British Steel Pension Scheme Investment Options for your Top-Up Contributions

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1 British Steel Pension Scheme Investment Options for your Top-Up Contributions This document forms part of the Legal & General WorkSave Pension Investment Options brochure. This section lists the investment options are available to you for your British Steel Pension Scheme (the Scheme) Top-Up Contributions (TUCs), to help make your investment choice easier. TUCs are intended to complement your main Scheme benefits and are provided on a defined contribution (DC) basis (also known as money purchase). This means that as well as your normal Scheme benefits, which are provided on a defined benefit (DB) basis, you will have the option to build up an individual Top-Up pension pot the value of which will depend on the amount of your contributions and the investment performance. At retirement you can use the funds available in your TUC account to provide you with pension in addition to your main Scheme benefits. Please note that in so far as this Investment Options brochure describes benefits payable under the Scheme, it is subject to the Rules of the Scheme as amended from time to time and in the event of any inconsistency between this brochure and the Rules, it is the Rules that govern your entitlement to benefits. The investment options available to you will always be shown online through Manage Your Account if you have registered your TUC with Legal & General.

2 What happens to your money? Whenever a TUC is made, it is passed to the Scheme s TUC administration and investment management service provider, currently Legal & General Assurance Society Limited (Legal & General), who buy units in your selected funds. Although the investments are held under an insurance policy provided by Legal & General to the BSPS Trustee, they are allocated to individual accounts, so that at any time your balance may be calculated and either quoted to you or viewed on-line. Planning your investment? The benefits that you will receive from your TUCs will depend on: How much money you choose to contribute; The growth that your investments achieve; and The rate at which your account can be converted to pension income when you choose to draw your benefits For these reasons, it is important you take time to understand your investment options. By law, the Company, Trustee and Legal & General cannot give you advice about investments. You may therefore wish to consult an independent financial adviser. In deciding what investments will best suit your requirements, you should consider: Your investments aims and the target value of the fund you are looking to achieve by the time of your retirement The age at which you plan to draw your pension benefits. This will determine how long your investments have to grow Your attitude to risk; How long your pension will be paid for; Whether or not you wish to provide for any dependants; and The type of benefits you wish to take with your TUCs. There are a wide range of investment funds offered by Legal & General. From this range, the Trustee, after taking appropriate investment advice, has chosen a limited number of funds for the Scheme s TUC, to suit a range of different member circumstances. Neither the Trustee nor Legal & General can provide any assurance on how these funds will perform, and whether or not they are suitable for you or your circumstances. For this reason, you are recommended to read this list of investment options in conjunction with the rest of the Legal & General WorkSave Pension Investment Options brochure so that you understand the aims, risks and other important information associated with investing in the funds currently being made available to members. We recommend that you keep this document with the rest of the brochure. The Trustee has chosen to make available six funds and two lifestyle options. Brief details of these funds are given on pages 4 to 6 of this booklet. You are strongly recommended to review the fund factsheets provided by Legal & General when considering your investment choice. From time to time the Trustee will review the funds it makes available to members and may make changes where they are considered appropriate. All but one of the six investment funds currently available for TUCs are passively managed. The exception is the Cash fund, which is actively managed. A passive fund does not aim to beat the market, but to match the average market performance as measured by appropriate industry standard indices. An active fund will aim to outperform the market. How do I choose which funds are right for me? When making your investment choice, you should consider the range of funds available. Your attitude to risk and reward will help determine which investments you wish to choose. It is very important that you keep in mind that past performance is no guide to future performance. Equity funds invest in company shares. Equity funds have in the past generally delivered higher long-term growth than most other forms of investment. However, equity funds are also higher risk than most other forms of investment as the value of equities can fall sharply over the short term. Bond and Gilt Funds have generally delivered lower growth than equity funds over the longer term. However, they are lower risk and are less likely to fall sharply over the short term. A bond is a type of loan issued by a company or government, providing regular income in the form of interest payments and repayment of capital after a specified period. A Gilt is a bond issued by the UK Government and is therefore viewed as offering a higher level of security than a corporate bond. Investing in this type of asset is often considered appropriate for people nearing retirement and it offers protection against sudden changes in the value of your fund. 2

3 Cash Funds are considered low risk and can help achieve security for your capital (i.e. the amount you have invested). Cash and deposits are unlikely to provide a high level of long-term growth because interest rates have in the past normally been low compared with the returns from shares, bonds and gilts. There are two main investment choices available to you: Lifestyle is a process, which automatically selects funds for you in the period up to retirement. In the early years, when you want your money to grow, Lifestyle looks to beat inflation and generate a return through investing in equities. This is known as the accumulation phase. As you get closer to retirement, when you want to protect the value of your TUC Account, Lifestyle moves your contributions out of equities and into less volatile investments such as bonds and cash. This is called the transition phase. The object of the Lifestyle option is to offer potential growth during the accumulation phase, and then as you approach retirement, to reduce the risk of the fund you have built up falling against the cost of securing your pension. The Lifestyle option is designed to work with the Scheme s Normal Pension Age of 65 and therefore if you expect to retire earlier or later than this, you will need to tell the administrators, Legal & General as soon as you decide, otherwise your account might be in an inappropriate mix of investments when you retire. Self Selection is where you choose the specific funds into which your contributions will be invested. You can choose any proportion from the range of available funds. Legal & General will invest your TUC contributions in line with your instructions. If you do not wish to choose specific funds to invest your contributions in, they will be invested into the Default Option selected by the BSPS Trustee and advisers, which is currently the 10 Year Lifestyle Profile. Can I change my investment choices? It is recommended that you regularly review your investments to ensure that they continue to meet your objectives. You may alter your investment choice at any time subject to giving appropriate notice to Legal & General. There is generally no administration charge for this. What are the charges? Each of the investment options is subject to an Annual Management Charge (AMC). There is an administration charge of 0.30% of the value of your fund each year plus a fund management charge, which varies depending on your choice of investment. Total AMC's are detailed with each fund in this guide. This will vary according to the funds chosen and will be deducted directly from each fund s assets. These charges can be varied at any time by the administration and investment management service provider. Legal & General will give the Trustee at least 30 days notice of a change to their charges. What happens to my TUC Account at retirement? You can take your TUC benefits at the same time as your normal Scheme benefits. It may also be possible from age 55 to take your TUC benefits at a different time from your normal Scheme benefits with the consent of the Company and Trustee. If you wish to take your TUC benefits before or after age 65 you will need to advise the Trustee and administrators, Legal & General, of your target retirement date. When you wish to draw your pension, you can decide how you wish to take your TUC benefits. You can use your account to buy an annuity from an insurance company, otherwise known as a pension, or take up to 25% 1 of your TUC account as a tax free cash lump sum and use the balance to buy an annuity. You can choose which company you want to buy your annuity from. This company (normally an insurance company) will then pay you a regular income for the rest of your life. When making this decision it is important to shop around for the best deal. When you are near your pension date Legal & General will provide you with some options to help you make this decision. What is the role of the BSPS Trustee? The Trustees will review the investment choices that are made available to you and monitor the investment managers performance, but you are solely responsible for your investment choices. 1 Subject to any restrictions that might apply. 3

4 Investment Choices Available? Please note the Trustee can change the range of funds available. The Trustee can also change the way in which the Lifestyle Option works, including available funds, switching mechanisms and the date of switching. The Trustee can do this without prior notice to you though the Trustee would try to give as much notice as practicable. Lifestyle 2 The 10 Year Lifestyle Profile: Default Investment Profile code: LC23 Lifestyle profile description: Under age 55 or greater than 10 years from target retirement age all contributions are invested in the Legal & General (PMC) Global Equity 30:70 Index Fund 75% GBP Currency Hedged Fund. Over age 55 or within 10 years from target retirement age - contributions start to be switched out of this fund on a monthly basis. Your contributions move from being invested in the Legal & General (PMC) Global Equity 30:70 Index Fund 75% GBP Currency Hedged Fund into the Legal & General (PMC) Pre-Retirement Fund and Legal & General Cash Fund. Age 65 or at your target retirement age, - contributions are invested 75% in the Legal & General (PMC) Pre-Retirement Fund and 25% in the Legal & General Cash Fund. The 5 Year Lifestyle Profile Profile code: LNL3 Lifestyle profile description: Under age 60 or greater than 10 years from target retirement age all contributions are invested in the Legal & General (PMC) Global Equity Market Weights 30:70 Index 75% GBP Currency Hedged Fund. Over age 60 or within 5 years from target retirement age - contributions start to be switched out of this fund on a monthly basis. Your contributions move from being invested in the Legal & General (PMC) Global Equity Market Weights 30:70 Index 75% GBP Currency Hedged Fund into the Legal & General (PMC) Pre-Retirement Fund and Legal & General Cash Fund. Age 65 or at your target retirement age, - contributions are invested 75% in the Legal & General (PMC) Pre-Retirement Fund and 25% in the Legal & General Cash Fund. 2 The Annual Management Charge for each Lifestyle option is calculated from the charges for the funds it uses. 4

5 SELF SELECT FUNDS. Legal & General Cash Fund 3 Fund code: EAB3 Fund aim: To provide capital protection with growth at short term interest rates. The fund invests in the short term money markets such as bank deposits and Treasury Bills. (A.) The fund does not invest in any asset types where the capital value can fall, such as fixed interest securities. The value of the fund s assets would only fall if a deposit holder or the UK Government were unable to meet their obligations.( B.) If the interest earned by the fund s assets is insufficient to cover the annual management charge and any additional fund expenses, the value of your pension account invested in this fund will fall. Annual Management Charge: 0.40% Active Fund Deposit & Treasury Minimal 24, 29 Legal & General (PMC) Over 5 Year Index-Linked Gilts Index Fund 3 Fund code: NEC3 Fund aim: To track the sterling total returns of the FTSE A Index-linked (Over 5 Year) Index (including re-invested income) to within +/- 0.25% per annum for two in three years. Annual Management Charge: 0.38% UK Index-Linked Gilt Cautious 14, 20, 29 Legal & General (PMC) Pre-Retirement Fund 3 Fund code: NEN3 Fund aim: To invest in assets that reflect the investments underlying a typical non-inflation linked pension annuity product. The fund invests in the Legal & General (PMC) Over 15 Year Gilts Index Fund and the Legal & General (PMC) AAA-AA-A Corporate Bond Over 15 Year Index Fund and the mix between the funds is regularly reviewed. Annual Management Charge: 0.42% Sterling Long Bond Cautious 14, 20, 29 5

6 Legal & General (PMC) UK Equity Index Fund 3 Fund code: NBC3 Fund aim: To track the sterling total returns of the FTSE All-Share Index (including re-invested income). Annual Management Charge: 0.40% UK All Companies Moderate 13, 19, 29 Legal & General (PMC) World (Ex-UK) Equity Index Fund 3 Fund code: NED3 Fund aim: To track the sterling total returns of the FTSE World (excluding-uk) Index (including re-invested income, less withholding tax) to within +/- 0.5% per annum for two years in three. Annual Management Charge: 0.42% Global Equities High 12, 13, 29 Legal & General (PMC) Global Equity Market Weights 30:70 Index 75% GBP Currency Hedged Fund 3 Fund code: NRJ3 Fund aim: The investment objective of the Fund is to provide diversified exposure to UK and overseas equity markets while reducing foreign currency exposure of 75% of the overseas assets. A 30/70 distribution between UK and overseas assets is maintained with the overseas allocation mirroring that of the FTSE AW-All World (ex-uk) Index. Annual Management Charge: 0.44% Global Equities High 12, 13, 29 Contact Us Pension.enquiries@tatasteel.com British Steel Pension Scheme, FREEPOST RLXS-ZXKT-AUER, Glasgow G2 7BW August