Changes to Xerox pension arrangements what they mean for you

Transcription

1 Xerox FundXtra Changes to Xerox pension arrangements what they mean for you At the end of last year the Company announced that, like many other companies, it was no longer able to meet the higher and increasingly volatile costs of a final salary pension scheme and that it would, therefore, be closing the Xerox Final Salary Pension Scheme to all employees from 1st January This Scheme closure has implications for some members of Xerox FundXtra (the Company s pension scheme of which you are a member). The members who will be affected are those who currently have the option to transfer to the Xerox Final Salary Pension Scheme at age 40. Other Xerox FundXtra members will not be affected by the Scheme closure. However, the Company has also announced other changes to its pension and related benefit arrangements from 1st January 2014 which will affect all existing Xerox FundXtra members. These changes are: A new pension option, the BlackRock Stakeholder Pension Plan, will become available to all Xerox employees. New death-in-service and ill-health benefits will be introduced, which will apply to all Xerox employees. This guide tells you more about these new arrangements which the Company will be putting in place in order to achieve a more sustainable and cost-effective way of providing pension and other related benefits for all its employees. Summary of key changes CHANGES AFFECTING ALL XEROX FUNDXTRA MEMBERS New Pension Plan available from 1st January 2014 All employees will have the option of joining the new BlackRock Stakeholder Pension Plan from 1st January Under the new Plan, more generous Company contribution rates will be available than with Xerox FundXtra, provided that you also pay more into the Plan yourself. See pages 3-7 New death-in-service and ill-health benefits from 1st January 2014 From 1st January 2014, new death-in-service benefits for all employees will be provided through a new Xerox Life Assurance Plan. See page 8 From 1st January 2014, a new Xerox Income Protection Plan will provide an income for up to five years for all employees unable to work because of ill-health or injury. After five years, a lump sum will be paid into your Pension Account and, with the money already accumulated there, will be used to provide an ill-health pension. See page 9 Until 31st December 2013, death-in-service benefits and ill-health retirement benefits will continue to be payable for existing employed members of Xerox FundXtra on the same basis as currently applies. CHANGES ONLY AFFECTING EXISTING XEROX FUNDXTRA MEMBERS WHO CURRENTLY HAVE THE OPTION TO TRANSFER TO THE XEROX FINAL SALARY PENSION SCHEME AT AGE 40 Closure of the Xerox Final Salary Pension Scheme If you reach age 40 before 31st December 2013, you will still be able to join the Xerox Final Salary Pension Scheme and build up benefits in the Scheme up to that date. However, you will not be able to earn further benefits in the Scheme after that date. See page 10 If you reach age 40 after 31st December 2013, you will no longer be able to join the Scheme. See page 11 If you are not sure whether you currently have the option to join the Xerox Final Salary Pension Scheme at age 40, you should check with your local HR Department. 1

2 Your pension under the new arrangements Are you currently eligible to join the Xerox Final Salary Pension Scheme from age 40? (check with your local HR Department if you re not sure) YES NO Will you reach age 40 before ? NO YES Do you want to join the Xerox Final Salary Pension Scheme at age 40? NO YES Up to From Up to From EITHER OR Remain in Xerox FundXtra until age 40 then switch to Xerox Final Salary Pension Scheme until Join the BlackRock Stakeholder Pension Plan Remain in Xerox FundXtra Remain in Xerox FundXtra Join the BlackRock Stakeholder Pension Plan Total pension at Normal Benefit Age Pension from the Xerox Final Salary Pension Scheme for service up to plus Pension from Xerox FundXtra plus Pension from BlackRock Stakeholder Pension Plan for service from plus State Additional Pension 2 Pension from Xerox FundXtra plus State Additional Pension 2 Pension from Xerox FundXtra plus Pension from BlackRock Stakeholder Pension Plan for service from plus State Additional Pension 2 In addition you will receive: State Basic Pension plus Any other pension 3 1 Provided that you remain in service until you retire, your pension from the Xerox Final Salary Pension Scheme will be calculated using your actual Pensionable Earnings at the date of retiring (not your Pensionable Earnings at 31st December 2013). 2 You will build up entitlement to the State Additional Pension while you are a member of both Xerox FundXtra and the BlackRock Stakeholder Pension Plan. 3 You may have a pension from other pension arrangements you have been a member of. 2

