Capgemini UK (2004) Pension Plan

Transcription

1 Capgemini UK (2004) Pension Plan Annual Update Welcome to the Capgemini UK (2004) Pension Plan Annual Update for the year ended 31 March This Update is designed to keep you informed of the Plan s development over the past year and is produced after the Trustee accounts for the year ended 31 March have been completed and signed in October. It is intended for members of the following Sections of the Plan: Defined Benefit (DB): Aspire 1994 Section Aspire Retirement Section Classic Section Local Government Pension Section Local Government (2008) Pension Section DFEE (Xansa) Section (from 1 April 2015) Defined Contribution (DC): Aspire Investment Section Chairman s Review for the year ended 31 March 2017 As always this was a busy year for the Trustees, with continuing change both within the Plan and in the wider market environment. The 2017 year saw two changes to the Plan management. During 2016 the term of office for the existing Member Nominated Trustees (MNTs) expired, and a nomination and election process was run for the two vacancies. Following this process, Frank Curry was re-elected and Karen Bishop was elected to fill these MNT vacancies. The Trustees wish to thank Blair Jones, who stood down at this time, for all his hard work and contribution as a Trustee. At the end of December 2016, the Chairman of Trustees, Tony Fisher, retired from the board. Tony s experience and contribution over many years has been invaluable, and the Trustees thank him for his long service to the Plan. With effect from 1 January 2017, the Company appointed Ian Pittaway of Independent Trustee Limited, a professional independent Trustee, to join the board as Chair. On the wider market background, at the start of the Plan year the Trustees worked with our advisers to prepare for the outcome of the UK referendum on membership of the EU, and following the result in June we reviewed implications of the vote and the subsequent market activity for the Plan. Market conditions have been uncertain, and the full implications of the vote are yet to be seen. Our focus, as a Trustee board, has been to continue to monitor the risk profile of our portfolio, and seek to reduce volatility where possible during these unusual market conditions. As we approached the year end the Trustees began preparations for the actuarial valuation as at 31 March 2017, and are currently in discussion with the Employer regarding the preliminary results. The final results of the valuation will be shared in next year s report, and annual Summary Funding Statement to members. I wish to thank my fellow Trustees for their hard work over the past 12 months. Ian Pittaway, Independent Trustee Limited Chairman of Trustees

2 The Plan year in brief The Plan s DB assets increased from 416.5m to 509m over the year. The Plan s DC assets increased from 10.9m to 12.8m during the year. Capgemini made contributions of 17.6m to the Defined Benefit Sections during the year. The Plan s DB investments achieved a return of 20.7% in challenging market conditions, and an average return of 14.6% per annum over the three year period. Plan Management The Plan is managed by a board of Trustees, with the support of the Capgemini Pensions Team in Woking and a number of professional advisers. Contact details for the Plan administrators are at the end of this Update. Trustees The current Trustees of the Plan are: Independent Trustee Limited (Appointed 1 January 2017) Tony Winslade Norman Buckingham Frank Curry (MNT) (reappointed 22 November 2016) Karen Bishop (MNT) (appointed 22 November 2016) Norman Buckingham is also the Secretary to the Trustees and the Head of Pensions for Capgemini UK. He is supported by Brenda Thomas, Assistant Pensions Manager, and Sue Richardson, Pensions and Benefits Officer. Advisers to the Trustees The Trustees are assisted in the running of the Plan by a number of professional advisers as follows: Plan Actuary : Mr Julian Hough FIA (Xafinity) Plan Administrators : Xafinity Plan Investment Consultants : Xafinity Plan Auditors : PricewaterhouseCoopers LLP (PwC) Plan Lawyers : Travers Smith LLP Fiduciary Managers (DB Assets) : Kempen Fiduciary Management Employer Covenant Adviser : Lincoln Pensions Investment Managers: Defined Benefit Sections (DB): Anchorage Capital Partners (appointed July 2016) Babson Capital Europe Limited (appointed May 2016) Baillie Gifford & Co Limited Barings LLC (appointed July 2016) BlackRock Investment Management (UK) Limited BlueCrest Capital Management LLP BlueMountain Capital Management Brevan Howard Capital Management LP Bridgewater Associates LP & Bridgewater Associates Inc Bridgewater Associates, LP Canyon Capital Advisors LLC Capital Fund Management S.A D.E. Shaw & Co, LLC Insight Investment Management Limited Lazard Asset management AB Legal & General Investment Management Limited Lynx Asset Management Majedie Asset Management Limited MN Services Fondsenbeheer B.V One William Street Capital Management LP Neuberger Berman Group LLC (appointed May 2016) Nordea Asset Management (appointed August 2016) Northern Trust Corporation (appointed April 2016) Ruffer LLP Standard Life Investments (Mutual Funds) Limited Stratus Asset Management LLC Vanguard Asset Management (appointed April 2016) Defined Contribution Section (DC): Fidelity Investments Life Insurance Limited Legal & General Investment Management Limited Prudential Assurance Company Limited 2

