THE EDF ENERGY PENSION SCHEME. A guide for new joiners

Transcription

1 THE EDF ENERGY PENSION SCHEME A guide for new joiners January 2016

2 CONTENTS Welcome 3 CARE Section 4 At a glance How it works Membership and contributions Building retirement benefits today Building retirement benefits following the 1 April 2019 actuarial valuation Your retirement choices Life events Other benefits Leaving the CARE Section Defined Contribution Section 21 How it works Saving in the DC Section 3 simple steps Your retirement choices Other benefits Leaving the DC Section Current tax limits 27 How the Scheme works with UK tax laws Looking after the Scheme 28 The arrangements in place to increase security for your benefits Useful information 30 Details of pensions regulators and supporting Government organisations Contact us 31 Contact details for the Scheme This guide describes the CARE Section and the DC Section of the EDF Energy Pension Scheme (the Scheme) for new joiners from 1 January 2016 onwards. It is intended for guidance only. Pensions law and the legal documents governing the Scheme (the Trust Deed and Rules) will always overrule this guide if there is any difference. When we refer to the Company in this booklet, we mean EDF Energy plc or any other company that takes part in the Scheme. 2 The EDF Energy Pension Scheme (EEPS)

3 WELCOME Whether you have a long time until you retire or you re looking forward to finishing work in the next few years, it s a good idea to make financial plans for your future. By joining the EDF Energy Pension Scheme (the Scheme), you ve made an important choice in saving for your retirement. As a member of the Scheme you will have access to a range of benefits both when you retire and during your working life. Because we feel these are important principles, the Company contributes a large part of the cost of providing these benefits. From 1 January 2016, the Scheme has two sections open to new joiners the CARE Section (defined benefit) and the DC Section (defined contribution). You will be automatically enrolled into the CARE Section (which allows you to earn defined benefits subject to a pensionable salary cap ), but you can choose to join the DC Section if you prefer and build up benefits there instead, or opt out of the Scheme entirely. If you are in the CARE Section and your salary exceeds NJC Spine Pay Point 35 (see page 7 for more information), you will be eligible to join the DC Section as a top-up member allowing you to add to the benefits you are earning under the CARE Section. You can learn more about how it all works in this guide. This guide has been prepared by the trustees of the EDF Energy Pension Scheme and explains how the Scheme works and the benefits it provides for you as a member. The EDF Energy Pension Scheme (EEPS) 3

4 CARE SECTION At a glance You choose the level of pension you build up and the contributions you wish to pay. This gives you a defined income when you retire based on your length of service and your pay (subject to a pensionable salary cap) over your entire period of CARE Section membership. You can also take a tax-free cash sum of up to 25% of the total value of your savings when you retire. Being a member of the CARE Section increases the benefits paid to your dependants. It also offers you protection if ill health forces you to give up work and offers you security for your dependants. If you wish, you can choose to build up benefits in the DC Section instead, or opt out of the Scheme entirely. TAKE ACTION! As a new CARE Section member, you should: Read this guide to understand the benefits you have as a CARE Section member Complete your Expression of Wish form so we know the people you would like to receive any cash sum if you die Consider your contribution choices you can change your accrual rate each April, plus you can also make Defined Contribution (DC) Section contributions to boost your retirement savings. To find out more, see page 8. 4 The EDF Energy Pension Scheme (EEPS)

5 How it works The CARE Section provides benefits based on Career Average Revalued Earnings, also known as CARE. It provides a defined benefit pension based on your pensionable salary over the entire period of your membership in the CARE Section until you retire or leave. Because CARE benefits are not directly linked to the performance of the CARE Section s investments, you can predict the level of income you will have after you retire based on: The rate at which your pension builds up (the accrual rate) Your pensionable salary over each Scheme year throughout your membership (subject to a cap) Your period of pensionable service Inflation as measured by the Consumer Prices Index (CPI). How Career Average Revalued Earnings schemes work Trustees invest contributions to pay benefits when due Benefits calculated using Accrual rate Rate at which pension accrues each year (e.g. 1/60 th ) Benefits promised Annual income/pension Contributions (A percentage of pensionable salary from the member, balance of cost met by Company) Pensionable salary Pensionable service Tax-free cash Dependants benefits For each complete year of your CARE Section membership, you build up a block of pension based on your pensionable salary (subject to a cap*) and your accrual rate Each earned block of pension is then revalued or increased each year between the date you earn it and the date at which you draw your pension, leave the Scheme or on your death On retirement, the total amount of pension you have built up while a member of the CARE Section will be payable to you You will receive this monthly for the rest of your life. Revaluation will be equal to the rise in inflation (as measured by CPI). If you leave pensionable service before retirement, the pension built up at leaving would be revalued annually as required by law. * Note: your pensionable salary may be limited to the cap as described on page 7 if you are a higher earner. The EDF Energy Pension Scheme (EEPS) 5

6 Membership and contributions Becoming a member The CARE Section is open to existing and new employees under age 75 you will automatically join the CARE Section from the date you join the Company. You can contribute to your own personal pension arrangements as well as being a member of the Scheme, if you wish. Part-time work If you work (or subsequently work) part-time, the benefits you build up will reflect the number of hours you work. For example, if you work half of normal full-time hours, you will build up half the normal level of pension for the contribution rate you have chosen. We use the full-time equivalent of your pensionable salary. This makes it easier to combine periods of service at different hours and different pension levels. Opting out Membership of the CARE Section is voluntary, and you can leave the CARE Section at any time (known as opting out ). If you are considering opting out you may wish to take independent financial advice (see useful information on page 30 for details on how to find an adviser) before you make your final decision. You can opt out at any time. If you decide not to be a member of the CARE Section, you must complete and return an opt-out form, available from the pensions administration team see page 31 for contact details. If you decide to opt out within your first month of joining the Company, you would need to give one month s written notice by completing and sending an opt-out form to the pensions administration team. Please think carefully if you are considering turning down this opportunity to save for the future. If you choose to opt out, you will be automatically re-enrolled at a later date (usually every three years, but it may be sooner if you meet certain criteria). If this is the case we will write to you and you will be given a further opportunity to opt out if you wish. Previous schemes The Scheme does not accept transfers into it for any benefits you may have in other pension schemes. BUILDING UP SAVINGS IN THE DC SECTION You also have the choice to build up retirement savings on a defined contribution basis in the DC Section. As a member of the DC Section you can choose how your contributions are invested from a range of funds available. The value of your retirement savings is directly linked to the amount of contributions you make and the performance of the funds in which you invest them. At retirement you may be able to take your retirement savings as cash or transfer them to another arrangement of your choice to draw a fixed pension or drawdown an income as you wish. For more information on the DC Section turn to page 21. REMEMBER If you opt out of the Scheme entirely, you will not earn any further pension benefits while you continue working for the Company. Instead, you will become a life assurance only member. This means that if you die whilst in Company service, the only benefit payable will be an amount equal to your basic salary (subject to the Scheme Earnings Cap see page 23). If you stay a member of the CARE Section, this is equal to four times your pensionable salary plus any death benefit payable in the DC top-up section if you are impacted by the pensionable salary cap (see page 25), plus a spouse and/or dependants pensions may be paid. 6 The EDF Energy Pension Scheme (EEPS)

7 Contributing to your pension While you are contributing to the CARE Section, you earn pension which builds up for each year of your pensionable service. The minimum or core contribution rate you make is 5% of your pensionable salary, which is your basic salary (subject to a cap see below) together with any other payments the Company decides to include. You receive tax relief on your contributions, and the Company also pays regular contributions. The level of pension you build up depends on the contribution rate you choose. Currently, the core contribution rate of 5% pensionable salary builds pension at an accrual rate of 1/60th. This will be reviewed after the 1 April 2019 valuation; more information can be found on page 13. Pensionable salary cap in the CARE Section If your basic salary is above the NJC Spine Pay Point 35 ( 65,745 for the period between 1 July 2015 to 30 June 2016, and updated each year) your pensionable salary will be subject to a cap under the rules of the CARE Section. NJC 35 is a pay reference amount agreed with the Trades Unions which is benchmarked externally. If you receive additional pensionable allowances (e.g. shift allowance), these would not be covered by the cap and would be included in full as part of your overall pensionable salary. If your basic salary is above NJC Spine Pay point 35 on joining the Scheme or in future the following will apply: If you have any benefits built up in a previous scheme and you have registered them for protection under the new pension tax laws, you should let us know before you join the Company. Joining the Scheme could affect any protection you have arranged. FIND OUT MORE To find out how much the cost of the higher pension level would cost you, use the contribution calculator available in the Pensions section of the Human Resources area of Pulse. Your pensionable basic salary (the element of your basic salary that is included in your pensionable salary) used for your CARE Section benefits will be capped at NJC Spine Pay point 35 at the date of your pay rise. Subsequent increases in pensionable basic salary will be limited to 1% per year, or restricted to the cap if greater Some or all of your basic salary above the cap (subject to certain limits) can be used to make contributions into the Defined Contribution (DC) Section and invested to top up your Scheme benefits; the Company will match contributions up to certain limits see pages 21 to 26 for further details Alternatively, the full amount above the cap can instead be paid to you as part of your normal salary if you choose. The EDF Energy Pension Scheme (EEPS) 7

8 Boosting your savings Increased contributions Each year you will have the option to choose to pay increased contributions and build up your CARE pension at a higher accrual rate of 1/50ths if you wish. The contribution rate you will need to pay to build up this higher level of pension will depend on your age, and may change from time to time. The rate takes effect from April each year and is fixed for 12 months. If you do not notify us before 1 April each year that you wish to change your accrual rate, we will assume you wish to continue building up pension at your current accrual rate, but under the contribution rate applicable that year. If you join the Scheme between 1 January 2016 and 31 March 2016 your first opportunity to increase your contribution and accrual rate will be for the year beginning April FIND OUT MORE To find out how much the cost of the higher pension level would cost you, use the contribution calculator available in the Pensions section of the Human Resources area of Pulse. You can also contact the pension administration team, whose contact details are on page 31. DC top-up contributions As a CARE Section member, you can also make top-up contributions into the Defined Contribution (DC) Section. If you re a higher earner affected by the pensionable salary cap described on page 7, your contributions will be matched by the Company up to certain limits too. If you re not affected by the cap, you won t receive matching contributions from the Company, but can benefit from NI savings and tax relief (see page 9 for more information on National Insurance and tax savings). A DC pension account works like a savings account, with the specific purpose of building up savings to be used to provide you with an income at retirement. More information can be found on page The EDF Energy Pension Scheme (EEPS)

9 National Insurance and tax savings As an EDF Energy employee, your contributions to the Scheme (both to the CARE Section and any DC top-up contributions you might make) are made tax efficiently through Salary Conversion (sometimes called salary sacrifice). It works by the Company making additional contributions on your behalf to the Scheme, equivalent to the contributions you would otherwise have deducted from your pay. Because gross salary is reduced, most members make savings in their National Insurance contributions. Here s an example of how you could benefit from participating through Salary Conversion: If you pay tax at 20% If you pay tax at 40% Your pensionable salary is 25,000 and you choose the core contribution rate of 5%. The actual cost to you after tax relief and National Insurance savings is only 71 a month when you participate through Salary Conversion. If you don t participate through Salary Conversion, the cost to you would be 83 a month. Your pensionable salary is 50,000 and you choose the core contribution rate of 5%. The actual cost to you after tax relief and National Insurance savings is only 121 a month when you participate through Salary Conversion. If you don t participate through Salary Conversion, the cost to you would be 125 a month. Note: Salary Conversion requires a reduction in salary. Because gross salary or the amount of National Insurance you pay is used to calculate many State benefits, Salary Conversion could affect your entitlement to State benefits; either now or in the future. This means you should carefully consider whether it is right for you. If you decide Salary Conversion is not appropriate, please contact Mercer, the pension administrators, and request a Salary Conversion opt-out form once you have begun your employment. Your salary, prior to any adjustment for salary conversion, will continue to be used to determine future salary increases and certain other salary-related benefits. Should the Salary Conversion arrangement cease you will be required to pay employee contributions and your salary will be re-converted. The EDF Energy Pension Scheme (EEPS) 9

