The Royal Mail Defined Contribution Plan Automatic enrolment

Transcription

1 Dear Colleague, Date: your RMG joining service date The Royal Mail Defined Contribution Plan Automatic enrolment To help people save more for retirement, the Government requires employers to automatically enrol workers into a workplace pension scheme if they meet certain eligibility criteria. This letter explains what arrangements Royal Mail Group ( RMG ) has made to provide retirement savings and life assurance protection. What this means for you Life assurance protection Firstly, from the first day you start working for RMG you are provided with life assurance cover: If you are under age 63 on joining service: RMG enrols you into the Royal Mail Defined Contribution Plan which provides a life assurance benefit of four times your Annual Pensionable Pay, plus an additional two times your Annual Pensionable Pay, if you have dependants. If you are age 63 or over on joining service: RMG enrols you in the Royal Mail Group Life Assurance Scheme which provides a life assurance benefit of two times your Annual Pensionable Pay. Retirement savings If you meet the following eligibility criteria 3 months after your RMG joining service date (your Deferral Date - see below): RMG also automatically enrols you into the Royal Mail Defined Contribution Plan ( the Plan ) as a contributing member if you: Earn over 10,000 a year (before deductions) that s 833 a month or 192 a week (for the 2017/2018 tax year); Are at least age 22 and below your State pension age, and; Are working or usually work in the UK. As a contributing member both you and RMG start to pay pension contributions towards your retirement. Employers are allowed by law to postpone automatic enrolment and RMG has chosen to automatically enrol workers after they have completed 3 months service this is referred to as your Deferral Date. However, you have the right to join the Plan before your Deferral Date if you want to.

2 If you don t meet the automatic enrolment eligibility criteria on your Deferral Date and you are: At least 16 and under 75, and; Are working in the UK. We won t automatically enrol you into the Plan as a contributing member. However, you can still choose to opt into the Plan as a contributing member if you wish and both you and RMG would then make contributions. If you don t opt in and subsequently meet the eligibility criteria for automatic enrolment after your Deferral Date, we would write to you again. How much do I and RMG contribute to my retirement? If you are automatically enrolled or opt into the Plan as a contributing member: both you and RMG currently pay 1% of your Pensionable Pay to the Plan and you can contribute more if you want. Once you have completed 12 months continuous service (or reached age 18, if later), currently your minimum contribution rate automatically increases to 5% of your Pensionable Pay and RMG s to 8%. If you are under 63 on joining service and have not become a contributing member of the Plan by the time you have completed 12 months continuous service (or reached age 18, if later) either through automatic enrolment or by opting-in: RMG would enrol you into the Plan and would write to you again at that time. How is my pension account invested? When you are enrolled or opt in as a contributing member, contributions are paid into a Member Account set up in your name and are automatically invested in the Lifecycle option. You can then make changes to how your Member Account is invested if you wish. How are contributions made to the Plan? For eligible employees, contributions to the Plan are automatically made via pension salary exchange (PSE), which is a more efficient way of making contributions to the Plan. In brief, your entitlement to your pay is reduced by an amount equal to the pension contributions you would usually make. RMG then pays this amount to the Plan on your behalf along with its usual employer contribution. Making pension contributions via PSE means: you can save National Insurance Contributions (NICs), if you pay them; the Plan still receives the same amount of pension contributions in total; the amount of money you take home each week or month is increased by the amount of any NIC saving you make, and; PSE is designed not to affect your other Royal Mail benefits such as overtime, bonuses, sick pay and life assurance cover which continue to be based on your pre- PSE salary or wages. We automatically enrol you into the Plan via PSE providing your pay after PSE is over the PSE participation limit (which is currently 10,000 a year - that s 833 a month or 192 a week). Other eligibility conditions also apply for PSE and further information can be found at:

3 Your participation in PSE is a change to your terms and conditions of employment and you will be deemed to have accepted the change if you do not opt out. It is therefore important that you read and understand this letter, the enclosed Information sheet and the information on PSE at: You can opt-out of PSE and still be a contributing member of the Plan. If you do not wish to participate in PSE, please contact Royal Mail HR Services on for further information and to request a PSE opt out form. Opting into the Plan You can opt into the Plan as a contributing member either: If you don t meet the eligibility criteria to be automatically enrolled, or; You meet the eligibility criteria and wish to join the Plan before your Deferral Date. To join the Plan in this way, you would need to complete an Opt-in form see the enclosed Information sheet for more details. Opting out of the Plan If you don t want to remain in the Plan as a contributing member, either when you have been automatically enrolled or, alternatively, enrolled on completion of 12 months continuous service, you can opt out. Further information about opting out is provided in the enclosed Information sheet For further information regarding auto enrolment in general, please read the Information sheet enclosed. Yours faithfully Douglas Hamilton Head of Pensions Strategy Enclosures: Information sheet Summary of Plan information Legal note: This letter gives no right to benefits. Rights to benefits under any Royal Mail pension arrangement arise only under the governing documents of that arrangement as from time to time amended and in force. RMG has the right to amend, suspend or withdraw any or all of the Royal Mail pension arrangements and PSE at any time. RMG has the right to change the participation limit for PSE at any time.

4 Information sheet - Auto enrolment guidance 1. Why is this happening? The Government s aim is for people to build up additional income in retirement on top of the State Pension. The State Pension is a foundation you may want more. Employers are required by the Government to automatically enrol qualifying employees (i.e. those meeting the criteria in Q2 below) into a workplace pension scheme to make it easier for people to start saving. 2. When am I enrolled into a workplace pension scheme? If you are under age 63, Royal Mail Group (RMG) enrols you into the Royal Mail Defined Contribution Plan ( the Plan ) for life assurance benefits from your first day of employment. Unless you are then automatically enrolled as a contributing member (see below) or opt-in, you become a contributing member of the Plan (i.e. RMG and you make contributions towards your pension) when you reach 12 months continuous service with RMG (or age 18, if later). However, the law requires that you must become a contributing member before you reach 12 months continuous service, if you meet the automatic enrolment eligibility criteria below: Earn over 10,000 a year (before deductions) that s 833 a month or 192 a week (for the 2017/2018 tax year); Are at least age 22 and below your State pension age, and; Are working or usually work in the UK. 3. What happens if I meet the automatic enrolment eligibility criteria on my Deferral Date? If on your Deferral Date you meet the automatic enrolment eligibility criteria above, you are automatically enrolled as a contributing member of the Plan on your Deferral Date and both you and RMG start making pension contributions. It is important to note the following: You can choose to opt out of the Plan if you want to (although not before you have been automatically enrolled). RMG and you make contributions to the Plan each payroll period. You automatically make contributions via pension salary exchange (PSE), providing you meet the PSE eligibility conditions or unless you choose to opt out of PSE or RMG tells you otherwise. The Government also contributes through tax relief on the contributions paid. You have the right to become a contributing member of the Plan before your Deferral Date if you want to. Please contact the Zurich Royal Mail Service Team (see Q5) if you would like to explore this option. They can provide you with further information and an Opt-in Form.

5 4. What happens if I do not meet the automatic enrolment eligibility criteria? You would not be automatically enrolled as a contributing member of the Plan on your Deferral Date if either of the following applies to you: A You are aged under 22 years, or over State Pension age (but under age 75), OR You are aged between 16 and 74 and earn more than 5,876 ( 113 a week or 490 a month), but not more than 10,000 a year ( 192 a week or 833 a month) in the 2017/2018 tax year OR B You are aged between 16 and 74; AND You earn 5,876 or less a year (equivalent to 113 a week or 490 a month) in the 2017/2018 tax year In either case, you still have the right to become a contributing member of the Plan by opting-in (see Q5). Employees in these categories are generally treated the same as employees who are automatically enrolled. This means that RMG and you both make contributions to the Plan during each payroll period. Note: Under the law, only employees meeting criteria A above are entitled to receive employer contributions towards the Plan. The legal requirement for employees meeting criteria B above is only to be provided with a pension scheme that they can join (with no employer contributions). However, RMG s current policy is to treat both categories the same and therefore to make contributions to the Plan for all employees in these categories who become a contributing member of the Plan. Please note that the requirement for RMG to automatically enrol you as a contributing member of the Plan may be triggered in the future. This is likely to happen when you reach age 22 or if you start to earn more than 10,000 a year. If this does happen, we would write to you again with further information. Even if you don t meet the criteria for automatic enrolment, you still become a contributing member of the Plan when you complete 12 months continuous service with RMG (or age 18, if later), unless you choose to opt out of the Plan. 5. How do I opt-into the Plan? You can join the Plan if you don t meet automatic enrolment eligibility criteria. You can also join the Plan before your Deferral Date if you do meet the automatic enrolment eligibility criteria and want to join early. In either case, please contact the Zurich Royal Mail Service Team to request an Opt-in Form. This Form must be completed, signed by you and then returned to Zurich. You would then be sent further information on the Plan and confirmation of your enrolment. If you complete an Opt-in Form you would become a contributing member from your next available payroll date. You can contact the Zurich Royal Mail Service Team by: Telephone: ; or royalmailserviceteam@uk.zurich.com

6 6. What happens if I become a contributing member of the Plan? You and RMG contribute to the Plan. The contributions paid by you and RMG each pay period are invested by the Plan Trustees in your Member Account. When you retire, the value of your Member Account is then used to provide pension benefits for you. What you receive depends on: The contributions paid by you and RMG; The investment returns on those contributions and the effect of any charges, and; If applicable, the cost of buying a pension from the value of your Member Account (after any cash lump sum has been taken) at the time you take your benefits. The Trustees of the Plan have appointed Zurich to administer the Plan. Information on the Plan is sent to you when you become a contributing member. A summary of the Plan information is enclosed. 7. How are contributions made when I m enrolled or opt-into the Plan? Contributions to the Plan are automatically made via pension salary exchange (PSE), unless: You are not eligible to participate in PSE please refer to the PSE guide Your guide to Royal Mail pension salary exchange (available on for further information; You choose to opt out of PSE (see Q8 for further details); or RMG tells you otherwise. Participation in PSE is a change to your terms and conditions of employment. In brief, your entitlement to your pay is reduced by an amount equal to the pension contributions you would usually make. RMG then pays this amount to the Plan on your behalf along with its usual employer contribution. You will be deemed to have accepted the change if you do not opt out of PSE (see Q8 for further details). 8. What if I don t want to participate in PSE? PSE has been designed so that most employees are expected to benefit by making contributions this way but you do not have to participate in PSE. If you choose to opt out, you would make contributions by deduction from your pay but would miss out on the opportunity to make National Insurance Contribution savings. You are able to opt out of PSE if you wish to do so during a 30 day period from the date you become a contributing member of the Plan. If you miss the 30 day opt-out period, you can opt out of PSE once a year during a specific period. To opt out, you must contact Royal Mail HR Services by calling or by ing advicecentrepay@royalmail.com and asking for an opt-out form. 9. What contributions are made when I m automatically enrolled or opt-into the Plan? The level of contributions payable to the Plan if you become a contributing member before you reach 12 months continuous RMG service (or age 18, if later) is currently: 1% of your Pensionable Pay from you (less tax relief), plus; 1% of your Pensionable Pay paid by RMG.

7 However, as explained above, if you participate in pension salary exchange (PSE), you do not actually pay any contributions to the Plan. Instead, your entitlement to your salary or wages is reduced by the amount of contributions you would have paid. RMG then pays this amount into the Plan on your behalf, together with its contribution. Once you have completed 12 months continuous RMG service (or age 18, if later), contributions automatically increase to a minimum of: 5% of your Pensionable Pay (or such other percentage as specified in the Plan s Trust Deed and Rules at the relevant time) paid by you, usually via PSE, plus; 8% of your Pensionable Pay (or such other percentage as specified in the Plan s Trust Deed and Rules at the relevant time) paid by RMG. Where contributions are made via pension salary sacrifice (PSE), you are deemed to have agreed to a further change in your terms and conditions of employment (and a further reduction in salary or wages in exchange for increased contributions from RMG) when the increase comes into effect, unless you opt out of PSE (see Q8) or opt out of the Plan (see Q14). You can choose to contribute at a lower or higher rate if you wish (with a minimum contribution of 4%) and subject to the Plan s Trust Deed and Rules. You can currently choose one of the contribution rates shown below: You pay* RMG pays* 4% 7% 5% 8% 6% 9% *The contribution rates are expressed as a percentage of your Pensionable Pay Once you have completed 12 months continuous RMG service, you can change the level of contributions by contacting the Zurich Royal Mail Service Team. Pensionable Pay means: If you are employed on a full time contract your basic salary or wage (excluding overtime, bonuses or any other items), or; If you are contracted to work less than full time your basic salary or wage for your contractual hours, plus the salary or wage you earn for non-contractual hours worked each pay period. Earnings for hours of work that are in excess of the number of hours normally scheduled for someone working full time in your role are not counted for the purpose of Pensionable Pay. Bonuses and any other items are also excluded. Pensionable Pay is based on your pre-pse salary or wages. 10. How much will I get from the Plan when I retire? This depends, amongst other things, on how much is contributed to your Member Account and the investment return received on those contributions. There is a planner available on the Plan website to enable you to get an illustration. This can also show you how much more you could receive if you increase the contributions you make to the Plan. Also, as a contributing member of the Plan, you receive an annual benefit statement which provides an illustration of your estimated pension benefits.

