AvestaPolarit Pension Scheme Defined Benefit/Final Salary Section

Transcription

1 AvestaPolarit Pension Scheme Defined Benefit/Final Salary Section Members' handbook Members in employment with Outokumpu Stainless Limited on 31 March

2 Contents Section 1: Section 2: Section 3: Section 4: Section 4A: Definitions and explanations Introduction Membership Contributions and benefits Defined Benefit Pension contributions/benefits Contributions Your Defined Benefit Pension at retirement Benefits payable on death Benefits on leaving Section 4B: Additional Money Purchase Pension contributions/benefits Applicability Funding your Money Purchase Account including Additional Voluntary Contributions Your Money Purchase benefits at retirement Money Purchase benefits payable on death Money Purchase benefits on leaving Section 5: Section 6: Section 7: Section 8: State pensions How the Scheme works Help and further information Scheme overview 2

3 Section 1. Definitions and explanations 1. Some terms used in this booklet have special meanings. They are explained below and appear in bold type throughout the booklet. Account: Company: Defined Benefit Pension: Dependant: Dependent Child: Final Pensionable Earnings: Your individual account in the Scheme where certain monies (if any) are normally invested to provide additional benefits on a money purchase basis. These monies may comprise any or all of: Additional Voluntary Contributions (AVCs); transferred-in money purchase benefits; and existing pre-1 September 2003 money purchase accounts in the Scheme (where not otherwise converted or transferred). Outokumpu Stainless Limited A pension based on Final Pensionable Earnings and Pensionable Service. Your Spouse or any other individual, including a common-law spouse, same sex partner or other individual(s), whom the Trustees consider to be financially dependent on you. Your children, either born to you or legally adopted by you, who are: under the age of 16;or up to age 23 if in full time education and financially dependent upon you; or in the opinion of the Trustees suffering from such disability as to make him/her dependent upon you for so long as the Trustees so decide. For all Members in respect of Pensionable Service after 1 September 2003, this means the average of the highest 3 tax years' Pensionable Earnings (annualised if appropriate) out of the last 10 tax years of active membership (or the actual number of tax years if less than 10), up to the end of the last complete tax year. For existing Members of the Scheme on 1 September 2003 with accrued Pensionable Service prior to that date, this means the higher of the above; and the highest tax year s Pensionable Earnings of the 5 consecutive tax years up to the end of the 2002/2003 tax year. Earnings that include abnormally wide fluctuations will be averaged based on the tax year in question and the two immediately preceding tax years. Earnings history within the British Steel Pension Scheme (BSPS) will be retained for former BSPS members who made a transfer in at 1 September

4 Minimum Pension Age (MPA): Money Purchase Pension: Normal Retirement Age (NRA): Pensionable service: Pensionable Earnings: Age 55, except where Members who joined the Scheme before 6 April 2006 meet the criteria to retain a protected pension age of 50. A pension based on the value of a Member s Account and the cost of buying pension annuities at a point in time. Age 65. The period of your active membership of the Defined Benefits section of the Scheme including any Pensionable Service credits granted on transfers into the Defined Benefit section. Salary or wages before tax and any other deductions : including shift premiums, bonuses and overtime payments and such other emoluments as determined from time to time by the Company; excluding any part of the value of benefits that are not in monetary form and or any sum paid in lieu thereof and any bonuses, allowances, expenses or other payments made to or in respect of a Member in respect of any duties performed outside of the United Kingdom. less the single person's category A Basic State Pension (currently 5, a year for the 2013/4 tax year) for the relevant year. Scheme: The AvestaPolarit Pension Scheme. Spouse: Trustee: The person to whom the Member is legally married or (in respect of certain benefits) a civil partner, and where the context allows includes a widow, widower, or surviving civil partner of a Member. AvestaPolarit Pension Trustees Limited Trust Deed and Rules: The governing documentation of the Scheme as amended from time to time. This includes the Defined Benefit Section and the Money Purchase Section. 4

5 Section 2. Introduction 2. This booklet is designed for members of the AvestaPolarit Pension Scheme (the Scheme) who were also employees of the Company (then known as AvestaPolarit Limited) on 31 March It reflects the simplified tax regime for pension schemes which came into effect on 6 April 2006 (known as "A-Day"). These changes created a single set of tax rules for all pension schemes registered with Her Majesty's Revenue & Customs (HMRC). The framework for the new system is set out in the Finance Act 2004, which is further expanded by regulations. The new tax regime establishes two over-arching criteria: It limits the contribution to or accrual of benefits in a pension scheme each year without incurring a charge to tax. This limit is called the Annual Allowance. See paragraphs 49 and 90. It limits the value of benefits that can be paid at retirement, without incurring additional tax. This limit is called the Lifetime Allowance. See paragraphs 49 and Members who were employees of the Company on 31 March 2003 may have access to two types of pension benefits under the Defined Benefit (alternatively referred to as Final Salary) section of the Scheme comprising the following: a Defined Benefit Pension - offering benefits based on your years of Pensionable Service (including approved Defined Benefit transfers from other schemes) and your earnings near retirement (Final Pensionable Earnings); and a Money Purchase Pension (where applicable) offering an additional pension through the accumulation of your own fund or Account. The level of pension is not guaranteed but is based on the value of your Account and the cost of buying annuities when you retire. 4. You are a Member of the Defined Benefit Section of the Scheme. Money Purchase Benefits only apply in the specific circumstances noted and operate as a sub-section of the Defined Benefit Section of the Scheme. 5. If you build up both Defined Benefit and Money Purchase benefits, on retirement you will receive one pension comprised of two elements under the Scheme. For the sake of clarity, benefits such as death in service are only payable once from the Scheme. 6. The benefits provided through the Scheme include: a pension for life on retirement; the option to exchange part of your pension for a cash lump sum at retirement (this is payable tax-free under current legislation); a cash lump sum if you die in service; a Spouse's pension whether you die in service or after retirement; Dependent Children allowances; and the possibility of an early pension if you are unable to carry on working at any time because of ill health. 5

