Spirit for Life. May 2015 SPIRIT FOR LIFE

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1 SPIRIT FOR LIFE

2 REDISCOVER YOUR SPIRIT FOR LIFE Welcome to the latest issue of, where we help you to learn more about what you can do to improve your pension. 2 The last year has been one of significant change for the world of pensions, not least because of the 2014 Budget Update. Thanks to this, you have much more freedom in how you can take your income in retirement. We ll cover this and what it means for you in more detail on page 4. You can also find out more about other pension news on page 3. Imitation is the sincerest form of flattery You may have seen in the news that the Government has launched a new pension advice service for members of defined contribution pension schemes who are nearing retirement, by the name of Pension Wise. As you know, this is very similar to the name of our Scheme newsletter: B~Pensionswise. To avoid any confusion to you, we have renamed our newsletter. We hope you like it! TELL US WHAT YOU THINK We hope you enjoy this issue of. If you have any comments or feedback: us at: Bacardi-martini@hymans.co.uk call our Scheme Administrators on: IN THIS ISSUE

3 IN THE NEWS PENSION SCAMS PENSION SCAMS BE AWARE OF THE CONSEQUENCES There have been a number of reports of often unscrupulous operators encouraging members of pension schemes to access their pension assets before they reach age 55 (currently the minimum age at which someone can take their pension assets). However, if you choose to release money from your pension before you re age 55, you face losing up to 70% of your money back to HMRC. Please remember to be cautious if you are approached by a company or individual offering you a chance to get a loan, saving advance or cash back from your pension, or to access your pension early. You can read more about pension liberation on the Pensions Regulator s website at STATE PENSION AGE TO RISE EVEN FASTER THAN PLANNED In 2013, the Chancellor announced that the State Pension Age would rise even faster than previously suggested. Initially it was planned that the State Pension Age would rise to 68 between 2044 and 2046, but that has now been brought forward to some point in the 2030s about 10 years earlier. This means that many members in their mid-to-late 40s will have to wait longer to receive their State Pension. ARE YOU A HIGH EARNER? There are some tax rules around pensions savings that generally only affect higher earners. While these have not changed recently, we thought it would be useful to remind you of the tax limits that apply to members of pension schemes at present. Annual allowance this is the value by which your pension can grow each year in the LGPS and still receive tax relief. Its rate is currently set at 40,000. Lifetime allowance this is a limit on the total value of pension benefits that you can build up tax free during your working lifetime. If you exceed the lifetime allowance you would face a tax charge on the value of the excess benefits. Currently the value of the lifetime allowance is set at 1.25m. 3

4 A TOAST TO FREEDOM NEW FLEXIBILITY ON PENSIONS SETS YOUR MONEY FREE You ll have undoubtedly seen in the news over the past year that there have been some pretty big changes to how you can take your income at retirement following the 2014 Budget Update, particularly as most of the changes impact defined contribution schemes like ours. In short, these changes mean more freedom for you to take your retirement income in a way that suits you. So Carpe Diem seize the day and take control of your pension. YOUR SCHEME As the Scheme is a defined contribution one, both you and the Company contribute every month to your retirement account. The Government also helps you save by providing tax relief on your contributions. To help your savings grow, you select where to invest your account from a range of investment options. THE PENSION REVOLUTION Most of the new flexibilities direclty affect you, and the majority of these new changes relate to how you can choose to take your income in retirement: You don t have to buy an annuity (this is a regular guaranteed income from an insurance company payable until you die). You can draw an income from your Retirement Account as you like - there are no limits. You can take your entire Retirement Account as cash (regardless of its value). You can receive free, impartial guidance at the point of retirement to help you decide what to do. One of the biggest differences will be that you can take all of your retirement account as a cash lump sum. The first 25% will be tax-free, with the remaining balance taxed at the highest rate of income tax you pay. Remember, if you take the cash option you will need to ensure that you have other sources of income to live on when you retire. The State Pension will be around 151 a week from April 2016 if you qualify for the full amount. 4