3 New Blackrock Plan from 1st January 2014 Since 1st January 2009, the pension option offered to all new Xerox recruits has been the BlackRock Stakeholder Pension Plan. From 1st January 2014, you too will have the option of joining this new Pension Plan. Alternatively, it is currently the Company s intention that Xerox FundXtra will remain open beyond 1st January 2014 to employees who are already members of the Scheme at that date. So you will be able to stay in Xerox FundXtra beyond 1st January 2014 if you want to. However, the Company reserves the right to make any further changes to its pension arrangements which it deems necessary, so the option to stay in Xerox FundXtra may not remain open indefinitely. The following table compares the BlackRock Stakeholder Pension Plan with Xerox FundXtra. The key differences between the two arrangements are explained in more detail on the next four pages. How it works (see page 4) Contributions (see pages 4-6) Additional Voluntary Contributions (see page 6) Pension (see page 6) Transfers-in (see page 7) Range of funds (see page 7) Leaving (see page 7) State pension benefits (see page 7) Xerox FundXtra Defined contribution arrangement. You do not have to pay to be a member. If you do not contribute, the Company pays a contribution rate of 2%. You have a choice of contribution rates from 1% to 4% and you get extra contributions from the Company if you pay more. The maximum Company contribution rate is 4% (if you pay 4%). Contributions are calculated as a percentage of your total earnings above the Lower Earnings Limit. (The Lower Earnings Limit is set by the Government in April each year and, for the tax year beginning April 2010, it stands at 5,044.) You can pay more than 4% if you wish, in order to build up a bigger Pension Account. You will use your Pension Account at retirement to buy an annuity. You cannot transfer benefits earned in previous pension schemes into Xerox FundXtra. There are 6 self-select funds plus a Lifestyle Strategy to choose from. If you leave Xerox, you cannot continue to contribute to the Scheme. As well as building up your State Basic Pension entitlement, you also earn a State Additional Pension. BlackRock Stakeholder Pension Plan Defined contribution arrangement. You must pay at least 2% to be a member. If you pay the minimum 2%, the Company pays a contribution rate of 4%. You have a choice of contribution rates from 2% to 6% and you get extra contributions from the Company if you pay more. The maximum Company contribution rate is 8% (if you pay 6%). Contributions are calculated as a percentage of your basic salary plus 2/3 of your planned variable earnings (with no Lower Earnings Limit deduction). You can pay more than 6% if you wish, in order to build up a bigger Pension Account. You will use your Pension Account at retirement to buy an annuity. You are permitted to transfer benefits earned in previous pension schemes into the BlackRock Stakeholder Pension Plan. There are currently more than 70 self-select funds plus a Lifestyle Strategy to choose from. If you leave Xerox, you can continue to pay your own contributions into your Pension Account until you retire. As well as building up your State Basic Pension entitlement, you also earn a State Additional Pension. 3

4 Blackrock Plan v. Xerox FundXtra how they compare The BlackRock Stakeholder Pension Plan for Xerox employees is administered on behalf of Xerox by BlackRock, an international investment management company. To find out more about the BlackRock Stakeholder Pension Plan, go to To find out more about the Xerox Pension Schemes, please go to the Xerox Pensions website at Below we look in more detail at the key differences between the new BlackRock Stakeholder Pension Plan and Xerox FundXtra, as summarised in the table on the previous page. Defined contribution arrangement Both Xerox FundXtra and the BlackRock Stakeholder Pension Plan work on what is known as a defined contribution basis (also sometimes called a money purchase arrangement). With this kind of pension arrangement, both you and the Company pay an agreed rate of contributions into your own Pension Account which is then used to buy a pension, in the form of an annuity, when you retire. Contributions The following table compares the contribution options under Xerox FundXtra and the BlackRock Stakeholder Pension Plan. If you pay The Company pays Total going into your Pension Account Xerox FundXtra 1 BlackRock Plan 1 Xerox FundXtra BlackRock Plan 0% 2 2% not available 2% not available 1% 2 2.5% not available 3.5% not available 2% 3% 4% 5% 6% 3% 3.5% 5% 6.5% 8% 4% 4% 6% 8% 10% (maximum Company contribution) 5% 3 Company continues 7% 3 9% 12% to pay maximum 4% 6% 3 Company continues 8% 3 10% 14% to pay maximum 4% (maximum Company contribution rate) Notes 1 In the case of Xerox FundXtra, both your and the Company s contributions are based on your total earnings after a deduction has been made for the Lower Earnings Limit (LEL see page 3). If you join the BlackRock Stakeholder Pension Plan, contributions are based on your basic salary plus 2/3 of your planned variable earnings, with no deduction for the LEL. For employees hired after 1st January 2009, contributions to the BlackRock Stakeholder Pension Plan are based on basic salary only. 2 These contribution options are not available with the BlackRock Stakeholder Pension Plan, as you must pay at least 2% to be a member. 3 You will be eligible immediately for the higher contribution rates shown in the table above if you join the BlackRock Stakeholder Pension Plan. Employees hired after 1st January 2009 are only able to pay 5% or 6% and receive the corresponding higher Company contribution rates after completing 4 years and 6 years service respectively. 4

5 Future pension contributions To get the best out of the BlackRock Stakeholder Pension Plan from 2014, you should aim to pay more than you currently pay as a member of Xerox FundXtra, as higher Company contribution rates are offered by the BlackRock Stakeholder Pension Plan provided that you also pay more. In addition, you should bear in mind that: You do not have to pay to be a member of Xerox FundXtra but you must pay at least 2% to be a member of the BlackRock Stakeholder Pension Plan. and The earnings figure used to calculate your contributions to the BlackRock Stakeholder Pension Plan will be higher than the one used to calculate your current contributions to Xerox FundXtra because there is no Lower Earnings Limit deduction. (Typically, in the past, many pension schemes made a Lower Earnings Limit deduction (broadly equivalent to the amount of the State Basic Pension) to prevent double payments of State and scheme pensions. With most stakeholder pension plans, like the BlackRock Stakeholder Pension Plan, it is no longer usual to make this deduction). The example below illustrates these differences. Contributions example (all figures are annual) This example is based on tax rates at 6th April It assumes that Members 1 and 2 pay income tax at the basic rate (20%) and that Member 3 pays income tax at the higher rate (40%). Xerox FundXtra In the following example, we look at members on different annual salary levels 20,000, 40,000 and 60,000. If we assume that the member pays 4%, thereby qualifying for the maximum Company contribution of 4%, current contributions into Xerox FundXtra are calculated as follows: 5 Member 1 Member 2 Member 3 Total earnings 20,000 40,000 60,000 LESS Lower Earnings Limit (April 2010 figure) 5,044 5,044 5,044 EQUALS Earnings used for calculating contributions 14,956 34,956 54,956 Member contributions (assuming 4% contribution rate) , ,198 1 Company contributions (4%) 598 1,398 2,198 Total paid into member s Pension Account 1,196 2,796 4,396 1 Most members get full tax relief on their contributions to the Scheme (but please see note on tax relief for higher earners on page 12), so that the net cost of being in the Scheme is reduced to 478 for Member 1, 1,118 for Member 2 and 1,319 for Member 3. Currently, you receive this tax relief automatically as your contributions are deducted from your pay before the tax is calculated. BlackRock Stakeholder Pension Plan If Members 1, 2 and 3 join the BlackRock Stakeholder Pension Plan from 2014 and choose a 6% contribution rate, thereby again qualifying for the maximum Company contribution rate (this time 8%), contributions to the Plan will be calculated as follows: Member 1 Member 2 Member 3 Basic salary plus 2/3 of planned variable earnings 20,000 40,000 60,000 Member contributions (assuming 6% contribution rate) 1, , ,600 2 Company contributions (8%) 1,600 3,200 4,800 Total paid into member s Pension Account 2,800 5,600 8,400 2 Most members will get full tax relief on their contributions to the Scheme (but please see note on tax relief for higher earners on page 12), so that the net cost of being in the Plan is reduced to 960 for Member 1, 1,920 for Member 2 and 2,160 for Member 3.

