POPULAR REPORT Chairman s introduction. MNDs. Pension liberation fraud. Benefit statements. Benefits on death. Financial overview

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1 Chairman s introduction MNDs Pension liberation fraud Benefit statements Benefits on death POPULAR REPORT 2012 For members of the DELCO Pension Plan Financial overview

2 Chairman s introduction Welcome to the latest edition of the Delco Electronics Overseas Corporation Pension Plan Annual Popular Report, in which we tell you about developments in the Delco Electronics Overseas Corporation Pension Plan (the Scheme) during In this report we have provided an update on the following areas: Member nominated directors Pension liberation fraud Benefit statements Benefits on death The purpose of the Popular Report is to not only include an update on the facts and figures, but also to keep you up to date on key developments and provide you with the reassurance that the Scheme is being well managed. We welcome any feedback you might have and, in particular, if you have any suggestions for future articles, please let us know. Ian Gaskell Chairman 2

3 Member-nominated Directors (MNDs) The Plan is run by a Trustee Company that has both Company and Member Nominated Directors (MNDs). The Trustee Board is made up of three Company representatives and two member representatives. The current members are shown on the back of this report. Under the relevant Regulations, at least one third of the Directors must be member nominated, and in 2007 a process was put in place to select the MNDs. The term of office was for six years, beginning on 1 September The term of office for the current MNDs ran out on 31 August Active members and pensioners were given the opportunity to apply to become an MND. One of the former MNDs, Terry Prout, agreed to stand again for another term of office. Applications were received from three members in addition to the MND standing for repeat election. As there were more applicants than vacancies, a Selection Panel met to select the most appropriate candidates for the vacancies. The Panel met on 9 August 2013 and was made up of the Chairman of the Board, Ian Gaskell, John Kearns and Ian Gorry. The MNDs selected were Terry Prout and Thomas McKeown. 3

4 Pension liberation fraud The Pensions Regulator has expressed concern over Companies who are approaching members of occupational pension schemes, trying to entice them to transfer their pension out of the scheme with either pension loans or cash incentives. This is known as pension liberation fraud and is becoming more common. Companies are contacting members out of the blue and duping them into transferring their funds to rogue pension arrangements. One technique that pension fraudsters use is to send a large portion of the pension transfer overseas. This makes the money harder to trace and retrieve when the scam is closed down and allows those running the scheme to spend the money in jurisdictions that normally have less regulation than the UK. What to look out for: Unsolicited text messages Transfer to be completed very quickly A bonus paid on transfer Transfers to overseas schemes Access to your pension before age 55 The Trustees of the Plan have put in place steps to check the receiving pension scheme is bona fide before any transfer payment is made. For the majority of pension schemes, accessing a pension before age 55 is not a right and could result in an unauthorised payment charge. If a transfer is made to a fraudulent pension scheme the unauthorised payment charge to the member is 55% of the value paid regardless of any loss the member has suffered. In addition, fees deducted from the transfer value for the transfer are unlikely to be recovered. Such fees tend to be very high and could be 20% or more of the transfer value paid in some cases. Most of the time, people targeted by pension fraudsters or scammers are not informed of the potential tax consequences involved or the fact they may lose virtually all of their pension. 4

5 Benefit statements Last year Plan members were able to view their benefit statement online for the first time. This year members will have received a postcard with a unique password to access their statement online, or a paper statement if requested. For any members who have not been online to check their statement or have had trouble in accessing it, the process is to visit the website and click on the Pension Statement icon (as shown on the left). From August, members have been able to reset their password by clicking the link on the website forgot my password. You will be asked for your National Insurance number, then an with a link to reset your password will be sent back to you. When you click the link you will be asked to provide a piece of information i.e. date of birth. You will then be allowed to generate a new password. A message will be displayed confirming the password has been changed successfully, and then the normal logon process should be followed. The logon ID is your National Insurance number and the unique password is on the postcard. You will then be directed to another screen which asks you to change your password and put in a valid address. The website will send you an with a link back to the site to enable you to logon with your National Insurance number and the password you have created. Why has the process changed? Over the course of the year some members wanted to view their statement again but had forgotten or lost the password they had created. The Pensions Department then had to ask the website providers to re-set passwords. 5

