Important information about your pension benefits at Siemens

Transcription

1 Siemens Benefits Scheme Member Dear Mr Siemens Benefits Scheme Member 28 September 2007 Important information about your pension benefits at Siemens The formal consultation period relating to the proposals announced on 21 June 2007 is now completed. Please read this letter carefully as it describes the changes that will apply to your pension benefits from 1 January You need to sign and return the enclosed Employment Contract Amendment by 24 October 2007 to make elements of the proposed changes a contractual entitlement and to receive the maximum possible matching contribution from the company towards your future pension savings. In brief From 1 January 2008 the company will provide your pension benefits through membership of the Investor Plan on a specially enhanced basis To receive the enhancements including additional matching contributions and to make them a contractual entitlement, you need to return the enclosed Employment Contract Amendment by 24 October 2007 The benefits you have earned so far in the Siemens Benefits Scheme are protected and will increase The company will pay off the deficit in the Siemens Benefits Scheme From 1 January 2008 you will no longer earn future pension benefits from the defined benefit sections of the Siemens Benefits Scheme The consultation Since our initial announcement on 21 June 2007, employees have had the chance to express their opinions and raise any questions and issues they have concerning the proposals. We would like to thank all those who attended the roadshows, completed questionnaires or who took the time to raise their questions either through their representatives or with us directly by telephone or . The company has considered the views expressed and has endeavoured to respond to the questions raised and comments made. Throughout the consultation period the company has posted questions and answers picking up on the points of general interest onto the pensions intranet site and a final set of the questions and answers are now online following the recent employee consultative forums.

2 In total we have answered over 1,400 questions from the consultative forums; received over 700 calls and s to the Helpdesk and run roadshows in 26 locations attended by over 1,000 members (with 550 DVDs issued to employees who could not attend roadshows themselves). Having assessed all the comments and suggestions received, the company has concluded that the overall strategy behind the initial proposal is the most appropriate way forward to: increase the security of the benefits that members have earned to date reduce the uncertainty of future pension costs and so make the company more competitive continue to provide significant ongoing financial help to employees to build up their pension savings and to provide benefits in the event of ill-health or death in service. However, through the feedback received, the company has recognised that the new pension arrangements proposed involve a change to members current arrangements. The company has agreed to make a number of changes to the proposals originally outlined to members on 21 June In particular: Any favourable early retirement arrangements that apply to active members will be maintained in exactly the same form, while your employment with the company continues Enhanced matching and the element of salary linkage on deferred benefits will be a contractual entitlement for those who join the Investor Plan on the enhanced terms being offered Employees death in service and ill-health early retirement benefits will be protected at a minimum of their current amount for the next 5 years. In addition, members who wish to obtain independent financial advice will be reimbursed by the company up to a maximum of 200 (and the company will pay any tax and National Insurance due on this). The changes which take effect from 1 January 2008 During the first week of October, you will be sent an Investor Plan booklet with full details of your future benefits. This booklet sets out the details and features of the Investor Plan as well as containing some of its key rules. An illustration of the pension you have earned under the Siemens Benefits Scheme will be provided at the same time. By way of a summary, effective from 1 January 2008: Siemens will pay into the Siemens Benefits Scheme the funds needed to make good any shortfall calculated at the end of the current financial year (30 September 2007) based on the method used to produce the deficit figures shown in the company s balance sheet. If deficits calculated on this basis arise in the future, they too will be paid off within the following 12 months The benefits you have earned will be revalued by the increase in your Final Pensionable Salary up to the rise in the Retail Prices Index plus 2% in each year until This will be subject to an underpin over that period (or to your retirement if sooner) of the rise in the Retail Prices Index (capped at 5% a year) over the entire period. Assuming you have not retired by then, from 2023 onwards, further increases will be provided equal to the rise in the Retail Prices Index (capped at 5% a year) over the entire period up until your retirement. Please note that the company can only make this commitment in respect of employees whose employment remains with a company within the Siemens group of companies. If you are no longer a company employee, you will become a deferred member and your benefits will increase as required by legislation. However if at a future 2

3 date your employing company ceases to be part of the group, Siemens will use all reasonable endeavours to ensure that the new employer provides benefits of comparable value to those specified in this paragraph Instead of your membership of the defined benefit sections of the Siemens Benefits Scheme, you will be able to join the Investor Plan section of the Siemens Benefits Scheme The Investor Plan is a defined contribution ( money purchase ) plan so you will have an investment account into which yours and the company s contributions are paid. Your contributions will be paid to the Investor Plan by a process known as salary conversion under the My choice flexible benefits scheme Because you are a former member of a Siemens defined benefit scheme, you will be entitled to enhanced pension contribution matching. This will start at 2 for every 1 you pay (up to 10% of your Pensionable Salary) and will gradually reduce to the standard 1 for every 1 matching after 15 years, as shown in the table below. Please note that the company can only make this commitment in respect of employees whose employment remains with a company within the Siemens group of companies. However if at a future date your employing company ceases to be part of the group, Siemens will use all reasonable endeavours to ensure that the new employer provides benefits of comparable value to those specified in this paragraph Year Calendar Year Contribution for every 10 (gross) you pay - (up to 10% of your Pensionable Salary) You Company Total onwards (standard rate) 20 You may make supplementary contributions through AVCs and/or Employee Directed Contributions (EDCs) but these contributions will not receive a matching company contribution On death in service, your dependants will receive the benefits payable under the Investor Plan. Details will be in the Plan booklet, but the payment will be at least 6 times your Death Benefit Salary. In addition the defined benefit section of the Siemens Benefits Scheme will pay the benefits appropriate to a deferred member. For the next 5 years, if the total payable is less than would have been due had you died as a member of that section on 31 December 2007, then a further amount will be payable to bring it up to this level 3

4 The same principle applies on ill-health early retirement and for the next 5 years, you will always get at least the pension that would have been paid had you taken ill-health early retirement under your defined benefit section of the Siemens Benefits Scheme on 31 December 2007 Any favourable early retirement arrangements that apply to active members will be maintained in respect of your deferred Siemens Benefits Scheme benefits while your employment with the company continues You will no longer earn any future benefits under a defined benefit section of Siemens Benefits Scheme. Remember, the proposed changes only apply to your future pensionable earnings. The pension benefits you have earned based on your past earnings are unaffected. What next? Our aim in the next two months is to help you in three key areas: 1. Your membership of the Investor Plan 2. Deciding how much to pay in 3. Choosing where to invest Remember, if you consult an Independent Financial Adviser on any of these issues, the company will reimburse to you the first 200 you spend (provided you return your claim form by 30 November 2007). 1. Your membership of the Investor Plan From 1 January 2008, the company will continue paying into a company pension scheme to help you to build up your pension savings. The arrangement being used is the Investor Plan. There are many reasons why most advisers would recommend you save for retirement through a company pension scheme, such as the Investor Plan. These include: The immediate doubling of your money due to matching company contributions The enhanced matching payments the company will make over the next 15 years tripling the contribution to your account in the first year! The protection the Investor Plan gives to your dependants on your death paid for by the company The Investor Plan s administration costs - paid for by the company Access to best in class investment funds with low management fees The tax advantages of saving through a company pension scheme Pension annuity purchase arranged and funded by the company. If you do not benefit from a company pension plan, you will need to rely solely on a pension from the State, or save independently for retirement without the benefit of any help from your employer. You will also lose the benefit of a lump sum payment and pension protection available from the Investor Plan in the event of your death. 4

5 What do I need to do? To get the full benefit out of your membership, simply sign and return one copy of the enclosed Employment Contract Amendment forms and return it to us in the envelope provided by Wednesday 24 October You need to return this to us in order to receive your entitlement to the enhanced matching contributions and the element of salary linkage on your defined benefit Siemens Benefits Scheme benefits. Do I have to return an Employment Contract Amendment? The company would like to make sure you continue to benefit from a company contribution towards your pension savings, so our aim would be to make sure you don t miss out by not joining the Investor Plan from the first opportunity - 1 January If we don t hear from you, we will assume you are content to join the Investor Plan, but you will only receive the basic company matching contribution and you will not be entitled to the enhanced matching or the element of salary linkage on your deferred benefits. It is important, therefore, that you return your Employment Contract Amendment by 24 October 2007 to benefit from the enhancements on offer. However, no one has to join a company pension scheme. You can decide you do not want to build up any further pension with any help from Siemens. If you want to opt out completely you need to contact the Helpdesk ( pensions.review.css.uk@siemens.com; external tel: ; internal tel: x5555 option 6) to tell us you no longer wish to build up any further company pension and to request an opting-out form. If you believe you are not likely to accept the Investor Plan as your future pension vehicle or if there are points of clarification required, please take this up with your personnel partner as soon as possible. What further help will I get? We believe the decision whether or not to join the Investor Plan and receive the enhanced matching payments is a straightforward one. We sent you an outline of the Investor Plan in June and more detailed information will be included in your Investor Plan booklet. Following completion of the consultation, this is currently being finalised and we expect to have it printed and issued in the first week of October. You will also have the opportunity to ask questions at the roadshows being held during October. In the mean time, if you have any immediate questions about how the Investor Plan works, please contact the Helpdesk by telephone or (see above). 2. Deciding how much to pay in The amount of contributions paid into the Investor Plan will directly affect the benefits you receive. It is very important that you think carefully about the amount you choose to pay as a matched contribution as this will apply for the whole of Because of the enhanced matching and the tax relief available, if you are a basic rate tax payer, for every 100 that comes out of your take home pay, a total of will be contributed to the Investor Plan in And in addition you save National Insurance contributions as a result of the salary conversion process under My choice. What further help will I get? The company has provided a modeller on the internet which shows examples of the pension that may be produced by different levels of contribution. There is also a contribution calculator on the pensions intranet site which illustrates the effect your chosen contribution will have on your take home pay. Further guidance on selecting a contribution level will be provided at the roadshows being held in October 2007 and instructions on completing your My choice enrolment form will be provided at the time. The pensions modeller can be found at: The contribution calculator is at 5

6 What do I need to do? Your decision about how much to pay into the Investor Plan is made through the My choice enrolment process either online or by completing a form. Details of this process will be posted to your home address in the last week of October and you will have 3 further weeks to finalise your decision. You will be able to choose to pay at the same rate you do now or to select another rate between 3 and 10% of your Pensionable Salary. You can also choose to pay additional contributions (over the 10% maximum for matching contributions) through My choice (up to a further 35% of your Pensionable Salary) as EDCs. Your choice of matched contributions and EDCs will apply for the whole of You may also pay Additional Voluntary Contributions (AVCs) which can be varied on a monthly basis. Further information (and AVC application forms) is available from the Helpdesk. Remember, AVCs and EDCs do not receive a matching contribution from the company: so, in general, you should only consider these after you have chosen to pay the maximum 10% matched contribution into the Investor Plan. Also, as we explained in Pension Review Issue 2, if you select the option to carry on paying at the same rate as you do now, this will not produce the same take home pay or the same benefit at retirement as now. What if I don t make a decision? Provided you have signed and returned the enclosed Employment Contract Amendment, you will be entitled to the enhanced company matching contributions. If you do not then go on to choose a particular contribution rate through the My choice enrolment process, the default level of contributions will apply i.e. your contribution will be set at 3% and the company will pay 6%. You will have the chance to change this level of contribution from 1 January If you have not returned your signed Employment Contract Amendment then the company contribution will be 3%. 3. Choosing where to invest Just as with your contributions, the investment of your Investor Plan account has a direct effect on your benefits. Neither the company nor the trustees are allowed to give you advice on where to invest but guidance will be available to help you with this important decision. What do I need to do? In the last week of October, as part of the My choice enrolment process you will be asked to decide whether you want to make a personal investment choice or follow the lifestyle strategy selected by the trustees (see below), with a target retirement age of 65. You will have at least a 3 week window to finalise your decision but you should start to think about this over the following weeks as information is made available to you. If you do not want to choose the lifestyle strategy with a target retirement age of 65, and you wish to make your own choice of investments (or choose a different target retirement age), then a separate form will be sent to you in the first week of December. This will give you the option of choosing your own target retirement age or selecting from the range of funds offered by the trustees. If you want your choices to apply from January s contributions, you will need to return your form by the first week of January. What if I don t make a decision? We know that not everyone wishes to make their own investment choices. That is why the trustees have set up a default arrangement that applies to members who do not make a personal choice. The trustees provide this ready made strategy (known as the lifestyle strategy ) to reduce the volatility of investments and protect the pension buying power of your funds at your chosen retirement age. We will explain how this option works in more detail when we send you your full booklet in the first week of October. What further help will I get? Over the next two months we will provide you with information and guidance to help you choose the investment funds that best suit your needs. Explanations of the options you have, along with assistance in making your decision will be mailed to your home address in the first week of October. Further guidance will be provided at the roadshows in October. Remember, if you consult an Independent Financial Adviser the company will reimburse the first 200 you spend (provided you return your claim form by 30 November 2007). 6

7 What about the pension I have earned so far? You will still receive the benefits you have accrued in the defined benefit sections of the Siemens Benefits Scheme. In particular, remember: The benefits you have accrued based on your pensionable earnings to 31 December 2007 are unaffected by the changes Accelerated funding of the Siemens defined benefit pension schemes deficits will enhance their security The benefits you have earned are revalued by the increase in your Final Pensionable Salary up to the rise in the Retail Prices Index plus 2% in each year, until This will be subject to an underpin over that period (or to your retirement if sooner) of the rise in the Retail Prices Index (capped at 5% a year) over the entire period. Assuming you have not retired by then, from 2023 onwards, further increases will be provided equal to the rise in the Retail Prices Index (capped at 5% a year) over the entire period up until your retirement You will receive an estimate of your Siemens Benefits Scheme benefits earned to 31 December 2007 in the first week of October. The purpose of this is to help you with your decisions around future contributions You will receive a formal leaving statement of your accrued benefits entitlement within 2 months of 31 December Finally We recognise the Investor Plan involves making choices that are new and unfamiliar for most of us. However, we are providing as much assistance as we can to help you make these choices. Decisions about the level of contributions and where to invest do not need to be made yet you will receive further guidance on how to do this in the My choice enrolment process to be issued in the last week of October. Remember, to benefit fully from joining the Investor Plan you must return your Employment Contract Amendment in the envelope provided by 24 October Yours sincerely Ian Howard Director of Corporate Pensions Peter Merrick Director of Corporate Personnel 7