PENSION UPDATE For members of Your Tomorrow, the pension scheme for Lloyds Banking Group colleagues.

Transcription

1 PENSION UPDATE 2015 For members of Your Tomorrow, the pension scheme for Lloyds Banking Group colleagues. September 2015

2 CONTENTS WELCOME NEW FLEXIBLE RETIREMENT OPTIONS UPDATES TO PENSION SAVINGS ALLOWANCES 6 NEW RETIREMENT SECTION OF THE WEBSITE 7 COMING SOON 8 PENSION SCAMS 9 PENSION STATEMENTS YOUR PENSION 10 HOW TO INCREASE YOUR CONTRIBUTIONS 10 INVESTMENT PERFORMANCE UPDATE INVESTMENT CHANGES 14 HAVE YOU COMPLETED A NOMINATION FORM? 15 FINANCIALS AND MEMBERSHIP 16 THE TRUSTEE BOARD 17 WHAT DOES THE TRUSTEE BOARD DO? 18 SCHEME ADVISERS 19 CONTACT US 20

3 WELCOME Welcome to the latest edition of Pension Update, which brings you news and developments that are important to you as a member of Your Tomorrow (the Scheme). In Pension Update 2014, we told you about the announcements made by the Chancellor of the Exchequer in the March 2014 Budget. In this newsletter we ve included some of the changes that were introduced from 6 April 2015 as a result. To reflect the changes, we ve also updated the Group Pensions website. The new Retirement section in Scheme benefits includes videos and information which explains your options at retirement and helps you to understand the decisions that you will need to make. As in previous years, if you d like a printed copy of this newsletter, you can request one from Equiniti, the Scheme administrator. You can find Equiniti s contact details on the back page. We hope you enjoy reading this newsletter. Please let us know your thoughts and we d be delighted to hear your ideas for any future articles that we could include. You can us at ytfeedback@lloydsbankingpensiondocuments.com David Nicholson Chairman of the Trustee Board 3

4 NEW FLEXIBLE RETIREMENT OPTIONS As widely reported in the media, new pension flexibilities came into effect on 6 April 2015 in the UK. The changes give individuals with defined contribution (DC) pension savings more control over how and when those savings can be used. Here we explain what the changes mean for UK members of Your Tomorrow. The new flexibilities, set out below, are available from the age of 55. This will increase to age 57 in 2028 and will change in future to remain ten years from State Pension age. Buy a regular income for life (an annuity) The option to purchase an annuity from an insurance company with your DC savings will still be available. An annuity provides the reassurance of a regular income for life (or for a set period of time if you choose a short-term annuity rather than a lifetime annuity). The amount of income depends on the value of your savings and the type of annuity that you choose. For example, you can choose whether the income is fixed or increases with inflation and whether an amount would be payable to a spouse/partner in the event of your death. You can take up to 25% of the total savings from your retirement account in Your Tomorrow as a tax-free cash lump sum and use the remainder to buy an annuity. Take a series of cash lump sums (drawdown) You can transfer your savings out of Your Tomorrow to an external drawdown provider of your choice and then take payments from the drawdown account in one of two ways: 1. Take up to 25% of your total savings as a single tax-free cash lump sum when you first enter the drawdown plan. You can then take further payments from the drawdown account as and when you choose, while the rest of your savings remain invested. Each payment taken will be taxed as income. This option is known as Flexi-access drawdown. 2. Take payments from the drawdown account as and when you choose, with 25% of each payment being tax free and the rest taxed as income, while the rest of your savings remain invested. As the rest of your savings remain invested, it s important to review your drawdown account regularly as it could fall in value or run out of money if your investments do not perform well and/or if you withdraw too much too quickly. 4