3 Plan Benefits - Your Annual Checklist The Trustees of the Plan work hard with their advisers, the Company, and Company third party providers to manage the Plan benefits on behalf of members. However, as a member of the Plan it is important that you monitor your own pension benefits. Here are some suggestions for your annual pension checklist: 1) Annual Benefit Statement Your Annual Benefit Statement for the year ending 31 March 2017 is available on your Compendia record. This contains the personal information the Plan administrators hold for you, and a projection of your benefits at retirement. Please check your statement to make sure you understand the benefits expected, and let the administration team know if you have any questions (a reminder of how to access Compendia and contact details for the pension administration team are at the end of this Update). 2) Beneficiary Nomination forms All current employees have a life assurance benefit and, in most cases, the DB and Investment Sections provide for dependant pensions to be paid on death in service. The DB Sections also provide for a dependant pension on death in deferment or death in retirement in many cases. These benefits are payable at the discretion of the Trustees, which means that the Trustees will take account of all of the information available to them at the time of death, and make a decision as to whom the benefit should be paid to. To help the Trustees make this decision, please make sure you have completed an up to date Beneficiary Nomination form, and Dependant Nomination form. Whilst these are not legally binding on the Trustees, they will help the Trustees to understand your wishes, so it is important that you keep these forms up to date if your circumstances change. You can download a new form from your Compendia record or obtain one from the pension administration team. 3) Defined Benefit Section members Additional Voluntary Contributions Pension benefits under the Defined Benefit (DB) Sections of the Plan are based on a calculation using your service and salary further details can be found in the Plan booklet. You may supplement your pension benefits if you wish by making Additional Voluntary Contributions (AVCs). These would be on a defined contribution basis, building up an additional fund of money for you to use to provide pension benefits when you retire. You can elect to pay AVCs by downloading an application form from your Compendia record, or by contacting the administration team at Xafinity. 4) Investment Section members Contributions and Investment choices The Investment Section is a Defined Contribution arrangement, which means that your pension benefits will be based on the value of your Retirement Account when you come to draw your benefits. Your Retirement Account, in turn will be based on the contributions you and Capgemini pay, and the return on the investment funds you have chosen. You can make additional pension contributions if you wish and there are two choices open to you - Optional Contributions and Additional Voluntary Contributions (AVCs). Optional Contributions are age-related and if you elect these, the Company will also pay an Optional Contribution on your behalf. If you pay AVCs, these can be either monthly or one-off payments but the Company doesn t make AVCs on your behalf. You can arrange to pay additional pension contributions by completing the appropriate application form which is available from the pension administration team. You can also change your investment choices for existing investments and/or future contributions at any time by logging on to Compendia. The on-line form for changing investment choices can be found under My Investments. If you aren t sure which fund is right for you, the Trustees strongly recommend that you seek financial advice from an Independent Financial Adviser (IFA). 5) Annual Allowance and Lifetime Allowance check The majority of pension savings benefit from tax relief but there are limits on how much tax relief you can receive on pension savings into registered pension arrangements like the Plan in any one year, and over the course of your lifetime. If your savings in the Plan go over the annual limit in any one year, the pension administration team will write to you to let you know, but please bear in mind that they won t be aware of any pension savings you have outside of the Plan. Your Annual Allowance can also be affected by your total income (not just your Capgemini earnings e.g. income from property, rents, personal savings and investments), and briefing notes on these rules can be found on Compendia and the Pensions Talent site. If you think you might be affected, please contact the Annual and Lifetime Allowance helpline at Xafinity (contact details are at the end of this Update). 3

4 Trustees Annual Report and Accounts The Plan s accounts were signed in October 2017, following a clean bill of health by the Plan auditor, PwC. The key highlights of the accounts are set out below: Summary of Accounts 2016/ /2016 ( 000) ( 000) Fund Value at Start of Year 427, ,049 Money Paid into the Plan Contributions 18,874 19,990 Transfers In and Other Income 334 7,984 Net Investment Return 88, Money paid out of the Plan Pensioner and Leaver benefits (7,948) (7,795) Transfers to other plans (5,019) (1,464) Fund Value at End of Year 521, ,406 Membership Active members of the Plan at 1 April Less Adjustments (4)* Less Retirements (29) Leavers (refunds, deferred, transfers out) (93) Deaths (2) Active members at Deferred Pensioners at ,111 Pensioners at Total 2,300 *Adjustments to reflect movements processed after the previous reconciliation was completed. 4

5 Investment report 12 month market summary Growth assets made a confident start to the second quarter of 2016, but the reaction to the UK s decision to leave the EU defined the performance of assets over the whole quarter. Global equity markets initially fell following the result, however headline UK equities recovered by the end of the quarter as investors anticipated the beneficial impact of a weakened sterling to their predominately overseas earnings base. The decrease in the value of sterling following the Brexit vote also led to falls in UK government bond yields, which resulted in much higher liability values for UK pension schemes. This trend continued during the year until the final quarter of Government bond yields in most markets rose during this final quarter, on expectation of both higher inflation and growth, and tighter monetary policy. The rise in yields intensified following the election of Donald Trump, who is expected to adopt looser fiscal policies that are more inflationary than monetary policies. Equity markets had already been rising on good economic data, but gained further momentum as investors predicted further growth from the economic measures advocated by the Trump administration. Meanwhile, ongoing discussions regarding the manner in which the UK would exit the EU resulted in a continued decline in the value of the pound, improving the returns of foreign currency assets to a sterling investor. This meant funding ratios improved significantly by the end of the quarter, and for 2016 as a whole. Investment Performance Defined Benefit (DB) Sections The assets of the Plan are invested with a number of investment managers, in a broad range of asset classes with different levels of risk and return. The Plan s Fiduciary Manager, Kempen, manages the DB Sections investments on the Trustees behalf. In total the fund achieved a return of 20.7% over the 12 month period, and an average return of 14.6% per annum over the three year period. DB Asset Allocation Working with their Fiduciary Manager, Kempen, the Trustees continue to review the strategic approach to the Plan s investments, taking into consideration both the assets and the liabilities of the Plan. This process involves an estimation of the likely long term growth of the Plan s liabilities and the consideration of alternative asset mixes that are likely to produce a targeted return, whilst avoiding unnecessary volatility. An important aspect of the investment strategy that the Trustees have adopted is to hedge against interest rate risk, with the use of certain types of derivatives. These specialist funds enable the Trustees to protect the Plan against the impact of fluctuations in interest rates, which is one of the key factors affecting the value of the Plan s liabilities. Equity markets had a good start to The election of Donald Trump, and his pledge to deliver economy boosting policies, played a part in the rally, as did improving global economic data. This also had the effect of increasing inflation expectations, which pushed government bond yields higher. However, toward the end of the first quarter investors began to question the ability of the Trump administration to deliver on its promised policies, while the UK triggered article 50, adding to the uncertainty. Inflation expectations fell, and yields returned to the very low levels last seen at the end of

6 With their Fiduciary Manager the Trustees split the Plan s investments across three core portfolios, each with a differing objective and risk profile: 1) Matching Portfolio The matching portfolio includes high yield investment grade credits, bonds and European bank loans. Its purpose is to provide an income stream that broadly matches the liabilities payable from the Plan e.g. monthly pension payment, pension transfers. This section of the portfolio is less volatile as it invests in government bonds, which provide a steadier level of return and is subject to less dramatic falls in the market. 2) Growth Portfolio The growth portfolio includes UK and global equity funds, property and infrastructure, commodities and hedge funds. The purpose of the growth portfolio is to increase the assets of the DB Sections through investment returns. This section of the portfolio is more volatile, as it is subject to fluctuations in the equity markets. 3) Diversified growth funds The diversified growth funds invest in a mixture of equities, bonds, property, cash, and more complex investment instruments such as forward contracts and options. The managers change holdings tactically within the funds depending on their view of the market. The purpose of the diversified growth funds is to continue to generate return for the Plan, but with a lower level of risk. The potential returns are not as high as equity funds, as the assets are spread across different asset classes, however the strategy of the manager is to protect the funds in a falling market. The Plan s DB assets were invested with 27 managers at the year end. As part of their ongoing management of the investment portfolio, the Trustees work with Kempen to appoint and remove managers during the year as required to achieve the Trustees objectives. The split of assets across the Trustees three core portfolios at 31 March 2017 was as follows: 23% Diversified growth funds 21% Matching portfolio 56% Growth portfolio 6

