LUXFER GROUP PENSION PLAN NEWSLETTER

Transcription

1 LUXFER GROUP PENSION PLAN NEWSLETTER DECEMBER 2016 CHAIRMAN S REVIEW This Newsletter gives a summary of the formal Trustees report and accounts for the year ended 5 April 2016, together with comment on issues relating to the Plan and pensions in general during Actuarial valuation We have completed the actuarial valuation as at 5 April 2015 and issued a summary report to members in August. We have included a further update on the funding position in this newsletter. Investments The Plan assets suffered a small reduction in value during the year under review. We have continued to refine our investment strategy and further changes were made during More information is included in this Newsletter. EU Referendum It is too early to evaluate the long term consequences of the decision to leave the European Union, but already there have been some actions which affect the Plan; the fall in the value of Sterling and the decision by the Bank of England to lower Bank rate and to purchase Government Bonds have had an impact (some beneficial) which we comment on. Benefit options In association with the Company, the Trustees are looking at the scope members have at normal retirement (or earlier in some cases) to enable them to make use of the flexibilities now permitted in relation to how pension benefits can be taken and a reminder of these flexibilities is included in this Newsletter. Trustees Following a review of the make-up of the Trustee Board, we agreed with the Company that there should be six trustees, including two membernominated trustees. David Fletcher resigned from the Board following his appointment as Group Company Secretary and Jamie Savage (Divisional Finance Director for MEL Chemicals) has been appointed. I would like to thank David for his contribution to the Trustees discussions during his time as a trustee. At the conclusion of another year I would like to record my thanks to my fellow Trustees for their valuable input throughout the year. I hope you will find this Newsletter of interest. If you have any comments or queries about the content of this Newsletter or the Website please speak to your LPC or GPC representative, or contact the pensions manager, Steve Williams Chairman of Trustees KEEPING IN TOUCH If you have any queries about the Plan or about your benefits, or if you would like further information regarding any issue covered in this Newsletter, you should contact the pensions manager (see Who runs the Plan ) or go to the pension scheme website. If you are a pensioner or deferred member, remember to notify the Plan administrator Mercer, of any change of address. REMEMBER THE PENSIONS WEBSITE Luxfer Group Pension Plan Anchorage Gateway 5 Anchorage Quay Salford M50 3XE

2 FUNDING The actuarial valuation as at 5 April 2015 showed the Plan had liabilities of million (after allowing for the April 2016 changes closing the Plan to future accrual and moving to CPI as the reference index for pension increases) compared with assets of million. To make good the deficit of 32.5 million the Trustees have agreed a funding plan with the Company designed to eliminate the deficit by April More details on the actuarial valuation and the funding plan were included in the Newsletter dated July In 2015/16 the Company paid 4.6 million towards eliminating the deficit and a further 4.3 million is payable in the 2016/17 year. Had we experienced financial conditions expected at time of the valuation, the Trustees would have been well on course to reduce the deficit in the planned timescale. However, as noted elsewhere in this Newsletter, asset values fell during the year and this was accompanied by a fall in Bond yields (regular readers of these Newsletters will know that a lower Bond yield increases the value of liabilities). Over the year the funding position worsened with the deficit rising to an estimated 42.5 million by April The result of the EU Referendum had mixed consequences. The depreciation of Sterling (which had begun earlier in the year but accelerated at the end of June) had a beneficial effect on the value of the trustees overseas equity holdings as their value appreciated. The decision by the Bank of England to reduce the base interest rate and to commence a further programme of purchasing Bonds led to a further fall in Bond yields, increasing the value of liabilities further. Thus by the end of October 2016 the Trustees had seen the value of the fund increase to 226 million, but liabilities also increased so the deficit stood at almost 40 million. This is indicative of the volatility that will affect the Plan during the long period over which the benefits of the Plan will be paid. The Trustees regularly monitor the financial position of the Plan and work with the Company to ensure an appropriate