POPULAR REPORT Chairman s introduction. Budget changes. State pension age. AVC review. Member Nominated Directors. Financial overview

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1 Chairman s introduction Budget changes State pension age AVC review Member Nominated Directors POPULAR REPORT 2013 For members of the DASUK Pension Plan Financial overview

2 Chairman s introduction Welcome to the latest edition of the Delphi Automotive Systems (UK) Pension Plan Annual Popular Report, in which we tell you about developments in the Delphi Automotive Systems (UK) Pension Plan (the Plan ) during In this report we have provided an update on the following: Budget changes State pension age AVC review Member Nominated Directors The purpose of the Popular Report is to not only include an update on the facts and figures, but also to keep you informed of key developments and provide you with reassurance that the Plan is being well managed. We welcome any feedback you might have and, in particular, if you have any suggestions for future articles, please let us know. Tony Horne Chairman 2

3 Budget changes In the March 2014 Budget, the Chancellor announced proposals to introduce greater flexibility over how people with a Defined Contribution ( DC ) pension plan can take their retirement benefits. Some of the changes were effective from March 2014 and others will become effective from April As your main scheme benefits are Defined Benefit ( DB ), you will not be affected, but there could be additional flexibility for AVCs. The Company and Trustees will review the new legislation and update you on any changes. The State pension age will increase to 67 in 2028 and at the same time the Government proposes to increase the earliest age members can access their occupational pension to 57. In future, the minimum pension age will rise in line with the State pension age, to maintain a ten-year differential. The Government announced that it was consulting on ceasing transfers out of DB pension schemes to DC pension schemes. Following the consultation it was decided that transfers should be allowed to continue but the member must take independent financial advice if their pension benefits are valued above 30,000. Trustees will be required to check that advice has been taken before the transfer can take place. Currently, your right to a statutory transfer value is up to one year before normal retirement age. From April 2015, subject to the Company and Trustee adopting the new legislation, members will be allowed to transfer out of schemes right up to the point of retirement. Small lump sums pensions with a cash value of 10,000 or less can be taken as a one-off lump sum, with 25% tax-free and the remainder taxable at your normal tax rate. 3

4 State pension age When you re working, you pay National Insurance contributions and in turn receive credits towards your State pension when you reach the relevant age. The amount of basic State pension you will receive depends on how many years you have paid National Insurance contributions. Currently, to qualify for the full basic State pension contributions are required for 30 years. In order to get the new full State pension you will require 35 years of contributions if you do not have a National Insurance record prior to 6 April The State pension age has been undergoing changes since April For women, this will now reach 65 by The age for men and women will rise from 66 to 67 between 2024 and The Government intends to introduce an automatic review of the State pension age every five years, with the first review planned for Birth Date Between 6 December 1953 and 5 October 1954 From 6 October April 1968 Age 66 Between 6 April 1960 and 5 March 1961 From 6 March April 1977 Age 67 Between 6 April 1977 and 5 April 1978 From 6 April 1978 onwards Age 68 State pension age (Men and Women) Phased in between age 65 and 66 Phased in between age 66 and 67 Phased in between age 67 and 68 People born after 5 April 1960 and before 6 April 1968: State pension age is already 66. People born after 5 April 1969 and before 6 April 1977: State pension age is already 67. To work out your exact State pension age, you can use the State pension age calculator at: 4

5 AVC review The Trustees are responsible for monitoring the performance of the Plan s investments and this includes the AVC arrangements. The Trustees recently engaged Towers Watson to conduct a review of the current AVC arrangements to ensure they remain suitable for members. Currently the AVC arrangement comprises eight different funds, seven with Fidelity and a With-Profits fund with Prudential. No changes are being made to the Prudential With-Profits fund for past or future contributions. The funds being closed to future contributions are: Fund Charge* Fidelity Moneybuilder Global 2.33% Fidelity Global Focus 1.73% Fidelity UK Growth 1.70% Fidelity European Opportunities 1.72% What is changing? The choice of funds available from Fidelity, along with the Lifestyle option. Four of the funds currently offered will be closed to future contributions from 1 December The remaining three funds will continue to accept contributions and four new funds will be offered plus a new Lifestyle strategy. No further contributions will be paid into the old Lifestyle strategy, and members will have the option to switch past contributions into the new Lifestyle strategy. These changes are mainly being made to provide a broader range of assets to invest in and to lower fund charges. 5

6 AVC review The new fund range for future contributions will be: Fund Asset class Management style Charge Fidelity Gross Accumulating Cash Money markets Active 0.40% Fidelity Long Bond Long-dated bonds Active 0.33% Fidelity BlackRock Over 5 years Index-Linked Gilt Index-linked gilts Passive 0.45% Fidelity Threadneedle Property Commercial property Active 1.27% Fidelity BlackRock Global Equity 50/50 Global equities Passive 0.65% Fidelity BlackRock World (ex-uk) Equity Non-UK equities Passive 0.65% Fidelity Moneybuilder UK Index UK equities Passive 0.30% Under the old Lifestyle strategy, contributions were initially invested primarily in the Fidelity Moneybuilder Global fund. This fund is being closed to future contributions partly because members investing in this fund are subject to high charges. Under the new Lifestyle strategy, contributions are initially invested in the Fidelity BlackRock World (ex-uk) Equity fund and the Fidelity Moneybuilder UK Index fund, which are subject to lower charges. 6

