifice still be available? (03/02) 28/ Is pensionable pay based on salary before reduction for salary sacrifice? (03/02) 29/ Can you cash in hours from Lifestyle Accounts for CARE pensionable salary? (03/02) 30/ I have banked overtime hours, would these be included in my final pensionable salary at April 2017? (03/02) 31/ Does early retirement still apply to CARE? (03/02) 32/ What is the DB contribution compared to DC? (03/02 UPDATED 03/03) 33/ Why can't we pay more to keep the current scheme? (03/02, UPDATED 28/02) 34/ Is an increase in the DB contributions subsidising DC? Why offer the increased contribution to DC members if the Company can t continue to support the DB schemes? (03/02, UPDATED 03/03) 35/ Will the Company top up National Insurance payments? (03/02) 3

4 36/ Why does the increase in contribution only apply to upper tiers? (03/02) 37/ Can I move back to 'lower tier' if I choose 'higher tier'? (03/02) 38/ Would there be an option to voluntarily enhance the CARE benefits I would build up? (03/02) 39/ Have you considered reviewing early retirement factors for those close to retirement? (03/02) 40/ Will retirement ages between JPP and LRPS be equalised? (03/02) 41/ Would I still be able to pay AVCs? If my contributions increase will it affect the maximum AVC I can pay? (03/02) 42/ How would the new commutation factors affect annuity conversion for AVCs? For example, the ability of Land Rover members to convert pre-2013 AVCs to pension? (03/02, UPDATED 03/03) 43/ Why do I need to give up my Ford guarantee to benefit from the proposed improved commutation factor and the choice between the higher and lower CARE tiers? (03/02) 44/ What happens if I leave or retire from my defined benefit scheme before the proposed changes are introduced? (03/02) 45/ What will happen to the security of the defined benefit schemes if many members choose to transfer their benefits elsewhere? (03/02) 46/ Can you show additional case studies in the information pack? (03/02) 47/ What other options have you considered? For example, what about a negotiated settlement that lies somewhere between the current arrangements and the proposed changes? (03/02, UPDATED 22/03) 48/ Do you plan to offer enhanced transfer values, improvements to benefits that have already been built up or any other payments to members? (03/02, UPDATED 17/02) 49/ Would I be able to postpone my retirement until after my normal retirement age and would I be able to continue building up benefits? (03/02, UPDATED 17/02) 50/ What are the accrual rates under the new proposals? For example, I currently have a different accrual rate to the proposed lower and higher tiers; can I keep this rate? How would my Annual Allowance be affected by the changes? (03/02, UPDATED 22/03) 51/ I am a Halewood member with a Ford guarantee; at what date was my Ford grade set for the purpose of calculating the Ford guarantee pension? (03/02, UPDATED 28/02) 52/ Would the Company need to pay more for members who choose the higher tier (once members are paying 11% contribution) as opposed to the lower tier? (03/02) 53/ If inflation is negative could my benefits be reduced? (03/02) 54/ I think I am entitled to membership of the management car scheme when I retire, would the consultation change this? (10/02) 55/ How much would the Company save as a result of the proposed changes? How much is the consultation process costing and who is paying for it? (10/02, UPDATED 22/03) 56/ The proposed changes affect individuals with different circumstances differently; isn t this unfair? (10/02) 57/ Has Jaguar Land Rover met its commitment to make contributions as set out in the schedule of contributions and referred to in the Trustee s 2013 Winter Newsletter? Has Jaguar Land Rover ever taken any payment holidays? (10/02) 4