6 Pay more for a better pension Many experts now say that most people in this country will need to pay considerably more towards their pension in the future if they are to achieve their desired level of income in retirement. If you join the BlackRock Stakeholder Pension Plan, you will be able to benefit from higher Company contribution rates, but only if you are also prepared to pay more yourself. You may want to consider starting to increase the amount you pay now in order to build up gradually to a higher level of pension contributions. You could do so by paying Additional SMART Contributions (see next section) although please also see the note on tax relief for higher earners on page 12. Additional Voluntary Contributions Currently, as a member of Xerox FundXtra, you can pay Additional Voluntary Contributions (above the 4% rate which attracts the maximum Company contribution rate) if you want to boost your Pension Account. During the consultation process on the proposed changes to its pension arrangements, the Company was asked by employees to consider extending SMART, the Company s salary sacrifice arrangement for pensions, to include regular Additional Voluntary Contributions (AVCs). The Company agreed to this and so, since 1st April 2010, it has been possible for members to pay AVCs to Xerox FundXtra through SMART. Such payments are known as Additional SMART Contributions (ASCs) and, if you pay ASCs, you receive a 10% top-up payment from the Company. If you were paying ASCs or AVCs before 1st January 2014, you may continue to pay them from that date. ASCs will continue to qualify for the 10% Company top-up from 1st January The Company and the Trustees will review these arrangements in 2020 and will decide whether this facility will continue after that date. To find out more about Additional Voluntary Contributions, go to the Xerox Pensions website at Pension Both Xerox FundXtra and the BlackRock Stakeholder Pension Plan provide pension in a similar way: Both you and the Company pay contributions into your own Pension Account. You choose how to invest your Pension Account from a range of investment funds. The BlackRock Stakeholder Pension Plan offers a wider choice of investment funds than Xerox FundXtra. When you retire, you will use your Pension Account to buy a pension, in the form of an annuity. An annuity is a product sold by insurance companies which converts the money you have built up in your Pension Account into an income during your retirement. You can also take part of your Pension Account as a tax-free cash sum, under current law, if you wish, or use some of it to provide benefits for your dependants. Your pension will depend on how much is paid into your Pension Account, how you choose to invest your Pension Account and how your investments perform, as well as the cost of buying benefits when you retire and the type of benefits you choose. 6

7 Transfers-in Xerox FundXtra You are not permitted to transfer into Xerox FundXtra benefits earned in any previous pension arrangement. BlackRock Stakeholder Pension Plan If you join the BlackRock Stakeholder Pension Plan from 2014, you will have the option of transferring the value of any benefits which you have earned in previous pension arrangements of which you have been a member into your Pension Account in the Plan. There may be advantages in consolidating pension funds which you have, as larger funds may attract better annuity rates at retirement. Range of funds Xerox FundXtra With Xerox FundXtra, there is a choice of 6 self-select funds plus a Lifestyle Strategy. The self-select approach is for members who want to take an active part in managing how their FundXtra account is invested. The Lifestyle Strategy is designed for members who do not want to take an active part in managing how their FundXtra account is invested. With the Lifestyle Strategy, the investment of your Xerox FundXtra account is managed automatically on your behalf, with appropriate changes to investment strategy being made as you get closer to Normal Benefit Age (65). BlackRock Stakeholder Pension Plan With the BlackRock Stakeholder Pension Plan, there is a choice of over 70 self-select funds including, currently, 46 equity funds, 11 fixed-interest (bond) funds and 9 balanced funds plus a Lifestyle Strategy. Leaving Xerox FundXtra Currently, if you leave Xerox, you are not able to continue paying contributions to the Scheme. BlackRock Stakeholder Pension Plan If you join the BlackRock Stakeholder Pension Plan from 2014 and subsequently leave Xerox, you will have the option of continuing