The Royal Mail Defined Contribution Plan

Transcription

1 The Royal Mail Defined Contribution Plan This document gives you an overview of how the Plan works, your choices and the investment options available. You should read this in conjunction with the Plan Guide and the Investment Guide, which can be found on the Plan s website. How it works The chart below explains how the Plan works. Contributions Investments B e n e fi t s Retirement You pay regular contributions* Your employer also pays a regular contribution Lifecycle option or Do It Yourself Your Member Account You choose when to take your benefi ts Life assurance paid for by your employer Secure lifelong income You can use some or all of your retirement savings to buy an annuity, which provides you with a regular income for the rest of your life. This income is taxable. You can also take up to 25% as a tax-free lump sum. /Or Flexible income Your voluntary contributions (optional)* You can keep your retirement savings invested and take a regular taxable income and/or one-off taxable payments from your savings. You can also take up to 25% as cash, tax free. /Or Cash lump sum * You don t pay income tax on these, which means it may cost you less than you may think. Not all options are available within the Plan. Your contributions will be paid to the Plan via pensions salary exchange (PSE) if you are eligible. You can take some or all of your retirement savings as a lump sum - 25% is tax-free. When can I join? There are several types of Plan member. You may be allowed to opt in to the Plan or be enrolled automatically. Your employer will write to you, letting you know when you will be joining the Plan and what your contribution rate will be. Your choices When you begin making contributions to the Plan you ll be enrolled on the start-up membership basis which is defi ned overleaf. It is up to you whether you choose to change from the start-up membership basis, for example by paying more contributions. We have provided some information overleaf to help you decide:

2 Your choices 1 What is the start-up membership basis? The start-up membership basis is: You pay either 1% or 5% of your Pensionable Pay depending on what type of member you are Your employer puts in 1% or 8% of your Pensionable Pay, depending on what type of member you are You take at age 65 Your pension savings are invested in the Default Lifecycle option with a 10 year switching period. Note: your pension contributions will be paid to the Plan via pensions salary exchange (PSE) if you are eligible. Information on PSE can be found at: The Plan Guide has more information to help you understand the different contribution levels. 2 Can I change from the start-up membership basis? You have choices as to the amount you save to the Plan and how your pension savings are invested. The Plan Guide and Investment Guide will help you understand your choices. There is an investment summary over the page. All the guides are available on the Plan website zurich.co.uk/save/royalmaildcplan. 3 How can I decide whether the start-up membership basis is right for me? You can use various tools on the website to help you. The online pension planner tools at zurich.co.uk/save/royalmaildcplan can give you an idea of how much income your contributions plus those of your employer are likely to provide when you come to take. You can also use the online budget tool, so you can work out how much you can afford to pay. 4 I m comfortable with the start-up membership basis There is nothing you need to do. I d like to make my own choices (this can only be done once you ve made your first contribution) Soon after you start making contributions to the Plan, you ll be sent details about how to log onto the secure website. From here you can make changes to where your savings are invested. The Zurich Royal Mail Service Team can also take your instructions over the phone. I am not sure whether I should change from the start-up membership basis Please call the helpline on Zurich may record or monitor calls to improve their service.

3 Investment summary In addition to choosing what contributions you would like to make, you can also choose how your pension savings should be invested. There are three investment choices: Default Lifecycle option Your pension savings are moved automatically into less risky funds as you approach your Selected Retirement Age. Alternative Lifecycle options These are: 5 Year Royal Mail Lifecyle Strategy. 10 Year Royal Mail Annuity Strategy. Do It Yourself option You can choose your own investment mix from the twelve available funds and any of the Lifecycle options. When you start contributing to the Plan your pension savings will automatically go into the Default Lifecycle option but you can change this. Default Lifecycle option When you are younger the Lifecycle option invests the savings in your Member Account in the Growth Fund. This fund aims for long-term growth. As you approach your Selected Retirement Age your pension savings are gradually moved into the Cash Fund and Diversified Bonds Fund. This aims to help protect against short-term market movements and lowers the risk reward of your investments. When you reach your Selected Retirement Age your Member Account will be invested approximately: 75% in the Diversified Bonds Fund and 25% in the Cash Fund. The move into the Diversified Bonds Fund will start 10 years before your Selected Retirement Age depending on how quickly you wish to reduce the investment risk. This is known as the switching period. Initially, the switching period will be set at 10 years but once you ve joined you can change it to 5 years or an alternative 10 year Option. 5 Year Royal Mail Lifecycle Strategy When you are younger the Lifecycle option invests the savings in your Member Account in the Growth Fund This fund aims for long-term growth. As you approach your Selected Retirement Age your pension savings are gradually moved into the Cash Fund and Diversified Bonds Fund. This aims to help protect against short-term market movements and lowers the risk reward of your investments. When you reach your Selected Retirement Age your Member Account will be invested approximately: 75% in the Diversified Bonds Fund and 25% in the Cash Fund. The move into the Diversified Bonds Fund will start 5 years before your Selected Retirement Age depending on how quickly you wish to reduce the investment risk. This is known as the switching period. 10 Year Royal Mail Annuity Strategy When you are younger the Lifecycle option invests the savings in your Member Account in the Growth Fund. This fund aims for long-term growth. As you approach your Selected Retirement Age your pension savings are gradually moved into the Cash Fund and Annuity Bonds Fund. This aims to help protect against short-term movements in markets and changes in the cost of buying a pension. When you reach your Selected Retirement Age your Member Account will be invested approximately: 75% in the Annuity Bonds Fund and 25% in the Cash Fund. The move into the Annuity Bonds Fund will start 10 years before your Selected Retirement Age depending on how quickly you wish to reduce the investment risk. This is known as the switching period. Do It Yourself option The next page gives a brief description of each fund. More information, including individual Fund Information Sheets, is available on the Plan website. With the Do It Yourself option you choose and manage where to invest the savings in your Member Account. Currently there are 12 funds and three Lifecycle strategies to choose from, with a wide range of investment risk profiles. You can choose to put the savings in your Member Account into one fund or you can split them across as many of the funds and Lifecycle strategies as you like. If you do not choose to invest in any of the Lifecycle options as part of this option, there will be no automatic switching of your investments as you approach your Selected Retirement Age.