10 Building retirement benefits today The CARE Section provides you with a pension based on your accrual rate, your pensionable salary (subject to a cap) and your pensionable service. You can take it in full, or choose to give up some of the pension for tax-free cash. If you ve chosen to pay AVCs, or you are over the pensionable salary cap and make DC top-up contributions, then you ll receive these separately along with your State pension and any other benefits from previous employers that you may have. Here s how your pension is calculated: You build up a block of pension for each year you contribute to the CARE Section, based on your pensionable salary at the time (subject to a cap, if applicable) This increases each year in line with inflation, based on CPI Each block of pension then combines to form Your total annual pension 10 The EDF Energy Pension Scheme (EEPS)

11 EXAMPLE: How CARE Section benefits build up at the core accrual rate of 1/60th Kate joins the CARE Section with a pensionable salary of 25,000. She completes four years of pensionable service and contributes 5% of her pensionable salary to get an accrual rate of 1/60th. During this time Kate s salary increases by 2% each year and inflation, as measured by CPI, is 1.5% a year. At the end of four years, Kate s pension would be 1,756 a year as illustrated in the chart below. Year 1 Year 2 Year 3 Year 4 Building up an annual pension of Pension block 1 1/60th x Pensionable salary of 25,000 Pension Block 1 increases each year in line with inflation (1.5% a year) (i.e. multiply by per year) 436 ( 25,000/60 = 417 x ) Pension block 2 1/60th x Pensionable salary of 25,500 Pension Block 2 increases each year in line with inflation (1.5% a year) (i.e. multiply by per year) 438 ( 25,500/60 = 425 x ) Pension block 3 1/60th x Pensionable salary of 26,010 Pension Block 3 increases each year in line with inflation (1.5% a year) (i.e. multiply by per year) Pension block 4 1/60th x Pensionable salary of 26, ( 26,010/60 = x 1.015) 442 ( 26,530/60) Total pension paid to Kate each year once she retires: 1,756 a year This pension would be paid in addition to Kate s State pension and any other benefits she may have built up outside of EDF Energy. The EDF Energy Pension Scheme (EEPS) 11

12 EXAMPLE: How CARE Section benefits build up at the higher accrual rate of 1/50th This time, Kate joins the CARE Section with a pensionable salary of 25,000 and chooses to pay more of her pensionable salary in order to get the higher accrual rate from 1 April of her first year. She completes four years of pensionable service at the higher accrual rate of 1/50th. During this time Kate s salary increases by 2% each year and inflation, as measured by CPI, is 1.5% a year. At the end of four years, Kate s pension would be 2,107 a year as illustrated in the chart below. Year 1 Year 2 Year 3 Year 4 Building up an annual pension of Pension block 1 1/50th x Pensionable salary of 25,000 Pension Block 1 increases each year in line with inflation (1.5% a year) (i.e. multiply by per year) 523 ( 25,000/50 = 500 x ) Pension block 2 1/50th x Pensionable salary of 25,500 Pension Block 2 increases each year in line with inflation (1.5% a year) (i.e. multiply by per year) 525 ( 25,500/50 = 510 x ) Pension block 3 1/50th x Pensionable salary of 26,010 Pension Block 3 increases each year in line with inflation (1.5% a year) (i.e. multiply by per year) Pension block 4 1/50th x Pensionable salary of 26, ( 26,010/50 = 520 x 1.015) 531 ( 26,530/50) Total pension paid to Kate each year once she retires: 2,107 a year 12 The EDF Energy Pension Scheme (EEPS)

13 Building retirement benefits following the 1 April 2019 actuarial valuation In order to provide benefits in the CARE Section, both you and the Company currently make a contribution based on your pensionable salary to provide benefits. In addition to the 5% core contribution that you make in order to build up benefits at the 1/60th accrual rate, the Company also makes contributions based on the calculated required contribution rate following the actuarial valuation. The Company contributions will be fixed at 10% of members pensionable salaries to the CARE Section following the completion of the 1 April 2019 actuarial valuation. Any surplus contributions not required to meet the cost of ongoing benefits are kept to provide further security for the benefits already built up. It is also possible that the cost of providing the benefits available to you could increase significantly in future. The Company has agreed with the Trades Unions that if the cost to the Company of CARE benefits, in addition to the contributions you make, exceeds 10% of members pensionable salaries, the Company and the Trade Unions will review and agree how to adjust the benefits provided in the future to reduce the contribution to 10%. The next full valuation, where the cost of providing CARE benefits will be reviewed, will be completed as at 1 April 2019 and is expected to be available in the first half of The results of the full valuation could lead (but are not limited) to: the level of CARE benefits provided at the core contribution rate being adjusted, member contributions to the CARE Section being increased, or a combination of these options. The default change will be a reduction in the core accrual rate but the Company and Trades Unions may agree different changes. If the core accrual rate is reduced from 1/60th, then it is expected that an option to maintain your accrual rate at 1/60th in return for higher member contributions would be introduced. Any adjustments would only apply for future benefits from the date of change benefits already earned in the CARE Section would be unaffected by any changes. You would be notified prior to any changes being made. The EDF Energy Pension Scheme (EEPS) 13

14 Your retirement choices When you are ready to start receiving your pension, you can choose when and how you d like to receive it. We ve explained some of the choices you should consider when thinking about your retirement planning. When you can start to receive your pension When you reach the CARE Section s normal pension age you will be entitled to receive your pension. Normal pension age is aligned to your State pension age (SPA) subject to a minimum of 65 years of age. Your SPA depends on when you were born, and is reviewed by the Government regularly. Currently, for men and women the SPA will be equalised at age 65 by 2018 and then it will rise in stages to age 68 by The current rises in the SPA by 2046 could still be subject to change before this date. For an up-to-date estimate, you can find out your SPA at You may choose to delay taking your pension, or in certain circumstances, take it earlier than normal pension age. Depending on the age you start taking your pension, the amount of monthly income you receive may be increased or reduced. Retiring early Subject to Company agreement, you can retire and receive your pension at any time from age 55 (rising in future to equal 10 years from your normal pension age). You can retire at any age if you qualify for early retirement on the grounds of ill health. We will use your CARE Section benefits built up to date to calculate your pension. This amount will then be reduced to reflect the fact that it will be paid for longer because you are retiring early. If you are thinking about retiring early, please contact the pensions administration team and ask for details of the pension you might receive. Retiring late The Company and trustees may allow you to delay drawing your pension beyond normal pension age and continue contributing and building up pensionable service. These contributions could still be made via Salary Conversion (see page 9) to benefit from NI savings and tax efficiencies. A WORD ABOUT STATE PENSION AGE State pension age when you retire may not be the same as it is now if the government makes further changes this could have an impact on your normal pension age for taking your pension. However, the Company has guaranteed that any such changes would not impact members retiring on or before 31 December Flexible retirement You can ask to receive your Scheme benefits in whole at any time after age 55 (rising in future to equal 10 years before your State pension age) and still continue working for the Company. If the Company agrees, you would leave the Scheme and receive all your Scheme benefits. The amount you receive would be reduced to reflect the fact that it will be paid for longer because you are taking your benefits earlier than normal pension age. If you take flexible retirement, you can apply to re-join the Scheme s DC Section and build up a DC pension as long as you continue to work for the Company. For more details, please contact the pensions administration team. 14 The EDF Energy Pension Scheme (EEPS)

15 How you can receive your pension You will receive your CARE Section pension as monthly income for the rest of your life. It will be increased annually in line with increases in the Retail Prices Index (RPI) up to a maximum of 2.5% a year. Taking a tax-free cash sum If you wish, you can take part of your benefits as a cash sum. Cash sums up to 25% of the total value of your benefits are currently payable tax-free (up to a maximum of 25% of the lifetime allowance see page 27). Taking a cash sum will reduce the value of the pension you will receive, so you need to consider your retirement income requirements. The 25% tax-free cash sum limit applies to your total Scheme benefits. This means that if you have also built up DC top-up savings in the DC Section, you can exchange all or part of these for tax-free cash. If you have enough DC top-up savings to provide the full cash sum you need when you retire, you may not have to take a reduced value pension from the CARE Section. If you have any DC funds left over after taking your maximum tax-free cash, then these will need to be transferred out of the Scheme in order to be accessed either as pension or drawdown income. Exchanging part of your pension for a cash sum does not affect the level of any spouse s pension that is payable from the CARE Section when you die. Your spouse s pension will be based on your original (unreduced) pension. For further details about your tax allowances see page 27. Be wary of scams With the change in pension regulations, pension scams are on the rise. Many scams will offer you early release of your retirement savings, but this is not possible unless you are over 55 or in ill health. Scams will often involve cold calls, s, website pop-ups or text messages and will refer to legal loopholes. These scams can often involve transferring your pension savings overseas and can result in you losing all your retirement savings through early release fines, tax bills and risky investments. Find out more about pension scams at Predators stalk your pension Companies are singling out savers like you and claiming that they can help you cash in your pension early. If you agree to this you could face a tax bill of more than half your pension savings. Don t let your pension become prey. The EDF Energy Pension Scheme (EEPS) 15

16 Life events You will experience many changes throughout your working life and specific Scheme rules apply for certain life events. Maternity, paternity, adoption and parental leave The laws which deal with maternity, paternity, adoption and parental leave set out your pension rights. During these kinds of statutory or paid leave, your CARE Section membership will continue and your leave will count towards your pensionable service. We will base your benefits at the core level (other than any AVCs you may pay) on the salary you would receive if you were working. However you only pay contributions on the salary you actually receive. During any unpaid leave, you will not pay contributions and your period of unpaid leave will not count towards your pensionable service. When you return to work you will have the opportunity to pay backdated contributions to make this period count as pensionable service. If you decide not to return to work, you will have to give written notice, just as you would if you left the Company under any other circumstances. You will leave the Scheme when your employment with the Company ends. This is normally at the end of your notice period. Please contact the pensions administration team for information if you plan to be on leave for any length of time. Ill health Most absences only last a week or two and do not affect your contributions or your CARE Section membership. However, in severe cases it may be that you are forced to stop working due to ill health. If serious ill health prevents you from being in employment at any time before you reach normal pension age, you can apply for an ill-health early retirement pension. The trustees decide whether to pay an ill health pension and will need supporting medical evidence. If you are still contributing to the CARE Section, any ill-health pension is based on your revalued pensionable salary at the date you retire. It is not reduced for early payment. It is: the pension built up to the date you retire; and half the pension that you could have built up from the date you retire, to your normal pension age. This is calculated from a prospective pension based on the core accrual rate (currently 1/60ths) even if you have selected to build up under a higher accrual rate. The benefit will be based on your current annual pensionable salary, subject to the cap if applicable. We will review the payment of your ill-health benefits from time to time until you reach your normal pension age. If your health improves, we may reduce, suspend or stop your ill-health pension. In this case, you will start to receive a CARE Section pension again when you reach normal pension age. If the arrangements for your long-term absence are not covered here, the Company will consider your pension rights on an individual basis. Divorce The courts have the power to take pension benefits into account when they share out a couple s assets to settle a divorce. It is likely that similar rules will apply when couples formally end a civil partnership. The court has several options: It can offset the value of your pension against your share of the other assets It can earmark a share of your pension, so that when the benefits start, part must be paid to your ex-partner It can make a pension sharing order against your pension. In this case, your own share of the pension remains with the Scheme and your ex-partner can transfer the value of their share to another registered pension arrangement. If you need pension information for your divorce, please speak to the pensions administration team. The Scheme may make a charge for providing the information the court asks for. Also, please think about updating your Expression of Wish form. 16 The EDF Energy Pension Scheme (EEPS)

17 Other benefits The CARE Section also helps to protect the people who depend on you. It pays benefits if you die and provides a pension for those who are too ill to work. Contributing members If you die in service with the Company as a contributing member of the CARE Section, the following benefits are payable: A lump sum of four times your pensionable salary at the date you die (subject to the cap, if applicable). A spouse s pension for your husband or wife, a pension for your civil partner or, at the trustees discretion, an adult financial dependant. Pensions for your eligible children. The spouse s and children s pensions are all based on a percentage of the pension you could receive if you live to your normal pension age. This is based on: the pension you have built up to the date of your death; and the pension you could build up if you continued in the Scheme until your normal pension age. This is a prospective pension based on the core accrual rate (currently 1/60ths) even if you have selected to build up under a higher accrual rate. The benefit will be based on your current annual pensionable salary (subject to the cap, if applicable). The spouse s pension is 50% of the total above. The children s pensions are based on your pension and depend on how many children qualify. One child 25% Two children More than two children 25% each 50% of your pension divided between each eligible child If no spouse s pension is paid, the children receive double. There is more about how we calculate your pension on page 10. Insurance The Scheme currently insures the lump sum death in service benefit. Just like any other insurance, the insurer sets its own terms and conditions. We will tell you in writing if restrictions apply to your lump sum death benefit (restrictions may mean that cover is declined). Please note that if you choose to opt out of the Scheme altogether, you will be provided with a lump sum payment of once times your pensionable salary. The EDF Energy Pension Scheme (EEPS) 17

18 Pensioners If you die after your pension has started, there are the following benefits: A five year pension guarantee. A spouse s pension for your husband or wife, a pension for your civil partner or, at the trustees discretion, an adult financial dependant. Pensions for your eligible children. If you die before you have received five years pension payments, the Scheme will pay a lump sum equal to the value of the outstanding payments for the remainder of the five years. If you exchanged part of your Scheme pension for cash at retirement, this will not affect the level of any spouse s or children s pension when you die. These pensions will be based on your original (unreduced) pension, including any increases since you retired. The spouse s pension is 50% of this amount. The children s pensions are based on your pension and depend on how many children qualify. One child 25% Two children More than two children 25% each 50% of your pension divided between each eligible child If no spouse s pension is paid, the children receive double. Deferred members If you die after leaving service but before your deferred pension has started, there are the following benefits. A spouse s pension for your husband, wife or civil partner or, at the trustees discretion, an adult who is financially dependant Pensions for your children, providing they were born before you left the Company. The spouse s and children s pensions are based on a percentage of your deferred pension, including any increases it has received up to the date of your death. The spouse s pension is 50% of your deferred pension. The children s pensions are based on your pension and depend on how many children qualify. One child 25% Two children More than two children 25% each 50% of your deferred pension divided between each eligible child If no spouse s pension is paid, the children receive double. 18 The EDF Energy Pension Scheme (EEPS)

19 Who can qualify for benefits? Lump sums The trustees decide who will receive any lump sum payment after your death. This means that the payment does not form part of your estate, and so does not attract inheritance tax. Under the rules of the Scheme, the trustees can consider paying this money to anyone you have named on your Expression of Wish form. It is very important that you keep your Expression of Wish form up to date, especially when you join the Company or if you: get married or divorced; LET US KNOW YOUR WISHES Completing an Expression of Wish form ensures the trustees know the people you would like to receive any cash sum if you die. More information can be found by contacting the pensions administration team; their details are on page 31. register or end a civil partnership; or if you have children. Spouse s pension Your legal spouse is your husband or wife (including a spouse from a same-sex marriage). Your civil partner will also qualify for a spouse s pension. If you do not leave a husband, wife or civil partner, the trustees can decide to pay the pension to an adult who depended on you financially (or whose finances were dependent on yours). If the trustees decide that there is no other adult who depended on you financially (or whose finances were dependent on yours), this benefit will not be paid. For more details, please contact the pensions administration team. Children s pension The Scheme can pay a child s pension to your dependent child. This means a child up to age 18, or up to age 23 and in full-time education. The EDF Energy Pension Scheme (EEPS) 19

20 Leaving the CARE Section If you leave the CARE Section, the choices open to you depend on your length of pensionable service in the Scheme. Less than three months a refund You will receive a refund of all your own CARE Section contributions, including any DC Section contributions. Three months to two years a refund or a transfer to another suitable pension arrangement The pensions administration team will send you a cheque to cover the refund of your contributions. If you decide you want to transfer the benefits you have built up to another suitable pension arrangement you will need to return the cheque within three months. Two years or more a deferred pension You can leave your pension in the Scheme for payment when you retire. This is called a deferred pension. We work this out in the same way as a pension for someone who is retiring from service (see page 18). But we use your pensionable service and revalued pensionable salary at the date you leave, rather than when you retire. The Scheme will increase your deferred CARE Section pension each year until it starts to pay it. Under current law the increases are in line with the Consumer Prices Index up to a maximum of 2.5% a year, up to your normal pension age. For more information on your choices when you come to retire, see page 14. Transferring your benefits At any time, you can transfer your deferred benefits out of the CARE Section to any registered pension scheme. You will receive a cash equivalent transfer value. This is the estimated value of your benefits taking into account the guaranteed increases before you retire and after the pension starts. The transfer value is guaranteed for three months from the date of the quotation. This means that if you decide to proceed with the transfer within the three months, the Scheme will pay the amount quoted. If you decide to proceed with the transfer more than three months after the date of your quotation, you will need to request a new quotation. At any time, whether you have left pensionable service or not, you can ask for an estimate of the transfer value. We only have to give you one estimate in any 12 month period. REQUEST A TRANSFER VALUE If you want a transfer value quotation, you must put your request in writing and address it to the pension administration team, whose contact details are on page 31. You will normally receive a statement of your deferred benefits within two months of the Company telling the pensions administration team that you have left. 20 The EDF Energy Pension Scheme (EEPS)

21 DEFINED CONTRIBUTION SECTION When you first join the Scheme, you will be automatically enrolled into the CARE Section but you can choose to opt out and join the Defined Contribution Section (the DC Section) instead. You have the opportunity to join the DC Section once a year on 1 April. If you wish to join the DC Section, you should complete a form available from the pensions administration team (see page 31) and submit it to the trustees at least one month in advance. How it works When you join the DC Section, a pension account is set up in your name. You then choose the rate of contributions you want to make (subject to a minimum) and the Company will also make contributions (subject to a maximum). A DC pension account works like a savings account, with the specific purpose of building up savings to be used to provide you with an income at retirement. The size of the pot (and level of benefit provided with it) depends on the contributions paid in and the investment growth achieved over time it is not guaranteed. BOOSTING YOUR SAVINGS, OR A HIGHER EARNER? If you are a CARE member and your salary exceeds the pensionable salary cap (see page 7), you can join the DC Section as a top-up member, allowing you to top up the benefits you are earning under the CARE Section. The Company contributes extra, too. If you re just looking to boost your savings for retirement and you re not affected by the pensionable salary cap, you can also choose to save in the DC Section as a top-up member. However, your contributions won t be matched by the Company. Members manage their own investment strategy from available fund selections Benefits dependent on total pot of money accumulated at point of retirement; the member can choose how to use it Tax-free cash Cash lump sum or flexi-access drawdown Contributions (Company and member) Investment returns on member s chosen funds Annual income Dependants benefits The EDF Energy Pension Scheme (EEPS) 21

22 With your pension account, you ll be able to: Invest your savings in a choice of funds Take your savings at any time after age 55 (rising in future to equal 10 years before your State pension age) to provide retirement income in a number of flexible ways Take 25% of the total value of your pension benefits as a tax-free cash lump sum when you retire (you will have to transfer out to do so). DC SAVINGS FLEXIBILITY Since April 2015 there has been greater flexibility over what a member can do with their DC savings. At retirement, you have the option to transfer your savings into another arrangement that would allow you to mix and match a number of options including buying a guaranteed income (annuity), taking a flexible retirement income (flexi-access drawdown) and/or taking all of your DC retirement savings as cash in one go. You could also take up to 25% of your DC retirement savings as a tax-free lump sum under all of the options. You will need to transfer out of the Scheme to take advantage of these flexibilities as they will not be provided under the Scheme. Saving in the DC Section 3 simple steps 1 Work out how much you will need and when you want to retire 2 Contribute the right amount to meet your targets 3 Invest your savings in line with your retirement plans Step 1 Work how much you will need and when you want to retire The first step is to think about how much income you ll need to live the lifestyle you want in retirement. Work out how much you will need to live on in retirement by thinking about your regular outgoings now and how they might change in the future. Once you ve got a figure in mind, you ll need to think about how much you will need to save, by taking into account all your sources of income (like previous pensions, other savings and the State pension). At the same time, you need to think about when you want to retire. Because you can take your DC Section savings at any time from age 55 (rising in future to equal 10 years before your State pension age), you need to think about how long your savings will last no matter how early or late you retire. 22 The EDF Energy Pension Scheme (EEPS)

23 Step 2 Contribute the right amount to meet your targets Once you have an idea of how much you need, you can then think about how much you want to contribute into your pension account. Until you have been with the Company for at least four years (at 1 April), the minimum contribution required from you is 5% of your pensionable salary. Once you have been with the Company for more than four years, this rises to 6% of your pensionable salary. Your pensionable salary is your basic salary together with any other payments the Company decides to include. The Company also makes contributions to your pension account. Over time the Company s contributions grow until the total contribution made by you and the Company after four years will be 18% of your pensionable salary (up to the Scheme Earnings Cap). Note that the following contribution amounts apply only if you are a DC-only member (i.e. you have opted out of the CARE Section) or if you are affected by the pensionable salary cap and are making DC top-up contributions. Company Service as at 1 April Standard Member contribution as percentage of pensionable salary Company contribution as percentage of pensionable salary Total contribution to the Scheme as percentage of pensionable salary Up to 2 Years 5% 6% 11% 2 to 3 Years 5% 8% 13% 3 to 4 Years 5% 10% 15% 4 or more Years 6% 12% 18% The Scheme Earnings Cap If you are a high earner, your contribution rate will be calculated as a percentage of your pensionable salary up to the Scheme Earnings Cap. Anything you earn over this amount will not be factored into your contribution rate. For the tax year 2015/16 the Scheme Earnings Cap is 150,000. Each year the Scheme Earnings Cap generally increases in line with the Retail Prices Index. Please note this is different to the pensionable salary cap applicable to CARE members described on page 7. Top-up members contributions If you are a top-up member (i.e. you participate in the CARE Section and the pensionable salary cap described on page 7 applies to you), you and the Company pay contributions at the same rates as set out in the above table, but as a percentage of your pensionable salary between the pensionable salary cap and the Scheme Earnings Cap. You can also become a top-up member if you are not affected by the pensionable salary cap, but the Company will not pay contributions as set out in the above table. Note that DC top-up contributions are limited such that your CARE Section pensionable salary and DC top-up eligible salary cannot equal more than the Scheme Earnings Cap. Step 3 Invest your savings in line with your retirement plans Saving in the DC Section is not just about how much you contribute each month. How you choose to invest your savings, both in the years before and leading up to retirement, will impact their value. More information about the funds available, as well as investing your savings, will be made available to you on Pulse. The EDF Energy Pension Scheme (EEPS) 23

24 Your retirement choices As a DC Section member, you will have flexibility in the choices you can make when you come to retire. We ve explained some of the choices you should consider as you start to make plans for your future. How you can use your savings The savings you build up in your DC Section savings account can be used as you wish to provide an income for your retirement. When you come to take your savings, you will be able to transfer them out of the Scheme, where upon you ll be able to use them as you wish. Regardless of which option you choose, you can take up to 25% of your total benefits as tax-free cash. When you can take your savings Currently, you can choose to take your savings at any time from age 55 (rising in future to equal 10 years before your State pension age) but your normal pension age is 65 if you are a DC Section only member (i.e. you have opted out of the CARE Section). If you are a DC top-up member (i.e. you also participate in the CARE Section), your normal pension age is your State pension age at retirement (see page 14). Choosing a different retirement age for your DC benefits would impact a Lifestyling investment strategy (in which investments automatically switch to lower risk as you approach retirement), which you can learn more about in your investment guide. Taking your savings early due to ill health You can retire at any time if you become too ill to work. The trustees will decide whether or not you qualify for early retirement on ill health grounds and will need supporting medical evidence. If you are a DC only member (i.e. you have opted out of the CARE Section) and if you meet the criteria for an ill health pension, you would be eligible to receive 50% of your salary for five years, plus any savings built up in your DC Section account. If after five years you remain too ill to work, then a lump sum of once times your basic salary will be paid into your DC Section account. If you are a DC top-up member (i.e. a CARE Section member) who is impacted by the pensionable salary cap, you would be eligible to receive twice your DC top-up eligible salary (i.e. anything between the pensionable salary cap and the Earnings Cap), payable by EDF Energy into your account. In severe cases of ill health (as defined by HMRC), you may be eligible to receive four times your DC top-up salary. This is in addition to any savings built up in your DC Section account. 24 The EDF Energy Pension Scheme (EEPS)

25 Other benefits The DC Section also helps to protect those who depend on you if you die. If you die in service with the Company as a contributing DC only member, the Scheme will pay a lump sum of eight times your pensionable salary at the date you die. This is twice the lump sum that would be payable if you were a member of the CARE Section, but in the DC Section, there are no separate spouse s or children s pensions payable. The value of your savings account at your death will be added to that lump sum. Top-up members If you die in service with the Company as a contributing DC only member, the Scheme will pay a lump sum of eight times your pensionable salary at the date you die. This is twice the lump sum that would be payable if you were a member of the CARE Section, but in the DC Section, there are no separate spouse s or children s pensions payable. Please note the Scheme currently insures the lump sum death in service benefit. Just like any other insurance, the insurer sets its own terms and conditions. We will tell you in writing if restrictions apply to your lump sum death benefit (restrictions may mean that cover is declined). Please note that if you choose to opt out of the Scheme altogether, you will be provided with a lump sum payment of once times your pensionable salary. Lump sums The trustees will decide who will receive any lump sum payment after your death. This means that the payment does not form part of your estate, and so does not attract inheritance tax. Under the rules of the Scheme, the trustees can consider paying this money to anyone you have named on your Expression of Wish form. Please fill in and return this form when you join the Scheme. It is very important that you keep your Expression of Wish form up to date, especially if you: get married or divorced; register or end a civil partnership; or if you have children. LET US KNOW YOUR WISHES Completing an Expression of Wish form ensures we know the people you would like to receive any cash sum if you die. You can request a form from the pension administration team; their details can be found on page 31. The EDF Energy Pension Scheme (EEPS) 25

26 Leaving the DC Section If you choose to join, but later leave the DC Section, the choices open to you depend on the length of time you have been a member and whether or not you remain employed by the Company. If you opt out within 30 days of joining the DC Section, you will receive a full refund of your contributions. If you opt out of the DC Section after more than 30 days but remain employed by the Company, you can choose to become a deferred member. The contributions made by you and the Company will remain invested and you will continue to be able to review and change your investment choices until you take your savings from DC Section. Alternatively, you can choose to transfer the value of your savings account to another suitable arrangement for example a personal pension account. 26 The EDF Energy Pension Scheme (EEPS)

27 CURRENT TAX LIMITS One of the main benefits to saving for retirement in the Scheme is that you get tax relief on your contributions. The Scheme is registered with HM Revenue & Customs (HMRC). This means that the Scheme and its members receive valuable tax relief on pension contributions and benefits, up to certain limits. The limits that the HMRC puts on the amount of tax relief you get on your contributions and your total pension scheme benefits are summarised below. The Annual Allowance (AA) This is a limit on the amount of savings you can build up tax-efficiently in all your pension schemes each year. You will receive a statement each year from the pensions administrator telling you how much allowance you ve used up. If the value of the savings your build up exceeds this limit, then you may have to pay a tax charge. The AA is currently 40,000 for the tax year starting on 6 April This limit is regularly reviewed and so is likely to change in future. You should check for the latest information on the current limit, how your savings are assessed against this limit and what you have to do to pay your tax charge if you go over the limit. Scheme Pays If you receive notification of an Annual Allowance tax charge exceeding 2,000, the trustees can pay this tax charge on your behalf and your benefits at retirement will be reduced accordingly. More information on Scheme Pays is available by contacting Mercer, the Scheme administrator. The Lifetime Allowance (LTA) This is the limit on the total pension scheme benefits you can build up tax-efficiently from all sources (apart from State Pensions) over your career. For the tax year April 2015/2016 this stands at 1.25 million but will decrease to 1.0 million in 2016/17. The LTA is currently due to be increased in line with increases in the Consumer Prices Index from 6 April You can receive benefits above the LTA, but these excess benefits will attract a tax charge. Currently this is: 25% of the value of your excess pension when it starts (then you pay income tax as normal on your monthly pension); and 55% of lump sums (which works out as the 25% charge on top of the income tax of 40%). REVIEW YOUR ARRANGEMENTS It is your responsibility to check your pension arrangements against the tax allowances. Remember to include benefits from other arrangements but not your State Pension. Lump sum death benefits are tax-free up to the value of the remaining LTA. (Remember, the LTA covers your benefits from all sources except the State pension scheme.) You do not need to measure the spouse s or children s pensions against the LTA. When you retire, the pensions administration team will ask you to confirm certain details to assess whether the total of all your benefits under all of your pension arrangements are within the LTA. You will need to give them details of any benefits you may have in any other schemes outside the Company at the time you retire. The EDF Energy Pension Scheme (EEPS) 27

28 LOOKING AFTER THE SCHEME This section tells you about how the Scheme satisfies the pension laws that aim to increase security for members. About the trustees A trustee company, EDF Energy Pension Scheme Trustee Limited, runs the Scheme on behalf of everyone entitled to benefit from it. The trustees are the directors of the trustee company. Members of the Scheme elect three member-nominated trustees. The Company appoints the chairman and the other three trustees. The assets of the Scheme are entirely separate from those of the Company. The trustees are responsible for the Scheme s administration and for investing its assets. There are more details about this in the Funding section to the right. Each year, the trustees produce an annual report and publish key details from it in a newsletter. This gives information about the financial development of the Scheme. Copies are available by contacting the secretary to the trustees. If you would like more information about the work of the trustees, contact the secretary of the trustees at the address on page 31. The trust deed and rules The trustees must run the Scheme in line with its trust deed and rules. These are the legal documents which set out their powers and responsibilities, the role of the Company, and members rights and conditions. The trust deed and rules meet current HM Revenue & Customs requirements. This allows the Scheme to register for favourable tax treatment. If you would like to see a copy of the trust deed and rules, contact the secretary to the trustees at the address on page 31. Changes to the Scheme The Company intends to continue the Scheme indefinitely. However, the Company can alter or end the Scheme at any time provided the trustees agree. Note also the special arrangement regarding the cost of benefits in the CARE Section being adjusted if the Company contributions required to meet the cost of building up those benefits exceeds 10% of pensionable salary as set out on page 13. If there is any effect on your benefits, you will receive details. If the Scheme is ended, the trustees will use the assets to provide benefits for members and their dependants. The trust deed and rules and current pensions law set out how this must happen. Funding Pension schemes need to build up a fund of money to pay the benefits promised to members as they become due. The Pensions Act 2004 brought in regulations and guidelines about the funding of defined benefit pension schemes. These set out the responsibilities for: trustees who run work-based pension schemes; employers who provide financial support for the schemes; professionals who advise companies and trustees; and the Pensions Regulator, who regulates work-based pension schemes in the UK. In line with the Pensions Act 2004, you will receive a funding statement each year to give you information about the long-term financial situation of the Scheme. You will be able to ask for further information including: the statement of investment and funding principles, which sets out the strategy and aims that the trustees and the Company have agreed for the Scheme; any valuations or reports from the actuary; and the actuary s certificate to the schedule of contributions, which sets out the contributions the Scheme needs from the Company and members. 28 The EDF Energy Pension Scheme (EEPS)

29 Data protection The trustees (or the Scheme administrator, who acts on their behalf) need to hold personal information about you and your benefits in order to run the Scheme. The trustees arrange to keep your data secure and will only disclose it in limited circumstances. Here are some examples of the people who may receive information about you for the purposes of running the Scheme and administering benefits: administrators to work out your benefits; insurance companies to arrange cover and benefits; actuaries to advise the trustees about the Scheme; the Company; and the Government or regulatory bodies if necessary under pensions regulations. Some of this data is classed as sensitive data under the Data Protection Act By joining the Scheme, you agree to the trustees holding and using your data in this way. You are responsible for keeping the trustees up to date with your personal details, including your marital status and address. Without this information, there may be delays in paying benefits to you or to your dependants after your death. Complaints The trustees aim for high standards in managing the Scheme s assets and administering the benefits. Most queries or problems can be sorted out easily by the pensions administration team. However there may be times when you are not happy about your benefits or another matter relating to your membership, and you wish to take it further. The trustees have set up procedures for resolving complaints and disputes. There are two stages. Under the first stage, the Head of Pensions will carefully consider your complaint and make a decision. If you are not satisfied with this, you can appeal directly to the trustees. They will consider your case and let you know their decision. At each stage, they will do their best to reply to you within two months. The procedure covers anyone who has, or believes they have, a right to benefits under the Scheme. You can get full details of the procedure, along with the special application forms you will need, from the pensions administration team. The address is on page 31. If you prefer, you can nominate someone else as your representative to make the complaint for you. The procedure does not cover: complaints or disputes involving the Company; any case where court proceedings have started; or cases that the Pensions Ombudsman is already investigating. The EDF Energy Pension Scheme (EEPS) 29

30 USEFUL INFORMATION Financial advice By law, the Company and the trustees are not permitted to give you financial advice. If you need further advice on your pension, you should consider taking financial advice. Please be aware that a financial adviser may charge for their services. choosing-a-financial-adviser Pension Wise Pension Wise provides free and impartial guidance for anyone thinking about how they wish to access their DC Section savings. The Pensions Advisory Service The Pensions Advisory Service (TPAS) is an independent non-profit organisation. It is available at any time to give you information and guidance on pensions. It covers State, Company, personal and stakeholder schemes. TPAS can also help anyone who has a problem, complaint or dispute with their occupational or private pension arrangement. TPAS operates a national telephone helpline, or you can write, fax or your query. The Pensions Advisory Service 11 Belgrave Road, London SW1V 1RB Helpline Fax enquiries@pensionsadvisoryservice.org.uk The Pensions Ombudsman The Pensions Ombudsman investigates and decides complaints and disputes about the way that pension schemes are run. The Secretary of State for Work and Pensions appoints the Pensions Ombudsman and the government decides his powers and duties. He is completely independent and there is no charge for using the service. The Pensions Ombudsman will normally only consider cases after you have used the Scheme s own dispute resolution procedure and consulted TPAS. Lost pensions If you have lost touch with a previous pension scheme, you can use the pension tracing service. This holds details of registered pension schemes in the UK, including the addresses for contacting scheme trustees. We have given information about the scheme to the Tracing Service, which is currently run by the Department for Work and Pensions. Pension Tracing Service The Pension Service 9 Mail Handling Site A, Wolverhampton WV98 1LU Telephone You can also use their online form at: The Pensions Regulator The Pensions Regulator is the regulator of work-based pension schemes in the UK, set up under the Pensions Act Its priority is to work with schemes to identify and reduce any risk to members benefits. The Pensions Regulator: has clearly-defined objectives set out in pensions law; has a range of powers to investigate schemes and take action where necessary; takes an active approach to regulation; and provides practical support for pension schemes. The Pensions Regulator Napier House Trafalgar Place, Brighton BN1 4DW The Pensions Ombudsman 11 Belgrave Road, London SW1V 1RB Telephone Fax enquiries@pensions-ombudsman.org.uk 30 The EDF Energy Pension Scheme (EEPS)

31 CONTACT US The pensions administration team is your first contact for any questions you have about the Scheme or your benefits. Pensions Administration Team EDF Energy Pension Scheme PO Box 434 Westgate House, Chichester PO19 3ZU Telephone Further details on the Company s pension arrangements are available on Pulse or Mercer Oneview. If you want to contact the trustees you can do so by writing to the secretary to the trustees. Beth Hurt Secretary to the Trustees Pension Services EDF Energy Plc Atlantic House Henson Road Crawley RH10 1QQ beth.hurt@edfenergy.com EDF Energy plc 40 Grosvenor Place London SW1X 7EN The EDF Energy Pension Scheme (EEPS) 31