5 A TOAST TO FREEDOM SO WHAT NOW? You can request further information about your benefits in the Defined Contribution section, about transferring those benefits and the options available to you under the Scheme by contacting the Scheme Administrator using the details on the back page. This information may help you to decide what you do with your benefits. You can find an adviser in your area if you would like more help at You will be responsible for paying any fees associated with this advice. Information can also be found online at Don t forget to bear in mind your own personal tax and financial situation before making any final decisions. ACCESS THE GOVERNMENT S FREE AND IMPARTIAL ADVICE SERVICE As of April 2015 you have more options on what you can do with your pension savings. We recommend that you obtain guidance or advice to help you with your decision. To help you understand your options in relation to your retirement savings, the Government will provide you with free, impartial guidance through its new service, Pension Wise This is being provided by the Citizens Advice Bureau and The Pensions Advisory Service. This guidance will be tailored to you, but it won t make any recommendations about specific products. Please note that the Government s Pension Wise service is completely separate to updates. Pensions guidance from the Government s Pension Wise service can be accessed online at by phone or face-to-face. For further details of this service, see the Pension Wise website, phone the call centre ( ) or visit your local Citizens Advice Bureau. To book a phone or face-to-face appointment, call You should access the guidance available from the Government s Pension Wise service, and you should also consider taking independent advice to help you decide which option is most suitable for you. To learn about finding an independent financial adviser, visit en/articles/choosing-a-financial-adviser CHANGES TO YOUR PENSION COMING SOON! We re making some changes to the Scheme s investment options, to allow you to choose a new Lifestyle option that matches how you intend to take your Retirement Account. At the moment the Lifestyle option is set up to target an annuity when you retire. But following the changes, many of you may prefer to take the value of your Retirement Account as cash. So we re looking to make the option a better fit, with what we think most of you will do. Watch this space for more information we ll be writing to you to let you know more soon. 5

6 ONE LEGENDARY PENSION, THREE CLASSIC INGREDIENTS 6 PLANNING FOR RETIREMENT ONE LEGENDARY PENSION, THREE CLASSIC INGREDIENTS QUICK QUIZ Fact or fiction? There are three key things to think about when you re planning for retirement just as Bacardi, cola and lime make up a perfect Cuba Libra. Q1. The current average life expectancy But do you know what they are? This quick quiz will help you to understand in the UK is 80 for men and 82 for what you need to think about when planning when to retire, how much women. you ll need, and how you may need to spend your money. Q2. It costs 10,000 for the average person to cover their basic costs of living each year when they retire. Fact Fiction Q3. The Government will cover the costs of long-term care in retirement. Answers on Page 7

7 ONE LEGENDARY PENSION, THREE CLASSIC INGREDIENTS 7 ANSWERS Q1. Answer: Fiction! The current average life expectancy for men is 87.5 years, while for women it s 90.2 years. So the good news is we re living longer than we think on average, men underestimate their life expectancy by five years, and women by nearly eight years. This has implications for how you choose to take your retirement income an annuity will offer you a guaranteed income for life, but you may prefer the freedom that income drawdown options offers. It s important to make sure that you manage your money so that it lasts throughout the whole of your retirement. Q2. Answer: Fact! In the UK, the average income required to cover the basic costs of living (e.g. your accommodation, groceries and utilities) is currently 10,000. Naturally how much money you think you ll need to live on varies from person to person, dependent largely on your current level of income. Do you expect that you ll need more than this or less? How much more would you want on top of this to cover extra expenses, like holidays or taking care of your family? It s important to bear in mind that you ll receive the State Pension, which currently stands at about a week (just 5,928 a year). REMEMBER THAT THE COST OF LIVING INCREASES EACH YEAR IN LINE WITH INFLATION, SO YOU NEED TO MAKE SURE YOUR RETIREMENT INCOME CAN KEEP UP. Back in the 1980s, a glass of Bacardi and coke cost 1, but now it could cost around 5! Q3. Answer: Both! Most people expect that the cost of care will be met by a combination of the Government and their families. Government support in this area is means tested which means that many people won t be eligible for this and will have to meet their own care costs. In fact, if you have more than 126,000 in assets (including the value of your home), you re unlikely to be eligible for any Government support at all. It s important that you try to save as much as you can, in case you need long-term care in the future. HOW DID YOU DO? If you think that any one of these points apply to you, or you were surprised by any of the answers, why not study up on pensions using the handy tools available on our website Alternatively you may wish to seek financial advice. You can find an adviser near you by visiting but please bear in mind that you will be responsible for paying any costs for this advice. You can find more general information about almost anything relating to money at and at the websites featured on page 11. WHERE ARE THESE FIGURES FROM? The statistics used in this article have been taken from a paper entitled Reality Cheque, produced by Club Vita. Club Vita are experts in retirement data analysis and life expectancies.