5 58/ Are the new CARE lower and higher tiers equivalent to the lower and upper tiers in the LRPS? (17/02) 59/ If someone leaves with an unreduced pension on early retirement, does everyone else have to contribute towards it? (17/02) 60/ Will there be any changes to the way ill health or disability pensions are calculated? (17/02) 61/ What are the differences between increases to my benefits when I am still an active member, increases after I have left my defined benefit scheme and increases after I retire? What month CPI will be used for annual increases before and after retirement? (17/02, UPDATED 22/03) 62/ Is there a deadline to opt out of my DB scheme, so that my pre April 2017 benefits can be increased with current deferred revaluation? (17/02) 63/ Can I opt out of my DB scheme for pre April 2017 benefits but still build up CARE benefits? (17/02) 64/ Why can't those close to retirement be exempted from the changes? Will any of these proposed pension changes affect the retention of our ageing skills base? (17/02, UPDATED 22/03) 65/ Does removing the link to final salary for benefits already built up and moving to a CARE benefit structure constitute a breach of contract? (28/02) 66/ The information pack says the defined benefit scheme isn't closing, but we can't build up any more final salary pension; I don't understand. (03/03) 67/ Can t the proposed Commutation Factors be higher? (03/03) 68/ The last pensions newsletter for the Jaguar Pension Plan (Feb 2016) did not mention anything about this consultation. Why not? (03/03) 69/ I've heard that deficits for all DB schemes are reducing, so shouldn't the Scheme be reviewing the investment manager and administrators? (NEW 22/03) 70/ What is being done to reduce the large pensions that are paid out currently? What proposals are there to ensure that those who are currently benefiting from the Pensions share the burden? (NEW 22/03) 71/ I have seen an article where UNITE oppose changes to pension increases (in payment) from RPI to CPI are the proposed changes consistent with this? (NEW 22/03) Calculator 1/ Why doesn t my benefit statement or retirement quote match the Current benefit structure illustrations? (UPDATED 20/01) 2/ In the calculator, why are the past service figures different between the current and proposed benefit structures? 3/ Why are the past service figures different between the lower and higher tier proposed benefit structures? 4/ Are AVCs or pension that I have transferred into the scheme included in the calculator? Are historical accrual rates factored in? (UPDATED 03/02) 5

6 5/ Why does the calculator start with a retirement age of 60 and taking the maximum available lump sum? And why does it assume members work to the April after their chosen retirement age? (UPDATED 22/03) 6/ Why is State Pension included in the calculator illustrations and why is the level of State pension higher in the proposed benefit structure compared with the current benefit structure? (UPDATED 10/02) 7/ Where do the assumptions for the calculator come from? 8/ How are my accrued benefits calculated if I am working part-time? (UPDATED 03/03) 9/ Is my transferred in service credit included in the calculator? (20/01) 10/ What should I do if my data looks incorrect? (20/01, UPDATED 17/02) 11/ Why is my State Pension bigger than the maximum available State Pension? (20/01) 12/ Can you extend the age range of the calculator? For example, I can't afford to retire at 65 and intend to work to at least 70, probably longer. (20/01, UPDATED 17/02) 13/ What is the assumed tax-free cash sum on the calculator? Could I get more cash than this? (20/01, UPDATED 17/02) 14/ I expect my salary to increase as I progress through the Company; how will this affect my pension under the proposed CARE benefit structure? For example, what happens if I m waiting on the outcome of a promotion? (27/01, UPDATED 22/03) 15/ The 'User agreement' and 'Assumptions' tab of the calculator say that the illustrations are not guaranteed and shouldn't be relied upon. If I can't trust the figures, how can I make a judgement about how the proposed changes could affect me? (27/01) 16/ The 'Current provision' tab of the calculator shows my 'Pensionable pay' figure; how is this figure used in the illustrations? (27/01) 17/ How would my 'Pensionable pay' be calculated under the proposed CARE benefit structure? For example, will the extra hours that I work, as part of the Increased Working Week (IWW) arrangement, be included? (27/01, UPDATED 17/02) 18/ I understand that commutation factors are different at different ages; how would the proposed commutation factor of 14 at age 65 change if I retire before I'm 65? Why does someone younger have a higher commutation factor? (27/01, UPDATED 22/03) 19/ Why does the calculator show a full State Pension figure when I have been contracted-out whilst I've been a member of my defined benefit scheme? (27/01, UPDATED 30/01) 20/ Can you show different assumptions in the calculator or the examples in the information pack? For example, can you show the effect of different levels of CPI in the future? (27/01) 21/ My pensionable service doesn t look correct; why is this? (03/02) 22/ My illustrations are not the same as I have estimated and/or they are different to a colleague s figures why is this? (03/02) 23/ Will my pension reduce when the State Pension is paid? (03/02) 24/ Does the calculator allow for divorce orders? (03/02) 25/ How can someone work out expected CARE in the future? (03/02) 26/ The illustrations in the calculator are based on predictions about the future; could the decision be delayed until all of these factors are known for certain? (03/02) 27/ How can I work out how much commutation factors have improved? (03/02) 6

7 28/ How can I find out the value of my pension on the basis that the proposed CARE benefit structure is introduced? (03/02) 29/ My figures are higher under the proposed benefit structure than the current benefit structure when I take a tax-free cash sum; why is this? (10/02) 30/ I am a Halewood member - why do the current benefit structure figures change when I change the Ford guarantee option? (10/02) 31/ I am a Halewood member - how do I get hold of the Ford pension figures that I would accrue if I were to keep the Ford guarantee? (10/02) 32/ Do the early retirement figures assume that Company consent to retire early has been given? (17/02) 33/ I am a Halewood member and my pension statement says my Jaguar salary is being used; is it possible that the Ford guarantee could have a higher value in the future? (17/02) 34/ Why haven't you allowed for promotions in the calculator assumptions? (17/02) Consultation process 1/ Who is Ferrier Pearce and what is their role in the consultation process? (UPDATED 03/02) 2/ What is the turnaround time for any s into the feedback address? 3/ Why aren t you able to reply to individual s? (UPDATED 17/02) 4/ Who can I speak to about my personal situation? 5/ I have a question about my existing benefits who do I contact? (UPDATED 27/01) 6/ What will happen when the consultation finishes and how will I communicate my decision, if the changes are introduced? (20/01, UPDATED 03/03) 7/ Why aren t you able to confirm my understanding of how the proposals will affect me? (27/01) 8/ What obligations does Jaguar Land Rover have when proposing pension changes and how much time is required between a final decision and the date changes are introduced? (27/01, UPDATED 03/03) 9/ Why are the changes not part of the Pay Negotiations? (03/02, UPDATED 17/02) 10/ If the proposed changes are introduced, who can I speak to about the new benefit structure? (03/02, UPDATED 10/02) 11/ Why hasn't the Company provided independent financial advice to all affected employees? (03/02) 12/ Why is the Company and not the Trustee running the consultation? And who will be responsible for managing the defined benefit schemes if the proposed changes are introduced and how secure will my benefits be in the future? (03/02, UPDATED 22/03) 13/ I am also paying AVCs into the DC Fund, should I have received correspondence on the DC consultation too? (10/02) 14/ What can I do if I am not happy with the way the consultation is being run? For example, if I would like to make a formal complaint, rather than raise a question or submit feedback. (10/02, UPDATED 03/03) 15/ I have been sent a link to a petition website about the consultation, is everything it says true? (17/02, UPDATED 03/03) 16/ What happens if I do nothing? Will I automatically have to pay more? (17/02) 7

8 17/ Can the Company be clear about which aspects of the proposal are flexible so that the feedback can be more focussed? (17/02) 18/ Why are members of the DC Fund being included in the consultation on the defined benefit schemes? This doesn t seem fair, particularly as they are being offered an improvement to their benefits. (28/02) 19/ Have the Company considered the Government's Green Paper on 'Security and Sustainability in Defined Benefit Pension Schemes'? Is the timing of the consultation designed to avoid the conclusion of the Green Paper? (28/02) 20/ Are all of the pension schemes governed by the same Board of Trustees? (28/02) 21/ I ve seen an that says that Jaguar Land Rover s pensions consultation is not consistent with the ruling in the Briggs v Gleeds high court case. Is this true? (03/03) 22/ I am not represented by a Trade Union what steps were taken to engage with people who were not a member of a Union as part of this process? (03/03) 23/ I m considering taking a transfer value; what am I giving up? Do I need to take advice? (03/03, UPDATED 22/03) Registration 1/ I can t get onto the consultation website what can I do? 2/ I can t input the Security Verification code when I try to register for the consultation website what can I do? 8

9 Consultation proposals 1/ In light of Brexit, especially if inflation increases substantially, would it not have been better to keep RPI for future annual increases to the CARE blocks and to annual pension payments? And is the Company going to look again at the use of CPI? (UPDATED 22/03) We believe that the Consumer Prices Index (CPI) is the most suitable index to use when increasing benefits to help keep up with the expected increase in the cost of living. It is now common to use CPI instead of the Retail Prices Index (RPI) as CPI is a more realistic measure of the change in the cost of living. The Government now uses CPI as the measure by which annual increases to certain State benefits, and public sector pensions are calculated with reference to CPI. The Bank of England s ongoing target for CPI is 2% and this has been the average between September 1997 and September We will continue to review our pension arrangements in the future to help them remain appropriate and sustainable. As part of these reviews, all benefit design aspects (including what inflation index should be used) will be considered. It is also common for defined benefit pension schemes to promise a maximum increase to inflation linked benefits, which will apply if inflation goes above a certain point. This allows defined benefit schemes to be more certain about the future cost of the benefits that are building up. Introducing a maximum increase of 2.5% to future increases is one of the steps we are proposing to take to help improve the sustainability of our pension arrangements for the future. 2/ I am a younger member. Why are there no Meet people in a similar situation to you examples relevant to people in my age group? As the defined benefit schemes closed to new employees in 2010, very few of the schemes members are younger than 35. Members can use the personalised calculator on the consultation website - There you can see a projection of how you could personally be affected, if the proposed changes are introduced. You will need your payroll number and National Insurance number to register to use the site. 3/ How will accrued pensions be affected? (UPDATED 10/02) If the proposed changes are introduced, the pension you have already built up to 5 April 2017 would be based on your final pensionable salary at that point, taking account of your pensionable service until then, including any part years that you have built up. It would then be increased for every year up until you leave service or decide to take your benefits, to help keep up with the cost of living, using the Consumer Prices Index (CPI) plus 0.5%, up to a maximum of 2.5% per annum. See question 1 above for more information about why we are proposing to increase benefits that have already been built up, by this new rate. You will not automatically become a deferred member for benefits that you built up before April 2017 and you will not be able to transfer this part of your benefit separately (see question 4 below for more details). However, if you leave your defined benefit scheme before retirement you will stop building up further benefits. The benefits you have built up will increase between 9

10 your date of leaving and your retirement. Under the proposals, benefits built up to 5 April 2017 would increase as described in your member booklet. Please see the section What about the benefits I have already built up? in your information pack. 4/ What do the proposed changes mean for transfer values? And how long does it take to get a transfer calculation/value? (UPDATED 03/03) If the proposed changes are introduced, there will be no effect on your right to transfer your benefits to another pension arrangement. Your transfer would be calculated by the administrator on behalf of the Trustee, which is why we are not able to provide a transfer value as part of the consultation exercise, either as a statement or as part of the calculator (available via the consultation website). To transfer the value of your defined benefit pension, you would need to stop building up benefits in your defined benefit scheme and request a transfer value calculation from your scheme s administrator. Under current legislation you have the right to do this at any point up to one year before your normal retirement date. The pensions administrator is currently working through a high volume of requests, so if you are currently waiting for a transfer value you will need to contact them directly to understand current timescales for receiving this. Please note: Members should be aware that, as part of this consultation, there would be no reduction in the revaluation rate that applies after you leave the scheme for the benefits you have already built up to the point any changes are made. There would be no cliff-edge reduction in your transfer value if the proposals were introduced. (See Question 61 under the Consultation Proposals section of the Useful questions and answers document) The way that the benefits you ve built up to April 2017 increase will depend on whether or not you re still building up benefits in your scheme (see questions 2 and 8, under Calculator ) Question 9 in this section has more detail about how your current transfer value will be affected if the proposed changes are introduced. If you want to understand more about your transfer value, you should speak to an independent financial adviser (at your own cost). You can find an FCA approved adviser local to you at 5/ Would closing the scheme be more transparent and fair? Wouldn't it be better if I just left the DB scheme, so that my benefits are protected in the same way as deferred members? (UPDATED 22/03) Your representatives have strongly argued that employees who build up benefits in our defined benefit schemes should be able to continue to build up the type of benefits they re used to. As a result, we have worked hard to propose a range of changes that aim to improve the sustainability of the defined benefit schemes. One of the proposed changes means that 10

11 employees would not continue to build up final salary benefits in the future, and benefits already built up would be based on pensionable salary at the date the changes are introduced. We have been clear about this change in the information pack. You have the option to leave your defined benefit scheme at any time (see the next question) but you should consider this very carefully as you would not be able to re-join the scheme in the future. We recommend that you take independent financial advice before you decide to opt out of your defined benefit scheme (see question 4 and 23 in the Consultation process section). 6/ Do I have the option to leave the defined benefit scheme and join the DC Fund or can I be a member of both at the same time? (UPDATED 17/02) Yes, you can opt out of your defined benefit scheme at any point and join the DC Fund and receive Company contributions. You would stop building up defined benefits and you would be treated as a deferred defined benefit member, as described in your member booklet. However, we believe that it is valuable for employees who are currently building up benefits in our defined benefit schemes to be able to continue to build up the type of benefits they re used to (if they wish). Alternatively, you may pay Additional Voluntary Contributions (AVCs) into the DC Fund whilst continuing to build up benefits in the DB scheme (this option has been available since April 2013) but you would not benefit from any contributions from the Company into the DC Fund (see question 13 in the Consultation process section for more information). 7/ How can I object to these proposed changes? We have proposed a range of changes that aim to improve the sustainability of the defined benefit schemes. We understand that these proposals may not be welcomed by many employees but we believe this is the responsible action to take. To feedback on the proposed changes and/or make alternative suggestions, please feedback@ferrier-pearce.co.uk or send your correspondence to the postal address provided in your information pack. 8/ Is there any intention to make further changes in the future? (UPDATED 10/02) We want to make changes to help improve the sustainability of the defined benefit schemes, and to help provide a way for the schemes to remain open for employees who are currently building up benefits. Going forward, we will continue to review our approach to the defined benefit schemes and may therefore propose further changes in the future, so that they remain sustainable for the long term. 9/ How can you reduce the value of the benefits that I have already built up? Doesn t the pension scheme actuary need to provide a certificate stating that changes are not detrimental? (20/01, UPDATED 22/03) The proposed changes do not reduce the benefits you have already built up in your defined benefit scheme, as at the proposed date of change. Furthermore, if you were to leave your defined benefit scheme on the day the changes were introduced, there would be no effect on 11

12 your transfer value as a result of the proposed changes. This protection is set out by the Pensions Act 1995 and Jaguar Land Rover has been careful to comply with it. If you were to leave service immediately after any changes were made, your benefits built up before April 2017 would be the same amount as if you had left service immediately before the changes were made. This means that the changes being proposed do not constitute modifications of subsisting rights and that they do not require individual member consent or the consent of the Trustee of the defined benefit schemes before they are introduced. If the proposed changes go ahead, the Trust Deed and Rules would need to be amended to reflect these. In this case, we would discuss and agree rule changes with the Trustee. The Scheme Actuary would review the changes but as there is not reduction in subsisting rights a certificate of actuarial equivalence is not required. Under the consultation proposals, your past service benefits would increase, whilst you continue to build up benefits before you retire, using CARE revaluation. If you decide to leave your defined benefit scheme, your benefits will increase in line with deferred revaluation (please see your member booklet, which you can download from for further detail on deferred revaluation). This consultation does not propose changes to deferred revaluation for benefits built up to 5 April 2017 (see question 2, under Calculator for more information). 10/ Would the negotiated pay increase apply in my final salary calculation? (20/01, UPDATED 10/02) The pension you have already built up would be based on your final pensionable salary at the date any changes are introduced. If your pay increase takes effect before the proposed changes are introduced, then it would be taken into account in your final salary calculation. The way that the increase is taken into account would depend on the definition of final salary that applies to you. (You should read your member booklet for more information; you can download a copy at 11/ If conditions improve, will the Company consider improving benefits? (20/01) We hope that financial conditions do improve, as this should have a positive effect on the security of the benefits that members have already built up in their defined benefit schemes. We will continue to review our approach to the schemes, so that they remain sustainable for the long term. 12/ If I leave my defined benefit scheme before I retire, how do the benefits I ve built up increase up until my retirement? (20/01) If you leave your defined benefit scheme before you retire you will stop building up further benefits (see question 6 above). The benefits you have built up will increase between your date of leaving and your retirement. Under the proposals, the benefits you have built up to 5 April 2017 would increase as described in your member booklet. Under the proposals, your CARE pension, built up from 6 April 2017, would increase in line with statutory increases until you retire. Statutory increases are the minimum increases set by the Government, which apply to 12

13 pensions in deferment (the period between leaving pensionable service and retiring). Current statutory increases are in line with Consumer Prices Index (CPI), up to a maximum of 2.5%, for each complete year. 13/ I understand that under the new CARE benefit structure there is a cap on revaluation whilst I build up benefits; what is this? (20/01) Under the proposals, the benefits you build up in the new CARE benefit structure will increase, or revalue, every year up until you leave service or decide to take your benefits, to help keep up with the cost of living, using CPI plus 0.5%, capped at 2.5%. This means that if CPI + 0.5% is more than 2.5%, your benefits will increase at 2.5%. If CPI + 0.5% is less than 2.5%, your benefits will increase by CPI + 0.5%. A key aim of the package of proposed changes is to improve the sustainability of the defined benefit schemes. The cap on revaluation is a key part of this package, because it helps to make future increases more predictable. 14/ Is it worth paying extra contributions for the higher tier? (20/01) It is important to note that the difference in the amount of pension that you could build up in the higher and lower tiers of the CARE benefit structure would be payable every year for the rest of your life once you retire, and would also affect any dependants pensions that could be payable when you die. As we mention in the consultation information packs, neither Jaguar Land Rover, its pension administrators or Ferrier Pearce are able to offer advice about your individual circumstances. If you d like advice on your pension savings, you should speak to an independent financial adviser (at your own cost). You can find a local FCA approved adviser at 15/ Are any changes being made to deferred or pensioner members? (20/01) Deferred and pensioner members would not be eligible to join the CARE scheme from April 2017, so would not be affected by a majority of the changes. However, the improved tax-free cash commutation factors would apply to all members who have not yet retired (except Halewood members who choose to retain the Ford guarantee). Therefore, any member who is currently deferred, or who becomes deferred in the future, would benefit from the improved commutation factors if they retire after the changes are introduced. Pensioner members are unaffected. 16/ What happens to other benefits, such as those payable to dependants? (20/01) We are not proposing to change your life cover or the proportion of your pension, which would be paid to your loved ones if you die. However, as the amount of pension you will be able to build up in the future will change, if the proposals are introduced, so will the amount of pension payable to your dependants. 13

14 17/ Would there be any change to the way that the final salary benefits I have built up before April 2017 will increase in retirement? (27/01) No; this consultation does not propose changes to increases for pension in payment for benefits built up before April If the changes are introduced, the final salary benefits you have built up to April 2017 will increase, when they come into payment, as described in your member booklet (which you can download from 18/ How would service be calculated under the proposed CARE benefit structure? (27/01) Under the proposed CARE benefit structure, for every year of pensionable service, you would build up a block of pension based on your pensionable pay (in the 12 months to the previous 5 April) and the rate that you choose to build up pension (known as your accrual rate ). If you leave your defined benefit scheme part way through the year (from 6 April each year), you would build up a portion of one block depending on how many complete months of pensionable service you have built up in that year. For example, if you have six months of pensionable service in the year that you leave, you will build up half a block of CARE pension for that year. If you are working part-time, your service will be adjusted in the same way that it is now (see question 8 in the Calculator section for more details). 19/ Would the Variable Pension Option still be available to Halewood members? (27/01) Yes, the Variable Pension Option would still be available to Halewood members. 20/ Would I have an opportunity to top up the final salary benefits I have built up before April 2017? (27/01) No, there is no option to increase the size of your final salary benefits that you have already built up. 21/ How would my take-home pay be affected if my pension contributions increase? For example, how can I work out how much extra I will have to pay if I join the higher tier of the CARE benefit structure? (27/01, UPDATED 03/03) To see examples of how your take-home pay could be affected if your contribution rate increases by 1%, take a look at the Effect on Take Home Pay of Paying Additional Pension Contributions in the At a Glance section of the consultation website. As an example, if you earn 40,000 per year and are a member of the Pension Salary Sacrifice arrangement, a 1% increase in your contribution rate would mean your take-home pay would reduce by 5.20 per week. 22/ The information pack says that commutation factors may change in the future; can you tell me how often they would be reviewed? (27/01) It is standard practice and good governance for defined benefit pension schemes to review the commutation factors (and all other factors, such as the ones that apply on early retirement) it uses, from time to time, to make sure they remain suitable and in line with scheme rules and pension legislation. 14

15 These reviews are overseen by the Trustee of the defined benefit schemes. The Trustee generally reviews all factors after each actuarial valuation and any major event. 23/ Would senior employees of Jaguar Land Rover be affected by the proposed changes too? (27/01) All senior employees who are members of any of the Jaguar Land Rover defined benefit pension schemes will be affected in the same way as other employees, if the proposed changes are introduced. 24/ Why are the defined benefit schemes underfunded? Are active members contributing towards the deficit? (27/01, UPDATED 22/03) The defined benefit schemes are underfunded for a number of reasons, despite large contributions being paid towards the shortfall (see the next question). The reasons include: Changes in economic conditions that mean the money that has been set aside to pay pensions may not grow as much in the future as previously expected People are living longer than has previously been predicted, meaning their pension benefits are paid for longer and are more costly This means that even more money needs to be put aside to make up any shortfall. Jaguar Land Rover is committed to addressing any deficit in the defined benefit schemes (see question 25 in the 'Consultation proposals' section). We believe we must take action now to control the deficit. Contributions from active members cover benefits being built up in the future, not the deficit. The schemes are covered by the Pension Protection Fund, which is a Government lifeboat fund intended to protect members if their pension fund becomes insolvent. However, the Government does not generally contribute towards private sector pension schemes. You can read more about how these issues have affected the Jaguar Land Rover defined benefit schemes in your information pack, under the section Why are we proposing these changes?. It is important to note that Jaguar Land Rover is not alone in facing these issues; many other UK companies are experiencing the same funding issues with their defined benefit schemes. In some cases, companies have had to close their pension schemes and stop members building up defined pension benefits altogether; Jaguar Land Rover is proposing a package of changes that help improve the sustainability of pension provision, whilst avoiding having to take this step as part of this review exercise. 15

16 25/ Is there any data available on the reasons behind the proposed changes? What impact is this likely to have on the Company contributions? (27/01, UPDATED 03/02) For the year starting April 2017, if the proposed changes are not introduced, the Company would need to pay almost 50% of pensionable salaries towards the pension benefits for members of the defined benefit schemes. This means, if you have a pensionable salary of 30,000 per year and a member contribution of 7%, you would pay 2,100 per year from your gross pay and the Company would pay 9,300 per year towards the benefits you are building up along with deficit payments of approximately 7,000 for each active member. Based on the results of the April 2015 financial review of the defined benefit schemes, over the 2017/18 year, based on the current benefit structure, the Company will need to pay 175 million in ongoing contributions, 80 million in deficit contributions and 16 million of extra National Insurance contributions (as a result of changes in the State Pension and contracting out rules). That will be a total of 271 million for the year from April There is more detail on the Company s contributions below. Furthermore, the consultation proposals are not just about the cost of the defined benefit schemes. Whilst costs must be managed it is also essential that we control the risks involved with running the defined benefit schemes. Deficits continue to grow, despite the extra contributions paid by the Company, due to the various risks involved in running the schemes. We must improve the sustainability of our defined benefit schemes so that, in the future, everyone will receive the benefits they are entitled to. Further detail Jaguar Land Rover makes two main types of payment into the defined benefit pension schemes: 1) Ongoing Company contributions These contributions (and the contributions that members make) pay for active members benefits as they are built up. Between April 2011 and April 2016, ongoing Company contributions have more than doubled. Across all the defined benefit schemes, they have increased from approximately 15% of pensionable salaries in 2011, to approximately 31% of pensionable salaries in 2016, following the April 2015 actuarial valuation. This is equal to a Company contribution of around 175 million per year, from April Since April 2016, financial conditions have got even worse and, if another actuarial valuation was carried out now, the cost of ongoing Company contributions would increase even further. This is why we need to take responsible actions to address this issue. 16