5 Take all of your savings as a cash lump sum You can take all of your savings from Your Tomorrow as a single cash lump sum. 25% of this would be tax-free and the rest would be taxed as income. Depending on the total value and any other income that you may have in that same tax year, this may mean that you become subject to a higher tax rate than usual. Offshore members: the new UK flexibilities do not apply to savings built up while resident in Jersey, Guernsey or the Isle of Man. Options here continue to include buying an annuity or transferring to an offshore scheme, drawdown arrangement or similar (subject to local tax approval) and different minimum retirement ages may apply. However, the amount of tax-free cash that can be taken at retirement has now increased from 25% to 30% of your total savings in Your Tomorrow. To help individuals understand the new flexibilities, the government has introduced Pension Wise, a free and impartial service which offers guidance via telephone, the web or face-to-face. The service is aimed specifically at people who are close to, or over the age of, 55 and thinking of taking DC retirement benefits in the near future (Pension Wise is not available in Jersey, Guernsey or the Isle of Man). To find out more visit pensionwise.gov.uk You can also seek independent financial advice. Details of financial advisers in your area are available from unbiased.co.uk The Trustee is not able to provide you with advice, and is not responsible for any guidance you may receive from Pension Wise or advice provided from any financial advisers. Important: these options are based on current legislation which may change in the future. Maximum tax-free cash is limited to 25% of the Lifetime Allowance (LTA). These options apply to Your Tomorrow only. Different options may apply to other Lloyds Banking Group pension schemes. 5

6 UPDATES TO PENSION SAVINGS ALLOWANCES The government has made some changes to the allowances relating to tax relief on pension savings. The Annual Allowance (AA) was reduced to 40,000 from 6 April However, from 6 April 2015, for anyone who takes retirement benefits from a DC scheme as a single cash lump sum or a series of cash lump sums, a new lower allowance of 10,000 will apply for future contributions to a DC scheme. This means that if contributions from you and/or your employer exceed 40,000 in the year (or 10,000 if you are subject to the lower AA), a tax charge will be applicable to the contributions above the AA. In his Budget announcement on 8 July 2015, the Chancellor of the Exchequer announced further changes to the AA. Firstly, the period over which contributions are measured for the purpose of the AA (known as the Pension Input Period or PIP) will be aligned for all pension schemes with the tax year from 6 April 2016 onwards. To achieve this, the 2015/16 tax year has been split into two periods; the first from 6 April 2015 to 8 July 2015 and the second from 9 July 2015 to 5 April The AA (during this year only) is 80,000 (plus any available carry forward) for the first period and nil for the second period, but for any individual who was a member of a registered pension scheme during the first period, up to 40,000 of unused AA can be carried forward into the second period. In addition, for the tax year 2016/17, the AA will be reduced for people who have an adjusted income (taxable earnings including pension but not charitable contributions) over 150,000. For every 2 of adjusted income over 150,000, an individual s AA will be reduced by 1. The maximum reduction to the AA will be 30,000, so that anyone with adjusted income of or above 210,000 will have an AA of just 10,000. The Lifetime Allowance (LTA) was reduced to 1.25 million from 6 April The government has announced that this will reduce further to 1 million from 6 April If the value of your total pension benefits (excluding State Pension) when you retire exceeds the LTA, additional tax may be payable on the difference above the LTA, although certain protections are allowed by HM Revenue & Customs. Visit to read more. This is only a summary and more information about these changes can be found at lloydsbankinggrouppensions.com/taxinfo 6

7 NEW RETIREMENT SECTION OF THE WEBSITE We re proud to reveal the new Retirement section in Scheme benefits on the Group Pensions website. This section looks at the new flexible options that are available to you at retirement. Visit lloydsbankinggrouppensions.com/schemeben So, what s new? The new flexible options now available mean that you have more choice when you retire. The options that best suit you will depend on what you want from your pension savings and what other income or savings you will have in retirement. We ve developed some short videos which explain the options. The options are also explained briefly in What key decisions do I need to make at retirement? Will an annuity suit your retirement plans? What is drawdown and how does it work? What should you consider if you re thinking of taking cash? Countdown to retirement What will happen and when? This quick reference guide is also available to print off. After retirement What happens on the day you retire and the few months following? This information is also available for you to print off and read later. 7

8 COMING SOON A new look website The Group Pensions website is having a facelift with a new, simpler layout and fresher look! The Your Tomorrow section will also be updated, with enhanced features to help you get the most out of the website. A new retirement planning tool will be available to help you see the effect that your decisions will make on your overall retirement savings. We ll keep you updated about developments. The budget calculator Checking whether you re on target for saving for retirement doesn t just apply to you if you re approaching retirement. This tool enables you to look at what you re spending now, and what you re likely to spend in retirement. Simply input the details and you don t have to do any more work! We ll work out how much income you ll need to achieve the lifestyle you want in retirement. To use the budget calculator visit lloydsbankinggrouppensions.com/ytbc 8

9 PENSION SCAMS Be wary if you re thinking about cashing in any DC pension savings you have or are thinking of transferring out of Your Tomorrow to another scheme. Pension scams (previously called pension liberation fraud) are on the increase. If you become a victim of such a scam, you could end up losing your lifetime s savings. Prior to 6 April 2015, under-55s were the main target for scammers promising immediate access to cash or loans from pension funds. But the new pension freedoms legislation means that people over 55, or just about to retire, may now be at risk from scammers seeking to capitalise on people s uncertainty around the new pension flexibilities. The government is advising people not to take cold calls from fraudsters posing as pension professionals, but to use the government s Pension Wise service at pensionwise.gov.uk To find out more about pension scams and how to avoid them, read Scamproof your savings which you can find at thepensionsregulator.gov.uk/individuals/dangers-ofpension-scams 9

10 PENSION STATEMENTS 2015 Annual pension statements for active and deferred members will be issued before the end of this year. Your statement allows you to keep track of your retirement savings and helps you decide whether you ll have enough for a comfortable retirement or if you need to save more. YOUR PENSION View your own retirement account online whenever you want Visit your online administration system, YOUR PENSION, at lbg.xpmemberservices.com for quick access to your personal retirement account. If you re an active member of Your Tomorrow you can use the modeller to illustrate how paying additional contributions (ACs) could increase your retirement income. You can also obtain quotations and projections of your benefits to help you with your retirement planning. You can also access YOUR PENSION via lloydsbankinggrouppensions.com/yourjourney If you haven t used YOUR PENSION before, you ll need to register and set up your log in details. Read the self registration guide for instructions on how to do this at lloydsbankinggrouppensions.com/ypregguide HOW TO INCREASE YOUR CONTRIBUTIONS If you re an active member currently paying contributions into the Scheme, did you know that increasing what you pay into your account by just a small amount could make a big difference at retirement? If you ve considered increasing your contribution rate, but haven t done so yet, use the modeller on YOUR PENSION at lbg.xpmemberservices.com to see how much of a difference this could make to your savings at retirement. Most members pay contributions through SmartSaver. If you are in SmartSaver, Your Tomorrow contributions will show as a negative figure in the credits column of your payslip. If you are not in SmartSaver, there will be a positive figure in the debits column. Visit lloydsbankinggrouppensions.com/ss To increase your contributions, simply log onto or contact your Flex provider. Did you know that changes can be made at any time of the year, not just at Flex annual enrolment time? If you don t pay through SmartSaver, contact Equiniti. See back page for details. 10

11 INVESTMENT PERFORMANCE UPDATE The following funds aim to deliver returns that are broadly in line with the performance of the overall markets in which they invest. As at 31 March 2015, all funds had performed in line with the markets, as shown below: Investment fund Actual % Benchmark % Global Journey UK Equity Fund North America Equity Fund Continental Europe Equity Fund Japan Equity Fund Asia Pacific Equity Fund Emerging Markets Equity Fund Corporate Bond Fund Your Destination (Increasing Income) Your Destination (Level Income) The Property Fund achieved its aim of delivering returns that are comparable with similar funds that invest in UK commercial property and Destination Cash achieved its aim of delivering low-volatility returns and capital preservation consistent with investing in money markets: Investment fund Actual % Benchmark % Destination Cash Property Fund Please note that past performance is not a guide to future performance and investments can go down in value as well as up. 11

12 How investments performed from launch Name Year ending 31 March 2015 % 3 years ending 31 March 2015 (% a year) From launch (July 2010) to 31 March 2015 (% a year) Actual Benchmark Actual Benchmark Actual Benchmark Global Journey UK Equity Fund North America Equity Fund Continental Europe Equity Fund Japan Equity Fund Asia Pacific Equity Fund Emerging Markets Equity Fund Corporate Bond Fund Your Destination (Increasing Income) Your Destination (Level Income) Destination Cash Property Fund N/A Name Year ending 31 March 2015 % 3 years ending 31 March 2015 % From launch (July 2010) to 31 March 2015 % Your Journey Extra Your Journey Please note that past performance is not a guide to future performance and investments can go down in value as well as up. 12