to pay your own contributions into your Pension Account in the Plan until you retire (although Xerox will not contribute once you have left the Company). State pension benefits With both Xerox FundXtra and the BlackRock Stakeholder Pension Plan, you are contracted-in to the State Additional Pension. This means that, if you join the BlackRock Stakeholder Pension Plan from 2014, you will continue to build up entitlement to a State Additional Pension in the same way as you currently do as a member of Xerox FundXtra. The State Additional Pension is an earnings-related pension, payable to those who are eligible, in addition to the State Basic Pension. The detailed calculation of the State Additional Pension is complicated and there are plans to change it in the next few years. If these changes happen, individuals who earn above the Lower Earnings Limit ( 5,044 as at 6th April 2010) will be entitled to a flat-rate pension of at least 73 a year for each National Insurance qualifying year. Individuals who earn above 14,000 will also be able to build up extra State Additional Pension based on their earnings up to 40,040; however, this earnings-related element is being phased out over time. The calculations are very dependent on individual circumstances and the best way to estimate how much State Additional Pension you might get is to obtain your own State Pension Forecast. You can do this online through the Directgov website to access this go to then click on Pensions and retirement planning and you will find Get a State Pension forecast under Do it online. 7

8 New death-in-service benefits from 2014 From 1st January 2014, new death-in-service benefits (see below) and ill-health benefits (see next page) will be introduced, which will apply to all Xerox employees, including existing Xerox FundXtra members. Benefits payable on death before 1st January 2014 Lump sum Currently, all Xerox employees are covered for life assurance from the day they join the Company. This provides for a lump sum to be paid to the employee s dependants in the event of their death whilst in employment with Xerox. This lump sum is equal to four times an amount set by the Company, which is normally your base salary plus 2/3 of planned variable earnings at the date of your death. (Note: This lump sum may be increased to six times this amount if your death is the result of an accident.) In addition, if you are a member of Xerox FundXtra, the value of your Pension Account at the date of death will be applied to provide an additional lump sum or a pension for your dependants. Under current HM Revenue & Customs regulations, the death-in-service lump sum is payable tax-free up to 1.8 million. Dependants pensions As an employed member of Xerox FundXtra, if you die before 1st January 2014, additional benefits would be payable in the form of pensions for your widow, widower or civil partner and for any dependent children. These pensions are calculated using: Your potential Pensionable Service from the date of death to Normal Benefit Age (65) and Your Final Pensionable Earnings at the date of death. You can find full details of the benefits payable before 1st January 2014 in your Xerox FundXtra Scheme Explanatory Booklet or on the Xerox Pensions website at Benefits payable on death from 1st January 2014 Lump sum From 1st January 2014, you will be enrolled in the new Xerox Life Assurance Plan, paid for by the Company, which will provide life assurance cover for all Xerox employees in the event of death while in employment with Xerox. Under the new Plan, the lump sum payment in the event of death in service will be six times base salary, rising to seven times base salary for employees who complete six years service with the Company. (Note: This lump sum may be increased to eight and nine times base salary respectively if your death is the result of an accident.) In addition, if you are a member of either Xerox FundXtra or the BlackRock Stakeholder Pension Plan, the full value of your Pension Account at the date of death will be refunded. Under current HM Revenue & Customs regulations, this death-in-service lump sum would be payable tax-free up to 1.8 million. Dependants pensions If you remain in Xerox FundXtra from 2014 and you subsequently die whilst in employment with Xerox, the current dependants pensions will no longer be payable. Instead your dependants will receive the increased death-in-service lump sum described in the previous section (including a refund of the full value of your Xerox FundXtra Pension Account). If you join the BlackRock Stakeholder Pension Plan from 2014 and you subsequently die whilst in employment with Xerox, no dependants pensions are payable from the new Plan. Instead, your dependants will receive the increased deathin-service lump sum described in the previous section (including a refund of the full value of your Pension Account in the Plan). (If you still have money invested in Xerox FundXtra at the date of your death, this would also be used to provide benefits for your dependants.) 8

9 New ill-health retirement benefits from 2014 Benefits payable for ill-health retirement before 1st January 2014 Currently, if while you are a member of Xerox FundXtra you suffer a permanent deterioration in your health which prevents you from following your occupation, you may be considered for an immediate ill-health pension. You will find full details of the benefits payable for ill-health retirement before 1st January 2014 in your Xerox FundXtra Scheme Explanatory Booklet or on the Xerox Pensions website at Benefits payable for ill-health retirement from 1st January 2014 From 1st January 2014, you will be enrolled in a new Xerox Income Protection Plan, paid for by the Company, which will provide an income for any employee unable to work because of ill-health or injury. The benefits provided by the new Plan are summarised below: You will receive normal Company sick pay for up to 26 weeks (depending on your length of service with Xerox). After 26 weeks absence, you may apply for an income under the new Xerox Income Protection Plan. If the insurance company which administers the Plan considers that you are unable to continue to carry out your normal occupation, you may receive an income from the Plan equal to 68% of your base salary. This income would increase in line with inflation. It would be subject to income tax and National Insurance Contributions. This income would be payable for up to five years (or until you recover, if this is earlier). During this time, you can continue to pay contributions to either Xerox FundXtra or the BlackRock Stakeholder Pension Plan, depending on which of these arrangements you are a member of, out of the income you receive from the Xerox Income Protection Plan, and the Company will continue to pay its contributions in the normal way. If you have not recovered by the end of the five years for which the income is payable from the Plan, your employment will be terminated. If the insurance company which administers the Plan considers that you are permanently unable to continue to carry our your normal occupation, a lump sum will then be payable into the BlackRock Stakeholder Pension Plan, if you are a member. This lump sum will be equal to the Company contributions which would have been paid into the Plan up to Normal Benefit Age (65) this lump sum will be based on a 5% Company contribution rate, irrespective of the rate at which you were contributing to the Plan. You can then use your Pension Account in the BlackRock Stakeholder Pension Plan (as enhanced by the lump sum payment from the Company) to provide yourself with an immediate pension. Pensions workshops Over the next few weeks, we shall be holding workshops at major Company sites and, at these, you will have an opportunity to put questions about the Company s new pension arrangements to a member of the Xerox Pensions team. Location Room Date Time Cheadle 02/03 Monday 21 June Glasgow Kingston & Erskine Tuesday 22 June Meriden 2/3 Friday 25 June Uxbridge 103/104 Monday 28 June Riverview 103/104 Wednesday 30 June Welwyn ECGA & ECGB Monday 28 June ECGA & ECGB Wednesday 30 June Slough Neptune Tuesday 29 June If you are unable to attend these workshops, a recorded presentation will be available on the Xerox Pensions website. If there is a large demand for further workshops at other locations, these will be held after the main summer holiday period. 9

10 Closure of the Xerox Final Salary Pension Scheme from 2014 This section is only relevant for existing Xerox FundXtra members who currently have the option to join the Xerox Final Salary Pension Scheme at age If you currently have the option to join the Xerox Final Salary Pension Scheme at age 40 and you reach age 40 before 31st December 2013, you will still be able to join the Scheme and build up benefits in the Scheme up to that date. However, you will not be able to earn further benefits in the Scheme after that date. Pension If you join the Xerox Final Salary Pension Scheme before 31st December 2013, you will earn a pension from that Scheme for your period of membership. This pension will be calculated as follows: 2% of Final