6 7. The Scheme is set up under a trust and run by the Trustee. For further information on the set-up of the Scheme see paragraphs 124 and 125. The Trust Deed and Rules are the formal and overriding documents that govern the Scheme. In the event of any discrepancy, the Trust Deed and Rules prevail. All Scheme benefits are also subject to HMRC rules and overriding legislation. If you have any questions about the Scheme, or would like more information, please contact the Payroll Manager. 6

7 How the Defined Benefit Pension section works 8. In return for regular contributions from you and the Company, you become entitled to a Defined Benefit Pension whereby your pension benefits are linked to your length of Pensionable Service and your earnings near retirement. 9. In general, transfers in will only be allowed on a money purchase basis into the Money Purchase Section and such transfers are addressed at sub-section 4B. 10. You can also exchange part of your Defined Benefit Pension for a (currently tax-free) lump sum or, subject to the Trustee s discretion, for additional Dependant pensions payable after your death. 11. A Spouse s pension and Dependent Children allowances may also be provided where the relevant criteria are met on your death, and a lump sum is payable if you die in service. 12. If you retire early due to ill-health with the Company s consent, you can take an immediate pension. How the Money Purchase sub-section works 13. You will be entitled to a Money Purchase Pension in addition to a Defined Benefit Pension if you : decide to pay Additional Voluntary Contributions ( AVCs ); and/or transfer in pension benefits from another scheme on a money purchase basis; and/or had an existing money purchase fund within the Scheme at 1 September 2003 (having chosen not to have this fund exchanged for a Pensionable Service credit to form part of your Defined Benefit Pension entitlements); and/or previously opted out of the Defined Benefit Section and rejoined the Scheme, either voluntarily or through automatic enrolment. 14. All of the above funds are paid into your own retirement fund known as your Account. 15. The Company does not make any contributions to the Money Purchase sub-section on your behalf. 16. Your Account is invested over the years; when you retire it is used to buy additional retirement benefits. These benefits include a pension for you and, potentially, the option to take (currently tax-free) a cash lump sum and/or to provide a pension for your Dependants on your death. 17. Your Account may also pay additional benefits on death. 18. The pension or other benefits provided by your Account will be on a Money Purchase Pension basis where the amount of pension or other benefits receivable will depend on the size of your Account (which in turn depends on the funds paid in and investment returns) and pension conversion rates at the time you retire (e.g. the cost of buying an annuity). 7

8 Interaction with State Pensions 19. Regardless of whether you are also accruing benefits under the Money Purchase sub-section, your membership of the Scheme is through the Defined Benefits Section which is contracted out of the State Second Pension scheme ( S2P ). 20. You will, therefore, not earn a S2P pension whilst you are a Member of the Scheme and you will pay lower National Insurance contributions. Any S2P pension you have built up prior to joining the Defined Benefits Section of the Scheme will still be payable. 21. You will, however, remain entitled to the Basic State Pension. Are there other options for saving for retirement? 22. Members can contribute to as many different pension schemes as they wish, including personal pension schemes. We recommend that you seek independent financial advice before deciding which investment is most suitable for your own circumstances. You should note that pension benefits you build up from all sources are aggregated and tested both annually and at retirement against allowances set by HMRC (see paragraphs 49 and 90 for more information). 8