7 Member Nominated Directors The Plan is run by a Trustee Company, Delphi Automotive Systems (UK) Pension Trustees Limited. The Board of the Trustee Company consists of five directors, two of whom are nominated by the members (Member Nominated Directors or MNDs) and three of whom are appointed by the Company. Until 30 September the directors were: Company Nominated Trustee Directors Nick Coleman Marilyn Bradshaw Tony Humphreys Member Nominated Trustee Directors Tony Horne (Chairman) Stan Chadwick (Pensioner) The term of office for Tony Horne expired on 30 September 2014 and employee members and pensioners were given the opportunity to apply to become an MND. No applications were received by the closing date. Therefore Mr Horne is appointed for another term of office. 7

8 Financial overview Investment Spread of investments as at 31 December 2013: Matching portfolio this consists of investments in nominal gilts, index-linked gilts and SWAPs in line with the liability hedging strategy. Equities investments in company shares listed on the major stock exchanges of countries in Europe, Asia and America, and in some developing economies in Europe, Asia and South America. Property investment in pooled funds of commercial properties that are leased to businesses as offices, logistics and retail across UK and Europe. Bonds these are investments in loans issued by governments and companies around the world. Hedge Funds investment partnerships that follow a wide range of sophisticated investment strategies with the objective of achieving a positive return in all market conditions. Commodities this consists of investment in an index which represents exposure to physical assets such as gold, oil and wheat. 10% : Investment grade credit 7.5% : Emerging market bonds 7.5% : High yield credit 29% : Developed markets equity 4% : Property 3% : Commodities 9% : Hedge funds 20% : Matching Portfolio 10% : Emerging markets equity 8

9 Financial overview Membership numbers Total Plan membership decreased by nine during the year, with pensioner numbers rising by 25 and actives falling by two. Deferred members decreased by 32 over the period. As at December 2013: Income & expenditure Fund Receipts 000 Employers contributions 2,558 Members contributions 14 Transfers in - Bank Interest 3 Other income 2 Total 2, Pensioners Deferred members Active members Total Fund Payments 000 Pensions 7,007 Lump Sums 243 Death Benefits 1 Refunds 14 Transfers 230 Professional/Admin Fees 664 VAT to Custom & Excise - Conts. Equiv. Premiums - Total Payments 8,159 Please note these figures may be subject to rounding 9

10 Financial overview Net assets of the Plan 000 At 1 January ,396 Net withdrawals from dealing with members 5,711 Net returns on investments 6,657 Fund value 31 December ,342 10

11 Financial overview Investment overview 2013 again started on a hopeful note following strong investment returns as the world recovered from recession following the financial crisis. Positive economic data in the UK as well as from leading economies such as the US helped improve investor sentiment, whilst policy actions from global central banks indicated their continued commitment to support the recovery. Stocks rose for nine of the 12 months, but concerns about tighter monetary policy, particularly in the US, dampened investor sentiment in June, August and November. The Liberal Democratic Party (LDP) of Japan s victory in the Lower House elections in late 2012 marked a key turning point for the Japanese market. The reflationary policies of the new Shinzo Abe government fuelled a sharp correction in the Yen and set in motion a pro-cyclical rally. Aggressive easing measures from the Bank of Japan (BoJ) exceeded all expectations, further strengthening the tailwind for Japanese stocks. The search for income continued as interest rates remained low around the world. This lead to strong gains from property, high yield bonds and in many cases equities with attractive dividend rates. Investors withdrew from riskier assets in the run-up to the Fed s decision to scale back its stimulus programme, leading to a significant fall in share prices in the middle of the year and declines in both emerging market equities and bonds. Global long-term interest rates also rose after the Fed s announcement leading to falling gilt and liability values. Towards the year-end, and following a strong asset rally in the fourth quarter, investors started to become more cautious. They worried about the end of QE in the US, declining inflation in Europe and slowing growth in China, which led to a gradual reassessment of asset values. The Plan s performance Total rates of return for periods ended 31/12/2013 (annualised) One year % Three years % Five years % Plan returns Benchmark Out/(under)- performance (1.02) (0.46) (0.20) Total rates of return for periods ended 31/12/2012 (annualised) One year % Three years % Five years % Plan returns Benchmark Out/(under)- performance (0.84) 11

12 Contact us The Pensions Department Griffin House Osborne Road Luton LU1 3YT IMPORTANT Completion of a nomination form will greatly assist the Trustees in the payment of your lump sum benefit in the event that you die in service. Forms are available for download from the Pension Website at: