Toshiba Pension and Assurance Scheme Trustees Report to Members for the Year to 31 March 2006

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1 Toshiba Pension and Assurance Scheme Trustees Report to Members for the Year to 31 March 2006 Welcome to the Toshiba Pension and Assurance Scheme 2006 Trustees Report. The Trustees have been very busy this year following the results of the actuarial valuation, which showed that the assets of the Scheme were insufficient to cover the liabilities (pensions) accrued for members. They have had numerous meetings with Employers to negotiate a significant increase in the monies going into the Scheme to help remove the funding deficit. In addition, the Company closed the Scheme to future accrual which came into effect on 1 July 2006, and this involved the Trustees in a significant amount of work, both communicating with members and ensuring the security of member s benefits. During the year to 31 March 2006, pensions have again had high press coverage. The Government has introduced many legislative changes which could directly affect the decisions you make in planning for retirement. Pension Scheme members can save more towards retirement than before, and also have more options open for taking tax free cash from their funds at retirement. The main points of interest are outlined in this newsletter, which I would encourage you to read in full. If there is anything else you would like to see in future editions or if you have any comments about this newsletter or the Pension Scheme in general please get in touch. To contact the Administration Team please them at Toshiba.admin@hewitt.com. In this report we cover: A summary of membership of the Scheme Details of the Scheme s Trustees and the professional advisers they employ Scheme Actuary Report and Investment News Facts and Figures concerning what has been happening to the Scheme over the year A summary of where you can find further information A summary of points of interest We, the Trustees, hope you will find this report both interesting and informative. Regards Dick Jewkes (Chairman of the Trustees)

2 Meet the Trustees Dick Jewkes (Chairman) About the Toshiba Pension and Assurance Scheme The Scheme is run by a group of Trustees made up of representatives from the Company and the membership. Running a pension scheme is a complex job. To help the Trustees ensure the Scheme is correctly administered, the Trustees use the services of a group of professional advisers (see right hand column). The Scheme is governed by a legal document known as the Trust Deed and Rules. A copy of this is available on request for a nominal charge. The assets of the Scheme are managed separately from those of the Company. Our advisers Investment managers David Northey Trustee News During the year, Jane Hill resigned as Chairman and as a Trustee of the Toshiba Pension and Assurance Scheme. Jane has completed over 4 years of valuable service in her role as a Trustee, and has been an outstanding Chairman. On behalf of the members of the Scheme, we would like to thank Jane and wish her well in the future. Jane's successor as Chairman is Dick Jewkes. Legal advice Gavin Everson George Harris (Pensioner) Susan Stevens Bob Sharman Scheme Actuary's Report The benefits payable from the Scheme are provided by the contributions paid by both the members and the Company. The Trustees are responsible for ensuring that sufficient contributions are paid into the Scheme to meet the benefits payable under the Rules and to build up a fund to provide for future benefits. They are advised by the Scheme Actuary, who calculates the level of contributions to be paid. The Scheme Actuary monitors the amount of money in the Scheme relative to the benefits that must be paid out, both now and in the future, and carries out a full assessment (called a Funding Review) of the Scheme's finances at least once every three years. The last formal Actuarial Valuation, which reviewed the position of the Scheme as at 1 April 2005, confirmed that the Scheme's assets were not adequate to fully cover the benefits built up for former members and current members. Following the valuation, the Trustees and the employer have met on a number of occasions and the changes detailed below have been agreed. The Company has agreed to a large increase in their contribution rate, plus a cash injection. The Scheme will cease future accrual of benefits Past benefits for active members will cease to be linked to future salary increases. Instead members will be treated as deferred members and receive deferred inceases prior to retirement. Banking Actuary Administrators Additional Voluntary Contributions Legislative Changes Neil Doe The Pension Protection Fund PPF an extra layer of security The Pension Protection Fund (PPF) is a new insurance arrangement for final salary schemes. It aims to ensure a minimum level of benefits to members of final salary schemes, if their employer becomes insolvent and cannot afford to pay the benefits promised. In such an event, the PPF will normally: Auditors provide full pensions to members who are over the Scheme s normal retirement age.