9 Section 3: Membership Who is eligible for membership of the Defined Benefit Section? 23. Employees of the Company on 31 March 2003 who are aged inclusive are generally eligible to join the Defined Benefit section (including the Money Purchase sub-section thereof where applicable) of the Scheme. 24. If you are posted to work overseas by the Company, you may be unable to continue to be a Member of the Scheme until you return to the UK. The Company has discretion to determine and amend the rules on eligibility on this issue and other general issues concerning eligibility. 25. You become a member by completing the appropriate application form(s) and you may be required to undergo a medical examination. Can I opt out of membership? 26. You can opt out of the Scheme at any stage by giving one month s written notice to the Trustee. You would then be entitled to the benefits described for Leavers within section 4 of this booklet. You should be aware, however, that if you choose to opt out of the Scheme you might not be allowed to re-join at a later date. 27. Leaving the Scheme is an important decision because, for example, you will no longer be covered by the death in service benefits. It should not be taken without careful consideration of your own circumstances and those of your Dependants and you may wish to consult an independent financial adviser before taking any action. Can I transfer benefits from one section to the other and/or move from one section to another? 28. You cannot transfer benefits from the Defined Benefit Section to the Money Purchase Subsection. In limited circumstances, the Company and the Trustee may, at their sole discretion, allow benefits to be transferred from the Money Purchase Sub-section to the Defined Benefit Section on such bases as they determine. 29. Your basic pension contribution and that of the employer will only be applied to the Defined Benefit Section. You can only participate in the Money Purchase Sub-section in the specific circumstances set out in paragraph 13. Can I transfer previous benefits into the Scheme? 30. The Trustee may accept transfers from other schemes if appropriate undertakings are given by the other scheme. Any benefits transferred-in will generally go into the Money Purchase Sub-section and will be invested in your Account along with any AVCs and/or previous money purchase transfers-in you may have. 31. However, the Trustee has discretion to vary this policy and, with the Company s consent, can accept transfers into the Defined Benefit Section. 32. If you would like to transfer benefits from a previous pension scheme, please contact the Payroll Manager. 9

10 What about temporary absences? 33. Most absences from work are for relatively short periods and your membership of the Scheme is not affected where it is followed by another period of Pensionable Service. If you are away for a considerable time, your membership may be continued on terms decided by the Trustee and the Company. In exceptional cases of financial hardship or ill-health, it may be possible to suspend or reduce your contributions, where you have the Company's and the Trustee s permission to do so. Will maternity/paternity/ordinary adoption leave affect my membership? 34. Both you and the Company will continue to pay contributions to the Scheme during any paid maternity, paternity or ordinary adoption leave and your Pensionable Service will continue. You will pay contributions based on your actual remuneration including any statutory maternity or paternity pay during that period. The Company's contributions will be based on the Pensionable Earnings you would have received if you had not gone on maternity or paternity leave. 35. If you do not return to work, you will be treated as a leaver from the date your statutory maternity or paternity leave ended. 36. During periods of statutory adoption leave, you will continue to accrue Pensionable Service and both the Company s and your contributions will be based on the levels required by statute. You will continue to be covered for the death in service benefits while you are on maternity /paternity/adoption leave, which, subject to the Trustee s discretion will normally be based on the Pensionable Earnings you would have received had you been working normally. 37. If you return to work after any period of absence under maternity, paternity or adoption leave that did not count as qualifying service, you will have the option to make a one-off payment to reinstate that period of absence. Part timers 38. The following applies: your contributions will be based on your earnings less a pro-rata Basic State Pension deductor; and Pensionable Service credits within the Defined Benefit Section will be that fraction which the Company determines as being the proportion of comparable full time service and, in calculating your pension, this service credit will then be applied to your Pensionable Earnings based on your full time equivalent earnings (less the Basic State Pension deductor). 10

11 Section 4: Contributions and benefits 4A: Defined Benefit Pension Contributions How much will it cost me? 39. The total contribution from the Company and employees is agreed by the Company and the Trustee and depends on the advice of the Scheme Actuary and may vary from year to year. 40. It has been agreed that the split of the total contribution rate will be maintained in a fixed ratio of Company 10.5 : 8 Member. So if the total contribution rate was 18.5%, the Company would pay 10.5% and you would pay 8% of Pensionable Earnings. 41. If the Scheme performs better or worse than anticipated and hence if future contributions rates can prudently be reduced or need to increase, the rates paid by the Company and the Member will vary proportionately in the above ratio. 42. The Company can, at its sole discretion, decide to pay a higher proportion of the total contribution than that determined by the above ratio. In such circumstances, your contribution rate will be lower than would otherwise be the case. 43. The actual cost of membership of the Scheme to you will be as described above but the headline rate is reduced because: you get full tax relief on your contributions. Your contributions are deducted from your earnings before tax is calculated. So, (for the 2013/4 tax year) every 1 you contribute only costs you 80p, if you pay tax at 20% (or 60p if you pay tax at 40%); you pay lower National Insurance contributions because you are contracted-out of the S2P (the state earnings-related pension scheme). Example - Monthly contribution based on Pensionable Earnings of 1,500 a month ( 18,000 a year) based on tax and National Insurance rates for tax year 2013/4: Contribution rate Your contribution Tax relief at 20% NI saving Actual cost to you 8% What does the Company pay? 44. The Company s contributions are determined in line with paragraphs 40 to 42 above. Who pays the costs of running the Scheme? 45. The administration costs relating to the Defined Benefit Section, including the death in service costs, will be borne by the Scheme and the Company. Can I pay extra? 46. You can boost your benefits by paying AVCs. AVCs offer a tax-efficient way of building up extra pension for your retirement. Your AVCs are used to provide additional Money Purchase Pension benefits and accordingly your pension benefits from AVCs are not guaranteed but are dependent upon the amount invested and the investment performance. 11

12 The Company does not match AVCs. For more details, see the Money Purchase Sub-section 4B. Your Defined Benefit Pension at retirement What will my pension be at normal retirement age of 65 ( NRA )? 47. Your pension at age 65 is based on your length of Pensionable Service and your Final Pensionable Earnings. You will receive a pension of: 1/60 x your Final Pensionable Earnings for each year of Pensionable Service. Example - If you retire at age 65 with 25 years of qualifying Pensionable Service in the Defined Benefit section and your Final Pensionable Earnings are 18,000, your pension would be = 1/60 x 18,000 x 25 = 7, a year = a month 48. Your Defined Benefit Pension is paid in addition to any State pension you may be entitled to and in addition to any pension you build up in the Money Purchase sub-section. 49. Your pension under the Scheme is subject to HMRC limits. The amount of pension you can build up from which you benefit from tax relief is subject to allowances set by HMRC, as follows: The value of your total annual pension savings (including the increase in the annual pension earned) to all UK registered pension schemes in a tax year is tested against the Annual Allowance. From April 2014, the Annual Allowance will reduce from 50,000 to 40,000. The value of your total pension savings in all UK registered pension schemes is tested at retirement against the Lifetime Allowance. From April 2014, the Lifetime Allowance will reduce from 1.5M to 1.25M. Although the allowances are unlikely to affect most members, you should be aware of these limits particularly if you are a higher earner or make very large contributions (including Additional Voluntary Contributions (AVCs)) into your pension arrangement(s). What if I work on beyond NRA (age 65) and postpone my retirement? 50. Subject to Company consent, if you are permitted to work beyond NRA you will have a choice of either; ceasing contributions at NRA:- in this case you will become a deferred Member of the Scheme and will not accrue any further Pensionable Service. Your pension, when it comes into payment, will be calculated as if you had retired on attaining NRA and is then increased by a percentage determined by the Scheme Actuary for each completed 3 months of employment after NRA; or remaining an active Member of the Scheme and continuing to accrue Pensionable Service. When you retire, your pension will be calculated in the same way as a normal retirement pension, with the period between NRA and the date of your retirement (during which you were paying member contributions) counting as Pensionable Service. If you want to continue to pay contributions, you must notify the Trustee of this intention no earlier than three months before your NRA and no later than one month before your NRA. Pensions cannot be postponed beyond age 75 in either case. 12

13 Can I retire early? 51. You can ask to retire from service at any time from your Minimum Pension Age (MPA), although the Company must consent to such retirement. 52. If you retire early from service with Company consent, your pension is calculated in the same way as for normal retirement at NRA (see above) except that: it is based on your Pensionable Service and your Final Pensionable Earnings when you actually retire (instead of age 65); if you retire prior to age 60, your pension will be reduced for early payment (based on the number of years and months you retire before age 60); if you retire aged 60 to 64, your pension will not be reduced for early payment and, for members who transferred from the British Steel Pension Scheme on 1 September 2003, you will be granted an additional Pensionable Service credit equal to the lower of : 1 year for every 7 complete years of service you had completed in the British Steel Pension Scheme by 31 August 2003; and the period between the date of your actual retirement and NRA. 53. If you meet the MPA requirements to retire from age 50 and you retire early from service at the Company's request, your pension is calculated in the same way as for normal retirement except that: it is based on your qualifying Pensionable Service and your Final Pensionable Earnings when you actually retire (instead of age 65); if you retire aged 50 to 54, your pension will be reduced for early payment (based on the number of years and months you retire before age 55); if you retire aged 55 to 64, your pension will not be reduced for early payment What if I have to retire due to ill-health? 54. If you have to retire early from service due to incapacity or serious ill-health, you may qualify for an early pension. You must have the consent of the Company and must produce satisfactory medical evidence for the Company and the Trustee. The Trustee is entitled to review your case on an on-going basis to determine whether you continue to satisfy the conditions to receive an ill-health pension and you may therefore need to provide the Trustee with satisfactory evidence of continued ill-health at a later date in order to continue to receive this benefit. If it is determined by the Trustee that you no longer meet the criteria in order to receive the ill-health benefit or your condition has improved, the Trustee may suspend or reduce the benefit being paid to you. 55. The incapacity pension is based on your Pensionable Service in the Defined Benefit Section and your Final Pensionable Earnings at the time you retire. It is not reduced for early payment and for active members who have less than 20 years of actual Pensionable Service, your Pensionable Service will be enhanced to the lesser of: 2 years for each one year of actual Pensionable Service - subject to a minimum of 10 and a maximum of 20 years of resultant Pensionable Service; and 1 year for each year of Pensionable Service which would have been completed by Normal Retirement Age (NRA) subject to a maximum of

14 The serious ill-health pension is based on your Pensionable Service in the Defined Benefit Section and your Final Pensionable Earnings at the time you retire but will be reduced for early payment if paid before age 60. The definitions of incapacity and serious ill-health may be found in the Trust Deed and Rules. What retirement options do I have? Tax-free cash sum 56. When you retire, you can exchange part of your pension for a cash sum. The cash sum is taxfree under current legislation and can be used in any way you wish. 57. The maximum tax-free sum is governed by HMRC rules and is currently limited to the equivalent of 25% of the value of your pension benefits. See paragraphs 108 & 109 if you are also entitled to Money Purchase benefits through the Scheme. 58. The taking of a cash lump sum will reduce the annual pension you receive but it will not reduce the amount of any Spouse's pension payable on your death. Additional Dependant's pension 59. At retirement, subject to the Trustee s discretion and limits advised by the Scheme Actuary, you can give up some of your own pension to provide an additional pension for a chosen Dependant after your death. HI/LO offset 60. If you retire early from active service before your State Pension Age ("SPA"), you can choose to receive a higher pension payable until your expected SPA (as determined at the date of your retirement) and a lower pension after this date to take account of the expected Basic State Pension for a single person applicable at that time. You should note that if your SPA is altered after you retire this could result in a "dip" in your income between the expected SPA when you retired and the altered SPA. You must make this choice before your pension payment starts. This option is not available if you retire early due to incapacity or serious ill-health. How is my pension paid? 61. Your yearly pension will usually be paid from the Scheme by monthly instalments for life; however the Trustee retains the option to secure your benefits by purchasing an annuity. It is paid directly into your bank or building society account and tax is deducted under the PAYE system. Will my pension increase? 62. As your pension is based on your earnings near retirement, it should reflect changes in the cost of living up to that time. 63. Once your pension is being paid, it will increase each year in line with the annual rise in the Retail Prices Index during the previous year, up to a maximum of 5% a year in respect of Pensionable Service before 1 May 2006, and a maximum of 2.5% in respect of Pensionable Service on and after 1 May However, once your Guaranteed Minimum Pension (GMP) comes into payment at State Pension Age, the above method of increase will apply only to your pension in excess of GMP. Increases to your GMP will then be as specified by the Government each year. 14

15 64. Further increases above these guaranteed levels might be granted from time to time, at the discretion of the Trustee and with the consent of the Company. Benefits payable on death What if I die in Company service before NRA, or after NRA while still paying member contributions to the Scheme? 65. If you die in service whilst an active member of the Scheme before NRA, or while you are continuing to pay contributions to the Scheme having postponed your retirement past NRA, the following benefits will be payable: a lump sum of 4 times your Pensionable Earnings in the last complete tax year (without any deduction for the single person s Basic State Pension); a Spouse's pension equal to one half of that which you would have received had you retired immediately before your death on grounds of incapacity and taking Pensionable Service to be a minimum of 10 years; and Dependent Children allowances 66. The Spouse's pension will be paid by monthly instalments and will increase in line with the rise in the Retail Prices Index, up to a maximum of 5% a year in respect of Pensionable Service before 1 May 2006, and a maximum of 2.5% in respect of Pensionable Service on and after 1 May However, once the Guaranteed Minimum Pension (GMP) comes into payment the above method of increase will apply to the Spouse s pension in excess of GMP, and increases to the GMP will be as specified by the Government each year. What if I die in Company service after NRA having postponed my retirement without continuing to pay member contributions to the Scheme? 67. If you die in service whilst a Member of the Scheme but having postponed your retirement beyond NRA, the following benefits will be payable: a lump sum of the higher of 4 times your Pensionable Earnings in the last complete tax year (without any deduction for the single person s Basic State Pension), or six times the annual rate of pension you would have received if you retired on the date of your death; a Spouse s pension equal to one half of that which you would have received had you retired immediately before your death (disregarding any lump sum or Dependants options selected at NRA); Dependent Children allowances; and any additional Dependant s options selected at normal retirement age (see paragraph 59). 68. The Spouse's pension will be paid by monthly instalments and will increase in line with the rise in the RPI, up to a maximum of 5% a year in respect of Pensionable Service before 1 May 2006, and a maximum of 2.5% in respect of Pensionable Service on and after 1 May However, once the Guaranteed Minimum Pension (GMP) comes into payment the above method of increase will apply to the Spouse s pension in excess of GMP, and increases to the GMP will be as specified by the Government each year. 15

16 What benefits are payable on death in retirement? 69. If you die in retirement whilst receiving a Defined Benefit Pension, the following benefits are payable: a Spouse's pension a pension for life is immediately payable to your Spouse equal to half of the pension you would have been receiving had you not taken, where applicable, any taxfree cash or made a surrender for Dependants pensions or selected the hi/lo option. Dependent Children allowances. a lump sum payment - if you die within the first five years after retirement, a cash lump sum equal to the unpaid balance of five years' pension payments. a Dependant s pension - if you elected to give up some of your own pension at retirement in return for an additional Dependant s pension (see paragraph 59) then this will also be paid to your chosen Dependants. 70. The Spouse's pension will be paid by monthly instalments and will increase in line with the rise in the RPI, up to a maximum of 5% a year in respect of Pensionable Service before 1 May 2006, and a maximum of 2.5% in respect of Pensionable Service on and after 1 May However, once the Guaranteed Minimum Pension (GMP) comes into payment the above method of increase will apply to the Spouse s pension in excess of GMP, and increases to the GMP will be as specified by the Government each year. Who receives any lump sum benefit? 71. The Trustee decides who receives the lump sum benefit. You should therefore let the Trustee know your wishes by completing a nomination form. While the Trustee will consider your wishes before making payment, it cannot however be bound by them. 72. You should keep your nomination form up to date and complete a new form if your circumstances change (for example, if you marry or have a child). There is a nomination form enclosed at the back of this booklet and new forms are available from the Payroll Manager. 16

17 Benefits on leaving (leaving employment or opting out of membership) What are my options on leaving the Scheme? 73. If you leave the Scheme before you retire, you have the following options: If you have more than two years' Pensionable Service (or have received a transfer in): you can retain a deferred pension based on your Pensionable Service and your Final Pensionable Earnings at your date of leaving; or you can transfer the value of your deferred pension to another registered pension arrangement. 74. When you leave, the Trustee will provide you with a statement of your options. 75. When you leave the Scheme even if you are only opting out of membership whilst remaining in employment you are no longer covered by the death in service benefits. Deferred pension 76. A deferred pension is based on your Pensionable Service in the Defined Benefit Section and your Final Pensionable Earnings at the date you leave active membership. It is held for you in the Scheme and paid when you reach NRA. You will still have the options of taking a tax-free cash sum at retirement (paragraph 56) or providing an additional Dependant's pension (paragraph 59). 77. You can apply for early payment of your deferred pension from Minimum Pension Age and you can do so whether you are still in service or whether you have left employment. However, your pension will be reduced for early payment based on the number of years and months you retire before NRA. The amount of reduction is set by the Trustee based on actuarial advice. If you retire due to incapacity or serious ill-health, you can access your deferred pension at any age, with Company consent, and it will not be reduced if due to incapacity, but it will be reduced in cases of serious ill-health (see paragraphs 54 & 55). 78. Your deferred pension will increase over the period from leaving until retirement as required by statute. Any Guaranteed Minimum Pension (GMP) forming part of your deferred pension is revalued by a fixed rate, which is currently 4.75% a year for anyone leaving the Scheme after 5 April The UK Government dictates the rate at which GMP revalues and a different rate will apply to anyone who left the Scheme before 6 April This percentage may also be changed in the future. For pensions in respect of Pensionable Service prior to 6 April 2009, and in excess of the GMP, the increase will be in line with statutory rates. That is, the increase in the Retail Prices Index (RPI) to 2010, and then in line with the Consumer Prices Index (CPI) thereafter, subject to an overall maximum rate of 5% a year. For pensions in respect of Pensionable Service after 5 April 2009, the increase will be as set out above, but subject to an overall maximum rate of 2.5% a year. Once in payment, it will increase each year as explained in paragraph If you die after your deferred pension commences, your benefits are the same as those described under What benefits are payable on death in retirement? (paragraphs 69-70) 80. If you die before you start to receive your deferred pension, a Spouse's pension of half of your deferred pension that would have been payable had you attained NRA at the time of 17

18 your death and Dependent Children allowances will be paid. (The Spouse's pension will be paid by monthly instalments and will increase in line with the rise in the RPI, up to a maximum of 5% a year in respect of Pensionable Service before 1 May 2006, and a maximum of 2.5% in respect of Pensionable Service on and after 1 May 2006 However, once the Guaranteed Minimum Pension (GMP) comes into payment the above method of increase will apply to the Spouse s pension in excess of GMP, and increases to the GMP will be as specified by the Government each year.). A lump sum equal to your own contributions paid, plus interest accrued, whilst a Member of the Defined Benefits Section would also be paid (see paragraphs 71 and 72 above in relation to keeping your nomination form up to date). Transfer out payment 81. You can ask the Trustee to transfer the value of your deferred pension to a new employer's scheme, provided the new scheme is able to accept it. Alternatively, you have the option of transferring the value of your deferred pension to another pension arrangement of your choice, so long as it is registered with HMRC. 82. A transfer value is the cash equivalent of your deferred pension. It is the amount of money required, based on assumptions made by the Scheme Actuary, to provide your deferred benefits. 83. All active Members are entitled to receive an estimate of the cash equivalent transfer value that would apply if they were to leave the Scheme once a year on request. All Members who are one year or more away from Normal Retirement Age (whether active members or members who have left the Scheme) are entitled to receive a statement of entitlement to a guaranteed cash equivalent transfer value once a year on request. More information is available on request. 18

19 Section 4: Contributions and benefits continued 4B: Money Purchase Pension Sub-section Applicability 84. The following benefits described in this sub-section 4B are in addition to the benefits described under 4A: Defined Benefit Pensions. 85. Under the Money Purchase Sub-section an Account in your name is built up if you: decide to pay AVCs; and/or transfer in pension benefits from another scheme on a Money Purchase basis; and/or have an existing money purchase fund within the Scheme at 1 September 2003 (having chosen not to have this fund exchanged for a Pensionable Service credit to form part of your Defined Benefit Pension entitlements) 86. All of the above funds are paid into your own retirement fund known as your Account. 87. Your Account is invested over the years; when you retire/die it is used to provide additional retirement benefits on a Money Purchase basis. 88. However, where in receipt of an incapacity pension that has been enhanced through the granting of additional years of Pensionable Service, an offset may be applied to your Account. The offset does not apply to that part or your Account that relates to AVCs your AVCs are always applied to provide additional benefits for you even in the above circumstances. Funding Your Money Purchase Account Additional Voluntary Contributions 89. AVCs are a tax-efficient way of boosting your pension benefits at retirement. They are particularly useful if you are planning to retire early or only have a short period of membership in the Scheme. If you pay AVCs : you receive full tax relief on your contributions. If you pay tax at 20%, every 10 you invest in AVCs only costs you 8.00; or 6, if you pay tax at 40%. your AVCs build up in a fund that is largely free of income and capital gains taxes. How much can I pay in terms of AVCs? 90. You can contribute any amount, subject to any maximum or minimum set by the Trustee, so long as the total of your contributions to other pension arrangements and your AVCs and normal contributions to the Scheme does not exceed 100% of your total earnings in any tax year less the amount needed to pay your National Insurance contributions. Your AVCs may also have to be restricted, if necessary, so that your total Scheme pension and contributions do not exceed HMRC limits (i.e. the Annual Allowance and the Lifetime Allowance) and incur increased taxation levels as a result. For the tax year 2013/4 there is an Annual Allowance of 50,000 and a Lifetime Allowance of 1.5M. These allowances will decrease to 40,000 and 1.25M, respectively, for the 2014/5 tax year. (Also see paragraph 49) 91. You can pay AVCs by regular monthly payments of a fixed amount or percentage of Pensionable Earnings. You can also make one-off lump sum payments. 19

20 How are my AVCs managed? 92. Your AVCs are paid into an Account in your name and managed by an external professional investment manager. The additional benefits arising from your AVCs form part of the benefits arising from your Account as described in the relevant paragraphs below. 93. If you would like to know more about AVCs, please contact the Payroll Manager. Money Purchase transfers in 94. Transfers in from other pension schemes will normally only be accepted on a money purchase basis whereby they are added to your Account and invested along with your AVCs (if any). An existing Money Purchase Account in the Scheme as at 31 August If you had an existing Money Purchase fund or account within the Scheme at 31 August 2003 and you chose to maintain the account, the value of the account is reflected in your Money Purchase Account under the Money Purchase Sub-section. How is my Account invested? 96. Your Account is maintained in your name and managed by an external professional investment manager. 97. You have two major investment options, freestyle and lifestyle. The freestyle option enables you to choose the allocation of your accumulated Account and future contributions across a range of investment funds. You can amend your chosen allocation once per quarter. For details of the options, including the types of investment funds available, please contact the Payroll Manager. 98. The lifestyle option automatically reduces the risk of your investments as you approach Normal Retirement Age, or your target retirement age, if different, by reducing the amount in equities and increasing the amount in bonds, gilts and cash. However, while this switch should result in a less volatile investment strategy, it is generally associated with lower returns. 99. The value of your Account depends on monies paid in and the investment performance of the fund. You will receive a benefit statement each year showing the value of your Account and a Statutory Money Purchase Illustration of the pension benefits that might be expected to accrue from your Account A deduction will be made from your Account in respect of the investment management charges. 20

21 Your Money Purchase Pension on Retirement (in addition to your Defined Benefit Pension) When can I retire? 101. Your Normal Retirement Age is 65, but you may be able to retire at any time from Minimum Pension Age, or defer your retirement, with Company consent. Your retirement from the Money Purchase Sub-section will be based on the date you retire from the main Defined Benefit Section. How much pension will I receive? 102. When you retire other than on grounds of incapacity, the full value of your Account will be used to provide you with pension and other retirement benefits of your choice as described below in addition to your Defined Benefit Pension and any State Pension you are entitled to If you retire (at any age) due to incapacity under paragraphs 54-55, in addition to the incapacity pension benefits set out in the Defined Benefit section: The portion of your Account that relates to AVCs will be used to buy an additional pension for yourself and/or other benefits. The non-avc portion of your Account will also be used to buy an additional pension for yourself and/or other benefits except in the instance that you are entitled to an enhanced Defined Benefit Pension (involving the grant of enhanced Pensionable Service). In this latter case the cost of the enhancement will be deducted from your Account up to a maximum of the value of the Account that relates to non-avc monies The amount of pension you receive whenever you retire depends on the value of your Account, including net investment returns over your period of membership, and the cost of buying pensions when you retire. You will not know how much pension you can buy with your Account until you actually retire. It will depend on: the total contributions paid in by you; any transfers in from other pension schemes; the performance of the funds in which your Account is invested over the years; investment manager fees (which are deducted from your Account); the Lifetime Allowance at the time, if applicable; the cost of converting your Account to a pension when you retire; and the options you choose at retirement (see below) If you retire early, your Account will probably buy less pension than it would have done had you retired at NRA because your Account will have had less time to be invested and because your pension will be expected to be in payment for longer The terms on which your Account is converted into an annual pension will depend on the type of pension you choose at retirement, and any legal requirements applying at that time. The amount of pension you can build up in your Account and still benefit from tax relief is subject to allowances set by HMRC, including the Annual Allowance and the Lifetime Allowance (see paragraphs 49 & 90). 21

22 How will my pension be paid? 107. Your pension may either be paid from the Scheme or, more usually by the purchase of insurance policies. More information is available on request. What retirement options do I have? Tax-free cash sum 108. When you retire, you may be able to take part of your Account as a cash sum. This means that you will have less money available to buy a pension for yourself. However, the cash sum is tax-free under current legislation and can be used in any way you wish The amount of cash that you can take tax-free is governed by HMRC rules. Where Defined Benefit and Money Purchase benefits are held, the calculation of the exact amount of tax free cash available is complex, but will broadly be 25% of the value of your total benefits. The option of taking your cash lump sum from your Account may allow you to maximise your Defined Benefit Pension. More information is available on request. Dependants' benefits 110. When you retire, you can use some of your Account to provide a pension for your Spouse or other Dependants, which is payable when you die. This will reduce the amount of money available to buy a pension for you. You will be provided with illustrations shortly before you retire, so that you can consider your options. Money Purchase Benefits payable on death (additional to those payable under the Defined Benefit Section) What if I die in Company service? 111. Your beneficiaries will receive the relevant death in service benefits as described in the Defined Benefit Section. In addition, if you die whilst in service and whilst in active membership, your beneficiaries will receive the full value of your Account as an additional lump sum benefit. Who receives the lump sum benefit? 112. Consistent with the Defined Benefit lump sum, the Trustee decides who receives the lump sum benefit and you should therefore let the Trustee know your wishes by completing a nomination form. While the Trustee will consider your wishes before making payment, it cannot however be bound by them You should keep your nomination form up to date and complete a new form if your circumstances change, for example if you marry or have a child. There is a nomination form enclosed at the back of this booklet and new forms are available from the Payroll Manager. What if I die after retirement? 114. Your Dependant(s) will only receive an additional Money Purchase Pension if, when you retired, you used your Account to buy a pension for your Spouse or other Dependant(s). 22

23 Money Purchase Benefits on leaving or opting out of membership (additional to those payable under the Defined Benefit Section) What are my options on leaving the Scheme in respect of my Money Purchase Benefits? 115. If you leave the Scheme having completed at least two years Pensionable Service or having transferred in benefits from another scheme, you can : Either keep your Account invested in the Scheme until retirement: No more contributions will be paid into your Account but it will continue to be invested. When you retire, benefits from your Account will be provided in the same way as under 'How much pension will I receive?' (paragraph 102) You will still have the options of taking a tax-free cash sum at retirement (paragraphs 108 and 109) and providing a pension for a Dependant (paragraph 110). If you die before your benefits become payable, the value of your Account will be used, at the discretion of the Trustee, to provide benefits for your Dependants. Or transfer the value of your Account to another registered pension arrangement. You can ask the Trustee to transfer the value of your Account to a new employer's scheme, provided the scheme is able to accept it or alternatively you have the option of transferring the value of your Account to a private pension arrangement of your choice, registered with HMRC If you leave the Scheme having completed less than 2 years' Pensionable Service and have not received a transfer in from another scheme: you will, unless you exercise the option below, receive a refund of the current value of your own contributions to your Account less tax; this could be more or less than the cost of the contributions you have paid, as it depends on investment returns during your period of membership; if you have completed more than three months but less than two years Pensionable Service, as an alternative to the refund above, you may request a transfer-out of your benefits in accordance with paragraph 115 above When you leave, you will be provided with a statement of your options When you leave the Scheme even if you are only opting out of membership whilst remaining in employment you will no longer be entitled to the death in service benefits. 23

24 Section 5: State pensions What pension does the State provide? 119. The State currently provides two levels of pension from State Pension Age: Basic State Pension A flat-rate pension paid to everyone with a sufficient record of National Insurance contributions. For the 2013/4 tax year, the basic State pension for a single person is 5, a year ( a week). State second pension scheme ( S2P ) An additional pension based on earnings between a lower earnings limit and an upper accrual point. For the 2013/4 tax year, the lower limit is 5,668 a year ( 109 a week) and the upper accrual point is 40,040 a year ( 770 a week). This pension is provided under the S2P. What is State Pension Age? 120. State Pension Age has been the subject of many recent changes by the Government. To find out what your State Pension Age will be, based on the current legislation, please visit Will I receive a State pension? 121. Membership of the Scheme does not affect your entitlement to the Basic State pension. The Basic State pension is paid in addition to your Scheme pension While in the Defined Benefit Section, you are contracted out of S2P on a salary-related basis. You pay a lower rate of National Insurance contribution and receive benefits from the Scheme instead of S2P for that period of membership You will keep any S2P pension entitlement built up whilst previously in any other contracted - in schemes. 24