MMC UK Pension Fund. Guide. for Members. Mercer

Transcription

1 MMC UK Pension Fund A Guide for Members Mercer

2 Contents Page Section 1 How the Fund works 1 Section2 The Fund in brief 3 Section 3 Money Purchase section 4 Investment 4 Retirement benefits 5 Early and late retirement 6 AVC benefits - deferred payment 6 Death in service 7 Death after retirement 7 Pension increases 7 Leaving 8 Section 4 Defined Benefit section 9 Retirement benefits 9 Early and late retirement 10 Death in service 11 Death after retirement 11 Pension increases 12 AVC benefits - deferred payment 12 Leaving 12 Section 5 Further information 14

3 Section 1 How the Fund works The Company believes that the provision of a pension fund is an important part of your pay and benefits package and offers a flexible pension arrangement designed to help you plan for the future with confidence, whatever your age or personal circumstances. The purpose of the Fund is to: give you a secure income when you retire provide financial protection for you and your dependants should you die before retirement. The Fund uses two methods of providing benefits according to your age on joining the Fund. The Money Purchase section of the Fund provides benefits for eligible employees who are under age 30 when joining the Fund and the Defined Benefit section provides benefits for eligible employees who are over age 30 on joining. On reaching age 30 members will be able to choose either to stay in the Money Purchase section of the Fund or switch to the Defined Benefit section from the following 1 April. Details of the Money Purchase section of the Fund can be found in Section 3. Please refer to Section 4 for more information on the Defined Benefit section of the Fund. Who can join Contributory membership is open to employees under age 65 who fall into one of the categories below: Permanent employees Temporary employees who are in receipt of the benefit allowance If you are a permanent employee, you will be automatically entered into the Fund unless you indicate to the contrary (see Opting out of the Fund on page 14). If you are employed on a temporary contract, you will be advised by the Company whether you are eligible to join the Fund and will need to complete an application form to join. Definitions Certain terms have special meanings which are given in a table of definitions on the fold out flap at the back of this guide. Where a defined word is used in the main text it appears in italics. Contributions to the Fund Your contributions The Fund is designed to provide for your financial security, both now and in the future. Your share of the cost is currently 5% of your Pensionable Salary for members of the Defined Benefit section of the Fund or 3% of your Pensionable Salary for members of the Money Purchase section. However, the actual cost to you will normally be much less because you receive full tax relief on your contributions at the maximum rate to which you are liable. So if you pay tax at 22%, each 1 you contribute only costs you 78 pence. The PAYE system automatically adjusts for tax without any action on your part. Contributions normally cease at Normal Retirement Age. In addition, because the Fund is contracted out of all or part of the State Second Pension (S2P) you pay reduced National Insurance contributions (see page 17). Company contributions The Company is responsible for meeting the balance of the cost of the benefits from the Fund - both the Defined Benefit section and, separately, the amounts to be paid or credited to the Individual Accounts (in addition to your own contributions) to provide benefits under the Money Purchase section. Contributions are paid directly to the Fund by the 19th of the month following the month of collection. All the assets of the Fund are held in Trust, separate from the Company assets, under the responsibility of the Trustee. The Company sets the level of its contribution to the Defined Benefit section having regard to the advice of the Scheme Actuary who reviews the cost at regular intervals. 1

4 2 Additional voluntary contributions If you wish to boost your retirement benefits, you may choose to do so by paying additional voluntary contributions (AVCs). You can make AVCs in two ways if you are a member of the Defined Benefit section: You can increase your Benefit Accrual Rate by choosing to pay higher contributions to the Fund under Options. For further information please see the Flexible Defined Benefit AVC Arrangement leaflet which accompanies this guide. You can pay AVCs on a money purchase basis where contributions will be invested in a personal account with a savings institution chosen by the Trustee. Each year you will receive a statement showing the AVCs you have paid and the value of your AVC fund. For further details of the money purchase AVC arrangement please contact the administrator. You can download the Application to pay AVCs form from the Fund website, details of which can be found on page 14. If you are a member of the Money Purchase section of the Fund you may pay additional contributions to your Individual Account. From 6 April 2006, you will be able to pay up to 100% of your taxable earnings from the Company into the Fund as normal contributions and AVCs, inclusive of any contributions to other pension arrangements and receive tax relief. The Annual Allowance will act as a limit on the amount by which your pension benefits and/or pension savings can grow in a year, before being subject to tax. You may also pay into a personal or stakeholder pension plan. Although AVCs and personal or stakeholder pension arrangements may be an appropriate method of saving for retirement, there may be more flexible forms of investment available to you and we strongly advise you to seek independent financial advice before you make any decisions. Benefits from the Fund The pension you receive from the Fund will normally be paid in monthly instalments direct to your bank account. Pensions are subject to income tax and, if appropriate, this will be deducted before payment. In addition, subject to your National Insurance contribution history, you should also receive the Basic State Pension from State Pension Age (see page 17). Transfer of pension from a previous arrangement Transfers from previous schemes are not being accepted into the Fund. Expression of Wish forms One of the duties of the Trustee is to decide who should receive any lump sum if a member dies. To help the Trustee make this decision, you should complete the Expression of Wish form which accompanies this guide if you have not already done so. Although the Trustee is not bound to follow your wishes it will take them into account. You should at all times ensure that your Expression of Wish form is up-to-date. If you wish to change your beneficiaries, you should complete a new form immediately. Forms can be downloaded from the Fund website, details of which can be found on page 14. Leaving the Fund If you leave the Fund, no further contributions will be made, either by the Company or by you. Details of the benefits payable from the Fund on leaving can be found on pages 8 (Money Purchase) and 12 (Defined Benefit).