3 provide 90% of full pensions for other members, subject to a maximum of 25,000 p.a. per member. provide standard 50% spouse s / dependant s pensions upon the death of a member. provide increases to pensions in payment at the lower of inflation or 2.5% per annum but only in respect of benefits earned from April These benefits are subject to change in the future by the Government. Defined benefit schemes will have to pay a levy to the PPF to fund the scheme and membership will be compulsory. Toshiba will have to pay this levy from 6 April this year. As a member, you will not currently be required to contribute towards this levy. Employers who wind up schemes without being insolvent will not qualify for help from the PPF. They will have to cover the cost of providing the promised benefits by buying insurance policies. A new Pensions Regulator (introduced as part of the Pensions Act) will aim to ensure that employers do not avoid their obligations. Pension Increases In line with current legislative requirements, all pension built up in the Scheme since 6 April 1997 receives increases in payment of the Retail Prices Index (RPI) but capped at 5% a year. As part of the Pensions Act 2004, the Government has reduced this requirement for pension built up from 6 April 2005, from a cap of 5% to a cap of 2.5% a year. As a result your pension built up from 5 September 2005 will receive pension increases in line with the RPI capped at 2.5% a year (rather than 5% a year) when you retire, in line with the new legislative requirements. Please note however that this does not affect the increases applied to your pension built up prior to that date. Below are details of the main increases that will appy to your pension once it comes into payment: Pension Earned before 6 April 1997 Pension Earned after 6 April % pa - 3% minimum subject to a maximum of 5% dependent on the RPI Pension Earned after 31 December RPI up to a maximum of 5% Pension Earned after 5 September RPI up to a maximum of 2½%

4 Facts and Figures The Scheme was closed to future accural on the 30 June 2006 This was a difficult decision to make, but both the Company and the Trustees felt it was vital to protect the benefits already accrued by current members. Membership statistics FINAL SALARY OTHER MEMBERS AT 31 MARCH April Life Cover Only 58 New Entrants 0 Exits 15 Ex-members with 1198 preserved pensions Pensioners March Accounts Summary ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2006 Fund at the start of the year - 1 April ,863,000 Income less expenditure 532,000 Change in market value of investments 12,209,000 Total increase in market value during the year 12,741,000 Fund at the end of the year - 31 March ,604,000 What Came In - 1,931,000 What Went Out - 1,399, ,000 22,000 Company Contributions Member Contributions Investment Income 318,000 31,000 Benefits to members Fees, expenses and Life assurance premiums Transfers out and leaver benefits 1,365,000 1,050,000 Asset Distribution as at 31 March % 13% 9% Equities Government Bonds Corporate Bonds Property 78% Total Scheme assets at 31 March 2006: 60.6 million

5 Investment An Investment Committee has been established with members from both the Trustees and the Company, to monitor the complex area of investment. It should however be noted, that actual decisions relating to the investment of the Scheme s assets, lie solely with the Trustees. Independent measurement of the Scheme s investment performance is undertaken for the Trustees by Russell/Mellon. The Russell/Mellon report covering the period to 31 March 2006 showed that: As at 31 March 2006, the assets of the Scheme stood at 60.6m. The Scheme achieved an investment return of 25.4% in the 12 months to 31 March 2006, compared with a return of 26.2% for the benchmark set by the Trustees. Over the three years to 31 March 2006 the Scheme achieved an equivalent annual return of 19.9% pa compared with 20.4% pa for the Trustee benchmark. The investment managers' remuneration is related to the amount of funds under management. Further Information Trustees Report & Accounts The Trustees publish a formal Report and Accounts document each year that covers some of the items outlined in this report. Ask your Human Resources Department if you would like a copy or a copy of the Funding Review by the Scheme Actuary. You should also ask your Human Resources Department if you would like to see the Scheme's Trust Deed and Rules. Internal Disputes Resolution If you do have any problems with the Scheme it is hoped that these can be resolved by the Administrator or the Human Resources Department. If necessary, however, the Trustees have prepared a formal process for dealing with member disputes. Further details of this are available from your Human Resources Department. You may also be able to get assistance from the following external individuals and bodies: The Pensions Advisory Service Ltd (OPAS) The web address The Pensions Ombudsman The web address The Office of Public Sector Information The web address State Pension The web address