6 Benefits on death The Plan provides benefits whether you die while still working for the Company or after you retire. On death in service there is a lump sum, a pension for a spouse and any children in full time education up to the age of 23. The Plan is set up under a Deed of Trust and payment of the lump sum is at the discretion of the Trustees which means it does not form part of your estate and is not subject to inheritance tax. Members are invited to complete an expression of wish form to provide the Trustees with guidance on the beneficiary they would like to receive the lump sum. As well as the expression of wish form the Trustees may request additional information from the family, for example, whether the member had a Will, or had financial dependants. Regardless of whether the member dies in service or in retirement, a pension will also be payable to a spouse or civil partner. The definition of Spouse/Civil Partner in the Trust Deed and Rules is: Spouse means the widow or widower of a deceased Member, Postponed Pensioner, Deferred Member or Pensioner. Civil partner means, in relation to an individual, a person who has entered into a civil partnership with that individual within the meaning of Section 1 of the Civil Partnership Act

7 Completion of the expression of wish form does not entitle another beneficiary to receive payment of the pension. For example if you are living with a partner and nominate them to receive your lump sum death in service benefit subject to agreement of the Trustees they will do so. However, they will not receive payment of a pension. Likewise, in retirement any nomination form completed whilst in service does not entitle a partner to receive a pension on death. In such circumstances the Trustee does have the discretion to grant a dependant s pension. It is important that the expression of wish form is current, especially if your circumstances have changed. Forms are available either on Socrates or the Pension Department website 7

8 Financial overview Investment Spread of investment as at 31 December 2012: Matching portfolio this consists of investments in nominal gilts, index-linked gilts and SWAPs in line with the liability hedging strategy. Equities investments in company shares listed on the major stock exchanges of countries in Europe, Asia and America, and in some developing economies in Europe, Asia and South America. 12.4%: Investment Grade Corporate Bonds 7.1%: High Yield Corporate Bonds 7.0%: Emerging Market Bonds 6.0%: Emerging Markets Equity 4.5%: Property 2.8%: Commodities 8.4%: Hedge Funds Property a combination of UK investment properties including offices, shops and industrial units. The objective is to achieve income and capital returns. Alternative investments a range of different investments that seek to achieve consistently better returns regardless of how the markets move. The types of investments will vary for each market. Bonds these are investments in loans issued by governments and companies around the world. Hedging a process that removes the movements of foreign currencies when compared to Sterling. This reduces the volatility of overseas investments and ensures that the Plan receives the local market return. 30.1%: Developed Markets Equity 21.7%: Matching Portfolio 8

9 Financial overview Membership numbers Membership decreased by 46 over the year, with the number of active members dropping by 148. Deferred members increased by 65 and pensioners increased by 37. As at December 2012: Income & expenditure Income 000 Company contributions 3,921 Employee contributions 14 AVC contributions 135 Transfers in - Other income - Total 4,070 Expenditure 000 Pensions 7,625 Lump sum commuted pension 2,618 Individual transfers out of the Scheme Pensioners Administration expenses 878 Total 11,476 Deferred members Active members Total

10 Financial overview 000 Fund value 1 January ,804 Net withdrawals from dealing with members (7,406) Net returns on investments (after deduction of Management expenses) 11,700 Fund value 31 December ,098 10

11 Financial overview Investment overview 2012 started on a hopeful note as worries about a global double dip recession and the break-up of the eurozone seemed to be overblown. Strong data supporting a US economic recovery helped to drive equity and bond market returns. However, optimism diminished from April onwards when concerns about economic and political problems in the eurozone resurfaced. Sentiment shifted once again in June. News of the financial bailout for Spain to help its ailing banks, the perceived positive outcome of the second round of Greek elections on 17 June and the European Union summit agreement all served to provide a degree of welcome relief to the markets. This generally upbeat mood continued into the third quarter, as central bank actions helped to bolster investor sentiment. In particular, the European Central Bank (ECB) pledged to do whatever it takes to support Europe. Investors focussed on several key areas during the final quarter of 2012: the US Presidential election in November and the looming US fiscal cliff; leadership change and slowing growth in China; and ongoing worries over the economic health of the eurozone. On the positive side of the equation, GDP growth in the US remained stable, it was confirmed that the UK finally managed to drag itself out of recession during the third quarter of 2012, and the leadership in China appeared to transition smoothly. Most markets finished the year strongly. The Plan s performance DELCO Pension Plan 2012 Three years Five years Plan return 9.10% 7.16% 1.78% Benchmark 9.28% 6.98% 2.50% Relative return -0.18% 0.18% -0.72% DELCO Pension Plan 2011 Three years Five years Plan return 1.50% 9.50% 0.90% Benchmark 1.50% 9.10% 1.70% Relative return 0.00% 0.40% -0.80% 11

12 Contact us The Pensions Department Griffin House Osborne Road Luton LU1 3YT IMPORTANT Completion of a nomination form will greatly assist the Trustees in the payment of your lump sum benefit in the event that you die in service. Forms are available for download from the Pension Website at: