MITCHELLS & BUTLERS PENSION PLAN

Transcription

1 Question & Answer Guide MITCHELLS & BUTLERS PENSION PLAN Active Member Information on Changes Effective from 1 April 2007 Q1 A1 What changes are being made to the future contributions and accrual rates in the Pension Plan? The following changes are being made that will affect the future contribution and accrual rates of active (i.e. contributing) members of the Pension Plan: a) From 1 April 2007, with individual member consent, member contributions will increase from 5% to 6% of Pensionable Salary. b) A member who does not consent to the 1% increase in contributions can maintain their current contribution level at 5% of Pensionable Salary. Such members will receive reduced benefits for service from 1 April Q2 A2 What if I can t afford or don t want to pay higher contributions? The Company anticipates that most members will choose to pay the higher level of contributions in order to continue to earn benefits at the current level. However for those members who cannot afford or choose not to pay the higher level of contributions a new lower accrual rate will apply for future benefits. The benefits accrued in the future will be about 25% lower than the current level of benefits. These lower benefits will only apply to future service from 1 April Accrual in respect of service before that date will be unchanged. The enclosed benefits summary compares the contributions and benefits under the current accrual rate with those which would accrue in future. Q3 A3 Q4 A4 What do I need to do now? Once you have considered the choices available to you, you must complete and sign the enclosed Option Form and return it to the Mitchells & Butlers Pension Department, whose details are on the Form, in the envelope provided. If you require acknowledgement that your Option Form has been received, please complete the enclosed card, affix a stamp, and return it with your Option Form. Can I change my mind in future? Yes. If you wish to change your contribution rate you can do so by contacting the Plan Administrator whose contact details are set out in Question 12. Note that it is our intention that members will initially be permitted to make a maximum of two contribution rate changes in each calendar year this will remain under review and any change will be notified to you. January 2007 Page 1 of 6

2 Q5 A5 What will happen if I do not complete and return the Option Form? If the Mitchells & Butlers Pension Department does not receive a completed and signed Option Form from you by 28 February 2007 you will continue to contribute 5% of your Pensionable Salary and your benefits in respect of future service from 1 April 2007 will be about 25% lower than current. If you wish to continue to earn pension benefits at your current accrual rate from 1 April 2007 you must select Option 1 on the Option Form and return the signed form to the Mitchells & Butlers Pension Department by 28 February Q6 A6 Why is the Company making these changes? As explained in our letter of 12 October 2006 the cost of providing final salary pensions has increased substantially over recent years. The Company last reviewed member contributions in April Since that time there has been continued improvement in life expectancy, and interest rates have remained low. Both of these factors increase the cost of providing final salary pensions. Also the Government has imposed an additional cost on all final salary funds through the establishment of the Pension Protection Fund ( PPF ), which provides some protection for members of pension funds which are unable to meet their obligations to their members. MAB discharges this payment on behalf of the plans, and has now contributed in excess of 435,000 to the PPF since its inception. MAB wishes to maintain the final salary plan for its members. However, the Company has concluded that it is appropriate that members make some additional contribution to the increased costs. MAB has made additional 1 contributions to the two Plans totalling million since de-merger in April 2003, including 40 million in October 2006 and has committed to further additional contributions of 20 million in the next financial year. Q7 A7 Q8 A8 Q9 A9 Q10 Are there any plans to close the final salary plan to existing members? As set out in A6 above the Company wishes to maintain final salary benefits for existing members. There are currently no plans to close the Pension Plan to existing members. If I maintain my current contribution level, will I still have 4 times salary life assurance? Yes. These changes do not alter the level of lump sum life assurance cover provided under the Plan. Will my choice affect any other Plan benefits? Yes. The accrual rate you choose will be used to calculate benefits based on future service including incapacity pensions and spouse s pension for death in service. Are there any changes to DC Choice? 1 Additional contributions are amounts paid by the company in excess of the normal contributions required in respect of future service. January 2007 Page 2 of 6

