Mitchells & Butlers Staff Pension Plan

Transcription

1 Mitchells & Butlers Staff Pension Plan Summer 2003 Newsletter

2 GROUP PENSIONS NEWS WHAT S BEEN HAPPENING? Following the demerger of Six Continents PLC on 15 April we have been extremely busy with finalising the new InterContinental and Britvic pension arrangements, getting to grips with the practical implications for each demerged company and embarking on the project to ensure that each board of Trustees and the Companies can manage their own pension arrangements going forward. For Mitchells & Butlers this has meant renaming the Six Continents Plans as the Mitchells & Butlers Pension Plan and the Mitchells & Butlers Executive Pension Plan, and completing the membership and fund transfers of active, deferred and pensioner members who have become part of the new InterContinental Hotels and Britvic arrangements. WHAT DOES THE FUTURE HOLD? Group Pensions continues to administer the InterContinental, Britvic and Mitchells & Butlers Plans until 30 September The administration and pension payroll services are gradually being transferred to Mercer Human Resource Consulting under the experienced and watchful eyes of Trevor Jones, Director of Pensions, to ensure a seamless transition and handover on 1 October. Then when all the loose ends have been tied up, the Group Pensions office will close towards the end of the year and Trevor will retire. Other Group Pensions staff will take up pensions positions with InterContinental Hotels, Mitchells & Butlers or Mercer, but many will be made redundant. Britvic will shortly appoint its own pensions manager. So it will be the end of a long era for most of us, but life goes on and for members, I am sure that you will continue to receive an excellent pensions service. Kind regards and best wishes for the future, Anne Wall APMI Pensions Communication Manager

3 PLAN SECURITY FUNDING A primary concern for the final salary/defined benefit (DB) members is the strength of funding of the Plans. There are various ways to measure the funding of a plan and these were discussed in the spring 2003 editions of Plan Ahead and Explanation. The Pension Plan continues to be fully funded on the basis of the Minimum Funding Requirement (MFR) - the statutory test. For the solvency test, the Actuary calculates if the Plan has enough assets to buy-out the pension benefits if the Plan winds-up. As at 1 April 2003, the Pension Plan overall had 64% of the amount necessary to meet the benefits built up by all Plan members if the Plan were to close today. The on-going basis assumes a plan continues and the Actuary uses realistic financial and demographic assumptions for the future. The Pension Plan was 82% funded on this basis at 30 June Last year Six Continents showed its commitment to the UK Plans by deciding to increase on-going company contributions and to pay an extra 60m into the Plans. The final instalment of this will be paid by Mitchells & Butlers into the Mitchells & Butlers Plans in October. The next actuarial valuation of the Plan will be as at 31 March The Company and Trustees will then consider if further additional funding is appropriate in the context of the results of this valuation. GOVERNMENT ANNOUNCEMENT ON 11 JUNE 2003 The Government has published an action plan, following the recent Green Paper consultation, which focuses on member security. Although most of the changes will not be implemented before spring 2005, two will be implemented sooner: with immediate effect solvent employers will be unable to wind-up their pension schemes without fully funding them to be able to pay all the members' entitlements. this autumn the priority order on the wind-up of a scheme will be changed to a fairer basis. Whilst pensioners will still come before active members, it will no longer be that pensioners have all their entitlements secured before active members have anything secured. The Government has promised that: the protection in the priority rules will reflect the length of time a member has been contributing, and non-pensioners' basic entitlements will be given greater priority than pensioners' rights to future pension increases. The Government intends in 2005 to set up a pension protection fund. This will secure 100% of pensions in payment and 90% of the benefits of those not retired, based on a maximum final salary of between 40,000 p.a. and 60,000 p.a. where the employer becomes insolvent. The cost will be met by premiums paid nationally by employers. Comment Although the funding level of the Plan is less than 100% on several of the measures (and all of the Plans that stem from the Six Continents UK pension plans are in a similar position), the security of members is protected by the Company's commitment to the Plan, and this has been further reinforced by the changes that have been announced by the Government. NEW TRUSTEE ARRANGEMENTS The recent letter explaining the new Trustee arrangements proposed that there would be a new category of Trustee Director within the Trustee Company. This proposal (now accepted by the membership as there were very few objections) provides additional protection by making these Trustee Directors effectively independent of the Company. In summary, four of the Trustee Directors previously nominated by the Company will be in the position that, if they retired or resigned, they would be replaced by a majority vote of the remaining three directors only. These new arrangements will be implemented shortly. CORPORATE TRUSTEE AND TRUSTEE DIRECTORS In the recent letter explaining the new Trustee arrangements for Mitchells & Butlers, a few members commented that they did not understand the terminology. To make matters clear: Corporate Trustee means the Trustee Company, Mitchells & Butlers Pensions Limited or Mitchells & Butlers Executive Pension Trust Ltd, that acts as Trustee to the Mitchells & Butlers Pension Plan or Mitchells & Butlers Executive Pension Plan respectively. Trustee Director means a person who is a director of one of the Corporate Trustee companies. A Trustee Director is often referred to as a Trustee which may sometimes cause confusion.

4 THE FINANCIALS The year to 31 March 2003 proved another challenging year for the Plan. During the year, Six Continents PLC demerged its major businesses, creating Mitchells & Butlers PLC and InterContinental Hotels Group PLC. The turmoil in the investment markets deepened the funding problems of most pension funds and significant changes were made to the structure, processes and management of investments within the Plan. Immediately after the end of the Plan year, approximately 11,000 Staff and 380 Executive members connected with Hotels and Soft Drinks businesses were transferred to the new pension arrangements with a corresponding transfer of assets of around 196 million (Staff) and 67 million (Executive). A final adjustment followed on 1 August after the Actuary had determined the final apportionment of liabilities. A summary of the Trustee Report and Accounts at the year-end (before the demerger) is shown on these pages. MITCHELLS & BUTLERS COMMON INVESTMENT FUND TOTAL COMBINED ASSETS The Common Investment Fund (CIF) was established on 1 April 2002 by combining the assets of the Six Continents Pension Plan with those of the Six Continents Executive Pension Plan. This generates worthwhile cost savings in fund management and custodial expenses, while still preserving separate identity of each plan s assets in terms of units they buy and sell in the CIF. UK FIXED INTEREST 193.0m UK INDEX-LINKED 148.7m OVERSEAS BONDS 38.7m UK EQUITIES 257.3m OVERSEAS EQUITIES 244.1m PROPERTY 62.3m CASH AND OTHER 25.6m TOTAL 969.7m FUND PERFORMANCE -VS- INFLATION The bar chart shows how the Plan s investments have performed in comparison to inflation over 1, 3 and 5 year periods FUND PERFORMANCE % PA -7.8 INFLATION % PA Over 5 years Over 3 years Over 1 year

5 MEMBERSHIP The total number of members decreased during the year from 39,433 to 28,702 largely as a result of the transfer of members to the new Hotels and Britvic Plans on 1 April Membership as at 1 April 2003 TOTAL 39,433 TOTAL 28,702 20,820 17,820 10,067 8,546 3,010 7, Active Pensioner Deferred INCOME MEMBER CONTRIBUTIONS 7.1m COMPANY CONTRIBUTIONS 26.0m TRANSFER VALUES RECEIVED 6.7m OTHER INCOME 3.5m TOTAL 43.3m EXPENDITURE BENEFITS PAID 37.9m TRANFER VALUES PAID 2.4m CHANGES IN MARKET VALUE OF INVESTMENTS 140.0m ADMINISTRATION EXPENSES 1.5m TOTAL 181.8m VALUE OF THE FUND The bar chart shows the changes in the value of the Fund over the last five years. 1,818m 1,946m Note: A full copy of the Report and Accounts is available on request from the Company Pensions team at the address shown on the back page. 954m 900m 762m

6 GENERAL UPDATE NEW LOOK COMMUNICATIONS As the Company and the Trustees consider how they want to keep members informed about pension matters in the future, you can see that the style and nature of this newsletter is already different to that in the past. In addition, to reflect the changes that have been made to the Plans over recent years and the renaming of the Plans; a separate Plan website has been created; DC Choice members have been provided with their new communication packs (and dc-link login details) and all DB active members have been issued their annual benefit statements under the new Mitchells & Butlers Plans. A new final salary (DB) Handbook will also be distributed to DB active members in the autumn. The new Plan website can be accessed via MITCHELLS & BUTLERS LEISURECARD FOR PENSIONERS We are pleased to confirm that Mitchells & Butlers Plan pensioners and widows/ers who were part of the Retail (pubs and restaurants) business will be able to benefit from the leisurecard with effect from January However, we are sorry to have to say that the leisurecard will not be re-issued to pensioners and widow/ers who were part of Soft Drinks or Hotels businesses; although they may continue to use their existing card until the end of the year. BRITVIC STAFF SHOPS Previously, the above leisurecard has been used for identification purposes to gain entry to the Britvic Staff Shops. However, due to the Six Continents PLC demerger and the formation of separate pension plans, entry will only now be available if: You are a retired member or widow/er of the Britvic Pension Plan OR; You are a retired member or widow/er of the Mitchells & Butlers Pension Plans but who was formerly a Britvic employee AND You present the authorised pass - this can be obtained by completing the relevant Application Form (available from the Staff Shops) and attaching a passport photo. THE NEW MITCHELLS & BUTLERS PENSIONS TEAM With effect from 1 October 2003 the Company management of the Mitchells & Butlers Plans will be performed by a new team made up of existing staff, mainly transferred from Group Pensions. The team will be based at the new Mitchells & Butlers office in Fleet Street, Birmingham. Full contact details are displayed on the back page.

7 PLAN UPDATE IMPROVED MATERNITY AND NEW FAMILY LEAVE PROVISIONS The law changed on 1 April 2003 by extending the period of statutory maternity leave from 18 to 26 weeks and giving the right to a further period of absence of 26 weeks. This has implications on pension and life assurance benefits for both the final salary (DB) and DC Choice sections. Family leave covers: Ordinary maternity leave Additional paid maternity leave Ordinary adoption leave Additional paid adoption leave Paternity leave Parental leave As an active member of the Plan you will remain entitled to the usual range of benefits including death and ill-health benefits throughout your family leave. DB Section The above types of paid family leave automatically count towards your Pensionable Service and your contributions will be based on the rate of Annual Earnings you actually receive during this period. Further details can be found in the new Handbook, being issued in the autumn, or via your HR Department. DC Choice Please refer to the new Benefits Guide dated April 2003 for full details. Alternatively, please speak to your HR Department before you start your family leave. AVC FACTORS (DB SECTION) Under the Plan Rules the Trustees decide, acting on the Actuary's advice, the amount of pension that an AVC account will provide. The Actuary has recommended that the rates used to convert the total sum in an AVC account to an annual pension should be updated and varied regularly as financial conditions change. Initially the rates will be substantially different from those shown as an illustration in the 1997/1999 Editions of the Plan Handbooks, and may reduce by 30% or more. Part of the explanation is that interest rates are now lower and life expectancy has improved, both making pensions more expensive to buy. Furthermore, until now the AVC conversion rates have been deliberately kept artificially favourable so they would be consistent with commutation rates (conversion in the opposite direction, from pension to cash at retirement) which are limited (unfavourably) to their current levels by the Inland Revenue. The Trustees can no longer agree to the favourable AVC conversion rates as the Plan is less than 100% funded, and so favouring AVC payers automatically disadvantages other Plan members, by reducing their security. The impact on existing AVC payers has been considered. Those who started paying AVCs before 8 April 1987 are able to take all their AVCs as tax-free cash subject to Inland Revenue limits, and so for the vast majority of these, there will be no adverse impact. The Trustees, at their September Meeting, will consider the appropriate rates going forward, and will take into account any previous commitments given to members. An announcement will be made to all AVC members before the AVC conversion rates are changed. LATE RETIREMENT (DB SECTION) If you retire later than Normal Pension Age (NPA), and do not start to receive your pension, it is currently increased by 8% per year plus normal increases to pensions in payment. This late retirement increase rate was set at a time when double-digit interest rates were common, unlike today's financial conditions. On actuarial advice it is intended that the Plan Rules will be changed so that for those reaching NPA after 31 December 2003, the late retirement increase will be 5% per year compound plus normal pension increases. The late retirement increase for those reaching NPA prior to 31 December 2003 will remain unchanged. PENSION INCREASES FOR 2003 (DB SECTION) Pensions in excess of the Guaranteed Minimum Pension (GMP) for pensions in payment and deferred pensions (those of former employees who have not yet retired) will be increased by 3% with effect from 1 October This figure is the increase in the Retail Prices Index (RPI) over the year up to May, as specified in the Plan Rules. The following table shows the history of the last 10 years pension increases: Year % increase

8 PLAN THE NEW SECURITY PENSION SERVICE TRUSTEES Mitchells & Butlers Pensions Limited Board of nine Trustee Directors with responsibility for the running of the Plan and for the membership as a whole. Six Company appointed: Spencer Wigley (Chairman) Mike Bramley Trevor Jones Bronagh Kennedy Iain Kirkpatrick Bill Scobie Three member nominated: Andy Gordon Concepta Lowry Rita Mitchell COMPANY MANAGEMENT Anna Smith - Pensions Director Judith Deeley - Pensions Manager Tracey Hughes - Pensions Administration Manager Julia Mason - Company Secretarial Support & Communications Controller Colin Hammond - Financial Controller Pensions The new team s duties include managing the outsourced administration and assisting the Trustees with their duties. The new team will be based at: 27 Fleet Street Birmingham B3 1JP Tel: The Pensions Director is also the Internal Disputes Resolution Procedures contact at the above address. FINAL SALARY (DB) ADMINISTRATION & PENSION PAYROLL Mercer Human Resource Consulting Responsible for day-to-day administration and operation of the pensioner payroll. Mercers should be contacted in the first instance with routine enquires, including changes of address, quotations, payment of pensions etc. New contact and tax office details are shown below. DC CHOICE ADMINISTRATION LCP DC Link Limited Responsible for day-to-day administration. LCP DC Link Limited should be contacted in the first instance with routine queries on the DC Choice helpline MEMBERSHIP (DC) AT 1 APRIL 2003 Active CONTACT DETAILS (DB MEMBERS): ACTIVE AND DEFERRED MEMBERS Mitchells & Butlers Pensions Mercer Human Resource Consulting Stratford Court Cranmore Boulevard Solihull West Midlands B90 4QT Tel: mbplc@mercer.com PENSIONERS Pensioner Payroll Mitchells & Butlers Pensions Pension Payroll Mercer Human Resource Consulting 52 Westgate Chichester West Sussex PO19 3HF Tel: mbplc.pensionpayments@mercer.com TAX OFFICE DETAILS (PENSIONER PAYROLL) HM Inspector of Taxes Birmingham Solihull Area City Centre House 30 Union Street Birmingham B2 4AE Tel: Ref: 068 MZ41674