8 11. What s the retirement age in the Plan? When you are enrolled or opt-in as contributing member of the Plan, your Selected Retirement Age is automatically set at age 65. You may change this date to a birthday between age 55 and 75 if you wish to target your pension saving to a different age. You may change your Selected Retirement Age at any time and you would not be forced to draw your benefits on this date. 12. What are my investment options? When you are enrolled or opt-in as a contributing member of the Plan, contributions are automatically invested in the Lifecycle option. You can then make changes to how your Member Account is invested if you wish by contacting the Zurich Royal Mail Service Team or using the on-line service. Further details of your investment choices are contained in the Plan Guide which is available at: If in doubt, you should contact an independent financial adviser. 13. Can I opt out of the Plan and if I did, could I re-join in the future? Yes, you can opt out of the Plan by contacting the Zurich Royal Mail Service Team or using the on-line service. If you choose to opt out, then no further contributions in respect of you are payable to the Plan. However, if you opt out of the Plan you would only be covered for a life assurance benefit of two times Annual Pensionable Pay (see Q15) under the Royal Mail Group Life Assurance Scheme and not the higher death benefits available in the Plan. If you become a contributing member of the Plan through automatic enrolment, Government legislation states that you may only request to opt out of the Plan once you have been automatically enrolled. If you do not wish to become a contributing member of the Plan after completing 12 months continuous RMG service (or at age 18, if later), then, under these circumstances, you can decide to leave the Plan before being enrolled as a contributing member. You can re-join the Plan (if you are eligible) by completing an Opt-in Form (please note that there is a limit on the number of times you can re-join the Plan in any one year). Please remember that if you opt out then at some point in the future (normally every 3 years, though in some special circumstances this could be earlier) you may be re-enrolled into the Plan if you meet the eligibility criteria. If RMG is required to re-enrol you into the Plan, we would write to you again closer to that time. 14. If I opt out, can I have a refund of my contributions? Yes, in certain circumstances. If you become a contributing member through autoenrolment, or if you chose to opt-in and you are a category A employee (see Q4), you can opt out by calling the Zurich Royal Mail Service Team or using the on-line service. You must complete and submit your opt out request within 1 month of us sending you full Plan information in order to receive a refund of any contributions made either via PSE or deducted from your earnings if you did not participate in PSE. Contribution refunds are made through RMG payroll. Please be aware that if you are weekly paid, it is likely that several weeks contributions would be paid before they can be stopped.

9 If you opt out after the end of the 1 month period referred to above, you are not able to receive a refund. The contributions paid on your behalf (including RMG s contributions) will remain invested in your Member Account until you claim your benefits. In all other circumstances, including if you are a category B employee (see Q4) then the Zurich Royal Mail Service Team processes your pension benefits in line with the Rules of the Plan. If you have submitted your opt out request within 30 days of you joining the Plan then you will receive a refund. 15. What is the effect on my death in service benefits if I opt out of the Plan? If you are under age 63 on joining service, on death in service, you are covered for a life assurance benefit of four times your Annual Pensionable Pay, plus an additional two times Annual Pensionable Pay, if you have dependants. There is no change to these benefits once you become a contributing member. If you opt out of the Plan (or you are age 63 or over when you join service), you are covered for a life assurance benefit of two times Annual Pensionable Pay under the Royal Mail Group Life Assurance Scheme. An Expression of Wish Form for the Plan should be completed to guide the Trustees when they are deciding who receives the benefits payable in the event of your death. From time to time, it will be necessary for you to update this form, for example, if you get married. Cover for the death in service lump sum benefits is provided up to age 75 but you would not be covered for any death benefits if you are still working after that age. Also, in some circumstances you may be required to have a medical assessment before you can be covered and you will be told if this is necessary. If the insurer who provides the death in service cover restricts the amount that is payable on your death, your beneficiaries may receive less than the amount of death benefits stated above. If you have benefits from another pension arrangement provided by RMG, death in service benefits from the Plan may be reduced by the amount of other death benefits payable from such arrangements. Note: further information regarding the definition of Annual Pensionable Pay is available in the Plan Guide and varies according to whether you work full or part-time hours. 16. Where can I obtain further advice? Neither the Trustees of the Plan nor any employee of RMG is authorised to give you advice on your options. Zurich is also unable to provide financial advice to you. If you require advice regarding your options, please contact your independent financial advisor. If you do not have an advisor, a list of advisors in your local area can be found at: Where to go for further information More information on the Plan can be found in the enclosures or at the following link where you can also access a copy of the Plan Guide: or by contacting the Zurich Royal Mail Service Team by telephone: ; or by royalmailserviceteam@uk.zurich.com

10 More information on workplace pensions and saving for the future life can be found at: Note: if you have taken Enhanced Protection (in 2006) or Fixed Protection (in 2012, 2014 or 2016) then please contact the Zurich Royal Mail Service Team immediately. Legal note: This Information Sheet gives no right to benefits. Rights to benefits under any Royal Mail pension arrangement arise only under the governing documents of that arrangement as from time to time amended and in force. RMG has the right to amend, suspend or withdraw any or all of the Royal Mail pension arrangements and PSE at any time. RMG has the right to change the participation limit for PSE at any time.