PENSIONS Lafarge UK Pension Plan PensionBuilder plus CONTENTS 1

Transcription

1 PENSIONS Lafarge UK Pension Plan PensionBuilderplus PensionsINVESTMENTS A guide to investing your personal investment account and AVCs January 2017 CONTENTS 1

2 Contents INTRODUCTION JARGON-BUSTER INVESTMENTS MADE SIMPLE RISK AND REWARD UNDERSTANDING WHAT RISK MEANS TO YOU SELF SELECT OR LIFESTYLE? SELF SELECT LIFESTYLE CASH LIFESTYLE ANNUITY LIFESTYLE DRAWDOWN LIFESTYLE YOUR QUESTIONS ANSWERED USEFUL CONTACTS A FINAL WORD 2

3 INTRODUCTION Introduction As a member of the Lafarge UK Pension Plan, you can decide how to invest the money that is paid into your personal investment account. Investments play an important part in your retirement planning. In this type of pension scheme, the better your investments perform, the more money will be available in your personal investment account when you stop working. And that can make all the difference between enjoying a financially comfortable retirement and one where you just get by on the basics. This booklet will guide you through the steps you need to take to make your investment choices and explain the basics of: u how investments work u the investment options available under the Plan u what you need to think about when deciding how to invest your money in the Plan u how you can manage your Plan investments in the future so that you have the best chance of improving your financial security in retirement. New to investments? A number of special terms are used in this booklet. They are explained on the next page in our jargon-buster, in alphabetical order. You can refer to these terms as you read through the text. On the following pages, we ve included some basic information to get you started, such as the different types of investments, the importance of risk, and why your age matters. Please note that, by law, nobody within Lafarge, nor the Trustees, can give you specific investment advice. So, ultimately, if you re unsure of what to do and want investment advice, you should speak to an independent financial adviser. We ve provided some useful contact details on page 21. 3

4 Jargon-buster Jargon-buster The following two pages explain some common investment terms you are likely to come across. Annuity An annuity is an insurance policy that provides a defined and guaranteed taxable income in return for a lump sum of money. In simple terms, you give the insurance company some or all of the money you have built up in your personal investment account. In return the insurance company agrees to provide you with a regular income for the rest of your life, i.e. a pension. An annuity can also include other benefits, such as a pension for your partner, payable on your death, but these options make the annuity more expensive so you would get less income. Since April 2015, members with money purchase benefits no longer have to use their accounts to buy an annuity. It is strongly recommended that you speak to an independent financial adviser to find out about the different ways you can use your personal investment account to fund your retirement. AVCs Additional Voluntary Contributions (AVCs) are contributions that you may choose to pay in addition to your standard PensionBuilderplus contributions. They are also paid into your personal investment account and you also benefit from tax relief (up certain limits) on these contributions. Bonds This is a type of investment offered by companies (corporate bonds) or governments (gilts). (See page 6.) Capital A sum of money you invest. Capital protection Describes an investment that aims to protect the value of your investment, so that you should get back at least the amount of money you originally invested (although this cannot be guaranteed). Cash investments Investments in short-term money market instruments such as bank deposits and Treasury Bills. Defined contribution See money purchase. Diversified fund This is a fund that can invest in a variety of investments. Put simply, it is intended to benefit those who don t want to put all their eggs in one basket. A fund like this aims to produce an equity-like return over the long term, while having a lower level of investment risk than is usually associated with equities. Drawdown This is where you keep your account invested after retirement and gradually draw an income from it. There is a risk that the value of your account could fall in value while it remains invested, and you may also run out of money during your retirement. This option is not available directly through the Plan, so if you wanted to use drawdown you would have to transfer the value of your account out of the Plan, to a provider of your own choosing who offered this as an option. Equities Shares in companies. (See page 6.) Exhaustion risk The possibility that you run out of money during your retirement, especially in relation to drawdown, if you withdraw too much money from your account and exhaust your savings. Fund manager The person or firm that manages the investment for a fund. 4

5 Jargon-buster Gilts This is the name for bonds issued by the British Government. (See page 6.) Index A consistent means of measuring value, such as the value of a given stock market (e.g. the Financial Times Stock Exchange (FTSE) All- Share Index) or a part of a stock market (e.g. the FTSE 100 Index, FTSE 350 etc). Indexes are also published to measure other financial movements such as inflation (Retail Prices Index RPI), house prices, earnings growth and so on. An index (or passive) fund manager will follow a particular index by investing in the same or similar investments that make up that index. Investment return The gain (or loss) achieved by an investment. It represents the increase or decrease in the value of the investment, plus the income that is made from investing in it. Investment risk u Capital risk the possibility that an investment will lead to a gain or a loss. The higher the capital risk, the higher the anticipated rewards or potential losses; the lower the capital risk, the lower the anticipated rewards or potential losses. u Inflation risk the possibility that an investment will not grow quickly enough to keep up with increases in the cost of living. The lower the anticipated rewards, the greater the inflation risk. u Pension conversion risk the possibility that investment returns do not reflect changes in the cost of buying an annuity. Money purchase Money purchase is the name often given to the type of pension scheme that enables a member and employer to contribute into an individual account during the member s working life, to provide a sum of money that the member can use to fund their retirement. It is also commonly referred to as defined contribution. PensionBuilderplus is Lafarge s own money purchase scheme. PensionBuilderplus The name given to the money purchase section of the Lafarge UK Pension Plan. Personal investment account The fund of money you have built up in the Plan, through contributions paid by the employer and yourself (including AVCs), plus investment returns. 5

6 Investments made simple Investments made simple There are many different types of investments (or asset classes ) available to investors. The main ones are equities (company shares), bonds and cash. These are explained below: Equities (company shares) An equity is a share in a company. The company could be based in the UK or overseas. By buying shares in the company, the investor is entitled to a share of the company s profits (called a dividend ). As well as the dividend income, investors will also hopefully make money through the share price rising, so when they come to sell it they will have made a profit (or return on their investment). Bonds & gilts A bond is a loan to a company or institution for a fixed term that can be sold on to another investor before the end of the fixed term. The amount of the loan is paid back on a specific date, and interest payments are made throughout the duration of the bond, giving a stream of income to the investor. Units explained The money that is paid into your personal investment account will be used to buy units in the fund(s) you choose. The number of units you are able to buy will depend on the price of units on the day that the units are allocated to your account. The price of units will vary over time, depending on how the funds investments perform. You can see the latest unit prices online, via the Plan website. It is worth remembering that if any of the financial institutions with whom your money is invested become insolvent, you may not get back the full value of your investment and that the value of units in any of these investments can go down as well as up. Some investment funds invest in one country s stock market, while others buy shares in many different countries. Emerging markets equity funds invest in countries that have less developed markets and are experiencing high growth and industrialisation. These conditions offer potential for good investment returns, although they come with risks which are less common in more established markets, such as the exposure to political instability. Over the long term (say more than 20 years), equities are expected to produce strong returns above the rate of inflation, but there is no guarantee that this will be the case. In the short term, the returns from equities can be very unpredictable and large movements in share prices can significantly affect the value of investments in funds that invest in shares. Cash In investment terms, cash means deposit accounts or any short-term (less than one year) loans. Generally, cash will earn some interest on top of a relatively secure capital value, and in terms of protecting the capital value of your account is generally considered the safest investment. The interest rate may be fixed (a fixed interest bond) at the start, or index linked (e.g. linked to the Retail Prices Index). The interest rate will depend on, for example, the duration of the loan and the level of risk involved. Bonds issued by the UK Government are called gilts. Bonds issued by any other organisations are called corporate bonds. Corporate bonds are not as secure as gilts, but they tend to offer a higher yield (i.e. percentage return) to compensate for the additional risk. The value of bonds tends to be more stable than the value of equities. However, bonds can fall in value. This happens if interest rates rise. Multi-asset funds A multi-asset fund invests in a combination of asset classes (such as equities, bonds, cash and even property, infrastructure and commodities). 6