8 SAVING FOR RETIREMENT HOW MUCH WILL YOU NEED? The Scheme provides you with a valuable way to save for retirement. All new employees are automatically enrolled into the Scheme when they join to ensure they benefit immediately from the Company s contributions. Yet while the Scheme provides you with an important benefit, the contribution rate that you benefit from on joining may not be enough to support the life you want when you retire. It s important to spend some time thinking about how much income you may need in retirement, and how you might achieve that. A RECENT STUDY SHOWS THAT 80% OF PEOPLE UNDERESTIMATE HOW LONG THEY RE LIKELY TO LIVE FOR BY 5 TO 10 YEARS. HOW MUCH IS ENOUGH? Your retirement is in your hands what you might need Pensions can seem confusing and hard to plan for. But it s worth taking some time to think about your future and how much you re going to need. A recent study shows that 80% of people underestimate how long they re likely to live for by 5 to 10 years. So you need to ensure you have the money to support yourself through your whole retirement. After all, we often hear in the news that we re living longer, healthier and more active lives we might as well enjoy them! If you can t picture how much you ll need, the Department for Work & Pensions (DWP) has set out a guide for how much of your working life income you might need to cover your costs when you stop working: Your income at work (before retirement) How much of this income could you need in retirement? Less than 12,200 80% Up to 9,760 What this means in terms 12,201 to 22,400 70% 8,540 to 15,680 22,401 to 32,000 67% 15,010 to 21,440 32,001 to 51,300 60% 19,200 to 30,780 51,301 to 75,000 50% 25,650 to 37,500 8 * Remember that you could get 7,717 in retirement from the new flat-rate State Pension. This is our estimate, and you can calculate a more accurate picture at To help you to achieve an income at retirement that fits with what you may need, you can pay more in and you should also check you re happy with where your funds are invested.

9 SAVING FOR RETIREMENT INCREASING YOUR CONTRIBUTIONS As an active member of the Scheme, you re already saving for your long-term future, as Bacardi makes generous contributions to your pension based on your age. However, you still need to nurture your pension, to make sure it lets you live the life you want when you finish work. You are not required to make any contributions to the Scheme, but any contributions you do make will benefit from tax relief so they will go a long way to give you a healthier retirement account. DID YOU KNOW THAT FOR A REDUCTION IN PAY OF 120 A MONTH, A TOTAL OF 150 COULD BE CREDITED TO YOUR PENSION ACCOUNT? DID YOU KNOW? Some 20% of our members are already paying Additional Voluntary Contributions (AVCs) to top up their pension, and there was a 27% increase in the amount members were paying in last year. So if you aren t already paying AVCs, are you missing out? Saving into your pension could be cheaper than you think Did you know that for a reduction in pay of 120 a month, a total of 150 could be credited to your pension account? This is how it could happen: If you earned 36,000 a year, and paid 150 a month into your pension (5% of your salary). If you re a basic rate tax payer, 20% of this contribution ( 30) is made up of tax relief. So, although 150 is credited to your member account, your take home pay is reduced by just 120. So why not start to top up your pension today? If you would like to start paying extra contributions, you can complete the form here. 9