7 Aspire Investment Section Defined Contribution As a Member of the Aspire Investment Section you can manage your own investments by selecting from the range of funds the Plan has to offer. If you do not make a specific fund selection, contributions will be invested in line with the Plan s Lifestyle strategy further details can be found in the Plan booklet. The Trustees monitor the performance and suitability of both managers and funds to ensure that these remain appropriate for the Plan to invest in, but the decision as to which funds your contributions are held in is ultimately yours. As your personal circumstances and attitude to risk may change over time, it is important that you review your fund choices on a regular basis to ensure that they remain appropriate for you. Neither the Trustees nor Xafinity can offer any financial advice - if you feel that you need help in deciding how to invest your funds, or about your investment choices generally, it is strongly recommended that you seek independent investment advice. You can find a list of Independent Financial Advisers (IFAs) in your area at As mentioned in the investment report, the Plan year was a challenging one for global investment markets. Unpredictable political events led to a great deal of volatility in many funds, and this will have impacted the values of members Retirement Accounts. These values are related to the underlying unit prices of the funds offered under the Plan and can change on a daily basis. You can check the value of your Retirement Account at any time by logging on to Compendia. The investment returns on the Defined Contribution funds for the year ended 31 March 2017 were as follows: 12 months (%) 3 years (% per annum) Fund Benchmark Fund Benchmark Legal & General Global Equity (60:40) Fixed Weight* Over 15 Year Gilts Index* Cash * Fidelity Life Multi Asset Growth Fund UK Equity (active) UK Equity (passive) Global Equity (70:30) International Equity North American Equity European Equity Japanese Equity Pacific Equity Emerging Markets Equity Index Linked Bond Pension Annuity Cash * these funds form the basis of the Lifestyle strategy 7

8 Actuarial Valuation at 31 March 2014 As a part of running the Plan, the Trustees are required to carry out an actuarial valuation at least once every three years. This health check reviews the Plan s assets and liabilities to ensure that it is able to pay benefits to members as and when they become due. If the value of the assets is less than the liabilities, there is said to be a deficit. If the value of the assets is greater than the liabilities, there is said to be a surplus. The valuation is used to determine the funding position of the Plan and to provide a basis for the Trustees and the Company to agree the level of contributions to be paid into the Plan, including a Recovery Plan to eliminate any deficit. The most recent triennial actuarial valuation of the Plan which was carried out with an effective date of 31 March 2014 and signed on 30 June 2015 showed a deficit of 73.1m this represented a funding level of 81%. This is an increase in the deficit as at the 2011 valuation date, and is largely due to turbulence in the financial markets and falls in gilt yields, which have an impact on the cost of paying future benefits. As a result of the valuation, the Company agreed to pay contributions from 1 July 2015 at the following percentages of pensionable pay to cover the cost of future benefit accrual for active members: Aspire 1994 Section: 32.0% Aspire Retirement Section: 25.0% Local Government Pension Scheme Section: 26.1% Classic Section: 32.6% Local Government (2008) Pension Scheme Section: 20.2% DFEE (Xansa) Section: 29.5% In addition, in order to address the funding shortfall, Capgemini UK plc ( the Company ) agreed to a revised Recovery Plan under which it is paying additional contributions of million each year for three years commencing 1 July 2015, with each payment increasing annually in line with inflation. The Recovery Plan payments increased to million per annum from 1 July These contributions are on top of those paid by the Company to meet the cost of benefit accrual for members service after the valuation date. The Company also pays the Plan s running costs such as adviser fees, death in service insurance premiums and the Pension Protection Fund levy. More information is contained in the 2017 Summary Funding Statement, which has been issued to all members of the Plan s defined benefit Sections. Actuarial Valuation at 31 March 2017 The next valuation fell due with an effective date of 31 March 2017, and the Trustees began work on this with the Plan Actuary in the months following the year end; however the Trustees continue to monitor the funding position of the Plan through formal annual funding updates from the Plan Actuary. Company Proposal 2017 During the year, the Trustees were informed by Capgemini UK of a Company proposal to manage the risk and volatility associated with the DB Sections of the Plan. The Company s proposal was twofold: i) to cease defined benefit accrual in the Aspire Retirement Section; and ii) to restrict future increases to Pensionable Salary for members of the Aspire Retirement Section. Capgemini UK s consultation with the HMRC Forum and Affected Members ended in November 2017 and the Trustees have been advised of the outcome of the consultation process. At the time of writing, the Trustees had been informed that the Company intended to proceed with its proposal, with effect from April

9 Keeping in Touch - Useful information Pensions Talent Site The Pensions Talent site can be accessed via the Core Services link on Capgemini s Talent site. The site includes a lot of useful information about the Plan, together with current news items and links to Compendia and the Plan s investment managers. Compendia Your Compendia record contains details of your own benefits, useful Plan documents and announcements relating to Plan changes. You can access your record through MyConnect, the Employee Self Service portal on the Capgemini network, via the Benefits, Pay and Pensions link. If you are not on the Capgemini network, you can log in with your username and password at If you need a reminder of your Compendia password, please compendiahelpdesk@xafinityconsulting.com To ensure the security of your account, and to help the team to accurately identify your membership record within the database, could you please confirm the following details when contacting the Compendia Helpdesk: the first 4 characters of your National Insurance Number, the day of the month in which you were born, and the first line of your home address. Contacting the Plan Administrators If you can t find the information you re looking for on the Pensions Talent site or in Compendia, you should contact the Capgemini Pensions Helpline at Xafinity by phone on or by at capgemini.pensions@xafinityconsulting.com, or by post at: Xafinity Phoenix House 1 Station Hill Reading Berkshire RG1 1NB If you wish to discuss an Annual Allowance or Lifetime Allowance related issue, please capgemini.lta@xafinityconsulting.com Should Xafinity require any input on any issues that arise, they will contact the Company as appropriate. Death in Service Benefits All current employees have a life assurance benefit and, in most cases, the DB and Investment Sections provide for dependant pensions to be paid on death in service. The DB Sections also provide for a dependant pension on death in deferment or death in retirement in many cases. These benefits are payable at the discretion of the Trustees, which means that the Trustees will take account of all of the information available to them at the time of death, and make a decision as to whom the benefit should be paid to. Whilst life assurance benefits can be paid to a fairly wide range of beneficiary, dependant pensions can only be paid to a financial dependent. You can help the Trustees make their decision by completing a Beneficiary Nomination Form and, if appropriate, a Dependant Nomination form, which you can download from your Compendia record, or obtain from the pension administration team. Whilst the information you provide is not legally binding on the Trustees, they will take your wishes into account when making their decision so you can assist them in this process by giving them as much information as possible. If in doubt, please complete and return an up to date Nomination Form reflecting your current wishes. 9

10 Helpful contacts There are a number of other places you can look for information, and we would encourage you to research your options before making important decisions about your retirement: Financial Advice You should only ever take advice from a registered Independent Financial Adviser (IFA). You can find an IFA in your area at and check the IFA register at Pension Wise The government has set up a service to provide guidance to individuals aged over 50, with defined contribution benefits. If you have benefits in the Investment Section of the Plan, or you have defined contribution AVCs, you may be eligible to use this service. Go to for more details. State Pension Guide HMRC provides an overview of the State pension which you should review to understand how this will work for you at If you are: a man born on or after 6 April 1951 a woman born on or after 6 April 1953 the new State pension rules will apply to you. These can be found at If you would like an indication of what your State pension might be, you can check this at The Pensions Advisory Service The Pensions Advisory Service (TPAS) can provide a range of information about occupational pension schemes. You can contact them on or visit www. pensionsadvisoryservice.org.uk December 2017 Capgemini UK plc No. 1 Forge End Woking Surrey GU21 6DB Tel: Registered Office: Capgemini UK plc, No 1 Forge End, Woking, Surrey, GU21 6DB Registered in England Number