7 Risk and reward Risk and reward Before we explain your options in the Plan, you need to understand risk. What are the different types of investment risk and how do you, as an investor, feel about risk? Types of investment risk There are three types of investment risk you need to consider: u Capital risk The value of an investment can rise and fall. This happens with all the funds offered by the Plan, but is less likely to happen for the Cash Fund. u Inflation risk This risk comes from funds that do not grow enough to keep up with increases in the cost of living. u Pension conversion risk (sometimes called annuity risk ) Until April 2015, the only retirement option available to most members was to use their personal investment account to buy a pension (also called an annuity). You now have more options, but some members will still want the security that an annuity provides. How much annual pension your personal investment account provides will depend on annuity rates, which vary depending on market conditions and other factors at the time you retire. This means that the same value in your account may buy more or less pension, depending on annuity rates at the time you retire. Funds with a low capital risk are more stable, but they may not grow over the long term as fast as some of the other funds. They may be more suitable if you are close to retirement, and they are likely to be less appropriate if you are investing your account for a long time and you are looking for the best growth potential. Funds with a higher capital risk are likely to go up and down in value from one year to the next, but they can offer the most potential for growth in the long term. Funds with a low capital risk may not grow over the long term as fast as some of the other funds. Other risks to consider There are other risks you should consider. One is called exhaustion risk, which is basically the possibility that you could run out of money during your retirement. This could happen if you withdraw all of your pension savings as cash, or if you use a drawdown product, and you spend your money too quickly. There is also a risk that your investment choices don t match your retirement plans, especially if you use one of the Plan s Lifestyle options to invest your account. If you are invested in Cash Lifestyle, for example, but you plan to buy an annuity with your account, then your account may not be protected against changes in annuity rates. Likewise, if you are invested in Annuity Lifestyle but you plan to keep your account invested (drawdown) after retirement, then you may be missing out on some investment growth. 7

8 Risk and reward Why does age matter? As you get nearer to retirement, the relative importance of each type of risk changes. As a general rule, the longer you have until retirement, the more capital risk you can tolerate. This is partly because you have time on your side to allow your personal investment account to recover if it falls in value over the short term. In fact, for a young person, cash might be the riskiest type of investment. This is because their account is unlikely to grow fast enough to achieve a reasonable standard of living when they retire. If you use one of the Plan s Lifestyle options to invest your account, your age is also important because that will determine when your account will start switching from one type of investment into another. Taking the long-term view Over a long period (say 20+ years) equities would usually be expected to outperform bonds and cash. However there is no guarantee that this will happen. In the short term, equities can be very unpredictable. Many investors try to time the markets so if they see the price of units falling they think they should sell and put their money in safer investments, before it takes a further hit. However, if you do this, you will to some extent be locking in the losses to your personal investment account caused by stock market falls. (But if you are very close to retirement, this may give your account some protection against further falls in the stock market.) You must bear in mind that the value of your investments may go down as well as up, and your eventual pension benefit can only be finally confirmed when you actually retire. 8

9 Understanding what risk means to you Understanding what risk means to you The following exercise is designed to help you work out how you feel about investing in general. Read each question and tick one box. When you have finished, add up your score from the numbers to the right of the boxes you have ticked. I want to protect my savings I would be worried if they fell in value, even for a short time Your Score I strongly agree I agree I neither agree or disagree I disagree I strongly disagree I worry about my pension savings falling due to a market crash and having to delay retirement I strongly agree I agree I neither agree or disagree I disagree I strongly disagree If I had a choice between a guaranteed payment of 1,000 or a one-in-five chance of a payment of 10,000 or nothing, I would definitely take the 1,000 I strongly agree I agree I neither agree or disagree I disagree I strongly disagree I am comfortable with different investment assets classes and enjoy making investment decisions I strongly agree I agree I neither agree or disagree I disagree I strongly disagree I do not like the thought of my pension investments having too much risk I strongly agree I agree I neither agree or disagree I disagree I strongly disagree Add up your score and type it in the box. Total CONTENTS 9

10 Understanding what risk means to you Your score against the investment risk you are prepared to take If you scored 5 to 11 If you scored 12 to 18 If you scored 19 to 25 You are a cautious investor and accept this may mean your benefits grow more slowly. As all three Lifestyle options invest to some extent in equities, you may wish to consider investing a lower-risk combination of the Self-select funds. As there is a risk that the value of your personal investment account may not meet your needs, you may need to consider saving more. You are comfortable with taking some investment risk to get higher rewards. You may wish to consider investing in the Cash Lifestyle or Annuity Lifestyle options, or a medium-risk combination of the Self-select funds. By taking some investment risk your account should grow more quickly over the long term but may move up and down in value in the short term. You should also consider protecting your account against it falling in value as you get near to retirement. You are comfortable with taking more investment risk in return for the chance of higher rewards. You may wish to consider investing in the Drawdown Lifestyle option, or a higher-risk combination of the Self-select options. By taking a higher level of investment risk your account should grow more quickly over the long term but may move up and down in value rapidly in the short term. You should also consider protecting your account against it falling in value as you get near to retirement. Consider your retirement outcomes It s important to consider your attitude to risk but equally important, you need to consider how you plan to use the money that has built up in your personal investment account. As we mentioned earlier, it can be risky to be invested in a Lifestyle option that targets a particular retirement outcome if, in fact, you plan to do something completely different with your money. Legal & General has developed a profiling tool that can help you explore your retirement outcomes in more detail, looking at how contribution levels, different levels of investment risk and longevity might affect your options: 10