5 Section 2 MMC UK Pension Fund The Fund in brief Are you under age 30* on joining? Yes No Money Purchase section member Contributions Members: Company: To age 25* 3% of Pensionable Salary 3% of Pensionable Salary From age 25* 5% of Pensionable Salary 3 At age 30* you can transfer to be a member of the Defined Benefit section for future service Transfer Defined Benefit section member Don t transfer Continue as member of the Money Purchase section with 5% Company contribution Unit of pension for each year of service as a member of the Defined Benefit section = 1/60th ** x Pensionable Salary 5% Member Contribution Company pays balance of cost * age related changes take effect on the 1st April coincident with, or immediately following, the relevant birthday. ** you may alter your Benefit Accrual Rate annually through Options (see the Flexible Defined Benefit AVC arrangement leaflet which accompanies this guide for further information).

6 Section 3 Money Purchase section Investment Whilst you are a member of the Money Purchase section of the Fund, both your own and those contributions paid or credited to you on behalf of the Company are allocated to an Individual Account. This money will be invested on your behalf and the value of the Fund you have built up will be used to provide your benefits at retirement. When you join, you will need to complete an Investment Choice Form, indicating your choice of investment options. It is important that you decide how much of your Individual Account goes into each of the funds and that you complete the Investment Choice form. If you do not complete a form your Individual Account will be invested as decided by the Trustee. Please see the separate investment leaflet for further information. 4 Investment funds The Trustee has chosen a number of different investment funds in which your Individual Account can be invested. The funds are explained in more detail in the investment leaflet entitled Choosing your Investments, which accompanies this guide. The Trustee and the administrator are not able to provide advice in connection with your investments. If you are in any doubt about your investment choices you are strongly recommended to seek independent financial advice. Investment manager The Trustee is responsible for the investment of Money Purchase Individual Accounts and for the selection of the investment managers from which you may choose.

7 Retirement benefits Any examples given to you concerning the value of your Individual Account or your possible benefits at retirement depend on the assumptions made about contribution levels, investment returns and the cost of buying a pension when you retire. Whether the examples accurately predict the benefits ultimately payable depends on whether these assumptions are borne out in practice. The amount of your benefits cannot be guaranteed. Choosing your benefits at retirement Your pension, and any pension for a Spouse, Children or Dependent Relative, will be payable through an annuity bought from an insurance company. You will be given details shortly before retirement of the options and costs of converting your Individual Account into a pension and any fees for arranging this. At retirement you will need to decide the form of benefits you wish to provide for yourself and your dependants. The process of setting up your pension may take several weeks because of the procedures involved. You can help to reduce this delay by telling the Trustee which options you want to take and by returning any forms as soon as possible. Your retirement benefits may include the following: Five year guarantee If you die within the first five years of your retirement, the unpaid balance of five years pension payments will be paid to your dependants or estate as a lump sum. Spouse s/dependants pensions Pension increases You may use your Individual Account to buy a pension with any level of pension increases or none at all. Cash sum You may be able to take up to 25% of the value of your Individual Account (including any AVCs) as a cash sum when you retire, subject to a maximum of 25% of the Lifetime Allowance. Under current legislation your cash sum will be tax free unless the value of your benefits from all pension arrangements exceeds the Lifetime Allowance. You should note, however, that any cash you take will reduce the amount available in your Individual Account to purchase your pension. Before you begin to receive a pension from your Individual Account, the Trustee will check to ensure that your Individual Account is at least equal to the value of the State Reference Scheme. If you have built up benefits above the Lifetime Allowance they will be subject to additional tax, which may be deducted from your benefits or collected through self-assessment. The Government will allow employees to protect their pension rights where they are likely to have benefits that are in excess of the Lifetime Allowance. However, this is a complex area and you should contact an independent financial adviser for further information. 5

8 6 Early and late retirement Choosing to retire early from Company service Currently, you may choose to retire with an immediate pension from the Fund at any time after your 50th birthday, subject to the agreement of the Company and the Trustee although you should note that, from 6 April 2010, the earliest age at which it will be possible to start receiving your pension will increase to 55. Your benefits will depend on the value of your Individual Account, the sort of pension you choose and the cost of buying a pension at the time you retire. Generally speaking, the younger you are when you retire the shorter the time your Individual Account will have been invested and the more it will cost to buy each 1 of pension per annum. So, if you plan to retire early, you should ensure your financial planning meets your retirement needs. You may wish to seek independent financial advice on this. Retiring early on medical grounds The Company operates an Income Protection Scheme, which may provide an income on disability, subject to insurer acceptance. This benefit is not provided from the Fund. Full details are available from the HR Benefits Department at the following address: Westgate House 52 Westgate Chichester PO19 3HF Under exceptional circumstances, it may be possible for you to retire with an immediate ill-health pension from the Fund. The pension may be reduced due to the higher cost of buying the pension at an earlier age. If the cost of annuities is high, this may result in a lower pension, depending on your age and the nature of your illness. Provision of an ill-health pension is subject to the consent of the Company and the Trustee and the provision of appropriate medical evidence. Late retirement You may continue in employment after Normal Retirement Age at the discretion of the Company, but you may not continue accruing benefits in the Fund. Your Individual Account will remain invested and will be used to purchase a pension at your actual retirement date. AVC benefits - deferred payment When you retire and start taking your main benefits under the Fund, you may defer taking your AVC benefits up to, but not beyond, your 75th birthday. Your AVCs will remain invested during any period of deferment. If you die while you are receiving your main benefits but deferring your AVCs, the AVCs will normally be paid as an additional lump sum death benefit as decided by the Trustee. You cannot normally pay any further AVCs to the Fund once you retire. There are possible financial risks in choosing this option. Your AVCs that remain invested may not grow as you hope. When you wish to use the AVCs to provide retirement benefits, the cost of doing so may have gone up. Before choosing to defer payment of AVC benefits, you may want to obtain independent financial advice on whether this is a suitable option for you. Annual statement Each year you receive a personal statement showing the value of your Individual Account and the contributions paid into it during the year and the estimated pension that could be purchased. The estimated pension will be based on expected future returns, among other factors. You will be able to request a Fund annual report with more details and performance figures.

9 MMC UK Pension Fund Death in service If you die in service whilst contributing as a Money Purchase section member the following will be payable: Death in service lump sum The death in service lump sum for Contributing Members of the Fund is three times your Basic Salary unless you select a different multiple of salary through Options, subject to a maximum of the Lifetime Allowance. It is important that you complete an Expression of Wish form to assist the Trustee in the distribution of this lump sum payment. Please refer to the section on Inheritance tax on page 18 for further details of how this benefit will be paid. Any lump sum benefits payable on your death will be paid from the Fund where possible. You will be advised separately if any of your cover will be provided outside the Fund. Spouse s pension Your Spouse will receive a pension equivalent to 30% of your Final Pensionable Salary at the date of death, subject to a minimum level based on the State Reference Scheme. If your Spouse is, at the date of your death, at least 15 years younger than you, the pension may be reduced. Children s pensions In addition to the Spouse s pension, your Children (up to a maximum of 4) will receive pensions. Each Child will receive a pension of 5% of your Final Pensionable Salary at date of death. This pension will stop once the Child attains age 18 (or 23 if in full-time education). It can continue beyond this age if, at the time of your death, the Child was dependent on you through physical or mental impairment. Dependant s pension If you are not married, the Trustee may choose to pay a pension to a Dependent Relative where there is financial interdependency at the date of your death, subject to certain criteria. Any pension paid to a Spouse, Dependent Relative or Child will be subject to income tax but its value does not count towards your Lifetime Allowance or the recipient s own Lifetime Allowance. Death after retirement In the event of your death after retirement, your dependants will be entitled to the benefits you specified on retirement (see page 5). For example: When you retired you may have chosen to have a pension that pays a lump sum if you were to die within 5 years of your pension starting. Alternatively, you may have chosen to have a pension with no lump sum payable on death. You may have chosen to provide a pension payable to a Spouse, Dependent Relative or Children upon your death. You may have chosen to buy a pension with any level of annual increase, or none at all, and any pension payable to a Spouse, Dependent Relative or Child will be increased accordingly. Pension increases The timing of any annual increases applied to the pension will be determined by the insurance company with whom the pension has been purchased. 7

10 MMC UK Pension Fund 8 Leaving If you leave the Fund, your own contributions and the contributions paid or credited to you on behalf of the Company will cease. Less than two years Pensionable Service Less than 3 months Pensionable Service You will be entitled to a refund of your own contributions plus any AVCs, less statutory deductions. You will be reinstated in the State Second Pension for this period of your employment. More than 3 months but less than 2 years Pensionable Service You will be entitled to a refund of contributions as described above. As an alternative to taking a refund, you may transfer the full value of your Individual Account to another pension arrangement. You will receive a transfer value quotation when you leave and you will have three months in which to decide whether to transfer your pension or to take the cash refund, less deductions. See Transferring your Individual Account in the next column for further details. You may not leave your Individual Account in the Fund. Two or more years Pensionable Service Your Individual Account will remain invested until your Normal Retirement Age and a pension will be bought at that time. As an alternative to leaving your Individual Account invested in the Fund, you may transfer it to another pension arrangement. You may ask the Trustee for a statement of the value of your Individual Account at any time. The Fund is not obliged to provide another statement within 12 months of the date of your last request. Transferring your Individual Account You may ask the Trustee to transfer the value of your Individual Account to one of the following pension arrangements as long as the transfer takes place at least one year before your Normal Retirement Age: a registered pension plan with your new employer; or a registered personal pension plan or stakeholder plan of your choice, or an individual insurance policy in your name (commonly known as a buy-out policy). The transfer value will be equal to the value of your Individual Account at the date of transfer. If the value of the State Reference Scheme is higher, then this higher amount will be available to transfer. If you have made any AVCs, their value will be in addition to the transfer value. A deduction may be made for expenses. You should seek independent financial advice before proceeding with a transfer. Death before retirement If you leave the Company but keep your benefits in the Fund, the full value will be used to provide a pension for your Spouse (subject to a minimum based on the State Reference Scheme), or Dependent Relative, and Children in the event of your death before retirement.

11 Section 4 Defined Benefit section Retirement benefits Benefits for members of the Defined Benefit section of the Fund are calculated according to a formula, based on salary and service. Pension formula For each year of service as a member of the Defined Benefit section of the Fund you will earn a unit of pension as follows: 1/60th x Pensionable Salary Each unit of pension will be adjusted at the end of each year (31 March) by the rate of inflation (measured by the Retail Prices Index) up to a maximum of 5% a year until you cease active membership. Please refer to the example below for further details of how benefits for a member of the Defined Benefit section are calculated. Altering your accrual rate through Options You can alter your Benefit Accrual Rate to 1/45th, 1/50th or 1/70th through Options. Please refer to the separate Flexible Defined Benefit AVC Arrangement leaflet which accompanies this guide for further information. Cash option When you retire you have the option to exchange part of your pension for a cash sum, which is free of tax under current legislation unless the value of your benefits from all pension arrangements exceeds the Lifetime Allowance. You may take up to 25% of the value of your retirement benefits (including any AVCs) as a cash sum subject to a maximum of 25% of the Lifetime Allowance. You should note, however, that any cash you take will reduce your pension. 9 Example The following example will help to explain how your pension as a member of the Defined Benefit section of the Fund builds up. In the example below, it is assumed that the RPI increases by 2.5% in each year and that your Pensionable Salary goes up by 3% each year. Fund Year Pensionable Pension Unit of 1/60th Accumulated pension at the end of the (starts each Salary during Fund year (i.e. at 31 March) 1 April) the year Year one 30,000 1/60 x 30,000 = 500 ( 500 plus 2.5% increase) = 513 Year two 30,900 1/60 x 30,900 = 515 ( 1,028 plus 2.5% increase) = 1,054 Year three 31,827 1/60 x 31,827 = 530 ( 1,584 plus 2.5% increase) = 1,624 Year four 32,782 1/60 x 32,782 = 546 ( 2,170 plus 2.5% increase) = 2,224 Year five 33,765 1/60 x 33,765 = 563 ( 2,787 plus 2.5% increase) = 2,857 At the end of year five, the pension earned would be 2,857 p.a. for this five year period. Each year s unit of pension is earned during the Fund year which begins on each 1 April. Each unit of pension earned will first be increased at the end of the Fund year (i.e. on 31 March) in which it was earned. So, for example, the unit of pension earned during the Fund year that runs from 1 April 2006 to 31 March 2007 will receive its first increase on 31 March The increase will be in line with the rise in the RPI for the year to the previous December (subject to a maximum increase of 5%) therefore in this example, the increase at 31 March 2007 will be based on the rise in the RPI for the year to December Subsequent increases will be applied on each following 31 March.

12 10 Early and late retirement Choosing to retire early from Company service Currently, you may choose to retire with an immediate pension from the Fund at any time after your 50th birthday, subject to the agreement of the Company and the Trustee, although you should note that, from 6 April 2010, the earliest age at which it will be possible to start receiving your pension will increase to 55. If you retire early, your pension will be based on the units of pension you have earned as a member of the Defined Benefit section of the Fund, revalued to your actual retirement date as described on page 9. It will then be reduced to take account of the longer period for which it will be paid. The rate of reduction will be agreed by the Company and the Trustee. Options at retirement If you retire early, you may still have the option of exchanging part of your annual pension for a cash sum. If you take this option, your pension will be reduced. The amount of reduction varies depending on your age when you retire. The factors used for this calculation are reviewed from time to time; you will be advised of the reduction before you make a final decision. Retiring early on medical grounds The Company operates an Income Protection Scheme, which provides an income on disability, subject to insurer acceptance. This benefit is not provided from the Fund. Full details are available from the HR Benefits Department at the address below: Westgate House 52 Westgate Chichester PO19 3HF Under exceptional circumstances, it may be possible for you to retire with an immediate ill-health pension from the Fund. The pension may be reduced to take account of the longer period for which it will be paid. Provision of an ill-health pension is subject to the consent of the Company and the Trustee and the provision of appropriate medical evidence. The Trustee would require evidence of your continuing ill health on an ongoing basis up to your Normal Retirement Age. Late retirement You may continue in employment after Normal Retirement Age at the discretion of the Company, but you may not continue accruing benefits in the Fund. You may be able to draw an immediate pension or defer drawing it until you actually retire, when the Trustee may increase the pension for late payment in line with actuarial advice.

13 MMC UK Pension Fund Death in service If you die in service whilst contributing as a member of the Defined Benefit section of the Fund the following will be payable: Death in service lump sum The death in service lump sum is three times your Basic Salary unless you select a different multiple of salary through Options, subject to a maximum of the Lifetime Allowance. It is important that you complete an Expression of Wish form to assist the Trustee in the distribution of this lump sum payment. Please see page 2 for further details. Any lump sum benefits payable on your death will be paid from the Fund where possible. You will be advised separately if any of your cover will be provided outside the Fund. Spouse s pension Your Spouse will receive an amount equal to 60% of the pension you would have received at Normal Retirement Age as a member of the Defined Benefit section of the Fund had you stayed in the Fund until then including all revaluations received prior to the date of your death (but with no further allowance for any future revaluations). The pension will be paid in monthly instalments for the rest of your Spouse s life. If your Spouse is, at the date of your death, at least 15 years younger than you, the pension may be reduced. Children s pensions Children s pensions are also payable for the benefit of Children (up to a maximum of 4). Each Child will receive 10% of the pension you would have received at Normal Retirement Age had you stayed in the Fund until then including all revaluations received prior to the date of your death (but with no further allowance for any future revaluations). If there is no Spouse s or dependant s pension payable in respect of the member, each Child s pension will be doubled. Children s pensions will normally be paid until age 18, or until age 23 if in full-time education. It can continue beyond this age if at the time of your death, the Child was dependent on you through physical or mental impairment. Dependant s pension If you do not have a Spouse, the Trustee may choose to pay a pension to a Dependent Relative where there is financial interdependency at the date of your death, subject to certain criteria. Death after retirement In the event of your death after retirement the following benefits are payable: Five year pension guarantee If you die within the first five years of your retirement, the unpaid balance of five years pension payments will be paid as a lump sum by the Trustee. The Trustee will always try to follow your wishes as to whom the lump sum will be paid but it retains discretion so that under current legislation there is no liability for inheritance tax. Spouse s pension Your Spouse will receive a pension equal to 60% of your pension at the date of your death. The value, at the date of your death, of any pension you gave up for cash will be included for the purpose of this calculation. The pension would be paid in monthly instalments for the rest of your Spouse s life. If your Spouse is, at the date of your death, at least 15 years younger than you, the pension may be reduced. Children s pensions Children s pensions are also payable for the benefit of Children (up to a maximum of 4). Each Child will receive 10% of what would have been the pension when you died if you had not converted any of your pension into a cash sum. If there is no Spouse s or dependant s pension payable in respect of the member, each Child s pension will be doubled. Children s pensions will normally be paid until age 18, or until age 23 if in full-time education. It can continue beyond this age if at the time of your death, the Child was dependent on you through physical or mental impairment. Dependant s pension If you do not have a Spouse, the Trustee may choose to pay a pension to a Dependent Relative where there is financial interdependency at the date of your death, subject to certain criteria. 11

14 MMC UK Pension Fund 12 Pension increases Once in payment, your pension or any Spouse s, Dependent Relative s or Children s pensions will be increased each year in line with the RPI increase, up to a maximum of 2.5% per annum, as required by current legislation. This increase, together with any discretionary increases the Trustee and the Company agree to give will be made from 1 September each year. Where your pension has been in payment for less than a full year at 1 September, you will receive a proportionate increase based on the number of months that your pension has actually been paid. Money Purchase AVC benefits - deferred payment When you retire and start taking your main benefits under the Fund, you may defer taking your money purchase AVC benefits up to, but not beyond, your 75th birthday. Your AVCs will remain invested during any period of deferment. If you die while you are receiving your main benefits but deferring your AVCs, the AVCs will normally be paid as an additional lump sum death benefit as decided by the Trustee. You cannot normally pay any further AVCs to the Fund once you retire. There are possible financial risks in choosing this option. Your AVCs that remain invested may not grow as you hope. When you wish to use the AVCs to provide retirement benefits, the cost of doing so may have gone up. Before choosing to defer payment of AVC benefits, you may want to obtain independent financial advice on whether this is a suitable option for you. Deferred payment does not apply to Flexible Defined Benefit AVCs, which must be taken at the same time as your main benefits from the Fund. Leaving If you leave the Fund, no further contributions will be allowed either by the Company or by you. Less than two years Pensionable Service Less than 3 months Pensionable Service You will be entitled to a refund of your own contributions together with any AVCs, less statutory deductions. You will be reinstated in the State Second Pension for this period of your employment. More than 3 months but less than 2 years Pensionable Service You will be entitled to a refund of your own contributions as described above. As an alternative to taking a refund, you may opt for a full transfer value to another registered pension arrangement. You will receive a transfer value quotation when you leave, and will have three months in which to decide whether to transfer your pension or to take the cash refund less deductions. See Transferring your benefits overleaf for further details. You may not leave your contributions in the Fund. Two or more years Pensionable Service You will be entitled to a deferred pension, payable from Normal Retirement Age. This will be calculated based on the units of pension you have earned as a member of the Defined Benefit section of the Fund, revalued to your actual date of leaving as described on page 13. As an alternative to a deferred pension, you may ask the Trustee to transfer the value of your pension benefit to an alternative pension arrangement. See Transferring your benefits overleaf for further details. You will receive a written statement showing your entitlement within 3 months of your request. The cash equivalent will be guaranteed for 3 months from the date it was calculated. The Fund is not obliged to provide another statement within 12 months of the date of your last request.

15 Inflation protection To help offset the effects of inflation your deferred pension will be increased each year in line with the RPI increase up to a maximum of 5% per annum between the date you leave and your Normal Retirement Age. Once in payment your deferred pension will be increased each year in the same way as set out on page 12. Death before retirement If you should die before retirement, a Spouse s pension equal to 60% of your deferred pension, including any increases up to the date of your death, will be payable for the rest of your Spouse s life. Children s pensions may also be payable at the rates described on page 11. Transferring your benefits You may ask the Trustee to transfer the value of your pension benefit to one of the following pension arrangements as long as the transfer takes place at least one year before your Normal Retirement Age: a registered pension plan with your new employer; or a registered personal pension plan or stakeholder plan of your choice, or an individual insurance policy in your name (commonly known as a buy-out policy). The transfer value will take the form of a capital sum, known as the cash equivalent, representing the value of the benefits you earned as a member of the Defined Benefit section of the Fund up to the date you left. The cash equivalent is based on agreed assumptions and is calculated to be sufficient, at the date of calculation, to provide the pension at your Normal Retirement Age. Allowance is made for any guaranteed or statutory increases to be applied between the date you leave and your Normal Retirement Age, but not for any possible discretionary pension increases. An amount may be deducted for expenses. If you have been a member of the Money Purchase section of the Fund, the amount of your Individual Account will be in addition to the cash equivalent from the Defined Benefit section. Similarly, if you have made any money purchase AVCs, their value will be in addition to the Defined Benefit cash equivalent. You should seek independent financial advice before proceeding with a transfer. 13

16 Section 5 Furtherinformation 14 Looking after your interests The Fund is established under a trust and administered by a corporate trustee, MMC UK Pension Fund Trustee Ltd. Amongst other things, this means that the Fund s assets are legally separate from those of the Company and the Trustee is responsible for ensuring that members entitlements are protected. The administration of benefits and the investment of the Fund s assets fall within the responsibility of the Trustee. The members of the board of MMC UK Pension Fund Trustee Ltd serve as individual Trustee Directors. Most of the Trustee Directors are appointed by the Company but at least a third of them are Member Representative Trustee Directors ( MRTDs ). The procedure for appointing MRTDs is through their nomination by the Pensions Forum from among its elected staff members and subject to approval by the other Trustee Directors. The Pensions Forum is a committee established by MMC UK Pension Fund Trustee Ltd., to which a number of active members of the Fund and pensioners are elected by active Fund members and pensioners from the same constituency. You can contact the Trustee through the administrator as described below: Postal address: MMC UK Pension Fund PO Box 476 Westgate House 52 Westgate Chichester PO19 3WZ Tel: Fax: mmcpensions.uk@mercer.com Website: Keeping you in the picture Knowing where you stand with your pension is very important. As a Contributing Member of the Fund, you will be sent regular information designed to keep you in the picture about your benefits and the Fund in general. You will also receive details of specific changes, events and options relating to the Fund. Pension benefits basis that applies from 1 April 2006 This booklet describes the basis for calculating benefits earned from 1 April 2006 onwards. Members with continuous membership of the Fund, who earned benefits on a different basis up to 31 March 2006, should refer to their previous scheme documentation together with the information in this guide. Opting out of the Fund If you are a permanent employee, you will be automatically entered into the Fund unless you indicate to the contrary. You may decide not to join the Fund at all or to opt out at a later date and make your own pension arrangements. This decision should not be taken lightly and you are encouraged to take independent financial advice before doing so as the Company will no longer provide pension benefits for you or your dependants other than standard benefits for leavers (see pages 8 and 12) in respect of any benefits accrued to the date of opt out. Please note that once you have opted out of the Fund your life assurance cover will be reduced to two times your Basic Salary, although you may select a different multiple through Options. Should you decide to opt out of the Fund, you will need to complete a form, which can be obtained from the administrator at the address in the previous column. If you wish to rejoin the Fund subsequently, you will only be able to do so with the Company s and the Trustee s consent, and you may be subject to special terms. If you leave the Fund to take out a personal or stakeholder pension arrangement the Company will not contribute towards it on your behalf. If you have been a member of both the Defined Benefit section and the Money Purchase section of the Fund, you will remain entitled to both these benefits on leaving.

17 MMC UK Pension Fund Paying into other pension arrangements Members of the Fund can also contribute to their own personal pension arrangements, whether a personal pension policy or a stakeholder policy. Staying in touch Keeping in touch while you are with the Company is one thing, but it s easy to lose touch if you move on. If you leave the Company and your benefits remain in the Fund, the Trustee will keep a record of your last known address so that you can be contacted about your benefits or any issues affecting the Fund. It is important that you keep the administrator informed of any change of address once you have left. If for any reason you lose track of the Trustee s or the Company s address, you will be able to contact them through the Pension Tracing Service. In common with other pension schemes, the Trustee provides information about the Fund, including a contact address for inclusion in a pension registry. The address to write to is: Pension Tracing Service Tyneview Park Whitley Road Newcastle upon Tyne NE98 1BA Help at hand The aim of the Trustee is to give you clear, straightforward information which is timely and easy to understand. However, communication is a two way process and we recognise that there may be occasions when there are questions you want to ask, or issues you would like to discuss with someone. In the first instance, please contact the administrator at the address on page 14. Seeing eye to eye Most queries or problems can be dealt with and resolved, informally, as they arise. However, in rare cases a disagreement may occur which requires a more formal procedure for its resolution. In these circumstances a formal request may be made to invoke the Fund s Internal Dispute Resolution Procedure (IDRP). The IDRP does not apply to disputes between employees and the Company, or the Company and the Trustee. Also, it cannot be used for complaints or disputes which are already the subject of court proceedings or under investigation by the Pensions Ombudsman. The IDRP is a two-stage process. Under the first stage your complaint or dispute will be considered and decided upon by the Pensions Manager of the Fund. If you are happy with the decision, the process ends there. However, if you are not satisfied with the result of the first stage, you will have six months in which to ask the Trustee to reconsider and decide upon your complaint under stage two. Normally, a decision under either stage will be made within two months. Complaints and appeals must be made in writing and must provide some specific information. If you are unable, or you do not wish, to make the complaint or an appeal yourself, you can nominate someone else to act on your behalf. The Trustee aims to make the need for formal complaints the exception rather than the rule. However, should the need arise, full details of the procedure are available from the administrator at the address on page

18 MMC UK Pension Fund 16 Outside help In addition to the Fund s own arrangements, the Government has established two independent agencies to help, should an issue arise which cannot be resolved directly between a pension scheme and a member or beneficiary. They are The Pensions Advisory Service (TPAS) and the Pensions Ombudsman. TPAS is available to assist members and beneficiaries of the Fund in connection with queries at any time, or difficulties encountered at any stage of the disputes procedure. TPAS will offer advice on a particular case and, if necessary, may refer it to the Pensions Ombudsman who acts as an independent arbitrator in disputes between pension schemes and their members. The address of both TPAS and the Pensions Ombudsman is: 11 Belgrave Road London SW1V 1RB The Pensions Regulator The Pensions Regulator was set up by the Pensions Act 2004 to help ensure that work-based pension schemes in the UK are properly run. It is able to intervene in the running of schemes where trustees, employers or professional advisers have failed in their duties. The Pensions Regulator can be contacted at the following address: The Pensions Regulator Napier House Trafalgar Place Brighton East Sussex BN1 4DW Tel: customersupport@thepensionsregulator.gov.uk Website: Data protection legislation The Trustee works together with the Company to provide the benefits as set out in this guide. The information shared will be used to administer any benefits under the Fund. Only such details as are required to fulfil obligations to members and legal and regulatory obligations will be collected and stored. Your personal data will be treated in strictest confidence and will only be disclosed to others in limited circumstances, for example to product providers in the course of preparing or implementing advice or to meet legal or regulatory requirements. Where you are asked to supply information relating to your dependants, you should inform those individuals first; they might like to read this guide to find out how personal data is handled. Where information is required from your doctor this will not be sought without your permission. If you have a financial representative or independent financial adviser, the Trustee will liaise with that person or firm and share information only on your written instructions. If you die while you are a member of the Fund the Trustee will liaise with your personal representative(s), relatives and possibly your work colleagues who may supply us with information relating to you. If information is used to conduct statistical analysis and surveys, you would not be identified personally. Please note that all the information asked for is necessary and without it the Trustee would not be able to administer your benefits under the Fund.

19 The State Pension Scheme The State Pension Scheme is in two parts: the Basic Pension (the old age pension) which is a flat-rate pension paid to everyone who has paid enough National Insurance contributions, and the State Second Pension (S2P) which is based on an employee s earnings between a Lower and an Upper Earnings Limit throughout his or her working life. State pensions are paid from State Pension Age, which is currently 65 for men, 60 for women. However, a common State Pension Age of 65, for both men and women, is being phased in by the Government between the years 2010 and Contracting out As a member of the Fund, you are contracted out of the State Second Pension (S2P). As a result, depending on your level of earnings, you will not be entitled to all or part of the pension you would otherwise have received from S2P in respect of your service. In order to contract out, the Fund has to meet certain requirements laid down by the Government. The most important of these requirements is that the Fund must provide benefits which are broadly equivalent to, or better than, a model scheme set by the Government. This is known as the State Reference Scheme Test. As you are contracted out of the State Second Pension (S2P) you pay reduced National Insurance contributions. The rate of these contributions is reviewed regularly by the Government. Although you are contracted out of S2P, you will still be entitled to receive the Basic State Pension, subject to a full National Insurance record, from State Pension Age. Some members may also receive a small S2P top-up. Temporary absence If you stop receiving contractual pay or statutory sick pay, your membership of the Fund may, under certain circumstances, be continued with the Company s and the Trustee s consent. Ordinary maternity leave During ordinary maternity leave your pension benefits will continue. If, and for so long as, you qualify for Statutory Maternity Pay (SMP) or you receive contractual pay from your employer, your Pensionable Service under the Fund continues as if you are working normally. Your pension benefits will continue and will be based on the Pensionable Salary that would have applied had you been working normally. You continue to pay contributions but they are based on the pay you actually receive during ordinary maternity leave (rather than on your Pensionable Salary). If you are a member of the Defined Benefit section of the Fund who has elected to pay Flexible Defined Benefit AVCs under Options, contributions will be deducted at the rate appropriate to the accrual rate you have selected. Your death benefits will be similarly continued. If you do not receive SMP or do not receive contractual pay from your employer, your Pensionable Service and benefits continue, as previously described, for the ordinary maternity leave period of 26 weeks. You do not pay any contributions during any unpaid ordinary maternity leave. Your employer pays its own contributions in respect of you and, for Money Purchase section members, the difference between the contributions you would have paid to the Fund had you been working normally (but not any additional voluntary contributions) and those you actually pay during ordinary maternity leave. 17

20 18 Additional maternity leave Any additional maternity leave that you take will be unpaid. Your pension benefits for that period will not be continued but you may be able to make up your missed contributions when you return to work in order to maintain continuous Pensionable Service. Your death benefits will be continued during this period. For further information on the conditions that apply following your return to work please refer to the Maternity Policy on the Mercer intranet. If, following maternity leave (either ordinary or additional), you do not return to work, and you have not left the Fund earlier, you will then be treated as leaving service and the Fund. Your date of leaving the Fund is then taken as the date any maternity pay (either statutory maternity pay or contractual pay) stops or, if later, when your ordinary maternity leave ends. You will remain covered for the death in service benefits described on pages 7 and 11 throughout the whole period of your absence from work. The pension benefits will be based on your Pensionable Salary at its full, unreduced, level. The lump sum is based on Basic Salary. Paternity leave During paternity leave your pension and death benefits will continue as if you were working normally. Your contributions to the Fund will continue to be based on actual pay received. Adoption leave During adoption leave your pension and death benefits will be treated in exactly the same way as described above for maternity leave. However, for adoption leave, references to maternity leave, and Statutory Maternity Pay (SMP) should be taken to read adoption leave and Statutory Adoption Pay (SAP) respectively. Marital Status It is your responsibility to ensure that the Trustee is kept informed of any change in your marital status. If you are not legally married to your partner (or are not registered as civil partners) and there is no Spouse s pension payable, the Trustee may consider paying a pension to a Dependent Relative, subject to certain criteria. Any such payments are given at the absolute discretion of the Trustee. Divorce The Trustee must comply with any order made by a Court following a divorce or dissolution of a civil partnership. Insured benefits The lump sum benefit payable on death is secured under an insurance policy specifically to provide this benefit. In normal circumstances, the full benefit will be provided automatically without any enquiry into your state of health. Restrictions may be imposed on your benefit in certain circumstances and you will be notified if these apply to you. Income tax All Fund pensions are paid subject to income tax, as appropriate. Inheritance tax Under present legislation, lump sum death benefits paid under the Fund will not normally be subject to Inheritance Tax. To achieve this the Fund is arranged so that the Trustee has absolute discretion to decide who receives the lump sum payments. Normally the Trustee will follow your wishes. You should let the Trustee know who you would like to receive the money by completing the Expression of Wish form accompanying this guide. Expression of Wish forms can be downloaded from the website should your circumstances change or you change your mind at any time.

21 MMC UK Pension Fund HM Revenue & Customs registration and restrictions The Fund is registered with HM Revenue & Customs. This means that the Fund and the members receive important tax concessions. However, these tax concessions only apply to the value of a member s benefits up to certain levels, each year and in total. These limits are increased annually by HM Revenue & Customs. Any pension paid by the Fund is taxed under the PAYE system. Tax advantages The Fund has been registered with HM Revenue & Customs under the Finance Act Membership of the Fund currently brings with it several important tax advantages under this Act: Full tax relief on your contributions up to the Annual Allowance. A cash sum option on retirement, which will be tax free unless the value of your benefits from all pension arrangements exceeds the Lifetime Allowance. Lump sum death benefits paid to dependants are normally tax free. You are not taxed on the Company s contributions. Favourable tax relief on the Fund s investments. Trust Deed and Rules The Trustee administers the Fund in accordance with the Trust Deed and Rules which meet current legislative requirements. This guide provides a summary of the Fund and does not cover all the Fund s detailed provisions which are set out in the formal Rules. The Rules may be inspected at the office of the administrator by prior arrangement. Alternatively, copies may be obtained from the administrator at the address on page 14, although a charge may be made. In the event of a conflict between the terms of this guide and those of the Rules, the Rules will prevail. Amendment and discontinuance Subject to the Fund Rules the Company reserves the right to amend or discontinue the Fund at any time. If your benefits or rights are affected you will be given written notice. Retirement benefits to which you have already become entitled would, however, be safeguarded in accordance with the detailed provisions laid down in the Trust Deed and Rules. If the Fund winds up and the assets are insufficient to meet the liabilities, the treatment of your benefits will depend on whether or not the Company is in liquidation or receivership. If the Company goes into liquidation or receivership, the shortfall would be a debt on the Company. Failing this, you may be entitled to a payment under the Pension Protection Fund (PPF). The PPF will only pay up to 90% of pension benefits for Defined Benefit section members who have not yet reached Normal Retirement Age and limits total benefits to a maximum of 25,000 a year. If the Company is not in liquidation or receivership, it will have an obligation to make up the shortfall on winding up the Fund. Benefits non-assignable Your benefits under the Fund cannot be assigned or used as security for a loan. 19

22 20 Notes

23 Definitions Annual Allowance Basic Salary Benefit Accrual Rate Children Company Contributing Member Defined Benefit section Dependent Relative Final Pensionable salary Fund Individual Account Lifetime Allowance Lower Earnings Limit (LEL) Money Purchase section Normal Retirement Age is age 65. Pensionable Salary Pensionable Service RPI increase Scheme Actuary Spouse State Pension Age is a limit set by the Government on the amount by which your pension benefits and/or pension savings can grow in a year (1 April to 31 March) before being subject to tax. The growth in your benefits can be calculated by adding up the following: Any money purchase contributions (e.g. contributions to the Money Purchase section of the Fund or AVCs) made by you or paid or credited by the Company during the year; and, if applicable The amount by which your defined benefit pension entitlement has increased over the year, multiplied by 10; and, if applicable The growth in any other pension savings (excluding statutory revaluation on deferred pension benefits). The Annual Allowance has been set at 215,000 for the 2006/07 tax year. is your current annual base salary, excluding car allowances, bonuses or any other benefits. is the rate at which your pension builds up in the Defined Benefit section of the Fund. The core Benefit Accrual Rate is 1/60th. are your children or your Spouse s children who are financially dependent on you and are under age 18, or under age 23 if still in full-time education (or beyond if mentally or physically disabled). is Marsh & McLennan Companies UK Ltd, the Principal Employer. is a member who is currently paying contributions to the Fund and building up retirement benefits. is the section of the Fund in which retirement benefits are provided on a career revalued basis, whereby you earn a unit of pension for each year of Pensionable Service based on your Pensionable Salary during that year. Each unit of pension is increased at the end of the year and annually thereafter up to 31 March before you retire, leave or die. Full details are given in Section 4 of this guide. is any one or more of the following: a Child who is under the age of 18 years or under age 23 if still in full-time education, and any person who in the opinion of the Trustee is financially dependent on you. is the highest annual average of any 36 consecutive months Pensionable Salaries in the last 10 years. is the MMC UK Pension Fund. is an account set up in your name whilst contributing to the Money Purchase section of the Fund. is a limit set by the Government on the amount of pension savings that will qualify for tax relief. This allowance will start at 1.5 million worth of benefits from registered pension arrangements from 2006, rising to 1.8 million in The Lifetime Allowance will apply to all of the pension benefits you build up over your entire working life and will be triggered by a benefit crystallisation event such as payment of retirement income or death benefits. is the level of earnings at which benefits under the State Second Pension start accruing. This figure is set by the Government and adjusted each year. It is broadly equal to the Basic State Pension. is the section of the Fund in which an Individual Account is credited with contributions from both you and the Company, which earns investment returns over time. The value of your Individual Account is then used to purchase your benefits at retirement. Full details are given in Section 3 of this guide. is your Basic Salary less an amount equal to the LEL. For members working on a part-time basis the LEL is pro-rated before being deducted. is the number of consecutive completed years and days that you are a Contributing Member of the Fund. means the percentage increase in the Retail Prices Index over a defined 12 month period. is appointed by the Trustee to provide actuarial advice relating to the Fund. is your legally married husband or wife. Under the Civil Partnership Act 2004, a registered civil partner will be treated the same as a Spouse for pension purposes. for men is 65. For women born: before 6 April 1950, it is 60; after 5 April 1955, it is 65; between 6 April 1950 and 5 April 1955 it is on a sliding scale between 60 and 65. State Reference Scheme this provides for a benchmark pension broadly equal to 1/80th of average earnings between the LEL and UEL over the last 3 tax years, for each year of Pensionable Service, with a 50% Spouse s pension. State Second Pension (S2P) Upper Earnings Limit (UEL) provides a pension in addition to the Basic State Pension. Members of the Fund are contracted out of all or part of S2P. is the level of earnings at which benefits under the State Second Pension cease accruing. It is adjusted by the Government each year.

24 This booklet applies to members of the Mercer section of the MMC UK Pension Fund. A separate booklet describes the Fund in relation to other members. Please see overleaf for Definitions