3 A10 No. There are no changes to employer or employee contributions, or benefits in DC Choice. Q11 Where can I get advice on what to do? A11 Neither the Company nor the Plan Administrator is authorised to provide financial advice. Nothing in this briefing pack is intended to be financial advice. If you are unsure about what you should do you should contact an Independent Financial Advisor (IFA). IFA details are available on or through the IFA Promotion Helpline ( ). Please note that an IFA may charge a fee for any advice and that payment of such charges will be solely your responsibility. Q12 Who can I contact if I have any further questions? A12 You can either contact the Mitchells & Butlers Pension Department on /5767 or Mercers, the Plan Administrator, who will be pleased to answer any additional questions. Mercers can be contacted on their helpline ( ) or by to mbplc@mercer.com. You can also write to Mercer. Their address is Mitchells & Butlers Pensions Mercer Human Resource Consulting Stratford Court Cranmore Boulevard Solihull, West Midlands B90 4QT Note: This question and answer document is intended as a summary of the changes effective from 1 April The Pension Plan rules and any relevant legislation will take precedence over any information contained in this document. January 2007 Page 3 of 6

4 Benefits Summary Mitchells & Butlers Pension Plan ( the Plan ) Contribution and Benefit Changes Examples of the extra annual cost to members of the proposed 1% increase in contributions before tax are shown below. Annual salary Annual cost of additional 1% contributions* Weekly gross cost of additional 1% contributions* Weekly net cost 10, , , ** 60, ** *Pension contributions are subject to tax relief. Assuming basic rate tax. **Assuming higher rate tax. Making this additional 1% contribution maintains your current accrual rate. January 2007 Page 4 of 6

5 Examples of the potential impact on pension of the different accrual rates for members whose current accrual rate is 1/60 th are shown in the tables below. The examples are based on 3 members in the Plan aged 60, 55 and 50 respectively. Each member s situation will be different and you may wish to take independent financial advice when considering the impact on your own pension. Employee A (aged 60) Employee B (aged 55) Employee C (aged 50) Final Annual Earnings 25,000 25,000 25,000 Pension accrued to 1 April Service from 1 April 2007 to normal retirement date (age 65). 6,250 per year 6,250 per year 6,250 per year 5 years 10 years 15 years Future Accrual at 1/80 th (Contribution rate remains unchanged at 5% of Annual Earnings) Annual Gross Pension calculated on 1/80 th accrual rate. (Calculated as follows: years to normal retirement date divided by accrual rate, multiplied by Final Annual Earnings). 6, x 25,000 = 6, , = 7, per year 6, = 6, ,125 = 9, per year 6, = 6, , = 10, per year Future Accrual at 1/60 th (Contribution rate increased by 1% to 6% of Annual Earnings) Annual Gross Pension calculated on 1/60 th accrual rate. (Calculated as follows: years to normal retirement date divided by accrual rate, multiplied by Final Annual Earnings). 6, x 25,000 = 6, , = 8, per year 6, = 6, , =10, per year 6, = 6, , = 12,500 per year Additional gross contributions to age 65 to maintain 1/60 th accrual rate (over a 5% contribution and 1/80 th accrual rate) 1,250 (5yrs x 250 per year) 2,500 (10yrs x 250 per year) 3,750 (15yrs x 250 per year) Difference in annual pension from maintaining current accrual and increasing contribution rates per year (8, ,812.50) 1, per year (10, ,375.00) 1, per year (12,500 10,937.50) January 2007 Page 5 of 6

6 Thus for example moving to a 6% contribution rate to provide continued 1/60 th accrual will cost Employee B a total of 2,500 before tax over his / her remaining 10 years service, but will increase his / her pension before tax by at least 1, each year once the pension starts to be paid. As a guide you may wish to assess the potential impact of the accrual rates on your pension built up after 1 April 2007 by completing the pro forma below. Your Annual Earnings 2 (a) Service from 1 April 2007 to age 65 years (b) Potential pension from 1 April 2007 to age 65 if contribution rate maintained at 5% (b) years divided by future accrual rate (e.g. 80ths) multiplied by (a) Annual Earnings = Potential pension from 1 April 2007 to age 65 if contribution rate increased to 6% (b) years divided by current accrual rate (e.g. 60ths) multiplied by (a) Annual Earnings = 2 Your final benefits will depend on your Final Annual Earnings at the date you retire, leave the Plan or die (whichever occurs first) and is unlikely to be your current Annual Earnings. January 2007 Page 6 of 6