DEFINED BENEFIT SECTION ACTIVE AND DEFERRED MEMBERS

Transcription

1 THE METAL BOX PENSION SCHEME METAL BOX NEWSLETTER MEMBERS REPORT WINTER 2017/18 DEFINED BENEFIT SECTION ACTIVE AND DEFERRED MEMBERS In this issue... MND UPDATE VALUATION UPDATE SUMMARY REPORT & ACCOUNTS TRANSFER VALUES EXPLAINED PENSION NEWS AND MORE...

2 Welcome from the UK Pensions Manager Welcome to your Members Report from the Trustee of the Scheme. In this issue you ll find an update on the changes to your Member Nominated Trustee Directors (MNDs) and the usual financial updates. Members have been asking about transfer values and how they are calculated so we have included an article about this on pages 4 and 5. Members have also been asking about the Annual Allowance, so we ve included an update about this and also the Lifetime Allowance on pages 12 and 13. Please don t forget you can find lots of information on the Scheme website, which has been designed to help you make the most of your pension. Your Human Resources department or the Scheme administrators, Equiniti, will usually be able to help with questions you have about the Scheme. If you have any problems getting the information you need or if you wish to raise a query directly with the Trustee, you can contact me. I hope that you find this newsletter useful and I would encourage you to let me know the items you would like featured in future editions. As always, you can send your comments and suggestions to me using my contact details below. Cathy Aston UK Pensions Manager i 2 catherine.aston@eur.crowncork.com Tel: +44 (0) Copies of the newsletters issued to members of the DC Section and to pensioners can be downloaded from the website at

3 Member Nominated Trustee Directors (MNDs) The MNDs are selected from the pensioner and active members of the Scheme and are each appointed for a three-year term. Active MND Following the selection process held earlier this year, Richard Westcott, Head of Methods and Standards, Europe, was re-appointed with effect from 1 July 2017 for a second term of office. Richard subsequently decided to leave the Company which meant that the position became vacant once more. The selection panel reconsidered the other candidates who had applied for the position and Peter Young, Project Manager, Crown Technology, was appointed as MND for a three-year term with effect from 1 December Pensioner MND David Powell was appointed as an MND in April 2009 and was re-appointed in 2012 and His current term of office ends on 31 March 2018, by which time he will have completed nine years as an MND. David has decided that he will not re-apply for a fourth term of office. Pensioner MND The process to select the person who will replace David has now started. Any pensioner who is receiving a pension in their own right, who has at least three years contributory membership of the Scheme and has the support of at least 15 Scheme members, may now apply to be considered for selection as a Trustee Director. Pensioners who would like further information and an application form should contact Cathy Aston (UK Pensions Manager). For contact details see the back page. The closing date for applications is 28 February

4 Transfer values explained What is a transfer value? Very simply, it s the amount of money the Trustee expects is needed in the Scheme today to be able to pay the benefits due to you from the DB Section (e.g. future pension payments) until you die, and to any eligible dependants after your death. How is a transfer value calculated? When working out this amount of money, the Trustee has to make a number of assumptions about the future. These include how long the pension may be payable and at what rate it might increase in payment. The Trustee also makes an assumption about what future investment returns are expected to be earned on the money held today, which will help towards the cost of meeting your future benefit payments. Why have transfer values increased a lot recently? Transfer values have increased for many pension schemes. The main reason is because trustees expectations for future investment returns have reduced which means that more money is expected to be needed today to pay the benefits due in the future. Transfer values also fluctuate each month in line with changes in investment market conditions. These changes are normally relatively modest but can sometimes be significant, as was the case around June/July Do interest rates affect transfer values? Some members have asked how the Bank of England s Base Rate of interest affects transfer values. There is no direct link between the Base Rate and transfer values. However, expectations for how the Base Rate may change over time can influence expected future investment returns. For example, if there was a significant and unexpected increase in the Base Rate then this could lead to lower transfer values. Can transfer values change in the future? Transfer value terms are kept under regular review by the Trustee. So we could see large changes up or down again if, for example, the Trustee changes its view on the assumptions it has made for long-term investment returns, future pension increases or life expectancy. 4

5 What are my retirement income options and why are some members transferring out? The options available to you depend on whether you take your benefits directly from the Scheme or if you transfer out. Transferring out may mean you can receive your benefits in a way that better suits your needs. Given the different options available we have not attempted to summarise them here. For information see the My Pension My Choices factsheet which you can download from the Scheme website. You can transfer benefits at any age Does transferring out affect the minimum age at which I can receive any payments from my pension? You can normally take your benefits directly from the Scheme from age 50. If you transfer your pension, the age at which you can access your benefits depends on the law at that time and is currently age 55. Can I transfer before I leave the Company? You would first have to opt out of the DB Section of the Scheme and become a deferred member. You would need to think very carefully about this as you would not be able to re-join the DB Section. You would be able to join the DC Section. Why can t I have a guaranteed transfer value before I leave pensionable service? Whilst you are an Active member you are still earning benefits and so your deferred pension is not confirmed. How many quotes can I have, and is there a charge? An estimated transfer value is quoted on your annual benefit statement. In addition to this, you can have two free quotes a year after which a charge will be made unless you are actively engaged with an Independent Financial Adviser. What about financial advice? You should always consider taking financial advice to help you decide what option is suitable for you. If you are looking to transfer your benefits to another arrangement and the transfer value of your DB benefits in the Scheme is 30,000 or more, the Trustee is legally required to check that you have had advice from a suitably qualified adviser. For more information on how to choose an Independent Financial Adviser, please visit: What are pension scams and how can I avoid them? A pension scam is when someone tries to con you out of your pension savings. Scams will often start with someone contacting you unexpectedly. They might talk about an investment or other business opportunity that you ve not spoken to them about before, or about taking your pension money before you re 55, or the ways that you can invest your pension savings. Once you ve transferred your savings into a scam, it s too late. You could lose all your pension savings as well as face tax of up to 55% or huge additional fees. For more information on pension scams, please visit uk/pension-scams 5

6 Valuation update The Scheme s funding position The graphs below outline the funding position of the Scheme as at 31 March 2017 (the last interim valuation) compared with 31 March 2016 (the last full actuarial valuation). Liabilities 2,630m Shortfall 227m Assets 2,403m Funding Level 91% Liabilities 2,369m Shortfall 264m Assets 2,105m Funding Level 89% The figures to the left include DC Section assets and liabilities of: 37m 28m i Why are the DC Section figures included? As the DC Section is part of the Scheme, for accounting purposes the figures need to be included in the assets and liabilities. This does not affect the funding of the DB Section, as DC Section members contributions are paid directly into their Standard Life Personal Accounts. 6

7 How has the funding level changed? The estimated funding level has improved from 89% to 91% between the last full valuation at 31 March 2016 and the interim valuation at 31 March As highlighted opposite, this amounts to a decrease in the shortfall from 264m to 227m. This is mainly due to the investments outperforming relative to the value of the liabilities over the period, as well as deficit contributions paid by the Company. Impact of the revised Scheme Factors Following a review by the Trustee, the early retirement and commutation factors used to calculate retirement benefits and the factors used to calculate transfer values were improved with effect from 1 July Had these improved factors been in force at 31 March 2017, the deficit would have been 250m. What is being done to improve the funding level? Because there is a funding shortfall, the Trustee and the Company have agreed a Recovery Plan for the Company to pay deficit recovery contributions. An updated Recovery Plan was agreed as part of the 2016 valuation which means that contributions to address the shortfall will be paid from 1 February 2017 to 30 April 2027 at the rate of 25.4 million a year ( 2.1 million a month). These contributions increase each 1 January to take account of price inflation. What about the cost of future service benefits? The Company also pays contributions to meet the cost of future service benefits that continue to be earned by active members each month. The amount paid by the Company can go up or down and is reviewed at each full valuation by the Scheme Actuary. On 1 January 2017, the Company increased the rate of these contributions from 5.2 to 6.7 x members Ordinary Contributions (less Additional Contributions). Advance payment of deficit and future service contributions Since the valuation, for business management and budgeting purposes, the Company has offered to pay in advance the contributions due between 1 January 2018 and 31 December This is instead of making monthly payments (deficit recovery and future service) over the next 5 years. The Trustee agreed that this would be beneficial to the Scheme and a payment of 181m was made to the Scheme in December What other contributions does the Company pay? The Company pays the cost of the Pension Protection Fund (PPF) levy, which in 2017 was 632,219. Where can I get more information about how the Scheme is funded? You can find information in the Documents/Useful Info area on the Scheme website. You can also request a copy of the financial documents from the UK Pensions Manager. 7

8 Valuation update continued Have there been any payments from the Scheme to the Company? There haven t been any payments in the past 12 months. Is the Scheme subject to any directions imposed by the Regulator? We re required to explain whether the Scheme has been modified by the Pensions Regulator, is subject to directions from the Pensions Regulator, or is bound by a schedule of contributions imposed by the Pensions Regulator. We confirm that none of these situations apply to the Scheme. What would happen if the Scheme were to wind up? We are legally required to let you know what would happen in the event of the Scheme winding up. There are no plans to wind up the Scheme. The Scheme would use its assets to buy annuities for members from an insurance company. If this had happened at the valuation date 31 March 2017, the Scheme s Actuary estimates that on average 75% of the total benefits would have been provided (compared with 72% at 31 March 2016), although the actual proportion of the full benefit entitlement paid to any individual member would vary. Alternatively, depending on the funding level at the time, the Pension Protection Fund (PPF) could be asked to assist. The PPF pays compensation to members in the event of employers becoming insolvent, leaving a scheme in shortfall below a certain level. Pensions payable in this way are likely to be less than the full benefits earned through the Scheme. 8

9 Summary of the Report & Accounts The financial information shown below is taken from the Trustee s Report and Financial Statements. Please note that these figures relate to the DB Section only. Membership of the DB Section Active members Deferred members Pensioner members 31 March ,196 12,720 Total 17, March ,533 12,871 Total 18,190 9

10 Financials for the DB Section 2017 thousands 2016 thousands Value of DB Fund at start of the year 2,077,722 2,084,166 Money into the DB Section Member contributions (not paid via Salary Exchange) Member contributions (paid via Salary Exchange) 1,896 1,530 Employer contributions 34,216 38,278 Transfers in (from the Metal Box AVC Plan) 4,333 3,667 Total money in 40,707 43,936 Net returns on investments 363,531 56,441 Money out of the DB Section Pensions and retirement lump sums (101,207) (98,597) Death benefits (315) (120) Transfers out and Annual Allowance tax charges (11,545) (5,312) Administration expenses (2,312) (1,747) Pension Protection Fund and other levies (743) (1,045) Total money out (116,122) (106,821) Value of DB Fund at end of the year 2,365,838 2,077, Value of DB Fund at start of the Year 2,077,722,000 Total money out ( 116,122,000) Total money in 40,707,000 Return on investments 363,531, Value of DB Fund at end of the Year 2,365,838, You can find the full Report and Accounts to March 2017 on the Scheme website under the Documents/Useful Info page.

11 Investment update As at 31 March 2017, the DB Section investments were split as follows: Liability Matching Assets 1 1,078m Investment Grade Credit 223m Private Equity 89m Developed Market Equities 128m Hedge Funds 220m Alternative Credit 214m Infrastructure 68m Alternative Betas 2 146m Property 49m Other 3 151m 1) Gilts, swaps, inflation-linked bonds, cash 2) Re-insurance, volatility premium, merger arbitrage, momentum 3) Short term cash, legacy holdings, currency hedge, current assets and current liabilities How are the investments performing? The Trustee has compared the return the assets have achieved with a benchmark return (a measure of the liabilities). Assets % Benchmark The performance of the DB Section assets (pa) against this benchmark (pa) is shown below: 1 year 3 years 5 years 8.4% 10.7% 12.4% 14.3% 14.2% 17.0% The assets have beaten the benchmark over all periods. This is because the way the assets are invested means that the Scheme has significant protection against increases in the value of the liabilities. This protection, together with the well diversified investment approach has helped to increase the funding level of the Scheme. 1111

12 Pension tax allowance update What is the Annual Allowance? The Annual Allowance (AA) is the maximum pension savings you can make in a tax year without incurring tax charges. Your pension savings are determined by looking at your Pension Input Amount (PIA). The Annual Allowance is currently 40,000 but you can roll forward unused savings from the previous three tax years. Tapered AA This is the name given to a reduction in the AA that applies to some high-earners. The maximum reduction would result in a reduced AA of 10,000. What is the Money Purchase Annual Allowance (MPAA)? The MPAA restricts the amount of tax-free savings that can be made to a DC arrangement (including the AVC Plan and DC Section) after benefits have been flexibly accessed. It is currently 4,000. You would trigger the MPAA if you took all your savings in the DC Section or AVC Plan as a single lump sum and it cannot be paid as a Small Pot (usually because the gross payment is more than 10,000). You would also trigger it if, having transferred out, you take cash payments in stages, receive income under flexi-access drawdown or taxable payments under a flexible annuity. Please note this is not an exhaustive list and you would also trigger the MPAA if you flexibly access benefits from pension savings other than those arising from the Scheme and AVC Plan. How is the Pension Input Amount (PIA) calculated? Your PIA from the DB Section is calculated in accordance with a method determined by the UK government. The amount by which your pension has grown during the year is multiplied by a factor (currently 16). Your PIA from the AVC Plan is calculated by adding up the contributions you and the company have paid to your AVC account. If your PIA is more than the Annual Allowance limit you may incur a tax charge. For example: If your PIA is 42,000 and your annual allowance is 40,000, you would pay tax at your marginal rate on 2,000 unless you had enough unused annual allowance from the previous 3 tax years to offset the overpayment. Where can I find my PIA? Your benefit statement gives you the details of your PIA for the year. 12

13 Lifetime allowance (LTA) What if my PIA from the Scheme/Plan is more than 40,000? You will need to decide if you need to notify HMRC via a self assessment tax return. To help you to make this assessment Equiniti will send you a letter with more information. This is usually issued within 8 weeks of the benefit statements. What if I have a tax charge? If you are subject to a tax charge, you can pay this to HMRC yourself. Alternatively if your tax charge arising from your savings in the DB Section or AVC Plan is 2,000 or more you may be able to use the Scheme Pays option. If Scheme Pays is available to you, you can either: a) Cash in part of your AVC account to cover the combined tax charge from your DB Section and AVC Plan savings, or b) Reduce your benefits in the DB Section to cover the tax charge from the DB Section savings and cash in part of your AVC account to cover the tax charge from your AVC Plan savings. For more information see the Annual Allowance factsheet available on the Scheme website. What is it? This is the limit of the total benefits you can build up in registered pension scheme(s) without a tax charge. The standard lifetime allowance for the 2017/18 tax year is 1 million and will increase to 1,030,000 for the 2018/2019 tax year. Some members benefit from protections for a higher LTA. When is the test carried out? When benefits are paid to you, either directly from the Scheme or by your new provider if you transfer out. It also applies when lump sum death benefits are paid. How is it calculated? Your savings in the Scheme and AVC Plan are valued for LTA purposes in accordance with a method determined by the UK government. It will depend on the options you choose when you take your pension. A rough guide would be to multiply your pension from the DB Section by a factor (currently 20) and add your AVC Plan fund value. If you have concerns about the LTA and require more information please contact Equiniti. You may then wish to seek independent financial advice. What do I need to consider? Any savings you have in any other pension arrangements will be considered as part of the LTA as well as your savings in the Scheme and AVC Plan. What if I have protections in place? Please let Equiniti know if you have protections agreed with HMRC. 13

14 News AVC Plan news Factsheets Members of the AVC Plan can choose to invest their contributions in a range of funds chosen by the Trustee. The AVC funds factsheet is a handy guide to the funds available. It includes a short description of the objective, management charges and volatility ratings of each fund. The factsheet has recently been updated to provide the latest available information and can be downloaded from Scheme website at More detailed factsheets about each fund can also be found on the Scheme website by selecting the links on the fund information page. BlackRock UK Equity Tracker Pension Fund (code JP) Due to rebranding by BlackRock, this fund is now called the SL ishares UK Equity Index Pension Fund. The fund objectives and charges were not affected by this change. Changing your investment choices To switch your existing AVC Plan funds, complete an AVC Investment Switches form. To redirect future contributions to alternative funds (Active members only), complete an AVC contributions and investments form. For forms visit or contact Human Resources or Equiniti if you are a deferred member. State Pension update When can I get my State Pension? The current State Pension age is 65 for men born before 6 December 1953 and between age 60 and 65 for women born between 6 April 1950 and 5 December The State Pension age will increase for both men and women to: age age age 67 between 2026 and between 2018 and 2020 *The Government has announced plans to bring this forward. If this goes ahead, the State Pension age will increase to age 68 between 2037 and You can find your own State Pension age by visiting How much will I get? This depends on when you reach State Pension age and your National Insurance contribution record. For information about how you can find out how much you will get visit Voluntary National Insurance contributions 68 between 2044 and 2046* You may be able to fill certain gaps in your National Insurance record by paying voluntary National Insurance contributions. For more information visit 14

15 Useful information DB modeller The DB modeller has been updated you can now use it from a tablet or your mobile phone, as well as a desktop computer. The modeller is now available for deferred members. The modeller helps you forecast how much pension and tax-free cash you may receive from the Scheme/Plan at your chosen retirement age. The results are shown in today s terms which means you can compare the results with your current salary/income. You can find the modeller on the Scheme website: All you need to do is enter a few details from your latest benefit statement. By changing the inputs you can see what the impact on your pension could be of different retirement ages and investment returns, and if you are an active member, changes to pensionable salary, salary increases and AVC contribution rates. If you are an active member it also shows a breakdown of how your contributions and tax relief add up. The modeller is designed to be a long-term financial planning tool. So, if you are planning on retiring within the next 12 months, the modeller may not be suitable for working out your final benefits. For a more accurate figure, you should contact Equiniti. Find the modeller online at Pre-retirement courses Employees who are thinking of retiring in the next two to three years can attend a free pre-retirement course. Run by WEALTH at Work, the courses include changes to your lifestyle, your income needs in retirement, your retirement savings, State Pension, workplace pensions, the Scheme and next steps. Courses are usually run four times a year and are held at different factory locations depending on demand. You can bring your spouse/partner with you and feedback from employees who have already attended these courses has been positive. For more information about the course content and to book a place, please see your local HR contact in the first instance, or contact Kim Moore, Human Resources Assistant based in Wantage. 15

16 Who looks after the Scheme? Metal Box Pension Trustees Limited (the Trustee) is responsible for the stewardship of the Metal Box Pension Scheme and AVC Plan. There are currently four employernominated Trustee Directors, one of whom is Trustee Chairman, and two membernominated Trustee Directors (MNDs). The employer-nominated Trustee Directors are: Gary Fishlock (Chairman) Retired Paul Browett Vice President and Treasurer, CROWN Europe Howard Lomax Retired John Riley Director, Production Engineering, Food North America The member-nominated Trustee Directors are: David Powell Pensioner (see page 3) Peter Young Project Manager, Crown Technology Your contacts Equiniti Write to: The Metal Box Pension Scheme c/o Equiniti Sutherland House Russell Way Crawley RH10 1UH Your Trustee Chairman After almost 11 years as a Trustee Director, including 5 years as Chairman of the Trustee board, Terry Cartwright decided to stand down at the end of June Your new Trustee chairman is Gary Fishlock. Gary has a wide knowledge of the Crown business, having worked for the company for 38 years. The first half of his career was spent in the UK (at Twyford and Wantage supporting the Braunstone, Botcherby, Bridge of Allen, Poole, Portslade, Carlisle and Gresford plants). The latter part of his career was spent at Crown s plants in Asia. Gary has previously served on the Trustee board for a couple of years (2005 to 2007) and is now retired. Tel: +44 (0) Fax: +44 (0) Standard Life All enquiries: Scheme website The website provides you with lots of information about the Scheme. You can also use the modeller and download useful documents. Designed and produced by AHC 2017_ On behalf of Metal Box Pension Trustees Limited, the Trustee of The Metal Box Pension Scheme 2017