10 SAVING FOR RETIREMENT INVESTING IN THE FUTURE Your choice of investments is vital, because the funds you choose can help your pension account grow in a sustainable way. Bacardi gives you a direct say in where your money is invested, so you can choose funds that are right for you. You can choose the default Lifestyle option, or a range of Self Select funds. To help your pension account to grow, you should keep your choices under review to make sure they continue to be appropriate for your needs. You should also make sure that you give your investments enough time to make a difference to the value of your pension account by starting to save early. FIND THE RIGHT ASSETS MIX Each of our funds invests in one or more asset class, and each asset class has a different level of risk and return associated with it. You can build the right mix for you... The drink sizes in the glasses below indicate the level of risk (in the short term) and probability of high investment returns (in the long term). For example, the full equities glass shows a high level of expected risk and a high level of expected return. How full do you want your glass to be? Read our investment guide for details of the choices that you have. 10 LESS RETURN MORE RETURN Prudential AVC Account (AVC Fund only) Cash Fund Index - Linked Gilts Fund (Over 5 years) Fixed interest Gilts Fund (over 15 years) Corporate Bond Fund Diversified Growth Fund Property Fund Overseas Equity Fund UK Equity Fund Global Equity Fund LESS RISK MORE RISK REVIEW YOUR PERFORMANCE To help you keep track of the performance of your funds, you can find out up to date investment performance figures from our investment provider, BlackRock online. STARTING EARLIER COULD HELP YOU SAVE MORE If you start saving earlier, your pension account has more opportunity to benefit from your investment returns. So it s better to start saving early and start paying in regular amounts, than to leave it too late and pay in more to try and catch up. For more information on how you can benefit from starting to save earlier in life, please refer to the Scheme booklet on our website.

11 INNOVATION TO INSPIRE LIFE NEVER STANDS STILL At Bacardi, we re constantly innovating with the launch of our first dark and spiced rums earlier this year. Life never stands still, so we all need to keep planning for the future. With that in mind, to help spark your thinking towards your pension planning, here are a number of tools that can help you. YOUR PENSION TOOL KIT To help to revolutionise your pension, you ll need the right tools for the job. That s why we ve made the following tools easily accessible to you on our HELP FROM ELSEWHERE There s also a wealth of other information online to help you plan for the future: your one stop shop for your pension plan. Use it to check your personal details and investment choices, and if your details have changed, you can update them here. if you need access to a financial adviser. There may be a charge for this service which you will be responsible for paying. website for information about retirement planning and tax, as 1 An induction video which explains how you can mix your perfect pension cocktail. well as general public services. Find out which State benefits might be available to you when you retire, how to plan for retirement and much more by clicking on the Working, jobs and pensions tab A 60 second video explaining how automatic enrolment works. A secure area of the site for you to see your personal details and update your pension choices. The Scheme s booklet. for information about automatic enrolment and what it means for different employees throughout the UK. for more tips on building a better retirement and how to take the next steps Fully designed benefit statements, which we post to you each year. You can see your last statement by logging into the secure site

12 INNOVATION TO INSPIRE YOUR COLLEAGUES ARE GOING ONLINE TO UPDATE THEIR CHOICES... ARE YOU? Did you know that 522 members have been to the Scheme website in the last year, have viewed over 6,000 pages and have spent an average of 5 ½ minutes on the site? So if you haven t been online yet, check out the website to see how you could start making better plans for your future. When you go onto the site, you can update your investment choices online. You can also download a form to increase your contributions. WANT TO KNOW MORE? Money in and out of the Defined Contribution Section This is a summary of the value of the Scheme s assets (including members AVCs) at the start and at the end of the latest full Scheme Year: Value at 31 March 2013: 24,282,000 What came in: 2,896,000 Returns on investments: 1,895,000 What went out*: 1,303,000 Value at 31 March 2014: 27,770,000 (At 31 December 2014 the value of the assets had increased to 30,362,000) * The money paid out of the Scheme went towards payments to leavers, administration expenses, transfers to other pension arrangements and payments of benefits. OUR MEMBERS More of your colleagues have signed up to become members of the Scheme and start saving for their future. Here s how membership of the Defined Contribution Section of the Scheme has grown: Active members Deferred members HELP US TO HELP YOU 0 31 March March March March Remember to tell us if you change address, so that we can keep in touch with you. It is estimated that 3 billion of pension lies unclaimed in the UK because people lose contact with their former pension schemes. With the average person working for several companies during their lifetime, it s easy to lose track of an old pension. But how do you find it again? The easiest way to start looking is to contact the Pension Tracing Service, a free Government service. You can find out more details by calling or online at 12

13 13 Please note: While every effort is made to ensure the information about your benefits contained in this issue of is correct, in the case of any conflict with the trust documents which govern the Scheme and overriding legislation, the trust documents and legislation will prevail. CONTACT US SPIRIT FOR LIFE We hope you ve found this edition of helpful. For enquiries about the Scheme or your benefits contact the Scheme Administrator, Hymans Robertson LLP: Phone: