YOUR PENSION. Proposed changes and the consultation process

Transcription

1 YOUR PENSION Proposed changes and the consultation process

2 01 LADBROKES PENSION PLAN CONTENTS 01 LADBROKES PENSION PLAN PAGE 3 02 A SUMMARY OF THE PROPOSED CHANGES PAGE 4 03 HOW THE COMPANY PROPOSE TO MAKE THE CHANGES PAGE EXAMPLES OF IMPACT PAGE WHO TO CONTACT PAGE 20 LADBROKES PENSION PLAN PAGE 2

3 01 LADBROKES PENSION PLAN WELCOME TO YOUR LADBROKES PENSION This booklet sets out the changes that Ladbrokes plc ( the Company ) proposes to make to the Company s Pension Arrangements. You have received this because you are an active member of the Ladbrokes Pension Plan ( the Plan ), and it is important you read and understand this booklet and the Your Pension FAQs booklet which accompanies this and ask any questions that you have. This booklet also contains details of how the consultation process will work, how you can share your comments and who to contact if you have any queries. If the proposed changes are implemented, they will affect both your contractual pension benefits and your pension contributions, and so your take home pay. This booklet explains the proposed changes and sets out the opportunity you will have to join the Ladbrokes Pension Scheme on enhanced terms. The Company is committed to a full and open consultation process and wants to make sure your views are heard. As you would expect, any questions you have will be answered and any comments and suggestions listened to and considered. If you have questions about the pension proposals, you can Pensions@Ladbrokes.co.uk LADBROKES PENSION PLAN PAGE 3

4 02 A SUMMARY OF A SUMMARY OF THE PROPOSED CHANGES THE PROPOSED CHANGES The proposed changes to your pension benefit with effect from 1 July 2015 are: 1 You would be offered membership of the Ladbrokes Pension Scheme on enhanced terms; 2 You would stop paying contributions to the Ladbrokes Pension Plan and begin to pay contributions into the Ladbrokes Pension Scheme; 3 You would stop building up pension in the Plan in two ways: a) Cease monthly build up of pension benefit in the Ladbrokes Pension Plan at 30 June 2015 b) The Ladbrokes Pension Plan pension benefit built up to date would be calculated with reference to your Final Pensionable Salary at 30 June If the consultation proposals are implemented, the Company will double its first year pension contribution for those Ladbrokes Pension Plan members who agree to join the Ladbrokes Pension Scheme before the end of the process. LADBROKES PENSION PLAN PAGE 4

5 02 A SUMMARY OF THE PROPOSED CHANGES Why the Company needs to make this change The Company proposes to introduce this change because it will help, over time, reduce the volatility within the Plan by stopping the build up of future risk. Higher levels of volatility are a problem because they make cashflow planning almost impossible to carry out accurately and like all businesses, one of the key requirements of the Company is to understand its cashflow position in the short, medium and long term. The volatile nature of the Plan s funding makes this cashflow planning very difficult to achieve. Taking the last 3 year period as an example, if the valuation date had fallen on the best or worst dates, the Company could have faced paying contributions to pay off the deficit of: Best Worst 4.0m over 9 months 11.5m per annum for 7 years As you may know, the Company has taken action in the past in part because of the concern with volatility: 2002 / 2003 changing the benefit and member contribution basis for future pensionable service 2007 closing the Plan to new entrants As you will see from the information about this in Section 4 of the Your Pension FAQs document, there remains significant volatility in the Plan so the Company needs to renew its efforts to deal with this. More information about this and the timing of this proposal can be found in Section 4 What pension volatility is and why it s important in the Your Pension FAQs document. LADBROKES PENSION PLAN PAGE 5

6 02 A SUMMARY OF THE PROPOSED CHANGES Further changes The Company is committed to the provision of high quality pension arrangements. More information about the Company s aims regarding pension provision can be found in Section 2 Ladbrokes approach to pensions in the Your Pension FAQs document This includes the pensions built up in the Plan as well as the pensions being built up in the Ladbrokes Pension Scheme (invested with Legal & General). If the proposals are implemented, the Ladbrokes Pension Scheme Company contribution structure would also be improved for all colleagues. For Scheme members with 5 years or more opt in pensionable service (which would include all active Plan members), the Company will pay 1.5% contribution for each 1% contribution paid by the members to the maximum levels. And, if the proposals are implemented, and you choose to accept the change before the end of the process, the Company will double its first year contribution into your Scheme pension with Legal & General.. Example If a colleague in the Plan decided to pay 6% of their salary into the Scheme, Ladbrokes would pay 9% as the improved Company contribution, plus an additional 9% for the first year, giving a total of 18% Company contribution for that year. More information about how the Ladbrokes Pension Scheme operates can be found in Section 7 How the Ladbrokes Pension Scheme operates in the Your Pension FAQs document LADBROKES PENSION PLAN PAGE 6

7 02 A SUMMARY OF THE PROPOSED CHANGES More Details about the Proposals 1) Choose to start saving in the Ladbrokes Pension Scheme With effect from 1 July 2015, the Company proposes that Plan Members will be able to join the Ladbrokes Pension Scheme (which is invested with Legal & General) and receive an improved matching Company contribution. 2) Choose how much to pay into the Ladbrokes Pension Scheme The Scheme has full flexibility to allow you to be able to choose the level of your personal contributions into the Scheme. The table below shows the contributions you could make, including the improvement that would be made if the proposals are implemented. More than 5 years opt in pensionable service Improved contribution Grade Employee contribution Company maximum contribution Up to Grade 3 (including Retail) Up to 6.0% 9.0% Grade 2 / 2b Up to 10.0% 15.0% Grade 1a / 1 Up to 15.0% 22.5% LADBROKES PENSION PLAN PAGE 7

8 02 A SUMMARY OF THE PROPOSED CHANGES 3) Stop building up pension in the Plan, having the pension built up to date protected. Under the proposals, your last day of pensionable service in the Plan would be 30 June You would become a deferred member of the Plan from that date. This means that you will not build up additional pensionable service in the Plan from that date, and that your Final Pensionable Salary at 30 June 2015 will be used to calculate your deferred pension. What you have built up will increase, broadly in line with inflation up to certain limits, until it begins to be paid. More details about what a deferred pension is (and how it is increased) can be found in the Plan Member Handbook. If you do not have a copy of this to hand, please visit the Ladbrokes Pension Plan website for more information. This is: How is the pension made up? + Under the proposed changes State Pension + Ladbrokes Pension Scheme Continue building up a Begin saving in your Basic State Pension Individual pension pot Ladbrokes Pension Plan A broadly inflation linked deferred pension based on pensionable service to, and Final Pensionable Salary at 30 June 2015 Current Plan Basic State Pension + Ladbrokes Pension Plan More information about changing State Pension benefits can be found in Section 10 Your state pension entitlement in the Your Pension FAQs document. LADBROKES PENSION PLAN PAGE 8

9 02 A SUMMARY OF THE PROPOSED CHANGES How does the Ladbrokes Pension Scheme with (Legal & General) work? The Scheme is a defined contribution, or money purchase, scheme. This means that your contributions are combined with Ladbrokes contributions and put into an individual pension pot, created for you with Legal & General. This individual pension pot is separate from Ladbrokes, and separate from the pots of other Scheme members. Choice 1: How to Contribute YOU CAN CHOOSE You can choose how much you want to pay into your individual pension pot. Normally, monthly deductions are made from your salary, but you can choose to pay money into your individual pension pot direct from your private savings if you wish. As set out on page 7 Ladbrokes will also contribute up to certain limits based on your monthly contributions. Both you and Ladbrokes will pay full National Insurance Contributions which help you to build up a full State Pension (see section 10 Your state pension entitlement in the Your Pension FAQs document for more information). Choice 2: Where to invest YOU CAN CHOOSE You decide how to invest your funds. Currently, Legal & General provide 16 investment funds and 3 lifestyle funds to choose from which cover the main investment options. We know this will be new to most people, so we will provide support and information to help you make your decision on which investment fund/s to choose and how to invest. If you do not wish to choose how to invest, there is a default fund available which everyone will go into initially. This default investment fund has been chosen by the Ladbrokes Pension Scheme Trustees and is called a Multi Asset Lifestyle Profile. As time goes on, the size of your individual pension pot will depend on the amount of money you invest in it, Ladbrokes contributions and the net investment returns you receive on your investments. For more information about this, see Section 8 What this means for you of the Your Pension FAQs document. LADBROKES PENSION PLAN PAGE 9

10 02 A SUMMARY OF THE PROPOSED CHANGES Choice 3: Options at Retirement YOU CAN CHOOSE Having paid into the Scheme, there will come a time when you are ready to receive money rather than pay it in. When you are ready to take your benefit (at the moment, you can choose to do this from the age of 55), the Scheme offers a wide range of options about how to do this. The main choices are below: You can take up to 25% as a tax-free cash lump sum; From April 2015, the Government proposes that you will be able to take your remaining individual pension pot as a taxable cash lump sum; or, You can convert the remaining individual pension pot into the type of lifetime pension you would prefer (for example you can set how it increases each year and how much (if any) is paid to a surviving spouse) Other choices You have freedom to choose when to receive your pension and, like now, you can continue to work for Ladbrokes after you have started taking it. Although the Scheme s Notional Pension Age is 70 (to make sure this will not fall below the changing State Pension Age for a number of years), you can choose to change your Notional Pension Age to any age between 55 and 75. Expenses Your individual pension pot will be subject to an annual management charge a cost that is deducted automatically from your individual account on a monthly basis. This charge reduces for fund values in excess of 50,000 and depends on the actual investment funds that you choose to invest in. All other expenses of running the Scheme are met by the Company. Life Cover We offer a salary multiple life assurance lump sum. There are no planned changes to this at this time. LADBROKES PENSION PLAN PAGE 10

11 02 A SUMMARY OF THE PROPOSED CHANGES Keeping your details up-to-date Please do remember to keep your Life Assurance Nomination of Beneficiary form up-to-date. It s a crucial document that tells Trustees who should receive any lump sum of money, should the worst happen. Looking after your future If these proposals are implemented at the end of the consultation period but you decide not to join the Scheme, you will be giving up a valuable benefit. If you re thinking about deciding not to join, we strongly recommend you speak to an Independent Financial Advisor. By not joining, you would not be building up any further Ladbrokes pension, only building State Benefits through National Insurance Contributions. Crucially, you would also miss out on the significant contributions paid in by Ladbrokes. LADBROKES PENSION PLAN PAGE 11

12 03 HOW THE COMPANY PROPOSE TO MAKE THE CHANGES HOW THE COMPANY PROPOSE TO MAKE THE CHANGES The Company will be asking all colleagues in the Ladbrokes Pension Plan to agree to the proposed pension changes. The Company will initially consult with representatives of all affected colleagues about the proposals to ensure that colleagues understand the proposals in full. This will ensure the Company can listen to and consider any alternative ideas colleagues have in order to achieve the same key business outcomes for the Company. Subject to the consultation process, the Company proposes to ask each Plan member to agree to a variation to their contract of employment to implement the proposed changes to pension arrangements. You would be agreeing to cease build up of pension in the Plan at 30 June 2015 and that the pension you have earned in the Plan would be based on your Final Pensionable Salary at 30 June 2015, not on your future Pensionable Salaries. More information about the consultation process can be found in Section 6 More about the consultation process in the Your Pension FAQs document. LADBROKES PENSION PLAN PAGE 12

13 03 HOW THE COMPANY PROPOSE TO MAKE THE CHANGES Providing your views on the proposals Your suggestions and questions are really important to making this consultation process work. We are absolutely committed to listening to your ideas on how we can deliver the best possible pension arrangements for all our people and our Company. We ll soon be holding regular consultation meetings throughout the business with employee representatives. These employee representatives will be supported to represent their area do make sure you get involved. This consultation process will last for a minimum of 60 days WHAT DO YOU THINK? What happens during consultation? During the consultation meetings, we will: 1. Address and try to answer all the questions 2. Note colleague representatives views so that these can be taken into account when Ladbrokes makes the final decision. KEEPING YOU UP-TO-DATE Your employee representative will provide you with updates and copies of the consultation meeting minutes. As part of the process, we will ask the employee representatives to discuss these proposals with the colleagues they represent in order to get their views. In particular, we would like to understand all colleagues views regarding: The reasons given for the proposed changes; Ways of avoiding having to make the proposed changes; Their agreement or otherwise to the proposed changes; and, Details of any objections they may have to the proposed changes. Once the consultation has ended, Ladbrokes will review all the feedback and make a decision. If we have decided to implement the proposals, we will then write to all those affected to ask for their agreement. The process will then move on to holding individual consultation meetings with any individual employees who do not agree to the changes. This is likely to be in the autumn 2014, but the Company will keep the employee representatives updated about this timetable. More information about the consultation process can be found in Section 6 More about the consultation process in the Your Pension FAQs document. LADBROKES PENSION PLAN PAGE 13

14 04 EXAMPLES OF IMPACT How the proposals may impact typical members In the following tables you ll find a number of examples. These are intended to help you understand the general principles of the proposed changes, and show comparisons of the current position against the changes and two different types of Ladbrokes Pension Scheme benefit. Each individual s circumstances will be different - and for help understanding your own position please use the modelling tools available from Support to help you do this is set out on pages in section 8 of the Your Pension FAQ booklet. James, age 30, with 10 years service Basic Salary at 31/03/ ,000 Accrual Rate in Ladbrokes Pension Plan 80ths Projections assume that member continues to pay his current contribution rate of 4.5% in the Ladbrokes Pension Scheme Option Payable from age 65* Current Position Under Proposal LPS Pension increases in line with inflation & spouse s pension LPS pension has no increases or spouse s pension All Pension Past service pension (LPP) 1,100 pa 1,100 pa 1,100 pa Future service pension 3,800 pa 2,100 pa 3,800 pa Projected total pension 4,900 pa 3,200 pa 4,900 pa 25% Cash Lump Sum Tax-free cash lump sum; and 23,500 23,200 23,200 Residual pension 3,500 pa 2,300 pa 3,700 pa Max Cash Lump Sum** Cash lump sum; and 23,500 tax free 23,200 tax free cash 54,000 taxable cash 23,200 tax free cash 54,000 taxable cash Residual pension 3,500 pa 800 pa 800 pa In addition member would also receive a state pension of 7,500 pa*** from age 68 under all proposals * Figures exclude any entitlement to pension benefits earned in previous employment (if any) and are in today s money terms (see assumptions page for further explanation) ** Assumes in post 2014 budget world member takes all of LPS account as cash *** Assumes a full entitlement to flat-rate state pension LADBROKES PENSION PLAN PAGE 14

15 04 EXAMPLES OF IMPACT Rachel, age 38, with 13 years service Basic Salary at 31/03/ ,000 Accrual Rate in Ladbrokes Pension Plan 60ths Projections assume that member continues to pay her current contribution rate of 6.0% in the Ladbrokes Pension Scheme Option Payable from age 65* Current Position Under Proposal LPS Pension increases in line with inflation & spouse s pension LPS pension has no increases or spouse s pension All Pension Past service pension (LPP) 4,000 pa 4,000 pa 4,000 pa Future service pension 8,200 pa 3,700 pa 6,400 pa Projected total pension 12,200 pa 7,700 pa 10,400 pa 25% Cash Lump Sum Tax-free cash lump sum; and 58,600 48,300 48,300 Residual pension 8,800 pa 5,600 pa 7,600 pa Max Cash Lump Sum** Cash lump sum; and 58,600 48,300 tax free cash 87,900 taxable cash 48,300 tax free cash 87,900 taxable cash Residual pension 8,800 pa 2,900 pa 2,900 pa In addition member would also receive a state pension of 7,500 pa*** from age 67 under all proposals * Figures exclude any entitlement to pension benefits earned in previous employment (if any) and are in today s money terms (see assumptions page for further explanation) ** Assumes in post 2014 budget world member takes all of LPS account as cash *** Assumes a full entitlement to flat-rate state pension LADBROKES PENSION PLAN PAGE 15

16 04 EXAMPLES OF IMPACT Abdul, age 45, with 20 years service Basic Salary at 31/03/ ,000 Accrual Rate in Ladbrokes Pension Plan 60ths Projections assume that member continues to pay his current contribution rate of 6.0% in the Ladbrokes Pension Scheme Option Payable from age 65* Current Position Under Proposal LPS Pension increases in line with inflation & spouse s pension LPS pension has no increases or spouse s pension All Pension Past service pension (LPP) 9,300 pa 9,300 pa 9,300 pa Future service pension 9,300 pa 3,500 pa 6,400 pa Projected total pension 18,600 pa 12,800 pa 15,700 pa 25% Cash Lump Sum Tax-free cash lump sum; and 89,300 73,700 73,700 Residual pension 13,400 pa 9,300 pa 11,500 pa Max Cash Lump Sum** Tax-free cash lump sum; and 89,300 tax free 73,700 tax free cash 87,300 taxable cash 73,700 tax free cash 87,300 taxable cash Residual pension 13,400 pa 6,700 pa 6,700 pa In addition member would also receive a state pension of 7,500 pa*** from age 67 under all proposals * Figures exclude any entitlement to pension benefits earned in previous employment (if any) and are in today s money terms (see assumptions page for further explanation) ** Assumes in post 2014 budget world member takes all of LPS account as cash *** Assumes a full entitlement to flat-rate state pension LADBROKES PENSION PLAN PAGE 16

17 04 EXAMPLES OF IMPACT Charlotte, age 55, with 25 years service Basic Salary at 31/03/ ,000 Accrual Rate in Ladbrokes Pension Plan 60ths Projections assume that member continues to pay her current contribution rate of 9.0% in the Ladbrokes Pension Scheme Option Payable from age 65* Current Position Under Proposal LPS Pension increases in line with inflation & spouse s pension LPS pension has no increases or spouse s pension All Pension Past service pension (LPP) 13,600 pa 13,600 pa 13,600 pa Future service pension 2,700 pa 1,100 pa 2,000 pa Projected total pension 16,300 pa 14,700 pa 15,600 pa 25% Cash Lump Sum Tax-free cash lump sum; and 81,000 77,400 77,400 Residual pension 12,100 pa 11,000 pa 11,900 pa Max Cash Lump Sum** Cash lump sum; and 81,000 77,400 tax free cash 29,600 taxable 77,400 tax free cash 29,600 taxable Residual pension 12,100 pa 10,100 pa 10,100 pa In addition member would also receive a state pension of 7,500 pa*** from age 66 under all proposals * Figures exclude any entitlement to pension benefits earned in previous employment (if any) and are in today s money terms (see assumptions page for further explanation) ** Assumes in post 2014 budget world member takes all of LPS account as cash *** Assumes a full entitlement to flat-rate state pension LADBROKES PENSION PLAN PAGE 17

18 04 Appendix EXAMPLES OF IMPACT Key points Pension is in today s money terms Employer LPS contributions based on proposed 1.5 x matching contribution available (plus double company contributions in year 1) LPS projections are based on FCA current handbook (last updated May 2014) Assumptions Assumes member retires at age on example Salary assumed to increase in line with price inflation (and assumed has done so in previous two years) LPS accounts assumed invested in the L&G Multi Asset Lifestyle Profile prior to retirement LPS account is assumed to buy a pension at the specified retirement date Payable for life 50% spouse pension on death in retirement Increases in line with inflation (FCA guidance doesn t distinguish between RPI and CPI) 5 year guarantee Assumes the members work full-time Consumer price inflation of 2.5% pa, Retail price inflation 3.0% pa Investment return assumptions of: 4.5% pa for L&G (PMC) Multi-Asset Fund, 2.6% pa for L&G (PMC) Over 15 Year Gilts Index Fund and 2.6% pa for L&G Cash Fund (before expenses) Expenses and charges assumptions: total of 0.48% of pot amount for funds up to 50k and 0.38% for fund in excess of 50k for annual management and fund management charge together, 4% of fund for conversion to annuity at retirement Assumes no change from the current commutation factors in the Ladbrokes Pension Plan LADBROKES PENSION PLAN PAGE 18

19 04 To EXAMPLES OF IMPACT understand more about how these changes could impact you, you ll need the following three pieces of information: a) Your latest payslip to understand your basic pay and your current pension contribution b) Your latest Plan Annual Benefit Statement (provided by the Plan Administrators, Hymans Robertson) c) The Legal & General website for the Ladbrokes Pension Scheme You can find more information about what the changes may mean for you in Sections Sections 8 and 9 titled What this means for you and How much you can contribute in the Your Pension FAQs document. LADBROKES PENSION PLAN PAGE 19

20 05 WHO TO CONTACT WHO TO CONTACT Ladbrokes Pension Plan Team LADBROKES PENSION PLAN PAGE 20