4 Active Diversified The investment manager(s) of the Active Diversified Fund use their expertise to try to achieve a return above inflation over the longer-term and to protect against falling share markets. A diversified range of traditional and alternative asset classes are used to achieve this. Active Emerging Market Equity The Active Emerging Market Equity Fund invests in equities (also known as shares) of emerging market companies, aiming to achieve long term growth. The shares are actively chosen by the manager with the objective of outperforming the emerging market equity index. The value of equities can go up and down sharply particularly in the short-term. Active Global Equity The Active Global Equity Fund aims to achieve long term growth, but accepting some shorter term volatility associated with investing in equities (shares). This Fund invests in shares of UK and which are actively chosen by the manager with the objective of outperforming the global equity index. Annuity Bonds The Annuity Bonds Fund invests in fixed interest government bonds (gilts) and corporate bonds issued by UK companies. The Annuity Bonds Fund can provide stability as you draw closer to your Selected Retirement Age as the cost of buying a pension varies and depends partly on the price of bonds. Moving savings in your Member Account into the Annuity Bonds Fund when you are close to can help protect the value of the pension you buy. Cash This Fund is composed of short-term cash investments but is not a deposit account. The value can go down as well as up. If you are about to take, moving some of the savings in your Member Account into the Cash Fund could help protect the value of any tax-free cash lump sum you might want to take. Diversified Assets This Fund aims to provide more stable returns than funds that invest in one type of asset, by investing in a mix of growth assets such as equities, commodities and high-yield bonds. Investing in a mix of assets can mean that if one asset is performing poorly, it could be offset by a better performing asset. This is because not all assets react to market conditions in the same way. Diversified Bonds The Diversified Bonds Fund invests in government bonds, corporate bonds and derivatives with the aim of producing positive returns irrespective of market conditions. The Diversified Bonds Fund can therefore provide stability if the absolute value of at retirement is important, for example if you want to take your whole benefits as a cash lump sum. Ethical The Ethical Fund invests in UK and overseas shares. It aims to invest in companies that have adopted approved governance structures. It avoids investment in certain industries. As with the Shariah Fund, the range of investment opportunities may be restricted due to the nature of the fund. Global Equity The Global Equity Fund invests in equities (also known as shares) of both UK and, aiming to achieve long term growth. The value of equities can go up and down sharply particularly in the short-term. Growth The Growth Fund invests in a broad range of assets classes including shares from UK, overseas and emerging market companies, commodities and high yield bonds. The fund is designed to provide a return with the objective of outperforming the benchmark by 2%. Inflation-linked Bonds This Fund invests in government bonds (gilts) with an interest rate tied to inflation. It aims to minimise the conversion risk of buying a pension which increases with inflation. It can be used in a similar way to the Bond Fund and is most suitable for members wishing to buy a pension that will increase each year. Shariah The Shariah Fund invests in shares. Shariah investment is a way of investing that complies with Islamic Shariah principles. As this Fund has some limits on the companies in which it can invest, it does not have as many investment opportunities open to it as, for example, the Global Equity Fund. Things to consider when investing The more that is contributed to the Plan, the higher your pension savings are likely to be when you take. The value of your pension savings will also depend on which investment option you choose. You can use the tool on the Plan website to give you an indication of the impact of increasing contributions or changing your investment choices on the pension you might get. All investments carry some risk and the different types of risk are described in the Glossary. Historically, it is the funds that deliver higher returns over the longer-term that fall more sharply in value over the shorter-term. Remember that what you consider to be a suitable investment today may change in the future, as the risk you are comfortable with alters. It is important that you review your investment decisions regularly to make sure your investments are in line with your changing personal preferences.

5 Investment summary Fund Name 1 Invests in Aim of Fund When suitable Associated risks 3 Charges 2 Active Diversified Active Emerging Market Equity Active Global Equity Annuity Bonds Cash Diversified Assets Diversified Bonds Ethical Global Equity Growth Inflation-Linked Bonds Shariah Range of growth assets which will be chosen by the investment manager and will depend on his view of the markets Shares in emerging market companies Gilts and corporate bonds Wide range of deposit based investments and investments linked to interest rates Broad range of growth assets Government bonds, corporate bonds and derivatives that meet socially responsible criteria Broad range of growth assets including shares in UK, overseas and emerging markets Index-linked gilts issued with a long term repayment period that comply with Islamic Shariah principles growth in excess of inflation growth with the objective of outperforming the emerging market equity index growth with the objective of outperforming the global equity index Broadly match the cost of buying a flat rate pension Provide some protection to the value of your Member Account, particularly an amount equal to a tax-free cash lump sum. growth but with smoother returns than equities Produce positive returns irrespective of market conditions growth via socially responsible investments growth growth with smoother returns than equities Broadly match the cost of buying a pension that increases with inflation growth while meeting Islamic investment principles taking Mid to late career or approaching taking Close to taking your benefits Mid to late career or approaching taking Mid to late career or approaching taking Investment Medium Conversion Low Opportunity cost Medium Investment Low Opportunity cost High Investment Medium Opportunity cost Medium Investment Medium/Low Inflation Low Conversion Low Opportunity cost Medium/High 0.990% % 0.960% 0.240% 0.270% 0.520% 4 Notes: 1. The Trustees reserve the right to change the underlying funds from time to time. 2. The Charges are made up of a combination of an Annual Management Charge ( AMC ) and a Fund Based Charge ( FBC ). For the Diversified Assets, Shariah, Cash and Active Diversified Funds, the AMC is deducted on a daily basis from the investment fund before the daily price of the units is calculated and the FBC is deducted on a monthly basis by cancellation of units held within your Member Account. For all other funds, the combined charges are deduced on a monthly basis by cancellation of units held within your Member Account. 3. For an explanation of associated risks, see the Glossary. 4. There will be additional fees associated with the Diversified Assets Fund and Active Diversified Fund which relate to trading fees, legal fees, auditor fees and other operational expenses. These will be deducted on a daily basis from the investment fund before the daily price of units is calculated and can vary % 0.290% 0.270% 0.633% 0.240% 0.520%

6 The Royal Mail Defined Contribution Plan Glossary Member Account Your Member Account is the value of your savings in the Plan. The value of your Member Account depends on: how much you and your employer contribute to the Plan the investment returns achieved on those contributions the charges taken from your Member Account. Selected Retirement Age This is the age at which you wish to take. It will be assumed that this is age 65 if you do not make a choice. The Selected Retirement Age is used in the Lifecycle option to decide which funds you are invested in. It is also used for illustrations of the pension your Member Account may buy. Investment risk This is the risk that your investments will drop in value. The more time there is until you are due to take, the less worried you might be about short-term falls and more willing to accept investment risk for the chance of a higher return. Inflation risk This is the risk that your investments won t grow quickly enough to keep up with the cost of living (inflation). Even if they grow in value, if they don t grow more quickly than inflation, then the real value of your investment goes down. This could happen with low investment risk funds, which tend to produce low returns. Conversion risk When you decide to take your benefit, you may wish to buy a pension with the money in your Member Account. The cost of buying a pension varies from time to time and moves broadly in line with the price of bonds. Moving your Member Account into a fund that invests in Pre-Retirement bonds when you get closer to can help to protect the pension income that you can buy. Opportunity cost risk This is the risk that you invest cautiously when you could afford to take more investment risk. If you invest everything in less risky funds, such as a cash fund, your pension is likely to be less than it could have been had you invested in higher risk but potentially higher return funds. This is known as opportunity cost. For a more detailed explanation of the types of risk, see the Investment Guide which is available on the Plan website zurich.co.uk/save/royalmaildcplan or by contacting the Zurich Royal Mail Service Team. Flexible income This is also known as drawdown. It is a way of keeping your retirement savings invested and taking regular taxable income when it suits you. Secure lifelong income Also known as an annuity, this provides you with a regular taxable income for the rest of your life. This means you don t have to worry about your income running out. You can choose to use all of your retirement savings to buy an annuity or you could take part as a tax-free lump sum and use the remainder to buy an annuity which is taxed as income. The bigger the lump sum you take, the less you ll have left to provide an income. Contact Zurich If you have any questions about or you want to tell us about any changes to your member account, you can get in touch with the Zurich Royal Mail Service Team by: Telephone The telephone helpline is open 8am to 5.30pm except Bank Holidays and Public Holidays (as defined in England and Wales). An answerphone operates outside these hours and if you leave a message you will be called back the next working day. Address Web We record or monitor calls to improve our service. royalmailserviceteam@uk.zurich.com Zurich Royal Mail Service Team PO Box 1073, Cheltenham, Gloucestershire GL50 9NN zurich.co.uk/save/royalmaildcplan PP (10/17) RRD Royal Mail Group Limited All rights reserved.