LUXFER GROUP PENSION PLAN NEWSLETTER

Transcription

1 LUXFER GROUP PENSION PLAN NEWSLETTER JANUARY 2013 CONTENTS PETER BROCK I begin my review by recording, with great sadness, the death of Peter Brock on 8 June 2012, following a short illness. Peter will be remembered by many of you from the start of his career with Alcan at Rogerstone, and then as HR Manager at Luxfer Gas Cylinders at Nottingham. As HR Manager Peter had responsibility for, and took an interest in, all pension matters. This included serving on the Local Pensions Committee and later serving as secretary for the Group Pensions Council. He had been elected as the first Pensioner Trustee in 2009 and, employing his personnel experience, participated fully in the trustees discussions, and will be sorely missed. I will also take this opportunity to record with sadness the death of Arthur (Archie) Phillips on 20 August Archie had been employed by Magnesium Elektron for 34 years and had participated on the Alcan and Luxfer Group Pension Councils. Having served as a director of the Alcan Pension Trustee Company, Archie served as a trustee of the Plan from its commencement until his retirement on 31 March PENSIONER TRUSTEE I am pleased to note that a number of pensioners put their names forward for election as the next Pensioner Trustee. Having received the highest CHAIRMAN S REVIEW This Newsletter gives a summary of the formal Trustees report and accounts for the year ended 5 April 2012, together with comment on issues relating to the Plan and pensions in general during number of votes Gil Haycock has been elected as the Pensioner Trustee for the next three years. Actuarial valuation This year the Trustees begin to consider the results of the threeyearly actuarial valuation, effective 5 April The last actuarial valuation was conducted at a time when economies were starting to recover from the financial crises which occurred during 2008 and whilst there has been a recovery of sorts in financial markets in the intervening three years, the welldocumented problems in Europe, the slow recovery of the UK economy and the low yield on Gilts, will have had its effect upon the valuation. As a positive note, the financial strength of Luxfer Group has improved markedly, culminating in the floatation on the New York Stock Exchange in October. I am pleased to record that since April 2010, when the current funding agreement came into effect, to the end of the current Plan year (5 April 2013) Luxfer will have paid 4.25 million more than the minimum required under the agreement ( 6.76 million), with a further additional 2.75 million expected in 2013/14. I expect the results of the actuarial valuation, and the funding agreement with Luxfer, will be concluded by the middle of 2013, following which an updated funding statement will be issued to members. Investment Any improvement in the funding position is dependent upon the value of the fund s assets growing. Income & Expenditure Pages 2 Plan Investments Funding Membership Changes to LGPP Given the volatility of investment markets in the past 10 years or so, and expecting this to be repeated in the future, the Trustees have established a mechanism for capturing part of any investment growth as the funding position improves. During the year the value of the Plan investments showed a modest increase in value, although after allowing for encashments to meet benefit payments, the overall value of the fund remained flat. Other matters Page 3 Page 4 Page 5 Page 6 Expression of Wish Pages 7/8 State Benefits Pages 9 Legislation Update Page 10/11 Who Runs the Plan Page 12 We have included in this Newsletter a reminder of changes in legislation and Government proposals. At the conclusion of another year I would like to record my thanks to my fellow Trustees for their valuable input throughout the year. I hope you will find this Newsletter of interest. If you have any comments or queries about the content of this Newsletter or the Website please speak to your LPC or GPC representative, or contact the Pensions Manager, David Mead. Luxfer Group Pension Plan Anchorage Gateway 5 Anchorage Quay Salford M50 3XE

2 Fund Value at 5 April 2011 Outgoings Contributions Investment Gain Fund Value at 5 April m (8.8)m 6.5m 2.2m 162.2m Focus on Financials Income and expenditure thousands thousands Fund at 5 April ,274 Expenditure Pensions (6,201) Tax free cash sums (951) Death benefits (235) Transfer values (119) Insurance premiums (28) Administration expenses (288) PPF levy (967) Income Employers contributions: Ordinary 726 Deficit funding 4,000 PPF levy 957 Life assurance premium 28 Members contributions 596 N I rebates 194 Interest payments 4 Investments Investment income 365 Investment expenses (177) Increase in the value of investments 1,994 (8,789) 6,505 2,182 Fund at 5 April ,173 The income and expenditure figures are taken from the audited accounts of the Plan, which are available through the pensions website or on request to the Pensions Manager. investments and other assets millions millions Equities (Managed by L&G) UK equities 42.5 North American equities 14.6 European (exc UK) equities 15.1 Japanese equities 1.1 Other Far Eastern equities 3.9 Emerging Markets 14.8 Global Ascent Fund (Managed by Black Rock) 21.5 Bonds (Managed by L&G) Corporate Bonds 27.9 Index-linked Gilts 9.5 Bonds (Managed by Wellington) Short-dated credit 8.7 AVCs 1.4 Other net assets Fund at 5 April The value of investments increased during the year by 2.2 million, but after allowing for employer and employee contributions, investment income, encashments to pay benefits and investment manager expenses, the fund remained flat. The Trustees main expenditure is the payment of pensions and cash sums to retiring members; in the year these amounted to over 7.1 million, an increase of 0.6 million compared with the previous year. In the year the employers contributed over 5.7 million ( 4.6 million in the previous year), the largest payment being 4 million deficit funding payment. 2

3 Focus on Investments The value of the fund (excluding other net assets) remained flat during the year, after allowing for the sale of investments to cover expenditure, to stand at million. Where the money is invested Distribution of investments 5 April million Additional voluntary contributions 0.9% 42.5m 14.6m 15.1m 1.1m 3.9m 14.8m 21.5m 27.9m 9.5m 8.7m 1.4m UK equities North American equities European (exc UK) equities Japanese equities Other Far East equities Emerging Markets equities Global Ascent Funds (BlackRock) Corporate Bonds (L&G) Index-linked Gilts Corporate Bonds (Wellington) Additional voluntary contributions Bonds 5.4% Gilts 5.9% Bonds (L&G) 17.3% Global Ascent Fund 13.3% Emerging equities 9.2% UK equities 26.4% Other Far East 2.4% Japan 0.7% North America equities 9.1% Euro equities 9.4% Review of the year In the year under review, equities performed poorly until the end of 2011, when improving economic data relating to the US economy led to an improvement in market returns through to the beginning of April Throughout 2011 and into 2012 investors remained concerned about the absence of sustained economic growth and the effect of the financial crises in South European states. In contrast to the economic contraction across Europe into 2012, the US economy improved during 2011 and into The UK economy lagged the US and slowly moved out of recession in the latter part of The high level of inflation experienced through 2011 began to fall during China and India, which hitherto had been leading the global economic growth, exhibited signs of slowdown during 2011/12, caused in part by lower export demand from Europe. In contrast UK Gilts performed strongly over the year, with both the Bank of England s quantitative easing programme and the UK being perceived as a safe haven causing Gilt yields to fall to unprecedented levels. INVESTMENT STRATEGY CHANGES Measures were taken during the year to harness any growth the fund may enjoy. With a high proportion of the fund (70%) invested in growth assets (equities and Global Ascent) the Trustees are keen to control the short term risk of volatility. They have therefore established a risk control mechanism so that as the funding level improves above 70% a part of the growth assets will be switched to Bonds. The initial aim of this strategy is to move to an allocation of 60% growth assets and 40% Bonds. performance The performance of the fund assets is shown in the table below. All funds managed by Legal & General (L&G) are designed to track their relevant indices within agreed margins. In the year the funds achieved their performance objectives. The Global Ascent Fund managed by BlackRock has a target to return 13% pa above the return on cash in any three year period. Due to the volatility of markets over the past three years, this target has not been met. INVESTMENT PERFORMANCE - Year to 31 March 2012 %pa Fund % Index % UK equities (11.3) (11.5) (5.1) (5.1) (8.5) (8.8) (1.8) North Am equities Euro equities Japan equities Far East equities Emerging equities Global Ascent L&G Bonds Gilts Wellington Bonds 3

4 FUNDING The accounting figures show that the employers paid over 5.7 million into the Plan during the year ending 5 April million was for deficit reduction (under the funding agreement consisting of 2.25 minimum payment and 1.75 million profit sharing). It will also be noted that the payment in respect of the Pension Protection Fund (PPF) levy fell below 1 million, and as explained below the levy is expected to fall further in future. Our 2011 Newsletter provided an estimate of the funding position in April With the actuarial valuation in progress it is not possible at the present time to update the position to 2012 we will be in a position to do so by the middle of However, the Trustees do monitor the funding level regularly, together with the financial strength of Luxfer Group. Should there be any concerns about either the Trustees would have to take advice on any action to take. The Trustees have been particularly pleased to note the marked improvement in the financial strength of Luxfer, most recently following the floatation on the New York Stock Exchange, resulting in a stronger balance sheet and reduced debt. PPF levy The Trustees are required to pay an annual levy to the PPF, the payment being subsequently reimbursed in full by Luxfer. The levy helps the PPF meet their commitments to members of insolvent pension schemes (for more information about the role of the PPF and the level of compensation paid to members of insolvent pension schemes go to The amount of levy any pension scheme pays depends on a number of factors, the most significant being the size of the pension fund deficit and the perceived risk of the sponsoring employer becoming insolvent ( the insolvency risk ). The insolvency risk is determined initially by a credit rating company, Dunn & Bradstreet (D&B) and the PPF apply the risk rating in calculating the levy payable. So the higher the perceived risk of insolvency the more the amount of levy. Luxfer have worked hard to improve the factors that D&B take into account in making its assessments and as a result have been able to improve the Group s risk rating and so reduce the PPF levy payable. From a figure as high as 1.75 million in 2009 the levy has fallen to 706,000 in 2012/13 and we have estimated it may fall below 500,000 in 2013/14. PENSION INCREASES For pensioners, the pension in payment increased at 6 April 2012 as follows:- Increase %pa Pension in respect of service before 6 April % - other than guaranteed minimum pension (GMP) accrued before 6 April payable to members who in 2011 had not exchanged their pension for a higher fixed pension Non-commuted pension in respect of service between 6 April 1997 and 5 April % Non-commuted pension in respect of service after 5 April % 4

5 Membership During the year the number of members contributing to the Plan ( active members ) fell by 11 to leave 205 active members at 5 April The number of members receiving pension increased by 21 to 822 and the number of members who had left service without immediately drawing a pension ( deferred members ) fell to 848. There are three main categories of members in the LGPP: Change in Membership Over the Past Year 6th April th April 2012 Total membership down 10 1,885 1,875 Active Members Employees of Luxfer Group or one of its subsidiaries who are currently building up benefits in LGPP ACTIVES down 11 Retirements (10) Leavers (1) Deaths (0) Deferred Members Those who have left our employment and have not yet started to receive their pension from LGPP. DEFERREDS down 20 Members becoming 1 deferred Members retiring (16) Transfers (1) Deaths (4) Pensioners Those members who receive a pension from LGPP, including dependants in receipt of a pension following the death of a member. PENSIONERS up 21 New pensioners 26 Spouses pensions starting 13 Deaths (14) Members taking all pension as cash (4) th April th April 2012 ELECTION OF THE PENSIONER TRUSTEE The votes cast in the recent election of the Pensioner Trustee were: Gil Haycock 222 Tony Whelan 53 John Orwin 52 Ken Savage 31. Gil Haycock is therefore elected for three years. Until his retirement in 2011, Gil was HR Manager at MEL Chemicals. 5

6 RETIREMENT AT OR AFTER AGE 65 CHANGES TO THE PLAN 6 There have been three recent legislative changes that have a bearing on the Plan rules relating to benefits payable at or around the retirement age. These changes are: The increase in the State pension age for both men and women; The right to continue working later than age 65 The requirement that the Plan does not discriminate on grounds of age State pension age We have commented on changes to the State Pension Age elsewhere in this Newsletter. Continuing to work after age 65 It is no longer lawful for employers to require employees to retire at age 65. Discrimination on grounds of age With certain exceptions, a pension scheme may not include provisions that treat a member differently because of age. The exceptions principally relate to actuarial factors such as those relating to calculating transfer values, exchanging pension for tax free cash or for calculating an early retirement reduction. Effect on Luxfer Group Pension Plan The benefits under the Plan are defined around a normal retirement age of 65. Currently benefits accrue up to this age, but not later, and contributions stop at this age. It may be possible to retire before this age and draw a reduced pension and if the pension is not taken until later it would be increased on account of its later commencement. The Plan needs to recognise that members, in future, may continue working after age 65 (eg because of the later State pension age) but that the rules must not discriminate against such members. Accordingly the following changes have been made to the Plan rules: 1. Pension accrual Members will continue to accrue pension, while in service after age 65, in the same way that pension accrues up to age 65. Both the existing accrued pension and pension accrued after age 65 will be revalued each year up to 5 April preceding the date of actual retirement. 2. Pension contributions Members contributions will continue, while in service after age 65, at the rate (9.8% or 7.4%) selected by the member, until the date of actual retirement. 3. Death benefits In the event of a member s death while in service after age 65, there will be payable a lump sum of 3 times pensionable earnings and a dependant s pension of 60% of the accrued pension. 4. Drawing pension at age 65 Members may still draw their pension at age 65, in which case they will be treated as having retired and the foregoing will not apply. Pensionable service limited to 40 years Currently the rules limit pensionable service to 40 years and member s contributions cease at this point. This rule does not sit easily with the changes listed above and accordingly the limit on pensionable service has been removed. Members will accrue pension, and contribute to the Plan, in all years that they are in pensionable service.

7 Deferred members If you have left service without taking an immediate pension, you have a preserved pension which will become payable from age 65. It may be possible to draw a reduced pension before age 65 and if the pension is taken after age 65 it would be increased on account of its later commencement. Deferred members are reminded that the preserved pension carries a death benefit payable in the event of death before the pension starts, and you are reminded to keep your expression of wish up to date for the reasons explained below. KEEPING IN TOUCH If you have any queries about the Plan or about your benefits, or if you would like further information regarding any issue covered in this Newsletter, you should contact the pensions manager (see Who runs the Plan ) or go to the pension scheme website. If you are a pensioner or deferred member, remember to notify the Plan administrator Mercer, of any change of address. Remember the pensions website David Mead Pensions Manager EXPRESSION OF WISH We have repeatedly reminded members to make sure their expression of wish forms are up to date, but unfortunately the Trustees still find this is not always the case, and sometimes there is no expression of wish at all. The expression of wish helps the Trustees decide to whom any lump sums payable following your death should be paid. Although the contents of the form are not binding on the Trustees it is their preference to follow your wishes unless there are, in their opinion, good reasons not to do so. The reason for this is obvious you know best how you would like any lump sum paid but sometimes it is not clear if the contents of an expression of wish, completed many years ago, still reflect how you would wish the death benefit to be paid. The problems the Trustees have include: Deciding how to pay a lump sum if the member does not complete an expression of wish, or leave a Will; Deciding whether to take notice of an expression of wish completed many years before the member s death, where it is apparent that the member s personal circumstances have changed, but it is not clear if the member s wishes in respect of the death benefit has changed. It is in the interests of those whom you wish to receive any lump sum benefits that you ensure your expression of wish is up to date. Even if your wishes have not changed it would help the Trustees if you returned a form at least every five years. The form overleaf can be detached, completed and returned. 7

8 # LUXFER GROUP PENSION PLAN - EXPRESSION OF WISH If a lump sum death benefit becomes payable, the Trustees will decide who will receive the benefit. Making payments this way avoids the need for payment of tax. The Trustees will take into account your personal circumstances and any wishes you have expressed. You should make you wishes known to the Trustees by completing and returning the form below. (Please use block capitals only. You may continue on a separate sheet of paper, if necessary. Return in a sealed envelope marked Luxfer Group Pension Plan Expression of Wish with your name and National Insurance No. to your Local Pensions Administrator or to the Pensions Manager at Luxfer Group Limited, Anchorage Gateway, 5 Anchorage Quay, Salford M50 3XE.) Your Name: National Insurance No: In the event of my death, it is my wish that the person or persons named below is/are considered as recipients of any lump sum death benefit payable. FULL NAME CURRENT ADDRESS RELATIONSHIP TO MYSELF (IF ANY) % OF BENEFIT I understand that this Expression of Wish Form will not be legally binding on the Trustees. Signed: Date: NOTE: This form can also be downloaded from 8

9 State Benefits and Other Information Basic Pension From State Pension Age you will be entitled to claim your State pension benefits, although if you prefer you may delay receiving these. So if you continued to work you have the option of taking your State pension as well, or of deferring it until you stopped work. Currently the full basic State pension for a single person is per week and for a married couple claiming on the man s pension it is per week. The pension will be added to your other income for income tax purposes. To claim the full pension you need to have paid, or be credited with, national insurance contributions for a minimum number of 30 years. Additional Pension You may also be entitled to an Additional State pension (otherwise known as SERPS or the State Second Pension) but as you have been contracted out through your membership of the Plan this will be largely replaced by your Plan pension. Pension Forecast Inflation protection The basic State pension increases each April by the higher of: The increase in average earnings, The increase in prices (CPI), 2.5% In his Autumn Statement in December the Chancellor of the Exchequer stated that the basic State Pension would increase in April 2013 by 2.5% to Pension Tracing Service If you had an old company pension but have lost contact with the administrator the Pension Tracing Service may be able to help. They may be contacted on For more information on any of these items visit: The Government have improved their pensions website (see image of the new Home Page below). You can obtain a forecast of your State pensions from the website below Pension Credit Pension Credit is a means tested benefit of up to per week for a single person and for a couple. To calculate if you are entitled to Pension Credit the DWP will take into account your income from work or pensions, and the value of your savings. 9

10 Legislation update The 2011 Newsletter outlined a number of Government policy initiatives. The progress with these is set out below. State Pension Age State Pension Age is set to rise in recognition of the improvements in life expectancy. The table below shows the age at which you will reach State Pension Age under current proposals. YEAR OF BIRTH State Pension Age Born before * Born between & Rising in monthly steps to 66 Born between & Born between & Rising in monthly steps to 67 Born between & Born after *Females born between April 1950 and December 1953 have State Pension Age rising from 60 to 65 in monthly steps. Auto-enrolment The aim of encouraging more employees to save for retirement, especially those on lower pay or employed by smaller employers, began in October when the largest employers began auto-enroling employees into pension schemes. Over the next five years the requirement to auto-enrol will filter down to the smallest employers, with Luxfer becoming involved from As a member of the Plan you will not be affected by this requirement and other Luxfer Group employees will be able to join the Luxfer Group Retirement Savings Plan. State pension reform The complexity of achieving its goals has already led to the postponement of the proposals on at least two occasions. Measuring inflation There are two common measures of inflation published in the UK, RPI and CPI, both having relevance to increases paid on benefits provided by the Plan. They are constructed differently, both in terms of the basket of goods and services included in the index and in terms of the statistical calculation. Historically the rate of increase in CPI has lagged behind the increase in RPI. Now the construction of the RPI is under review and this may result in the two indices moving closer together. The Government are expected to publish proposals for reforming the basic State pension, probably by raising the flat rate pension to 140 per week. 10

11 AUTUMN STATEMENT PENSION TAXATION CHANGES The contributions payable to a pension scheme, or the benefits payable, have always been subject to limitation, with any contributions or benefits above the limits liable for additional taxation. Currently the limits on contributions and benefits are: Annual Allowance The Annual Allowance defines the maximum that may be input into pension savings each year, before being liable for tax (any contributions within the Annual Allowance are exempt from tax). For members of the Plan the input is calculated as the value of the increase in the accrued pension over the year in question. A simplified calculation is shown below. In these examples the value of the pension input, and the amount of the Annual Allowance used, is 8,000 (example 1) and 16,000 (example 2). In addition to this members may have other pension savings in the form of AVCs or, possibly, contributions to a personal pension plan. These contributions would also count towards the Annual Allowance (generally any deferred pensions from former employers do not count). For the current tax year the Annual Allowance is 50,000 (having been 255,000 before April 2012), but from April 2014 this will fall to 40,000, a reduction in the total tax free input allowed. Lifetime Allowance The Lifetime Allowance defines the maximum benefits you may receive from the Plan and any other pension arrangement. Any pension benefits that become payable are valued at 20 times the pension received. For example, if you receive a pension of 10,000 this has a Lifetime Allowance value of 200,000. If you also take a tax free cash sum this is added to the value of the pension. So a tax free cash sum of 30,000 would give a total Lifetime Allowance value of 230,000. Currently the Lifetime Allowance is 1.5 million (having been 1.8 million before April 2012), meaning that you can take benefits up to this value before being liable for a special rate of tax on any excess. From April 2014 the Lifetime Allowance will reduce to 1.25 million. Both annual allowance and Lifetime Allowance currently are at a level where only the top 5% of earners will be affected. However, there is no guarantee that these limits will be reviewed in future (and as we have seen they have been higher in the past) so in future more earners may come against one or both of these limits. EXAMPLE 1 EXAMPLE 2 Accrued pension at start of year 15,000 30,000 Revaluation added to accrued pension Additional pension accrued in year Increase in accrued pension in year Less allowance for inflation Net increase in accrued pension Value of increase (times 16) 8,000 16,000 11

12 Your Trustee Board Who Runs the Plan?. Responsibility for the management of the Plan rests with the Trustees who are: Stephen Williams Chairman Graham Bond Magnesium Elektron Andrew Considine MEL Chemicals Brian Purves Luxfer CEO Jim Simpson Gas Cylinders Member- Nominated Phil Wild MEL Chemicals Member- Nominated Gil Haycock Pensioner Trustee What the Trustees Do The Trustees principal responsibility is to ensure that the Plan is properly managed in accordance with the trust deed and in compliance with legislative requirements. We monitor the funding of the Plan and review the arrangements in place to provide additional future funding so that sufficient assets are built up to pay members benefits. At least once every three years we receive a full actuarial valuation, but the funding position is reviewed regularly. We ensure the correct contributions are paid by members and employers and have the plan accounts audited annually. We keep in contact with the Company to satisfy ourselves that it is able to make the contributions it has agreed to pay. We meet at least three times a year to discuss the business of the Plan and to ensure the Plan is properly managed. We regularly review our investment strategy to ensure it remains appropriate. An investment committee meets quarterly to review investment opportunities. We receive regular reports from our investment managers and Plan administrator to check that they perform in line with their service agreements. We also meet the investment managers and Plan administrator to review performance. The Group Pensions Council The Day-to-Day Management of the LGPP Phil Wild and Jim Simpson are appointed as members of the Group Pensions Council. The Group Pensions Council is a forum for members of Local Pension Councils to meet to discuss matters relating to the Plan and pensions in general. The members of the Group Pensions Council are: David Mead Pension Manager Steve Williams Chairman of Trustees Jim Simpson Luxfer Gas Cylinders Phil Wild MEL Chemicals John Ormes Magnesium Elektron Jon Fulcher Superform Aluminium The day to day running of the Plan is managed by the Pensions Manager, David Mead. He can be contacted at the following address: Luxfer Group Limited, Anchorage Gateway, 5 Anchorage Quay, Salford M50 3XE Tel: , david.mead@luxfer.com If you have any questions about the Plan or pensions in general your first point of contact is your Local Pensions Administrator or your Local Pensions Council member. It is through your Local Pensions Council that matters of concern can be raised at the Group Pensions Council and so brought to the attention of the Trustees and the Company. David Mead Pensions Manager Plan Advisors The Trustees retain a number of advisers to help run the Plan: Jon Ferns of Mercer Limited provides actuarial advice to the Trustees in his capacity as scheme actuary. Other Mercer consultants provide investment and general advice about pensions matters. Mercer Limited administer the Plan membership records and provide quotations for members at retirement, leaving etc. They also manage the Trustees bank account and pay pensions and other benefits. The administrators may be contacted at: Mercer Limited, Mercury Court, Tithebarn Street, Liverpool L2 2QH, Tel: Grant Thornton audit the Plan accounts. Eversheds provide legal advice to the Trustees. 12 Comments and queries should be addressed to: David Mead at the address above.