Pensionable Earnings for each year (and pro-rata for each month) of Pensionable Service in the Scheme up to 31st December 2013 Provided that you remain in service until retirement, your pension from the Xerox Final Salary Pension Scheme will be calculated using your actual Final Pensionable Earnings when you retire (not your Final Pensionable Earnings when the Scheme closes). So your pension will increase as your salary increases, even after the Scheme has closed. Example Let us assume that you are able to join the Xerox Final Salary Pension Scheme and complete 3 years Pensionable Service in the Scheme before it closes on 31st December If your Final Pensionable Earnings at that date are 20,000, your pension would be: 2% x 20,000 x 3 years = 1,200 a year Let us assume that, by the time you retire at Normal Benefit Age (65), your Final Pensionable Earnings have increased to 30,000 a year. Your Pensionable Service would still be 3 years (because you cannot build up any further Pensionable Service in the Scheme after 31st December 2013) but your pension at retirement would have grown to: 2% x 30,000 x 3 years = 1,800 a year With the Trustee Directors' agreement, you are currently permitted to transfer the proceeds of your Xerox FundXtra Pension Account to the Xerox Final Salary Pension Scheme in return for additional pension in that Scheme. Alternatively, you could leave your Pension Account invested in Xerox FundXtra and use it to buy a pension at retirement. If you join the BlackRock Stakeholder Pension Plan from 2014, you will then start to build up a Pension Account in the new Plan and this will also be used to buy a pension at retirement. Death-in-service and ill-health benefits If you join the Xerox Final Salary Pension Scheme before 31st December 2013, you will qualify for the death-in-service benefits and ill-health retirement benefits payable by that Scheme on the same basis as currently applies. You will find full details of these benefits from the Xerox Final Salary Pension Scheme on the Xerox Pensions website at The new death-in-service and ill-health retirement benefits which will take effect from 1st January 2014 are explained on pages 8 and 9. Option to join the BlackRock Stakeholder Pension Plan from 2014 When the Xerox Final Salary Pension Scheme closes on 31st December 2013, you will then have the option of joining the new BlackRock Stakeholder Pension Plan. You will not be able to re-join Xerox FundXtra. 10

11 2. If you currently have the option to join the Xerox Final Salary Pension Scheme at age 40, you will no longer be able to do so if you reach age 40 after 31st December In this case, you can remain in Xerox FundXtra or, from 1st January 2014, you will also have the option of joining the BlackRock Stakeholder Pension Plan. Pension Your Xerox FundXtra account will continue to be invested while you remain in the Scheme in the same way as now and you will use it to buy a pension when you retire. If you subsequently join the BlackRock Stakeholder Pension Plan, you will then start to build up a Pension Account in the new Plan and this will also be used to buy a pension at retirement. Death-in-service and ill-health benefits You will qualify for the same death-in-service benefits and ill-health retirement benefits as currently apply up to 31st December You will find full details of these benefits in your Xerox FundXtra Explanatory Booklet or on the Xerox Pensions website at The new death-in-service and ill-health retirement benefits which will take effect from 1st January 2014 are explained on pages 8 and 9. Options from 2014 From 1st January 2014, you can either remain in Xerox FundXtra or join the new BlackRock Stakeholder Pension Plan. Pensions modellers available to help you plan for retirement As a member of a defined contribution arrangement either Xerox FundXtra or the BlackRock Stakeholder Plan you have important decisions to make about how much you want to pay into your Pension Account and how your money should be invested. So it s important that you understand the implications of the decisions you make and there are a number of tools which you can use to help with your retirement planning. In the Xerox FundXtra section of the Xerox Pensions website, you can access three online pension modellers, provided by Fidelity Pensions: Investor profiler This tool assesses your investment style, compares it to your current life stage and illustrates an appropriate investment mix. myplan This tool will give you a quick and general indication of the level of retirement savings you will need in order to continue your current lifestyle in retirement. Retirement Planner This tool will enable you to create a more detailed plan of how to achieve your retirement income needs. You can access the Fidelity modellers at On the BlackRock website, there are further retirement planning tools available: Crystal Ball helps you work out how much you will need to finance the lifestyle you want in your retirement years. The Why start now calculator allows you to input your own personal data to see how important it is to start saving early for your pension. You can access the BlackRock planning tools at 11

12 . Important note on tax This note only applies to individuals with an income of 130,000 or more a year. The 2010 Finance Act provides for changes to tax relief on pension contributions for high earners. From April 2011, individuals with an annual relevant income of 130,000 or more may no longer receive tax relief on pension contributions at their highest rate of tax. Instead, relief will be restricted, tapering downwards so that it reduces to 20% for those with a gross income of over 180,000. We are currently waiting for details of the post-april 2011 tax position and will provide you with an update on this once they have been published. In the meantime, you may wish to consult an Independent Financial Adviser. Options for paying your pension contributions As a member of Xerox FundXtra, you currently get full tax relief on your contributions to the Scheme at your highest marginal rate of tax. This is true whether you pay your contributions through SMART the Company s salary sacrifice arrangement for pensions or whether you have opted out of SMART and pay your contributions directly to the Scheme. From April 2011, if you are subject to the new tax rules outlined in the previous section and if you are not eligible for the full amount of tax relief you have received, you will be required to repay the excess. If you join the BlackRock Stakeholder Pension Plan from 2014 and pay your contributions to the Plan through SMART, tax relief on your contributions will continue to operate in the same way as it does now. So, you will receive full tax relief at your highest marginal rate of tax but will be required to repay any excess tax relief you have received which you are not eligible for under the new tax rules. However, if you join the BlackRock Stakeholder Pension Plan from 2014 and you opt out of SMART and pay your contributions directly to the Plan, the Plan can only award relief at the basic rate of tax. You will have to claim personally for any higher rate tax relief you qualify for through your annual tax return. If you require any further information on the new tax rules, please contact an Independent Financial Adviser or see the HM Revenue & Customs website at ANY QUESTIONS? We recommend that you keep this guide in a safe place so that you can refer to it in the future as it gets nearer to the time when the changes described here are to be implemented. If you have any questions about this guide or about the Company s new pension arrangements in general, please them to the Xerox Pensions Team at xeroxpensions@xerox.com. Alternatively, you can write to Xerox Pensions at the address below. IMPORTANT NOTES This guide is a joint communication from the Company and the Trustees of the Xerox Pension Schemes. Although the Company currently has no intention of changing the pension arrangements described in this guide, it reserves the right to make any changes it deems necessary to vary or amend pension benefits under any of the arrangements referred to in this guide. It also reserves the right to discontinue the Xerox Final Salary Pension Scheme, Xerox FundXtra, contributions to the Blackrock Stakeholder Pension Plan and/or the Xerox Life Assurance Plan and the Xerox Income Protection Plan (when these two later arrangements come into operation). This guide is intended to be a helpful summary of the new pension arrangements which will take effect from 1st January The guide does not provide full details of all benefits under the Xerox Final Salary Pension Scheme, Xerox FundXtra or other arrangements and nothing in the guide overrides the terms of the Schemes Trust Deed & Rules, as amended from time to time, or the governing documentation of the other arrangements. The Trustees have the power to amend the Trust Deed & Rules of the Xerox Final Salary Pension Scheme and Xerox FundXtra with the agreement of the Company. You will be informed of any changes. Produced by Xerox Pensions, Compton Court, Temple End, High Wycombe, Buckinghamshire, HP13 5DR. MAY