11 INVESTMENT OPTIONS Self-select or Lifestyle? When it comes to investing your personal investment account, you can either make your own investment decisions ( Self-select ), or you can use one of our automatic investment strategies ( Lifestyle ). Self-select is designed for the more confident investor. With Selfselect you choose how to allocate your personal investment account between the available investment funds (a full list of which appears on the next page). Lifestyle invests your personal investment account for you and is designed for people who prefer to have their investment choices made for them. There are three Lifestyle options. They each work in a slightly different way, depending on how you think you will want to take the money in your personal investment account. If you do not make an investment decision, your account will be invested using Cash Lifestyle (the default investment). You can find out more about your Lifestyle options on page 15. You can invest in any combination of Self-select funds or you can invest in one of the Lifestyle options. You cannot do both. You can, however, change between Self-select and Lifestyle. Whether you choose Self-select or Lifestyle, it s important you understand how your investment choices might affect your pension savings and ultimately your options in later life. More information about your options can be found in our member guide, PensionsFACTS, which you can view on the Plan website. It is important that you review your investment choices regularly and make changes to your investments to suit your objectives at that time. For example, if you plan to buy an annuity with your personal investment account, but you later decide that drawdown would be more suitable for you, you need to consider whether your account is invested in the right funds to support that. You also need to review the age at which you plan to take your benefits, especially if you are invested in Lifestyle, as this can affect how your personal investment account switches from one type of fund into another. You can change how your account is invested, free of administration charges. You can change your investments online, by logging into Manage Your Account, the online system provided for Plan members by Legal & General. 11

12 SELF-SELECT Self-select: a flexible approach The Trustees have made the following 10 funds available to members, in which to invest their personal investment accounts. Equity-based funds Description Aims for: May be suitable: Level of investment risk: Total Expense Ratio: 1 UK Equities Fund (also known as UK Equities Index Fund 3) This fund invests only in UK equities, across a wide range of sectors (e.g. financial stocks, oil & gas, and consumer goods, to name but a few). It aims to track the performance of the FTSE All-Share Index by investing in most of the companies that make up this index, in order to maximise the growth of your personal investment account. mid to long-term growth if you re more,than 10 years from retiring, or if you re planning to use a drawdown product at retirement high capital risk low to medium inflation risk high pension conversion risk 0.27% 2 Overseas Equities Fund (also known as World Ex UK Equity Index GBP Hedged) This fund invests in Legal & General s pooled equity index funds in North America, Europe (excluding UK), Japan, Asia Pacific (excluding Japan), Middle East/Africa and Advanced Emerging Markets (which includes Brazil, Mexico, South Africa, South Korea, Taiwan, Hungary and Poland). The assets are currency hedged to sterling in order to protect the value of the investments against currency movements. mid to long-term growth if you re more than 10 years from retiring, or if you re planning to use a drawdown product at retirement high capital risk low to medium inflation risk high pension conversion risk 0.32% 3 Global Equities Fund (also known as Global Equity MW 30:70 75% GBP Currency Hedged Fund 3) This fund invests in equities, broadly 30% in the UK and 70% in overseas markets, including Europe, North America, Asia Pacific and emerging markets. Three-quarters of the overseas assets will be currency hedged to sterling, excluding the emerging market currencies. This aims to protect the value of the investments against currency movements. mid to long-term growth if you re more than 10 years from retiring, or if you re planning to use a drawdown product at retirement high capital risk low to medium inflation risk high pension conversion risk 0.31% 4 World Emerging Markets Fund (also known as World Emerging Markets Equity Index Fund 3) This fund invests in companies operating across a wide range of sectors in the BRIC countries (Brazil, Russia, Indonesia and China), as well other emerging markets around the world, such as South Africa, Mexico, the Philippines and Turkey. Investment markets in these countries are not as well developed as those in the UK. This means the investments are generally riskier than those in the UK because they are not as well regulated, are more difficult to buy and sell and are more exposed to political uncertainties. The value of the fund may go up and down more often than funds that invest in developed countries and by larger amounts. mid to long-term growth if you re more than 10 years from retiring, or if you re planning to use a drawdown product at retirement high capital risk low to medium inflation risk high pension conversion risk 0.62% 12

13 SELF-SELECT Self-select continued Multi-asset funds Description Aims for: May be suitable: Level of investment risk: Total Expense Ratio: 5 Diversified Fund (also known as Diversified Fund 3) This fund invests in a mix of different asset types, including equities, bonds, conventional gilts, property, infrastructure and commodities. The idea behind diversification is that the effect of poor performance in any one market could be offset by strong performance in another in effect smoothing out the returns, to provide a long-term rate of return that is broadly similar to that of developed market equities. Most of the underlying investments are passive that is, they track a particular index, for example, an index of shares such as the FTSE 100. However, the fund manager has some flexibility in deciding the exact makeup of the fund, including the proportion of the fund which is invested in each asset type, within certain parameters. mid to long-term growth if you re more than 10 years from retiring, or if you re planning to use a drawdown product at retirement high capital risk low to medium inflation risk high pension conversion risk 0.37% Cash funds Description Aims for: May be suitable: Level of investment risk: Total Expense Ratio: 6 Cash Fund (also known as Cash Fund 3) This fund is invested in cash deposits and other short-term investments. It aims to offer competitive rates of interest from sterling cash deposits with a number of high quality UK and overseas financial institutions. Cash is generally considered the safest investment in terms of protecting the capital value of your account. capital protection (rather than growth in the long term) if you are getting closer to retirement and intend to take a tax-free cash sum when you retire, or you plan to take all of your account as cash low capital risk high inflation risk medium pension conversion risk 0.27% 13

14 SELF-SELECT Self-select continued The Trustees have selected the following bonds funds to give greater choice to members who are planning to buy either an inflation-linked annuity (i.e. a pension whose payments increase in line with inflation), or a fixed annuity when they retire. Bond-based funds Description Aims for: May be suitable: Level of investment risk: Total Expense Ratio: 7 Government Bonds Fund (also known as Over 15 Yr Gilt Index Fund 3) This fund aims to capture the returns of the UK gilts market. It tracks the FTSE A Government (Over 15 Year) Index and invests in long-term gilts. Gilts pay a fixed rate of interest and have the security of being issued and backed by the UK Government. some protection against changes in fixed annuity prices if you re getting closer to retirement (say five to 10 years), or if you re planning to purchase an annuity medium capital risk medium inflation risk low to medium pension conversion risk 0.25% 8 Corporate Bonds Fund (also known as AAA-AA-A Bonds Over 15 Yr Index Fund 3) This fund invests mainly in long-dated sterling-denominated corporate bonds, all paying a fixed rate of interest. Bonds offer more security than equities, but their value can fall when interest rates rise. Corporate bonds also carry some additional investment risk because of the possibility of the issuer of the bond defaulting on the loan. some protection against changes in fixed annuity prices if you re getting closer to retirement (say five to 10 years), or if you re planning to purchase an annuity medium capital risk medium inflation risk low to medium pension conversion risk 0.29% 9 Pre-Retirement Fund (also known as Pre-Retirement Fund 3) This fund aims to protect the value of your personal investment account by investing in the same assets that annuity providers usually invest in bonds. The costs of annuities generally move in the same direction as bond prices. So, if bond prices go up due to falling interest rates, the cost of buying an annuity should also increase. The Pre-Retirement Fund invests in a range of corporate bonds (around 65%), and gilts (around 35%), although this allocation may change over time. good protection against changes in fixed annuity prices if you re getting closer to retirement (say five to 10 years), or if you re planning to purchase an annuity medium capital risk medium inflation risk low fixed pension conversion risk 0.29% 10 Index-Linked Government Bonds Fund (also known as Over 5 Yr Index Linked Gilts Fund 3) This fund aims to capture the returns of the UK index-linked gilts market. It tracks the FTSE A Government (Over Five Year) Index and invests in medium and long-term index-linked gilts. Index-linked gilts pay a fixed rate of interest, linked to inflation, and have the security of being issued and backed by the UK Government. good protection against inflation and changes in inflation-linked annuity prices if you re getting closer to retirement and you wish to elect an inflationlinked pension when you retire (say five to 10 years) medium capital risk low inflation risk low inflation linked pension conversion risk 0.25% REMEMBER: The value of units in these funds can go down as well as up. Past performance for all of these funds is not a guide to future performance. 14

