YOUR PENSION FAQS. Proposed changes and the consultation process

Transcription

1 YOUR PENSION FAQS Proposed changes and the consultation process

2 01 FREQUENTLY ASKED QUESTIONS FREQUENTLY ASKED QUESTIONS??? The Company pension changes being proposed will affect anybody who is a current or potential member of the Ladbrokes Pension Plan so it s important that you feel really well informed. We expect you may have lots of questions about the proposed changes so we ve put together this list of Frequently Asked Questions (FAQs) which should be read in conjunction with the Your Pension booklet accompanying this. IF YOU HAVE ANY QUESTIONS: There is a lot of information held in the notes below. For ease of reference, they are gathered into sections: 2) Ladbrokes approach to pensions 3) The proposed changes 4) What pension volatility is and why it s important 5) Ending active membership of the Plan 6) More about the consultation process 7) How the Ladbrokes Pension Scheme operates 8) What this means for you 9) How much you can contribute 10) Your state pension entitlement 11) Next steps 12) Who to contact LADBROKES PENSION PLAN PAGE 2

3 02 2. LADBROKES APPROACH TO PENSIONS ANSWERING YOUR QUESTIONS Once the consultation process begins, we will regularly update these FAQs so make sure you pass your queries on to your elected colleague representative. Ladbrokes approach to pensions What are Ladbrokes plc s pension aims? In December 2012, the PLC Board agreed the Pension Steering Group s (PSG) overriding aims with regard to pension provision across the Ladbrokes Group. The aims were as follows: 1) Pension costs and cash flows should be stable, transparent and predictable; Pension members should be able to plan with confidence for their retirement, and Ladbrokes should also be able to plan its own pension spending with confidence and certainty. 2) A benefit that s valued and understood by all We want all our employees and future employees to be clear that the rewards for working for Ladbrokes stretch beyond the last working day. 3) A clear, fair system One straightforward pension contribution structure for all colleagues, whether a) You work in Retail or Head Office b) You join as an apprentice, a Market Place Manager, or a Director c) You join as a Market Place Manager and work your way into more senior positions or remain at that grade. In setting these aims, a wide variety of factors were taken into account, including: 1) The need to manage our business in a long-term, sustainable way 2) Social and economic changes over time, and the tough economic conditions facing all of us 3) Market practice (the norms and best practice) across all elements of the business (including the retail sector and direct competitors) LADBROKES PENSION PLAN PAGE 3

4 02 What LADBROKES APPROACH TO PENSIONS is the Pension Steering Group? 1) In 2010, the Company established a Pension Steering Group ( PSG ). The members of this group were tasked with reviewing our pension provision in the UK, Ireland and across all the territories we operate in. 2) The PSG is made up as follows: Name Title Ladbrokes Pension Membership Andrew Harley (Chair) Group HR Director None Sara Matthews HR Director Reward & Resourcing Ladbrokes Pension Plan Snehal Shah Head of Financial Reporting Ladbrokes Pension Scheme Andy Wilson Group Financial Controller Ladbrokes Pension Plan Vinod Parmar Group Treasurer Ladbrokes Pension Plan LADBROKES PENSION PLAN PAGE 4

5 03 THE PROPOSED CHANGES 3. The proposed changes Q. What changes are being proposed? A. Following a detailed and careful consideration of the options available, we are proposing to change the type of pension arrangement we offer to colleagues in the Ladbrokes Pension Plan from 1 July The key change is that there would no longer be a benefit build-up within the Ladbrokes Pension Plan. Instead, colleagues will be invited to join the Ladbrokes Pension Scheme and choose their contribution rate. Take a look at the table on page 7 of the Your Pension document to find out what this means. The reasons why we are proposing these changes are set out in section 4 of this document on pages MARKET TRENDS Faced with increasing risks and the unpredictability of costs of defined benefit pension plans, more and more companies are making changes that are similar to those we re proposing. Asda, Vodafone, Alliance Boots, WH Smith, Trinity Mirror, Home Retail Group, Sainsbury s, Dixons Retail, Kingfisher, Greene King, Whitbread, Fuller, Smith & Turner and many other household names have moved to using defined contribution plans for future pension build up and this trend is expected to continue. Q. Does the proposal apply to all colleagues in the Plan? A. Yes. The proposal applies to all colleagues including Directors and members of the Pension Steering Group. LADBROKES PENSION PLAN PAGE 5

6 03 THE PROPOSED CHANGES Q. What are some of the main differences between the current Plan and the proposed Scheme? A. The main differences can be explained by looking at how our pension arrangements currently work: Main features Ladbrokes Pension Plan is a final salary plan Benefits at retirement are defined by the Plan rules with very little flexibility. The risks of funding those benefits sit with Ladbrokes. The pension builds up depending on length of service this is typically 1/80th or 1/60th (see example below) and the length of Pensionable Service as a member (see example below) of the Plan Ladbrokes Pension Scheme (with Legal & General) is a money purchase plan Members have flexibility to choose: How much to contribute Where to invest When pension is received Whether, on retirement, to take full cash or pension) The risk and reward of saving enough to fund pension benefits and making investment choices is with Scheme members Pension depends on: How the chosen investments perform (after deduction of charges) Age at retirement, the type of pension chosen (if any) and how much it costs to buy a pension at the time FINAL SALARY PLAN EXAMPLE 25 years Pensionable Service 80 (1/80 th accrual rate) x Final Pensionable Salary of 20,000 = 6,250 per annum LADBROKES PENSION PLAN PAGE 6

7 03 THE PROPOSED CHANGES Q. Is there scope for different solutions from the proposals already circulated? A. We take pension provision very seriously. That s why we have considered these proposed changes very carefully and believe them to be well-rounded proposals. However, the Company is very interested to hear views from as many Plan members as possible and will consider them all. Q. Have the proposed changes been discussed with the Trustees of the Plan? A. The Company has very recently notified the Trustees of its proposal to cease future accrual in the Plan. However, the Company does not need to seek the Trustees agreement to the proposal and as such the Trustees have not been consulted on or been involved in the process. The specific formal proposal and process of change is one which is being managed directly between Plan members and the Company, through a formal consultation process. Q. How important is the Plan to Ladbrokes? A. Very. We are committed to making sure the Plan benefits already built-up are delivered in full. Even if the proposals are implemented after the consultation process, the Plan will still require significant expenditure and effort to run it. Q. Is the Plan in deficit? A. The Plan Actuary carries out a valuation every three years to assess its financial health. The 2010 valuation showed that the Plan had a deficit of 32m on an ongoing funding basis. The 2013 valuation has not yet been completed but is likely to show a much smaller deficit on an ongoing funding basis. Q. What is a deficit? A. The deficit is, simply put, the difference between how much money the Plan has compared to the amount of money estimated to be needed to pay all the pensions when they fall due, taking into account future investment returns. Q. How is Ladbrokes going to fund the Plan in the future? A. We re absolutely committed to funding the Plan and will continue to make substantial contributions to it into the future. Ladbrokes has already paid a total of 75 million in top up payments into the Plan since LADBROKES PENSION PLAN PAGE 7

8 03 THE PROPOSED CHANGES Q. Could the deficit increase in future? A. Yes, the financial position of the current Plan could worsen over time, even if this proposal goes ahead. The valuation makes a number of assumptions about the future for example about investment returns and how long members will live. If the reality is worse than the assumptions, then there could be a further deficit which would need to be funded by Ladbrokes. Q. Will the Plan still fulfil its financial obligation if the proposed change is implemented? A. Yes the pension earned to date cannot be amended and we are totally committed to fulfilling our obligations. Q. What other options have Ladbrokes looked at? A. The PSG considered a range of options, including increasing Plan member contributions and reducing the level of pension benefits. However, these (and other) options do not remove the risk of cost volatility to the same extent that this proposal does. LADBROKES PENSION PLAN PAGE 8

9 04 WHAT PENSION VOLATILITY IS AND WHY IT S IMPORTANT 4. What pension volatility is and why it s important Q. How has the volatility shown itself in recent history? A. Pension Plan benefits are built up over time based on members pensionable salaries and service. Although the pension building up is predictable, Ladbrokes costs are not. The chart below shows the approximate funding position of the Ladbrokes Pension Plan over the past eight years. 40m 31 Dec Dec Dec Dec Dec Dec Dec Dec Dec 13 20m 0m Surplus (Deficit) ( 20m) (40m) (60m) (80m) (100m) In 2006, the Plan was fully funded thanks to a lump sum payment of 55.5m paid into the Ladbrokes Pension Plan Since then, we have continued to pay contributions to meet the cost of pension benefits being built up in the future as well as paying contributions to try to remove the deficit as it emerges Although funding levels are regularly monitored, every three years the funding position is formally reassessed. When that happens we review and agree new contribution levels. Despite the payments to remove the deficit totalling 75m since 2006, as you can see from the chart, the funding position remains volatile. The way pension funding operates means the funding position may change significantly over a short period, depending upon a wide range of financial and other circumstances. For example, if the valuation date had been in the summer of 2012 the deficit would probably have been around 72m. LADBROKES PENSION PLAN PAGE 9

10 04 WHAT PENSION VOLATILITY IS AND WHY IT S IMPORTANT Whatever the deficit is, members build-up of pensions and pensions in payment do not change. And yet Ladbrokes has to pay off these deficits based on the financial circumstances at the time of the valuation Since 2006, Ladbrokes funding plans excluding the payment of advisor fees and levies payable to pension regulators and authorities is set out in the table below: Valuation cycles (in payment order) Company Deficit Repair Contribution Company Future Service Cost (as % Pensionable Salary) 2006 lump sum 55.5m 2005 (paid from 1 April 2006) 1% Pensionable Salary (c 0.25m pa) 23.5% 2007 (paid from 1 Jan 2009) 1.6m pa (+ 640%) 20.5% (-13%) 2010 (paid from 30 June 2011) 5.3m pa (+ 330%) 22.2% (+8%) Q. Does volatility also impact on the build up of future pension benefits? A. As you can see from the chart above, it does. Q. If this type of pension scheme has always been subject to volatility, why is it important to make the change now? A. Volatility has always been present in this type of pension scheme, however in recent years the drivers underlying volatility have increased. LADBROKES PENSION PLAN PAGE 10

11 04 WHAT PENSION VOLATILITY IS AND WHY IT S IMPORTANT Recent changes Volatility of company pension costs are driven by volatility of financial markets but other risk factors are also important contributors. You can read more about these below: People living longer While this is good news for each of us, it does mean that pensions are paid for longer which means their cost increases. Recent studies into life expectancy show that the pace of medical, technological and societal changes are all improving life expectancy. Life expectancy assumptions must be reviewed more regularly as they have a material impact on funding levels. Changes to pensions legislation There have been many recent, significant, changes to pensions legislation and a general increase in regulation. These changes can, cumulatively, have an impact on the funding level and, in turn, affect the volatility of cost of the Plan in three key ways: Pressure to pay off deficits in quicker timeframes than was originally anticipated Trustees assumptions about the level of investment returns, for example, may have to be reconsidered in the light of new regulatory guidance. New legislation and regulation has guided many Trustees to ask for increasing commitments from the companies responsible for pension schemes. Q. What steps has Ladbrokes taken in the past to try to control volatility? A. In the past, we have taken steps to try to manage a range of different Plan issues, including volatility. Two recent examples of this that have affected Plan members are: 1) Change elements of benefit design (in 2002 / 2003) 2) Closing the Plan to new entrants in 2007 LADBROKES PENSION PLAN PAGE 11

12 04 WHAT PENSION VOLATILITY IS AND WHY IT S IMPORTANT Importantly, the recent history of legislative and regulatory change means that Ladbrokes, like many others, cannot plan any aspect of pension provision with certainty. For example, In the 2014 Budget and Queen s Speech there were provisions regarding pensions that could fundamentally change UK pensions once again. Q. Are there other reasons for these proposals being made now rather than, say, in 12 months time or 12 months ago? A. In December 2012 the PLC Board approved the Pension Steering Group and its aims, which you ve read about in Section 2. Since then, the PSG has carried out a series of reviews and changes in the UK and overseas to move closer to those aims. The 2013 actuarial valuation is also now well progressed (though not finalised) so this is the first natural opportunity after the Company approved the PSG aims. LADBROKES PENSION PLAN PAGE 12

13 05 ENDING ACTIVE MEMBERSHIP OF THE PLAN 5. Ending active membership of the Plan Q. How much pension will I get from the Plan? A. It is proposed that, from 30 June 2015, you would stop building up a pension in the Ladbrokes Pension Plan. At that point your pension would be worked out using your Pensionable Service and Final Pensionable Salary. This is called a deferred pension and it would be increased between 30 June 2015 and your retirement in line with the Plan rules and legal requirements. In broad terms, these rules aim to protect the value of your Plan pension against future price inflation. Should the proposal go ahead, you would receive a statement from the Plan Administrators showing the amount of deferred pension you had built up. What does ending Plan membership for me? You can get a sense of what ending your plan membership would mean by looking at your 2013 annual benefit statement. You ll find this contains two figures: UNDERSTANDING YOUR POSITION To find out what making the shift from the Plan to the Scheme would mean to you, go to section 9 of this booklet and the examples given on p14-17 of the Your Pension booklet. A figure based on what would have happened if you had stopped building up a pension in the Plan in June A second figure that assumed you remained in the Plan until your Plan Normal Retirement Date. By looking at these two figures you can get a good sense of the difference in amount of pension expected from the Plan and then using the tools outlined in p22-24, you can understand the likely Scheme pension you may receive. Combined, this allows you to estimate the total pension you may receive in retirement. Q. Would there be any changes to the salary multiple lump sum death in service benefit for colleagues in the Plan under the proposal? A. No. The Death in Service Lump Sum benefit pays a lump sum equal to 2-4 times (depending on your grade) of your annual basic earnings from a separate Life Assurance Only Trust. LADBROKES PENSION PLAN PAGE 13

14 05 ENDING ACTIVE MEMBERSHIP OF THE PLAN Q. Would there be any changes to the pension that my dependant would receive in the event of death in service under the new proposal? A. Yes. On death in service the Plan currently provides a pension to your spouse (or civil partner) equal to one half of the pension you expected to receive from the Plan at Normal Retirement Date. Under the proposal, if you die before you start to receive your deferred pension, your spouse (or civil partner) would be entitled to a pension of one half of your deferred pension, including increases, up to the date of death. Q. What are the early retirement reductions? A. Your pension is reduced if you chose to take your pension earlier than your Plan Normal Retirement Date. The reduction factors are calculated in accordance with the Plan Rules. QUICK QUESTIONS Q. Does this proposal affect deferred and pensioner members? A. No Q. Would I be able to retire early from the Plan? A. Yes, subject to the Plan Rules. Q. If I draw my pension early from the Plan, can I carry on working at Ladbrokes and paying into the Scheme? A. Yes Q. Will I still be able to apply for ill health early retirement from the Plan? A. Yes LADBROKES PENSION PLAN PAGE 14

15 06 6. MORE ABOUT THE CONSULTATION PROCESS More about the consultation process Q. Why does my contract need to be changed? What will the change mean? A. The only way we can make the proposed changes to your pension provision is by changing your employment contract. By changing your contract, your rights under the Plan will be varied. If this proposal goes ahead, we will ask you to agree to change your contract of employment. Under the amended contract you will not be entitled to accrue further benefits in the Ladbrokes Pension Plan and the pension you have earned based on service to 30 June 2015 will be based on your Final Pensionable Salary at 30 June 2015 and not your salary when you retire. We want you to feel comfortable with what s being proposed so you ll have information and plenty of opportunities to ask questions before you make a decision. If, following the consultation, we go ahead with the proposal, you will receive a letter that sets out the new wording that will be in your contract. You will be asked to sign and return a copy of this letter confirming your agreement. Of course some colleagues may not agree to change their contract of employment. If that happens we would move on to individual consultations a meeting with each individual colleague to fully understand their concerns to the proposal. Ultimately, if the proposal goes ahead and no agreement is reached, it may be necessary for us to terminate the current contracts of employment of those who do not agree to change their contract of employment. However, if this is the case, those individuals would immediately be offered a new contract based on the new terms and conditions including the new pension terms. LADBROKES PENSION PLAN PAGE 15

16 06 MORE ABOUT THE CONSULTATION PROCESS Q. What is collective consultation and how long will it last? A. Collective consultation is the process we use to share our proposals for the changes to pension arrangements. We will be holding consultation meetings with employee representatives through a series of group consultation meetings. YOUR EMPLOYEE REPRESENTATIVE If you are affected by these changes then you will soon have the opportunity to discuss them with your employee representative. This representative will listen to your views and represent them at the consultation meetings. We will arrange the election process so look out for more information coming soon Q. How will I know what is happening at consultation meetings? A. Your employee representative will receive minutes including all the Q&As of every meeting. We will be supporting all colleague representatives to update the colleagues they represent after each meeting, so make sure you know who your rep and how that s going to happen in area. LADBROKES PENSION PLAN PAGE 16

17 07 HOW THE LADBROKES PENSION SCHEME OPERATES 7. How the Ladbrokes Pension Scheme operates Q. How does a defined contribution plan work? A. The Scheme allows you to choose the amount you wish to contribute, how your fund is invested and ultimately the type of retirement benefit that you wish to receive An account would be set up in your name with Legal & General. You and Ladbrokes will pay pension contributions into this account each month to be invested. You would be able to choose how your Retirement Account was invested with a range of fund choices. Your options include shares and other investments such as bonds or cash funds, with the aim of growing the fund over the years before you retire. The value of these investments may go up or down depending on fund performance. Q. How does joining the Ladbrokes Pension Scheme affect my State Second Pension? A. The Ladbrokes Pension Scheme is not contracted out of the State Second Pension, which means you pay ordinary National Insurance contributions when you join the Scheme. This means that you would also start to build up a full entitlement to the State Second Pension in addition to your Scheme benefits. The Ladbrokes Pension Plan is contracted out which means that you do not earn the State Second Pension. Instead a broadly equivalent benefit is provided as part of your Plan pension. In exchange for the Plan providing an element of your State Pension, you (and Ladbrokes) pay lower National Insurance contributions. DID YOU KNOW? Following Government legislation, contracting out will stop in April 2016 for all arrangements like the Plan. This means that from this date onwards, you would pay slightly higher National Insurance contributions even if the Plan were to continue. LADBROKES PENSION PLAN PAGE 17

18 07 HOW THE LADBROKES PENSION SCHEME OPERATES Q. What happens to my Pension Pot if I leave Ladbrokes? A. If you have more than two years pensionable service in the Scheme, you can either leave your funds with the Scheme or transfer them to another registered pension scheme perhaps with a new employer. If the funds remain with the Scheme, the amount in it would continue to move up or down depending on the change in value of your investments. If you have less than two years pensionable service in the Scheme you can either take a refund of your own contributions made, or transfer the full fund value to another registered pension scheme perhaps with a new employer. If you leave your funds with the Scheme, you will continue to receive a personal statement each year that shows you the value of your Retirement Account. The Scheme does not make any charges for transferring your funds. Q. Why is my retirement age 70 in the Scheme rather than the current 65 or 60 (or a mixture of both ages) in the Plan? A. The Scheme s Notional Retirement Age is 70 to reflect the changing State Pension Age. However, you can change this Notional Retirement Age as often as you wish, and choose any age between 55 and 75. Q. How can I take my Scheme retirement funds? A. The 2014 budget announced a very big change in how people can take their pension. From 1 March 2015, you will be able to take all of your retirement fund as a cash lump sum. 25% of this will be tax free, as now, and the remaining value will be taxed at your marginal rate at the time of taking the lump sum. Alternatively, you are able to convert your fund value into a pension. This gives you significantly more freedom to decide how best to take your retirement savings. As set out in page 6 of this document, membership of the Ladbrokes Pension Plan means that at retirement you can choose to take up to 25% of your fund value as tax free cash, but you must take a pension (including automatic inflation proofing, a 5-year guarantee and a contingent spouse s pension) with the balance. LADBROKES PENSION PLAN PAGE 18

19 07 HOW THE LADBROKES PENSION SCHEME OPERATES Planning for the future How much you ll receive on retirement The pension you could receive when you retire would depend on a variety of factors, such as your contributions, the age you choose to retire, future investment performance (net of fund charges) and the cost of purchasing pensions when you retire if you choose to do that. To help you plan, you need to understand what the changes might mean for you. We ve provided a range of examples in the Your Pension brochure for you to consider. However, to understand your personal position, you can use the pension modeller hosted on More information about this is contained in page Q. Would I get a Ladbrokes Pension Scheme statement every year? A. Yes. You would receive an annual statement showing the value of your Retirement Account in the Ladbrokes Pension Scheme. In addition, you would be able to see the value of your Retirement Pension Pot online on Ladbrokes Reward Arena. WANT TO KNOW MORE? Q. Where can I find out more information about the Scheme? A. Full details about the Scheme are held on ladbrokespensionscheme. This includes the Scheme booklet, further information about your investment choices and what your potential benefit outcomes might be. Q. How has the Company decided on the Scheme s contribution structure? A. We re proposing to improve the Ladbrokes Pension Scheme to improve the retirement benefits for members. This is set out on page 7 of the Your Pensions booklet. We ve designed the contribution structure to take into account a range of factors such as: i) Affordability and sustainability for existing and future members, as well as Ladbrokes; ii) National statistics to ensure commercial competitiveness; and, iii) Likely outcomes for members, based on information provided by Department for Work and Pensions LADBROKES PENSION PLAN PAGE 19

20 07 HOW THE LADBROKES PENSION SCHEME OPERATES Q. The Ladbrokes Pension Scheme has the Pension Quality Mark. What is this? A. According to the National Association of Pension Funds, the PQM is a sign that your employer s pension scheme is a good one. [Your employer] value[s] your contribution to the business and it matters to them how you will fund your retirement. We are proud to have been awarded this relevant and independent mark of quality in February 2013 and that the Scheme has been recertified for You can read more information about it here: Q. If Ladbrokes proposal goes ahead, what support would be provided to help colleagues make investment choices in the Scheme? A. Your initial investment will be made into the Scheme s default investment fund. Once your first contribution has been received and invested by Legal & General, they will send you a Membership Certificate. You will then be able to make changes to your Scheme investments should you wish to do so. If you wish to understand more about the options available to you, please visit for more information about: a) The default fund, and how the lifestyle profile operates (in the Scheme Booklet and investment booklets); b) More information about all 12 available funds that you can choose from (in the investment booklets); and, c) What impact a change of investment choice might make (in Pensions Calculator ) to your overall retirement outcome which will assist you with determining what type of investor you may be. More information about this is shown on pages Q. Under Ladbrokes proposal, would colleagues be automatically enrolled into the Scheme? A. Like now, you would automatically be assessed against the government s pension auto enrolment criteria. If you choose to not join the Scheme, you will be auto enrolled at the mandated contribution levels (currently 1% qualifying earnings). However, if you opt in to the Scheme at the higher rate (for example, paying 6% of your Pensionable Salary), you will like now be in a Scheme exceeding pensions auto enrolment requirements and so no changes will need to be made. LADBROKES PENSION PLAN PAGE 20

21 08 WHAT THIS MEANS FOR YOU 8. What this means for you Q. How can I assess what these changes mean to me? A. The examples given in section 4 of Your Pension booklet show a range of possible pension outcomes. However we recognise that each individual s circumstances are different, and each Plan member will wish to understand different aspects of the proposed change. This section sets out the very different ways in which you can consider your own position. One of the key sources of information is provided at As well as Scheme documentation, there is lots of other information (under useful tools ) including a number of powerful modelling tools designed to help you understand all aspects of retirement planning in more detail. Q. How can I work out how much income in retirement I might need? A. There are two methods you could consider. General The first is a general rule of thumb based on research carried out by the Department for Work and Pensions. This sets out some typical income replacement ratios in retirement. The table below sets out the key information, with the link underneath providing the source to the detailed analysis. Pre retirement Earnings (per annum) Adequate income replacement levels (including State Pension) Less than 12,000 80% 12,000 22,400 70% 22,400 32,000 67% 32,000 51,300 60% Over 51,300 50% data/file/254321/framework-analysis-future-pensio-incomes.pdf LADBROKES PENSION PLAN PAGE 21