13 Your Journey Extra and Your Journey have shown lower volatility than equities since their introduction in July This means that over the short term the funds haven t shown sharp increases or falls in value like equities, which have greater unpredictability of returns. This is shown on the following graph: Global Journey (equities) Your Journey Extra Your Journey 15% 10% Return during the quarter 5% 0% -5% -10% -15% Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Quarter Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q The funds produced higher returns than equities in times when equity markets struggled, including late 2011 and early However, as equity markets have consistently produced positive returns every quarter since 2012, the more cautious nature of the two funds has meant that their performance has been lower than equities over that period, although returns have still been above the level of inflation. The Trustee s Investment Committee continues to meet with the investment manager to discuss performance and how longer-term performance can be improved without introducing excessive risk that could impact the funds if equity markets were to produce negative returns again. The following two funds invest in a diversified mix of different assets with the aim of delivering returns that are similar to equities over a three to five year period but with less volatility: Investment fund Year ending 31 March 2015 % Your Journey Extra 5.2 Your Journey 3.8 Please note that past performance is not a guide to future performance and investments can go down in value as well as up. 13

14 INVESTMENT PERFORMANCE UPDATE (CONTINUED) Since 2010, all funds, other than Destination Cash, have produced investment returns above the rate of inflation, as shown below. This means that members investments in Your Tomorrow have increased in value in real terms. Measure of inflation Year ending 31 March 2015 % 3 years ending 31 March 2015 % From launch (July 2010) to 31 March 2015 % Retail Price Index (RPI) Consumer Price Index (CPI) Up-to-date figures and unit prices are detailed on the Investment performance section at lloydsbankinggrouppensions.com/ytip You can also find comprehensive fund information for each of the funds available. A brief description of each of the 14 funds is also shown in Investment Choices for Your Tomorrow at lloydsbankinggrouppensions.com/ytig The current charges applicable to each fund are available in the Fund Charges section at lloydsbankinggrouppensions.com/ytfc The majority of Your Tomorrow members are investing for the long term and it is particularly important to remember this when looking at investment returns over relatively short periods of time. For information on how different types of assets have performed over the last 10 years, see Longer-term market returns at lloydsbankinggrouppensions.com/ltmr Past performance is not necessarily an indication of future results. INVESTMENT CHANGES The Trustee Board periodically reviews the investment fund choices for Your Tomorrow. A review is currently taking place and we expect to be able to announce if there will be any changes to investment fund choices in late In the meantime, the Trustee Board has moved Your Tomorrow to a new investment fund platform. There is no change to investment fund choices, investment managers or fund charges immediately following this move, but the new fund platform will make it easier and more cost effective to make changes in the future. Members funds remained fully invested during this move, but there was a four-week period where some transactions, including switching between funds, had to be temporarily put on hold until after the move was completed. A letter providing more information about the move was sent to all Your Tomorrow members at the end of July If you have any questions about this, please contact Equiniti. 14

15 HAVE YOU COMPLETED A NOMINATION FORM? Have you considered who is going to receive your retirement savings if you die before reaching retirement? It s very important that you complete a nomination form and keep it up to date as your circumstances change. A nomination form lets the Trustee Board know who you would like to receive any benefits that may become payable in the event of your death. The Trustee Board can often reach a decision more quickly about who should receive the benefits when there is an up-to-date completed nomination form. Without one, the Trustee Board may have to seek more information before being able to pay out the benefits, which can be upsetting for family and friends. The Trustee Board is not legally bound by your nomination form, but will take your wishes into account when deciding who should receive any benefits due. Under the current law, this normally means that any lump sum can be paid free of Inheritance Tax. If you have not yet completed a form (or you need to update it), you can download a nomination form at lloydsbankinggrouppensions.com/ytforms 15

16 FINANCIALS The Trustee s Annual Report and Financial Statement for the year ended 31 December 2014 is available to read at lloydsbankinggrouppensions.com Alternatively, you can request a copy from Equiniti. MEMBERSHIP As at 31 December 2014, there were 71,643 members in Your Tomorrow entitled to benefits. You can see the change in membership below. The fall in the number of active members, and the increase in the number of deferred members, was mainly due to colleagues who transferred to the employment of TSB Bank plc in April These members retained deferred benefits in Your Tomorrow. Active members At 31 December 2013 At 31 December ,741 52,463 Deferred members At 31 December 2013 At 31 December ,073 19,180 Total members At 31 December 2013 At 31 December ,814 71,643 16

