Issue 2 September 2013 On track with The Wrigley Pension Plan
Pensions: a golden egg? There s a definite bird theme to this edition of On Track. If you want to add to your nest egg for retirement, we ll show you how each 1 can instantly become worth nearly 2. Where else could you do that? And what can an ostrich teach you about saving for retirement? Well now you can go online and see what the star of our new pension videos has to say about not burying your head in the sand when it comes to planning for your future. The Government is trying to kill two birds with one stone, by reforming the Basic State Pension. They hope it will be simpler to understand and will also encourage people to save more. See whether you think they ve succeeded. Plus, each year the Trustees are required by law to send you a Summary Funding Statement. You will have received your copy earlier this month. We ve included an overview (you could say a bird s eye view) of what it s about. And finally, in the first issue of On Track, we mentioned we d include more detail about what it means to be a Trustee including an interview with one of our Member Nominated Trustees. There s so much else going on that we wanted to cover in this edition, we ve decided to hold this back until next time. You ll see that some of the content for this issue of On Track came as a result of feedback we ve received from you. If there are other subjects you want us to cover, just let us know using the contact details on the back page. 2
Here s what you said A big Thank you to the members who gave us their views on the first edition of On Track. Feedback on the first edition was very positive Voluntary contributions were top of the list of subjects you wanted to know more about Over 50 of you replied and the response was nearly universally positive. All except one person said they would definitely read future editions and only four people felt we had used too much jargon and that it wasn t useful. Most importantly, we have got some feedback on the subjects you wanted to hear more about. We received most requests for more information on paying additional voluntary contributions. So on page 4 we ve included an article on the subject, called Getting more. You can carry on giving us your feedback by using the Contact details on our website, www.wrigleypensionplan.co.uk. We ve put a copy of the results of your feedback on the Trustees News section of the website. You ll see from this that very few people wanted to receive future editions of On track by email, so we re sticking with a paper version for the moment, though we ll keep an archive of copies on the Trustees website as well. Finally, well done to our three lucky winners, who were picked first out of the hat out of everyone giving us their comments and won a bottle of wine. They were: Denise Russell Bottle Line Nicky Blacker Field Sales Andrew Bradshaw Senior Category Manager 3
Getting more: AVCs There s no getting away from it. A lot of what we ll want to do in retirement takes money. Whether it s holidays or hobbies, eating out or entertaining the grandchildren: we ll want to be sure we ve enough set aside for this as well as the basics of life. So whatever your age, it s a good idea to look at your benefit statement and see whether you think what you re expecting from the Wrigley Pension Plan along with any other savings you may have will pay for the kind of life you d like to live after you ve stopped work. Remember, the size of your Wrigley pension depends on how long you ve been a Plan member. So there are all sorts of reasons why you may want to give it a bit of a boost. For example: You may be thinking of retiring early You may not have been a Plan member for your full career perhaps you took a career break or joined later in life Or maybe you just want to have more income when you stop working. You can use the Plan as a way of saving more for your retirement by paying AVCs With tax breaks and a contribution from Wrigley your contributions could almost double in value overnight! Whatever your reason, one of the first options you should consider is paying Additional Voluntary Contributions (AVCs). The idea is simple: you pay additional money into an account set up within the Wrigley Pension Plan You choose how the money is invested from a range of options and when you take your pension, it provides extra benefits on top. So what s so special about AVCs? Well two big reasons to start with: The money comes out of your pay before any tax is taken. So if you re a 20% tax payer each 1 paid-in only reduces your take home pay by 80p Wrigley match every 1 you pay with an extra 50p - adding on a maximum of 3% of your annual basic salary. Example: Your basic annual salary Cost to you of contribution Amount paid into your account 25,000 1,200 2,250 Where else would you get that sort of return on day one! 4
So let s clear up a few common misunderstandings about AVCs: Don t you have to pay AVCs for a minimum period? No. You can stop, start, suspend, or pay one-off sums using the forms you can get on www.wrigleypensionplan.co.uk (or by contacting the P&O team). Isn t there a limit to how much I can pay? Yes, but it s quite generous. Currently you can get tax relief on contributions of up to 100% of your earnings in any tax year. There is an Annual Allowance, currently 50,000 (which limits the amount your benefits can grow in a year), and a Lifetime Allowance currently about 75,000 a year (which limits the amount of pension you can earn over your whole life). In both cases there s a tax charge if you go over the allowances and you can read more about this in your booklet. You can also find out more from the Rewards team and they ll tell you if your AVCs look like taking you over one of the allowances. Don t I need to use the money to buy a pension (an annuity ) and isn t that expensive? Within the limits allowed by the Plan, you can use your AVC fund at retirement to buy extra pension or as part of your tax-free cash sum. Broadly, you can take 25% of the value of all of your Wrigley Pension Plan benefits (including your AVCs) as cash. Ultimately the mix of benefits provided by AVCs will be determined between you and the Trustees of the Plan, when you start to take your benefits. Won t my family lose the money if I die before I retire? No, the full value of your account (including any matching contributions made by Wrigley) will be payable to your nominated dependants if you die before you have started to draw your Wrigley pension. Remember to keep your Nomination Form up to date (you can get a new form from the P&O team or online at www.wrigleypensionplan.co.uk). Doesn t my money get eaten into by charges and by falls in the stock market? You choose where you want to invest your AVCs from a range of options available. These don t necessarily invest in the stock market and charges are generally lower than you would get as an individual investor, between 1% and 1.6% of your fund each year. Won t I be better off with an ISA or my own private pension? We can t give you investment advice and what s best for you will depend on your personal circumstances. But you should remember that no other investment will offer the level of contribution Wrigley provide on the first 6% of your salary you pay in. On the other hand, with AVCs your investment is tied up until you retire. So if you re saving for the deposit on a house, a new car, or any kind of short-term saving, you can use investments like Individual Savings Accounts (ISAs) but not AVCS. Finally if you use your AVCS as part of your tax-free cash sum you ve paid no tax on the money when it s paid in and no tax on it when it comes out and that s not available with any other investment. If you want to know more about AVCs speak to the Rewards team. If you need financial advice, we recommend that you speak to an independent financial adviser (IFA). Wrigley can arrange this, or you can visit www.unbiased.co.uk to find an IFA in your local area. 5
Making State Pensions simpler eventually Last year the Government announced it was planning to make the Basic State Pension the same for everyone and that it would be more than it is now. Unfortunately the proposals aren t quite so straightforward: so here s a summary of what s being suggested and how it may affect you. You don t need to do anything at this stage, as the Government s plans are still proposals. We ll keep you informed when more is known. Where are we today? To understand what s being proposed we need to start with where we are today. Currently, there are actually two State Pensions. There s the Basic State Pension and the State Second Pension. The Basic State Pension: This is paid as a fixed amount. So it doesn t change depending on how much you earn. If you ve paid National Insurance contributions for 30 years, you ll get the full amount, which is currently 110.15 a week ( 5,727.80 a year). Everyone at Wrigley can earn the Basic State Pension. State Second Pension: This provides an additional amount that can vary depending on how much you earn. It s a complicated formula and to qualify for this you need to pay additional National Insurance Contributions. Members of some company pension schemes are opted out of this second pension. They don t pay for it and they don t receive it. This is called contractingout. The Government plans that from April 2016 you ll start to earn a bigger state pension But you (and Wrigley) will have to pay more as a result As a member of the Wrigley Pension Plan, you are contracted-out. So both you and Wrigley pay lower National Insurance contributions and don t earn any State Second Pension. You get your pension from the Wrigley Pension Plan instead. If you ve had other jobs, you may have built up some State Second Pension when you worked there (it used to be called SERPS). It could be worth up to 150 a week more. What s being proposed? The aim is to make the way State pensions work a lot simpler, so it s easier for us all to understand and plan for our retirement. As a result, from April 2016, the Government is proposing to scrap the State Second Pension and increase the Basic State Pension to an amount which is equivalent to 144 a week today (with inflation, it ll probably be worth around 155 a week or 8,060 a year by the time it s introduced but we ve used the figure of 144 throughout to keep things simple). The main points to note are: Current pensioners will not be affected: the change only applies to you if you reach State Pension Age after April 2016 (in other words if you were born on or after 6 April 1951 for men or on or after 6 April 1953 for women). To qualify for the full new Basic State Pension you will need to have 35 years worth of contributions. 6
At April 2016 you ll receive a starting credit reflecting the years you ve already contributed towards your State pension. Because you have been paying lower National Insurance Contributions as a result of being contracted-out of the State Second Pension, you will get a smaller starting credit than someone who has been paying higher National Insurance contributions. From April 2016, as there will be no State Second Pension, everyone will pay the same National Insurance, so you and Wrigley will start to pay higher National Insurance contributions. You will carry on earning Basic State Pension after April 2016 each year you work and pay in you will earn an extra pension of 4.11 a week until you reach the new maximum of 144 a week. What it means to you At current rates your National Insurance contributions will go up by a maximum of 481 a year. The increase will be less if you earn below 40,040. For example it s 200 a year if you earn 20,000. (Wrigley will have to pay more too: on those earnings they ll need to pay an extra 487 to the Government on your behalf.) Your basic state pension can t be worth less than the amount you d get under the current system ( 110.15 a week if you qualify for the full amount), and will be worth more than this if you reach State Pension Age after April 2016. We don t yet know exactly how the Government plan to work it out, but you ll be told your starting credit at the time. It will be less* than the new maximum figure of 144 a week but you can earn an extra 4.11 a week in pension for each year you pay in, until you reach this figure. It s a lot to take in, so it will take a while before we can all see exactly what the new rules will mean. And remember, at the moment these are only proposals: we ll keep you up to date with developments when we know more. *It is possible, if you joined Wrigley late in your career and built up a State Second Pension while at other jobs, that your starting credit will be greater than the new figure of 144 a week. If this is the case you will still get the extra amount, but you won t earn any new State pension after April 2016. You ll be given details of this when the new rules are introduced and you will still have to pay more National Insurance Contributions, like everyone else who s a Wrigley Pension Plan member. Add it to your favourites! You may not look at it as often as Facebook or your favourite football team s site, but now you can add www.wrigleypensionplan.co.uk to your list of favourites/bookmarks. The Trustees have a new website Make it your first port of call for information about the Plan Nothing on the site is more than two clicks away. You ll find information about the Plan, the forms you need to pay or change your AVCs and other news from the Trustees. And it s the only place you can get useful tips from an ostrich! Go to the site, get viewing, tell us what you think and what you want future videos to cover. 7
What is a Summary Funding Statement? Earlier this month, we sent you your copy of the Plan s Summary Funding Statement. You may be wondering why you have it and what you should do with it. So here are answers to some of the questions you may have. Why do I get a Summary Funding Statement each year? There s a longer and a shorter answer to this! The short answer is Because we have to : it s a legal requirement for pension plans like ours to issue these each year to members. The more helpful answer is that the Government introduced these statements to encourage pension plans to be more open about their finances. If you re old enough and have got a good memory, you may recall a scandal surrounding newspaper owner Robert Maxwell who owned the Mirror Group. After his death it was discovered he had been stealing millions from the Company s pension fund to prop up his ailing businesses. Since then many measures have been introduced to make pension plan finances more transparent and to encourage better communication with members. The Summary Funding Statement aims to do just this. So what does the statement tell me? There s a lot of detail which we have to include, but fundamentally the Statement is about 3 main things: How much we think it will cost to provide the pension you earn in the future Whether the money set aside so far is enough to cover the benefits you have earned to date, working on the assumption the Plan carries on as now - and if not, how much extra needs to be paid in to make up the shortfall Whether there is enough money to secure all of your benefits with an insurance company if Wrigley were to pay no more money into the Plan. Each year the Trustees have to issue you with a Summary Funding Statement It looks at the Plan s finances Although you should read it, you don t need to do anything as a result It talks about winding-up the Plan. Should I be concerned? No, this is one of the subjects we have to include by law. It s a bit like asking what would happen if you stopped paying your mortgage. The answer may seem a bit scary, but it s unlikely you have plans to stop paying your mortgage. Similarly, Wrigley is committed to providing pension benefits for employees and to keep the Plan running in the long-term and neither they, nor the Trustees, have current plans to wind up the Plan. What am I meant to do with it? We began with a short and a longer answer and we end the same way! The short answer to the question is nothing i.e. you don t have to do anything with this information. The longer answer is that it is important you understand how the Wrigley Pension Plan works as we said in the last On Track it s probably the most expensive thing you own. So you should read the Statement carefully and ask questions on anything you don t understand. Contact us Is there something you want to know more about? Tell us about it and we can include it in future editions of On track. Remember, if you don t say, we won t know! Email: marianne.stephens@wrigley.com Telephone: 01752 752044 Important There is a Trust Deed and Rules which sets out the benefits payable and when and how they are to be paid. Legislation and HM Revenue & Customs allowances also govern the benefits payable. This newsletter only summarises some of the benefits and it doesn t create any legal rights. The Trust Deed and Rules will always apply if there is any difference between it and this newsletter.