6 More cash at retirement! There have been two significant changes to the Scheme following A-day (6 April 2006). The main changes to the Scheme are outlined on this page. Maximum tax free cash sum at retirement members are entitled to take more of their benefits as tax free cash, 25% of the value of their benefits. When you retire, you can choose to exchange part of your Scheme pension for a tax free cash sum. The maximum cash you can take at retirement has changed, and an example of the change is shown below: Retirement at age 65 Pensionable service 20 years Final Pensionable salary 20,000 Commutation factor 9.00 cash for every 1 pension (The commutation factor is the factor to convert Pension to cash) OLD BASIS NEW BASIS Pension = 6,667 p.a or Tax Free Cash = 15,000 + Residual Pension 5,000 Pension = 6,667 p.a or Tax Free Cash = 25,500 + Residual Pension 3,830 Please note that the more cash you take, the smaller your residual pension will be. (The figures shown above are for example purposes only) Have you thought about early retirement? Currently: the Inland Revenue allows people to take early retirement at any time from age 50. This is reflected in the Scheme s rules which allow you to choose to retire early from age 50 and take an immediate pension from deferred status. If you do retire earlier than the normal retirement age of 65 your pension will be reduced for receiving it earlier than planned From 6 April 2010: the Inland Revenue have stipulated that the Plan s minimum early retirement age will increase to age 55. This means that if you were born: Before 5 April 1955 then you are unaffected by this change you can still retire at any time from 50 onwards. On or after 6 April 1960 then you cannot retire until you are age 55, subject to the usual consent. In the five years between 5 April 1955 and 6 April 1960, then you will have a window of opportunity to retire between your 50 th birthday and 6 April You will then have to wait until your 55 th birthday for another opportunity to take early retirement. Example: If you were born in April 1958 and so are 48 in April 2006 then you could retire at any point from April 2008 (your 50 th birthday and 6 April 2010 but then not again until April 2013 (your 55 th birthday). The Government s new law means that all UK pension schemes must implement a new minimum retirement age of 55 by no later than April The Toshiba Trustees have decided that rather than making this change immediately, it will be made at the last possible date i.e. 6 April 2010, ensuring that you have plenty of time to plan your retirement.

7 What should I be doing to plan for my future? Planning for your future has never been more important. The following short summary highlights actions you can be taking now to plan your retirement. Review your benefits: are they enough? The Scheme administrators provide you with an annual benefit statement each year. Read this statement thoroughly as it gives you a great deal of information about your pension at retirement, plus you will receive an indication of the benefits you are likely to receive from the Government Search out any statements you may have from pension arrangements from previous employers to see what benefits they will provide at retirement Ask the Inland Revenue to provide you with details of your projected State Benefits on retirement. You can get more information on how to do this by visiting their website at or your local office of the Department of Work and Pensions. Expression of Wishes Forms For tax reasons, the Trustees take the final decision on who receives the cash sum paid if you die in employment while a contributing member of the Scheme. A complete review of the Expression of Wishes forms took place at the beginning of 2005, but if your circumstances have changed since then, for example, as a result of marriage, it is important that you submit a revised form. If you have not already completed an Expression of Wishes form or you wish to change the details already submitted then you should contact your Human Resources Department who will be able to help.