17 THE TRUSTEE BOARD The Trustee Board of Your Tomorrow currently consists of seven directors. They each have different areas of expertise and work together to ensure Your Tomorrow runs effectively and in the best interests of its members. Employer-Appointed Trustee Directors David Nicholson Inder Dhingra Jayne Edwards* Member-Nominated Trustee Directors Independent Trustee Directors Mark Goree Shevonne McLarnon Eric Stobart * Jayne Edwards was appointed to the Trustee Board with effect from 1 May 2015 and replaces Rob Divall who left in The Law Debenture Pension Trust Corporation plc (Represented by Mark Ashworth) Martin Rickerby stepped down at the end of 2014 due to other commitments. There was therefore one vacancy for a new Member-Nominated Trustee Director (MNTD). We wrote to all active members in early June 2015 to invite nominations and to explain more about the role and how to apply. Nominations were received and considered over the summer and an appointment will be in place before the end of September. As explained in Pension Update 2014, Mark and Shevonne will remain on the Trustee Board as MNTDs until December 2016, when the positions of MNTD will be open for nomination again. In the meantime, the Trustee Board would like to thank Martin for his valuable contribution to the running of Your Tomorrow during his time serving as an MNTD. The Trustee Board would also like to thank everyone who nominated themselves to be considered for the MNTD position. 17

18 WHAT DOES THE TRUSTEE BOARD DO? The Trustee Board is legally responsible for looking after the investments in Your Tomorrow and for ensuring that benefits are paid out as they become due. Key duties include ensuring that: Appropriate investment options are in place, regularly monitoring their performance. Contributions are received from participating employers, are invested in the correct funds and on behalf of the right members. The correct benefits are paid out to members or beneficiaries at the right time, including at retirement, on death, or on leaving service. Your Tomorrow complies with all relevant legislation, regulations and recognised best practice. On a practical level, some of these responsibilities are delegated to other parties including the Scheme administrator, Equiniti, and the investment managers. However, the Trustee Board is still legally responsible so has to make sure that the delegations are being carried out correctly. The Trustee Board usually meets four times a year to oversee these activities. The role of the sub-committees The Trustee Board has two sub-committees; the DC Investment Committee (DCI) and DC Operations Committee (DCO), which bring expertise to specific matters relating to the running of Your Tomorrow. Both committees meet at least four times a year and are chaired by Trustee Directors who are members of Your Tomorrow. The DCI is responsible for the monitoring of investment performance and for developing investment strategy, including changes to funds and investment managers where appropriate. The DCO is responsible for monitoring the Scheme administrator, Equiniti, and for the Scheme s communications strategy, amongst other things. Having the necessary skills The Pensions Regulator requires that all Trustee Directors must have a minimum level of knowledge and expertise appropriate for their role. The Trustee Board is responsible for submitting an annual return to the Regulator and, following recent changes to pension legislation, for producing an annual statement which confirms (amongst other things) how the Regulator s requirements for knowledge and understanding have been met. Trustee Directors have to ensure that their knowledge remains up to date as legislation and best practice change. In addition to the usual Trustee Board and sub-committee meetings, the Trustee Board also holds a training and strategy day at least once a year. 18

19 SCHEME ADVISERS The Trustee Board has appointed the following professional advisers and managers to assist with the running of Your Tomorrow: Actuary Administrator Auditor Banker Investment adviser Investment managers Legal adviser Secretary James Wintle, Towers Watson Limited Equiniti Limited PricewaterhouseCoopers LLP Lloyds Bank Plc Towers Watson Ltd BlackRock Investment Management (UK) Ltd Legal & General Investment Management Ltd Sackers & Partners LLP Mark Honeyman 19

20 CONTACT US If you have any questions about the Scheme, please contact the Scheme administrator: Equiniti Limited, Pensions Administration, PO Box 2712, Bristol, BS1 9WD lloydsbankinggrouppensions.com Disclaimer The full terms and conditions of Your Tomorrow are contained in the Trust Deed and Rules. The Trust Deed and Rules are formal documents that are the legal basis of Your Tomorrow and will prevail in the event of any disagreement. Nothing in this document confers any entitlement to benefits. THIS NEWSLETTER IS AVAILABLE IN LARGE PRINT, BRAILLE OR AUDIO FORMAT. CONTACT EQUINITI. 20