17 In addition, the defined benefit schemes were originally designed to take account of the structure of State benefits that existed before April 2016, which meant that you and the Company paid reduced National Insurance contributions; this was because you were contracted out of the State Second Pension as a member of your defined benefit scheme. As a result of these reduced National Insurance contributions, the defined benefit schemes had to provide a minimum level of benefit for service built up during this period. Under the new structure of State benefits (from April 2016), it is not possible to contract out of the new single-tier State Pension, which means you and the Company must pay the higher full rate of National Insurance contributions. This has increased Company pension costs even further by approximately 16 million. The consultation proposals have been designed to bring the expected total ongoing Company pension contributions back to the level that the Company supported before the 2015 actuarial valuation. The actual effect on the ongoing contributions, given the continued worsening of financial conditions during 2016, will be established at the next actuarial valuation. 2) Deficit contributions These contributions must be paid when the money held by the defined benefit schemes is less than the expected cost of the benefits that have already been built up; this is known as a shortfall or deficit. Deficit payments are made as well as ongoing Company contributions. At April 2015, the shortfall for all of the UK defined benefit schemes was 789 million, an increase of 87 million, despite the Company having paid 265 million of deficit contributions since the 2012 valuation. The shortfall has further increased since April 2016 due to the continued worsening in financial conditions over 2016, despite the extra deficit contributions of 69 million that the Company has paid. The deficit is currently estimated to be over 900 million. Jaguar Land Rover has always paid the ongoing and deficit contributions agreed with the Trustee of the defined benefit schemes and has never taken money out of the schemes. The changes being proposed are designed to help improve the sustainability of the defined benefit schemes and the Company will continue to make the payments agreed with the Trustee. 26/ How many employees are affected by the consultation? (03/02, UPDATED 28/02) As at January 2017, the consultation affects a total of approximately 31,000 employees. Of these employees approximately 11,500 are building up benefits in the defined benefit schemes and approximately 19,500 are contributing to the Defined Contribution Fund. The defined benefit schemes are made up of approximately 5,000 Jaguar Pension Plan members (including the Jaguar Executive Pension Plan) and 6,500 Land Rover Pension Scheme members. Members of different schemes will be affected differently by different changes (please see question 56 in this section). There is no minimum number of active members required in these schemes for them to continue. 17

18 27/ Would salary sacrifice still be available? (03/02) Yes, we are not proposing to make any changes to our Pension Salary Sacrifice arrangement as part of the consultation. You would still be able to choose not to pay your contributions via the Pension Salary Sacrifice arrangement if you like. 28/ Is pensionable pay based on salary before reduction for salary sacrifice? (03/02) The benefits you build up in your defined benefit scheme are and would continue to be based on your notional pensionable pay, before any salary sacrifice reduction has been applied. See question 17 under Calculator for details of how your pensionable pay will be calculated under the proposed CARE benefit structure. 29/ Can you cash in hours from Lifestyle Accounts for CARE pensionable salary? (03/02) Yes, your pensionable pay under the proposed CARE benefit structure would include the same elements of pay as it currently does. For more information about how your pensionable pay is calculated, you should read your member booklet, which you can download from 30/ I have banked overtime hours, would these be included in my final pensionable salary at April 2017? (03/02) The Lifestyle Account is not being changed as part of this consultation. If you opt to take some of your lifestyle hours before any changes are introduced, these would be included in your pensionable salary at that time. If you opt to take some of your lifestyle hours after any changes are introduced, these would also be included in your pensionable salary at that time. 31/ Does early retirement still apply to CARE? (03/02) We are not proposing to change your normal retirement age, under your defined benefit scheme, or your ability to take an early retirement. For more details about early retirement, you should read your member booklet, which you can download from 32/ What is the DB contribution compared to DC? (03/02, UPDATED 03/03) Please see question 25 above, which describes the Company contributions towards the defined benefits schemes. The Company currently pays 8% of basic salary towards the Defined Contribution Fund. Under the proposals, to the Company would pay up to an extra 2%, if a member chooses to contribute up to an extra 2% of basic salary. 33/ Why can't we pay more to keep the current scheme? (03/02, UPDATED 28/02) You will see from question 25 above that we contribute a significant and increasing amount of money towards the defined benefit schemes, both for benefits being built up and to support the security of benefits already earned. Whilst one option would be to ask members for a significantly higher contribution, to share some of these increasing costs, this would not address the risk of further increases to both ongoing and deficit contributions in the future. Based on recent financial conditions, an employee contribution in excess of 20% would be required to 18