22 08 Using WHAT THIS MEANS FOR YOU the modelling tools Using the modelling tools available from Legal & General you are able to fine tune your pension options and understand what the implications are of making any changes. Use the link below to access the modelling tools. Retirement Planner (you will need to accept the terms and conditions) Choose modelling tool Specific Q. How can I work out how much income I might need in retirement? A. To help you understand the type of income you may need in retirement, please visit Legal & General s Retirement Planner Budget Tool. This can be found as follows: ladbrokes/useful-tools/ Retirement Planner (you will need to accept the terms and conditions) Target a retirement income Click on the link marked budget tool LADBROKES PENSION PLAN PAGE 22

23 08 Q. How can I work out how much pension I might be able to receive at my chosen retirement age? A. To help you understand the level of income you may receive in retirement, please visit Legal & General s Retirement Planner. This can be found as follows: ladbrokes/useful-tools/ Retirement Planner (you will need to accept the terms and conditions) Target a retirement income This allows you to add in private pension you have from all sources, such as: 1) Private pension(s) you may have built up before joining Ladbrokes (you will need an up to date pension statement to get the most accurate assessment) 2) Ladbrokes Pension Plan (taken from your latest benefit statement provided by the Plan Administrators, Hymans Robertson) 3) Ladbrokes Pension Scheme based on the contributions you may be considering paying, plus the Company s contribution (a reminder of this can be found on Your Pension, page 7). Q. I can afford a specific amount of money to be invested each month how do I know how much this might turn into in retirement? ladbrokes/useful-tools/ A. Like with the target a retirement income tool explained above, you can include your previous pensions here, and change the shape of your retirement income. Retirement Planner (you will need to accept the terms and conditions) Plan Contributions LADBROKES PENSION PLAN PAGE 23

24 08 WHAT THIS MEANS FOR YOU Q. I would like to try to receive a higher pension in retirement how can I achieve this? A. There are a number of ways this can be achieved, including: 1) You can change the pension shape taken at retirement for example, not including inflationary increases or not taking a tax-free lump sum. 2) You can pay more contributions in the Scheme (and, subject to upper limits, receive higher Company contributions) Q. How can I understand what investment risk is, and where I might wish to invest my pension pot? A. The Legal & General Attitude at Risk tool atrtool/ helps you understand what is meant by risk and, by answering 12 simple questions, you will be provided with Legal & General s view on risk. You can use this to help understand the choices you have regarding your investments with the Scheme. More information about your Scheme investment choices is also held here: Document?reference=Q _LadbrokesInvestmentGuide.pdf Q: What other information is there on the Legal & General site? A. There is more information including videos which covers: 1) Cash Family Challenges 2) Financial Education and 3) Pension Calculators, including information about the State Pension LADBROKES PENSION PLAN PAGE 24

25 09 HOW MUCH YOU CAN CONTRIBUTE 9. How much you can contribute Q. How do I know how much I am currently contributing to the Plan? A. This will be set out on your payslip each month. Alternatively you can contact the Plan Administrators on or ladbrokesadmin@hymans.co.uk Typically, colleagues contribute 4.5%, 6.0% or 9.0% of their Pensionable Salary. For the majority, Plan Pensionable Salary is basic salary less the Lower Earnings Limit. For 2014 / 2015 tax year, the Lower Earnings Limit is 5,772 per annum. For example, if your basic salary is 25,000, your Plan Pensionable Salary will be 19,228 per annum, and your contribution and pension would be based on this figure. Q. How would the new proposal change the amount I m paying in each month? A. The Ladbrokes Pension Scheme does not have a Lower Earnings Limit deduction. The table below gives shows you the impact using a colleague whose basic salary is 25,000 per annum. Name of pension arrangement Pensionable Salary Calculation 6% contribution (per annum) 6% contribution (gross per month) Ladbrokes Pension Scheme 25,000 Basic Salary 1, Ladbrokes Pension Plan 19,228 Basic Salary less Lower Earnings Limit 1, Increase If the colleague s percentage contribution (6%) remained the same, the contribution cost would increase by per month. Additionally, the Company s contribution within the Scheme would be based on the higher salary figure. LADBROKES PENSION PLAN PAGE 25

26 09 HOW MUCH YOU CAN CONTRIBUTE Q. Will the tax relief on colleague contributions work in the same way? A. No. The Ladbrokes Pension Scheme operates a relief at source basis. This means that tax relief of 20% is granted immediately (a contribution of 100 would cost only 80). If you don t pay tax, you would benefit by a 20% boost to your personal contributions. If you pay 40% or higher tax, you would need to claim back the difference through your Self Assessment Tax Return form. The Plan s tax relief operates to provide tax relief at colleagues highest rates automatically. Q. Is there an impact on the Annual Allowance? A. The Annual Allowance ( 40,000 for the 2014 / 2015 period) is a limit relating to pension growth and contributions over set periods. For most colleagues, this limit is not going to affect them. However, for some senior colleagues within the Plan, joining the Scheme may result in benefits exceeding the Annual Allowance. If you may be affected, you will be notified separately. LADBROKES PENSION PLAN PAGE 26

27 10 YOUR STATE PENSION ENTITLEMENT 10. State Pensions Basic State Pension and the additional State Second Pension Q. How do I qualify for the Basic State Pension? A. You qualify for a Basic State Pension by working and paying National Insurance contributions. You can find more details at Pensionsandretirementplanning/StatePension/index.htm HOW MUCH IS THE STATE PENSION? Q. How much is the Basic State Pension? A. The full Basic State Pension is currently per person per week for a single person (tax year 2014/15 rate). However, your Basic State Pension also depends on the number of qualifying years that you made National Insurance Contributions. Q. What additional State pension can I build up with the current Plan? A. The Plan is contracted-out of the additional State Second Pension arrangements. This means that if you contribute to the Plan you will not build up State Second Pension benefits. In exchange, you will pay slightly lower National Insurance contributions. Q. What additional State pension could I build up in the proposed Scheme? A. The Scheme is not contracted-out of the additional State Second Pension arrangements, which means that colleagues pay standard National Insurance contributions and build up entitlements to the additional State Second Pension benefits. Q. How much more National Insurance contributions would I have to pay? A. To earn State Second Pension benefits, National Insurance contributions would increase by 1.4% of annual earnings between the Earnings Threshold ( 7,956 provisional for tax year 2014/15) and the Upper Accrual Point ( 40,040 provisional for tax year 2014/15). This additional cost would be incurred regardless of the proposed changes because from 2016 companies will no longer be able to contract out. LADBROKES PENSION PLAN PAGE 27

28 10 YOUR STATE PENSION ENTITLEMENT Q. How much is the additional State Second Pension? A. The State Second Pension is related to earnings, so will vary depending on your individual earnings history. You can receive a forecast of your State Pension, including the State Second Pension, from the Pension Service on or further information is available at Pensionsandretirementplanning/StatePension/index.htm Q. When is my State pension age? A. The State pension age is currently increasing. Between now and 2018, the State pension age will rise to 65 for women. Following this, it will rise again to 68 for both men and women. To find out your State pension age, visit www. pensionsadvisoryservice.org.uk/state-pensions/state-pension-reforms Q. What are the government s current proposals to change the Basic State Pension and the additional State Second Pension? A. In January 2013, the government announced plans to reform the State pension system. Use the link below to understand these plans more fully. state-pension-reforms LADBROKES PENSION PLAN PAGE 28

29 11 NEXT STEPS 11. Next steps We know that there is a lot of information for you to now think about. Here s a checklist to help you get your thoughts in order. Step 1: Understanding the proposals Read the Your Pension brochure Look for updates and more information Understand your personal position Contact pensions@ladbrokes.co.uk if you have a question Step 2: Getting involved Make sure you engage with your employee representative who will engage meaningfully in the consultation process Check how to get in touch with your employee representative Keep up to date with the consultation discussions Contact your employee representative to ask questions and share views Step 3: Reviewing employee feedback Get ready to receive and discuss feedback at the end of the consultation. Step 4: Taking control Consider the proposed new terms Subject to the consultation process and implementation of the proposal, agree a change in your employment contract, sign the contract and send it back Decide how much you want to save and look at the options for different investments LADBROKES PENSION PLAN PAGE 29

30 12 WHO TO CONTACT WHO TO CONTACT Ladbrokes Pension Plan Team LADBROKES PENSION PLAN PAGE 30