level of funding is paid into the Plan and we will keep you up to date with the position in future Newsletters. In 2014 the Trustees re-configured the Bond assets with the aim of reducing the impact of falling Bond yields. Now 30% of an increase in liabilities will be matched by an increase in the asset value. There is a limit to the extent to which the Trustees can take this strategy without exposing the fund to possible costs or reducing the size of the growth assets; nevertheless the strategy has been successful in limiting the growth in the deficit. FUNDING LEVEL APRIL 2015 OCTOBER 2016 m April 2015 Liabilities Assets FOCUS ON FINANCIALS Fund value at 5 April 2015 Outgoings Pensions and tax free cash Other payments Expenses PPF levy Contributions Employers Employees Investment change Change in value of assets Investment expenses Fund value at 5 April April October 2016 Deficit (9.6 m) (0.3 m) (0.5 m) (0.2 m) 5.7 m 0.4m (3.8 m) (0.3 m) m (10.6m) 6.1m (4.1m) 200.0m The income and expenditure figures are taken from the audited accounts of the Plan, which are available through the pension website or on request to the Pensions Manager. In the year to 5 April 2016 the total value of the fund declined by 8.6 million. Cash received in the form of contributions was insufficient to cover outgoings, therefore 4.5 million was drawn from the fund to meet expenditure on pensions, other benefits and expenses (in a pension scheme that is closed to future accrual of benefits, this is not an unusual situation). The fall in the value of investments and investment expenses cost a further 4.1 million. The Trustees main expenditure was the payment of pensions ( 7.25 million) and tax free cash sums ( 2.39 million) to retiring members. In the year the Company s contribution of 5.7 million included a 4.6 million deficit funding payment.

3 FOCUS ON INVESTMENTS Review of the year The value of the fund (excluding other net assets and AVC assets) declined during the year, after allowing for the sale of investments to cover expenditure, to stand at million. A summary of the assets at the end of the year is shown below. 38.5% 76.5m 13.6% 27.0m 17.7% 35.2m 30.2% 59.9m UK Equities Overseas Equities Multi-asset Funds Bonds At the end of the year million was invested in growth assets, comprising equities or multi-asset funds (these invest in a wide range of assets, with the aim of providing equity-like returns but with less variability in annual returns from year to year), the aim of which is to increase the value of the assets relative to the liabilities and so improve the ability of the Trustees to pay benefits and reduce the dependence on the Company. The remaining 76.5 million was invested in matching or lower risk assets, comprising various fixed interest or index-linked Bonds, held to reduce the variability between the values of the liabilities and the assets as Gilt yield (which are the base on which the liabilities are valued) fluctuates. During the year under review the Trustees decided to change the balance between equities and multi-asset funds and this was in progress at the end of the year and completed by May The Trustees aim to have two-thirds of the growth assets in equities (about 40%) and one-third in multi-asset funds (about 20%). Performance The fund s equity holdings delivered negative returns in the year under review, with only North American investments gaining in value in Sterling terms as a result of the strength of the US Dollar. The fund s Bond holdings achieved small gains. Following the EU Referendum the value of investments has grown markedly as a result of the fall in the value of Sterling (increasing the value of equities) and the decision by the Bank of England to lower Bank rate and to purchase Government Bonds (increasing the value of Bonds but also lowering the Gilt yield so causing an increase in the value of liabilities). FREEDOM AND CHOICE IN PENSIONS Freedom of choice in defined contribution schemes In a defined contribution scheme you have complete freedom in what you do at retirement with any pension savings. 25% may be taken as a tax-free cash sum, and with the rest you can buy a pension or take the whole amount as a cash sum or withdraw money over time. Normal income tax rules will generally apply to any money taken out above the 25% tax-free amount. For guidance on the options at retirement you can go to Pension Wise, a service provided on behalf of the Government that offers free and impartial guidance online, face to face and over the telephone, whichever suits members. To find out more go to or call Employees who choose to take all of their pension savings as cash or withdraw money from their pension savings over time may be limited to 10,000 (expected to reduce to 4,000 from April 2017) on the amount they can then pay each year into any pension scheme (without having to pay a tax charge). This is to stop people exploiting the tax system. If the employee then dies before age 75, the beneficiary of any money left over will pay no tax on the funds. After age 75, the beneficiary will pay tax at their marginal (highest) rate of income tax. Option for Luxfer Group Pension Plan members For the Luxfer Group Pension Plan benefits, to have the same freedom as defined contribution savings you would need to transfer your benefits to a defined contribution scheme. If this is of interest to you, please contact the Luxfer Pensions Manager. Note: the law requires that, if your transfer value exceeds 30,000 then you will be required to have taken independent financial advice on the suitability of transferring your pension. The Minimum Pension Age The earliest age from which you can normally access your pension savings (known as the Minimum Pension Age ) is currently age 55 and this will increase from 55 to 57 from 2028, when the State Pension Age goes up to 67. It will then be set at 10 years below the State Pension Age, so the Minimum Pension Age is likely to go up again after NOTES We strongly suggest that you speak to a financial adviser before making decisions on any changes to your pension savings. This note does not constitute legal or financial advice. To find an adviser in your area, you could contact IFA Promotions, an organisation that promotes independent financial advice, by phoning or by visiting the website In a defined contribution scheme, you and your employer pay an agreed amount into your pension pot each year and the amount your pot is worth at retirement depends on how much has been paid in and how your chosen investments have performed. Luxfer Group Pension Plan is a defined benefit scheme, where the amount you receive at retirement is based your earnings (depending on the number of years you were a member of the Plan).

4 MEMBERSHIP Actives The deferred members at April 2016 includes 151 Group employees who became deferred members on 6 April 2016 when the Plan closed. In the year under review 45 members retired (16 employees and 29 deferred members) of whom 7 had small pensions which they converted to a cash sum. Sadly 13 pensioners died in the year, 9 are survived by spouses who are now in receipt of pensions. In addition 2 deferred members died. PENSIONS NEWS ROUND UP Commutation Factors At retirement, if you take part of your annual pension as a tax free cash sum, to find by how much to reduce your pension to allow for the cash sum, the administrator uses the commutation factor, ie: Pension reduction = tax free cash sum/commutation factor The commutation factor is a broad measure of the value of the pension exchanged which is subject to review, usually following an actuarial valuation, to ensure it remains appropriate. Following the recent actuarial valuation the commutation factors have been adjusted to take account of the improvements in life expectancy. This has the effect of improving the factors by small amount; so you give up a smaller pension for the same amount of cash. Examples of the new commutation factors are shown below. Age Deferreds Factor Pensioners Please be aware that it may not be in your best financial interests to take cash at retirement as this reduces the amount of your pension benefits from the Plan as highlighted above and we would recommend you seek advice from an IFA when considering your retirement options. Option to take your defined benefit pension as cash If you are aged 55 or over and either: your pension entitlement in any one scheme is worth no more than 10,000; or your total pension entitlements from all sources (excluding State pensions) are worth no more than 30,000 then you may be able to take all of your benefits as a cash sum. Income tax is normally payable on any cash sum above the 25% tax-free amount. Please contact the Luxfer Pensions Manager if you wish to receive a quotation. PPF levy For 2016/17 the levy paid to the Pension Protection Fund (PPF) was lower than in previous years at 177,253. The levy helps the PPF meet their commitments to members of insolvent pension schemes (for more information about the role of the PPF and the level of compensation paid to members of insolvent pension schemes go to Expression of wish and dependant nomination forms There is a death benefit payable from the Plan whether you die before or after retirement. Legally the Trustees have absolute discretion in deciding to whom the lump sum will be paid, but it is their preference to follow your wishes unless there are, in their opinion, good reasons not to do so. The reason for this is obvious you know best how you would like any lump sum paid but sometimes it is not clear if the contents of an expression of wish, completed many years ago, reflect how you wish the benefits to be paid. So that the Trustees know to whom you would like any lump sum to be paid, you should ensure your expression of wish is up to date. Even if your wishes have not changed it would help the Trustees if you returned a form at least every five years. After you have retired your pension will continue automatically to your spouse at a lower rate after your death. The Trustees also have the discretion to pay a dependant s pension, where for example you have not married your partner, if evidence of financial dependence or inter-dependence can be shown. If you wish the Trustees to consider paying a pension to a dependant, you may return a dependant s nomination form to the Trustees. It should be noted that this will not guarantee that a dependant s pension will be paid as the Trustees will need evidence of financial dependency at the appropriate time. Both forms may be downloaded from the Plan website or obtained from the Pensions Manager. continued overleaf

5 Pension increases From April 2016 the Trustees refer to the Consumer Prices Index (CPI), the Government s preferred measure of inflation, to determine the increase to apply to pensions in payment. At 6 April 2016 an increase of 0.1% was applied to all pensions in payment (other than guaranteed minimum pension (GMP) and any pension payable to members who in 2011 exchanged their pension for a higher fixed pension). Pension scams We included a warning about pensions liberation in last year s Newsletter and, according to HMRC and the Pensions Regulator, the scammers persists, as one unfortunate side effect of the pension reforms introduced from April Scammers may try to entice you with a free pension review, one-off investment opportunity or legal loophole. Early access to your pension savings may sound tempting but if you are under age 55, you cannot normally draw pension benefits unless you are in ill health. If you are 55 or over, you may be able to release your funds from your pension. However, you will still be at risk from scammers. How to spot the warning signs Scammers don t care whether you re an inexperienced investor or have never put your money anywhere other than a bank. They will try to flatter, tempt and pressure you into transferring your pension fund into, for example, an investment with guaranteed returns. Once the transfer has gone through, it s too late. Remember, the only people who benefit from scams are the scammers themselves. Here are some of the most common tactics used by pension scammers to get a hold of your pension savings: A cold call, text message, website pop-up or someone coming to your door offering you a free pension review, one-off investment opportunity or legal loophole. Convincing marketing materials that promise you returns of over 8% on your investment. Paperwork delivered to your door by courier that requires immediate signature. A proposal to put your money in a single investment. In most circumstances, financial advisers will suggest spreading your savings across a range of investment classes. Claims that you can access your pension before age 55. Transfers of your money overseas. Being taken in by one of these scams is likely to result in you being poorer in retirement, and could mean that you face substantial tax charges. Never be rushed into making a decision remember that your Scheme benefits are very valuable. If you are in any doubt please speak to the Pensions Department in the first instance. You can also find further information on the Pensions Advisory Service (TPAS) website which includes examples of real life pension scams STATE BENEFITS AND OTHER INFORMATION State Pension Age State Pension Age is set to rise in recognition of the improvements in life expectancy. The table below shows the age at which you will reach State Pension Age under current legislation. Year of birth Born before * *Females born between April 1950 and December 1953 have State Pension Age rising from 60 to 65 in monthly steps. State pension From State Pension Age you will be entitled to claim your State pension benefits, although if you prefer you may delay receiving these. So if you continued to work you have the option of taking your State pension as well, or of deferring it until you stop working. The State pension changed from April 2016, affecting anyone with a State Pension Age falling after that date. If at April 2016 you had already reached your State Pension Age your full basic State pension for a single person is per week and for a married couple claiming on the man s pension it is per week. The pension will be added to your other income for income tax purposes. To claim the full pension you would need to have paid, or be credited with, national insurance contributions for a minimum number of 30 years up to 5 April You may also be entitled to an Additional State pension (otherwise known as SERPS or the State Second Pension) but as you have been contracted out through your membership of the Plan this will be largely replaced by your Plan pension. If you reach State Pension Age after April 2016 the standard amount payable will be per week (based on 35 years national insurance contributions or credit). However, this will be reduced to allow for the period you have been contracted out of the additional State pension (eg as a member of the Plan) and there may be other adjustments as the new pension is phased in to recognise you have already built up entitlements in the old State scheme. You may, however, earn further State pension benefits following 6 April 2016 depending on the amount you had built up to 5 April You can obtain a forecast of your State Pension from the website on the following page. Pension Credit Pension Credit is a means tested benefit designed to top up your weekly income to per week for a single person and for a couple. To calculate if you are entitled to Pension Credit the DWP will take into account your income from work or pensions, and the value of your savings. Inflation protection The basic State pension increases each April by the higher of: The increase in average earnings, The increase in prices (CPI), 2.5% State Pension Age Born between & Rising in monthly steps to 66 Born between & Born between & Rising in monthly steps to 67 Born between & Born after Pension Tracing Service If you had an old company pension but have lost contact with the administrator the Pension Tracing Service may be able to help. They may be contacted on For more information on any of these items visit

6 WHO RUNS THE PLAN? Responsibility for the management of the Plan rests with the Trustees who are: Steve Williams Chairman, Adrian Basford, Graham Bond, Gil Haycock, John Rhodes, Jamie Savage. Adrian Basford is appointed by the Group Pensions Council, while Gil Haycock is elected by pensioners. The Group Pensions Council is a forum for members of Local Pension Councils to meet to discuss matters relating to the Plan and pensions in general. The members of the Group Pensions Council are: David Mead, Steve Williams, Adrian Basford Luxfer Gas Cylinders, Neil Chapman MEL Chemicals John Ormes Magnesium Elektron Jon Fulcher Superform Aluminium The day to day running of the Plan is managed by the Pensions Manager David Mead. He can be contacted at the following address: Luxfer Group Limited, Anchorage Gateway 5 Anchorage Quay, Salford M50 3XE. Tel: david.mead@luxfer.com If you have any questions about the Plan or pensions in general your first point of contact is your Local Pensions Administrator or your Local Pensions Council member. It is through your Local Pensions Council that matters of concern can be raised at the Group Pensions Council and so brought to the attention of the Trustees and the company The Trustees retain a number of advisers to help run the Plan: Anna Batterley of Mercer Limited provides actuarial advice to the Trustees in her capacity as scheme actuary. Other Mercer consultants provide investment and general advice about pensions matters Grant Thornton audit the Plan accounts Mercer Limited administer the Plan membership records and provide quotations for members at retirement, leaving etc. They also manage the Trustees bank account and pay pensions and other benefits. The administrators may be contacted at: Mercer Limited, No 4 St Paul s Square, Old Hall Street, Liverpool L3 9SJ Tel: Eversheds provide legal advice to the Trustees Data Protection The Trustees and their advisers (principally the Scheme s Actuary and Administrator) are responsible for holding information and data regarding you and your pension Scheme membership in order to provide your benefits from the Scheme. The Trustees and their advisers hold your data securely and comply with the regulations (under the Data Protection Act 1998) on how your data should be handled. For this purpose, under the Data Protection Act 1998, the Trustee and the Scheme Actuary are registered with the Information Commissioner and are defined as data controllers. The Trustee and its advisers adhere to the following key principles in managing data: Obtain and process information fairly Keep it only for lawful purposes Use and disclose it only in ways compatible with these purposes Keep it safe and secure Keep it accurate, complete and up-to-date Retain it for no longer than is necessary for the purpose or purposes Details on the Data Protection requirements can be found at the Information Commissioners website Alternatively, please contact the Trustees if you would like further information. PLEASE NOTE: The Plan Rules govern your benefits under the Plan and in the event of conflict between this newsletter and the Rules, the Rules take priority.