15 LIFESTYLE Lifestyle: a set approach Many people are happy to pay into a pension, but they don t like the idea of having to make decisions about where to invest their contributions. The Trustees and their advisers have set up three Lifestyle options to make it easy for you. These are investment strategies that automatically change the way your contributions are invested as you approach your selected retirement age. All we need is for you to tell us: How you think you might want to take the money in your personal investment account. Your options are: cash, annuity or drawdown. (You should read the member guide, PensionsFACTS, to help you understand these options.) in Dorking. This is because your selected retirement date triggers when your account starts to be switched into different funds, depending on your Lifestyle choices. Please note, you cannot invest your personal investment account in Self-select and Lifestyle at the same time. If you change your mind later, you can always switch into another Lifestyle option or even choose your own investments (Self-select). If you still can t decide, then we will automatically invest your account using Cash Lifestyle (which assumes you will take the money in your personal investment account as a cash lump sum). AND At what age you think you ll want to take your benefits. You can select a retirement age between 55 and 70. Age 55 is the minimum age set by the Government. Because your plans may change, you can change your selected retirement age at any time, but please remember to notify Legal & General or the Pensions team 15

16 LIFESTYLE Lifestyle continued How Lifestyle works Each of the Lifestyle investment strategies has been designed with a different objective in mind. Cash Lifestyle, for people who are planning to take their account as a cash lump sum. (This will be the default position so, if you do not make an investment decision, your account will be invested in Cash Lifestyle.) Annuity Lifestyle, for people who want to buy an annuity at retirement. Drawdown Lifestyle, for people who want to keep their retirement savings invested and take an income from it as and when they need (this is typically offered through a drawdown arrangement outside of the Plan). Things to consider Each Lifestyle option aims to use different kinds of investments in the most appropriate way at different stages of your working life. Lifestyle is intended to be a sensible choice for most members. However, different people have different investment needs, and investment performance is not guaranteed. A Lifestyle option may not therefore be suitable for everyone. If you invest in Lifestyle, you should regularly review whether your Lifestyle option remains suitable for your circumstances. A change in plans for when you want to take your benefits from the Plan, for example, is one reason why your original choice may no longer be suitable. 16

17 CASH LIFESTYLE Cash Lifestyle Cash Lifestyle is for members who think they will want to withdraw their whole account as a one-off lump sum. Under current tax rules, you can take up to 25% of the value of your benefits as a tax-free cash lump sum. If you have a Final Pay pension in addition to your PensionBuilderplus investment account, you may want to use all the money in your account towards your taxfree cash, so that your Final Pay pension is not reduced. It s also worth remembering that any money you withdraw over and above the 25% tax-free cash would be taxed as income, so your withdrawal could potentially push you into a higher tax bracket, resulting in you paying more tax. If you want to withdraw your pension savings as a series of payments over time, you would have to transfer your account to another pension arrangement which allows multiple withdrawals. When you are five years from your selected retirement date, your account will begin to gradually switch into the Cash Fund. By the time you reach your selected retirement date, your account will be 100% invested in the Cash Fund. Please note: Cash Lifestyle will be the new default investment option Years to retirement Diversified Fund Cash Fund 17

18 ANNUITY LIFESTYLE Annuity Lifestyle Annuity Lifestyle is for members who think they will want to use their account to buy an annuity at retirement. When you are five years from your selected retirement date, your account will begin to gradually switch into the Pre-Retirement Fund. When you are within three years of retirement, some of your investment account will also start to switch into the Cash Fund. When you reach your selected retirement date, 25% will be invested in the Cash Fund (as most people generally choose to take their taxfree lump sum). The balance (75%) will be in the Pre-Retirement Fund, which aims to track the cost of buying a non-inflation-linked annuity Years to retirement Diversified Fund Pre-Retirement Fund Cash Fund 18

19 DRAWDOWN LIFESTYLE Drawdown Lifestyle Drawdown Lifestyle is for members who want to keep their pension savings invested during retirement and withdraw money from it as and when needed. The Plan does not offer a drawdown facility and you would have to transfer your account to another pension arrangement which provides this as an option. When you are five years from your selected retirement date, some of your account will begin to gradually switch into the Pre-Retirement Fund. When you are within three years of retirement, some of your account will also start to switch into the Cash Fund. When you reach your selected retirement date, your investment account will be invested in the Diversified Fund (60%), Cash Fund (25%) and Pre-Retirement Fund (15%). This provides you with a portfolio that you can continue to invest after you retire, but remember that your investment account may not be fully protected against sudden stock market falls Years to retirement Diversified Fund Pre-Retirement Fund Cash Fund 19

20 FREQUENTLY ASKED QUESTIONS Your questions answered Can I change how my personal investment account is invested? Yes. You are not locked into your initial investment decision. Because your circumstances will change over time, you may change the way your account is invested and you can also change your selected retirement age whenever you want. Remember, if you select a Lifestyle option, your investments will start to switch out of the Diversified Fund into different funds when you are five years away from your selected retirement date. The easiest way to manage your investments is online at Manage Your Account. Legal & General has provided helpful information and videos on how to change your investment fund choices. You can also complete and return the Lafarge Investment Switch form to Legal & General. You can download a copy here. Are there any charges? The annual management charge (AMC) is charged by Legal & General as 0.17% of the value of your personal investment account. The Total Expense Ratio (TER) is the total fee you will pay towards the management of your chosen investment funds over a year, as a percentage of the fund s value. It includes the investment fund manager s charges (FMC) and the annual management charge (AMC), which covers other operating costs such legal fees and administration costs. Who manages the investment funds? The Trustees have selected Legal & General to provide a range of investment funds, which are managed by Legal & General. Legal & General is one of the biggest financial service companies in the UK, with a good investment performance track record. However, the investment manager and fund choices will be reviewed from time to time by the Trustees, with the assistance of their professional investment advisers, and could change in the future. How will I know how my investments are performing? You can download an annual benefit statement from Legal & General s secure online system, Manage Your Account. This will show the value of your personal investment account, the funds you have bought and sold during the year, the funds in which your account is currently invested and an estimate of how your account might increase in value up to age 65 or your selected retirement age, if different. At any time you can also see the latest unit prices on the Legal & General website, which you can access through the Plan website. What happens if I leave Lafarge before retirement? Your and Lafarge s pension contributions will cease. Your personal investment account will continue to be invested in the way that you have chosen. You can still change how your account is invested once you have left the company. 20

21 USEFUL CONTACTS Useful contacts If you want to find out more about the investment funds available to you as a member of the Plan, look on the Plan website under Your investment with L&G to access the Legal & General website. If you have a query about the Plan or about your benefits, you can contact the Pensions Team in Dorking. Postal address: Park Lodge London Road Dorking Surrey RH4 1TH Office hours: Monday to Friday 9am - 5pm Closed weekends & UK bank holidays What if I want financial advice? By law, nobody within Lafarge, nor the Trustees, can give you specific investment advice. You should not take any information or explanation that they give you as such. If you would like financial advice, you should speak to an independent financial adviser (IFA). You should bear in mind that an IFA may charge for any advice given and these costs will need to be met by yourself. The following website will help you find a local independent financial adviser: Other sources of information Tel: (Pensioner and deferred helpline / 24 hour answerphone) Tel: (employee helpline / 24 hour answerphone) Fax: info@lafargeukpensions.com 21

22 A FINAL WORD A final word The Trustees will keep the investment managers and the funds (including the Lifestyle options) under review. The Trustees may in the future decide to change investment managers, or introduce a new manager alongside existing ones. The Trustees may also decide to change the funds on offer. Also, from time to time, the investment managers may decide to change the funds they offer. They may introduce new funds, or stop offering existing funds. The Trustees will also keep under review the way the Lifestyle options operate and may make changes to their constitution from time to time. If any of this happens, the Trustees will let you know. Please note that the value of your investment may fall in value as well as rise. There are no guarantees under any of the funds including the Cash Fund. 22