Enclosure 1: AvestaPolarit Pension Scheme (the "Scheme ) Proposed Pension Changes Fact Sheet Introduction As explained in the attached letter, the Company is proposing to make the following changes to the Final Salary Section of the Scheme from 1 October 2016 for all members in active membership under the Final Salary Section immediately prior to that date: A. You will no longer build up future-service benefits in the Final Salary Section of the Scheme. Instead, you will become a 2016 Special Deferred Member of the Final Salary Section (see below for an explanation of 2016 Special Deferred Membership) and will build up future benefits in the Money Purchase Section on a defined contribution basis; B. The benefits you have built up to 30 September 2016 in the Final Salary Section will be protected, although they will no longer be linked to your Final Earnings at retirement. Instead, they will be based on your Final Earnings as at 30 September 2016 and then linked to inflation; C. The earliest age at which you will be able to receive your Final Salary Section benefits without reduction if you retire with consent whilst in employment with the Company will be changed from 60 (the current position on retirement from active membership) to 63. This is an enhancement to the deferred benefit where the earliest age you can receive your benefits unreduced is normally age 65; D. If you retire with Company consent (or choose to access your pension whilst remaining in employment with the Company) before age 63, an early retirement reduction of 4% for each year you retire under age 63 will be applied. This would replace the current reduction factor of 3% per year; E. The 1 for 7 service credits payable on retirement from active membership of the Final Salary Section on or after age 60 will no longer be paid from the Scheme. Instead, these benefits will be replaced with a benefit paid directly by the Company (see below for more details); F. You will be able to use the fund you build up in the Money Purchase Section of the Scheme (including Additional Voluntary Contributions (AVCs)) to fund the tax-free cash lump sum that is available as part of your retirement options; and G. Upon reaching the minimum age for accessing your occupational pension (as set down in legislation and the Scheme Rules) you will be able to access your pension whilst continuing to work for the Company if you wish to do so. For active members of the Final Salary Section who will be aged 59 or older on or before 31 October 2016, there will be temporary transitional arrangements in relation to items C and D above (see sections C and D below for further details). This Fact Sheet contains a more detailed explanation of each element of the proposed changes and some simple illustrations to explain how the changes will work in practice. This Fact Sheet forms part of the information being provided during the consultation with affected members of the Scheme and their representatives. The consultation period runs from 1 June to
31 July 2016. Should you have any feedback or queries in relation to the proposed changes, please contact Martin Pinder. Contact details for Martin Pinder can be found at the end of this Fact Sheet. The Company will fully consider all the feedback received during the consultation period prior to making a final decision on the proposals. All questions and observations need to be received by the Company before the consultation period closes on 31 July 2016. Definitions In this Fact Sheet, we have used a number of key terms which are important in relation to the pension calculation. These terms are defined in the Appendix to this Fact Sheet.
Information on the proposed changes The following table sets out a summary of how your current pension package compares to the proposed changes and also to the minimum level of benefits that the Company would have to provide you with by law (both in respect of the benefits you have built up in the Final Salary Section of the Scheme and going forwards in the Money Purchase Section). Ordinarily, were the Final Salary Section to close to future accrual, you would be entitled to standard deferred benefits under the Final Salary Section in respect of your accrual up to the closure date (this is the benefit described in the fourth column in the table below). The Company recognises, however, that the proposed changes, if implemented, will represent a big change to the way in which your pension builds up and could mean that the benefits you can expect to receive in retirement would be lower than if no changes were made. In recognition of this, the Company is proposing that certain enhancements to the normal deferred benefit will apply in respect of employees who are active members of the Final Salary Section as at the date the Final Salary Section closes to future accrual. Such members will become known as 2016 Special Deferred Members, and the enhancements to the ordinary deferred benefits are explained below. Final Salary Section benefit Earliest age Final Salary Section pension can be taken without reduction Reduction applied if pension taken early (i.e. before the age in the row above) Calculated by reference to Current active Proposed benefit Current APPS benefit deferred benefit 60 63 65 3% pa 4% pa 1 6% pa below 65 and 4% pa below 60 2 Service and Final Earnings at retirement 1 for 7 credit payable Yes, on retirement from active status at age 60 or over Ability to access Final Salary Section pension before leaving service with the Company Service and Final Earnings at 30 September 2016 (then linked to inflation up to retirement) 3 Alternative benefit to be provided by the Company instead of the Scheme Service and Final Earnings at date of leaving pensionable service(then linked to inflation up to retirement) 3 No No Yes Not normally applicable Death-in-service benefits See below See below See below Ill health benefit See below See below See below The Company s contribution A variable amount in respect of any deficit A variable amount in respect of any deficit A variable amount in respect of any deficit Current deficit expected to reduce by Nil 27m 37m Benefits built up after Current active Proposed benefit Minimum benefit 30 September 2016 benefit Basis of future pension Final Salary Money Purchase Money Purchase
My pension contribution 8% of Earnings 5 Between 3% and 8% of Earnings 5 5% of qualifying earnings 4 The Company s contribution Variable depending upon Scheme valuation Between 3% and 10% of Earnings 3% of qualifying earnings 4 Current costs expected to reduce by nil 2 million 2.5 million 1 The pension reduction factors are to be set by the Company (subject to the five year guarantee - see below) and are subject to review from time to time. 2 These pension reduction factors are set by the Trustees of the Scheme and are subject to review from time-totime. At the time of publication, these reduction factors are currently being reviewed by the Trustees. 3 The measure of inflation used is called statutory revaluation and is set by the Government every year. 4 Qualifying Earnings are currently earnings between 5,824 and 42,385. These minimum contribution rates will be applicable from April 2019, with transitional arrangements in the meantime. 5 Earnings in the Final Salary Section since April 2016 have excluded bonus. For the purposes of the Money Purchase Section, Earnings currently include bonus. Further information on each of the proposed changes is set out below in the remainder of this document. A - You will no longer build up future-service benefits in the Final Salary Section of the Scheme. Instead, you will become a 2016 Special Deferred Member of the Final Salary Section and will build up future benefits in the Money Purchase Section on a defined contribution basis. From 1 October 2016 you will no longer build up benefits in the Final Salary Section of the Scheme. Instead, you will build up benefits in the Money Purchase Section. Benefits in the Final Salary Section At the moment, you build up benefits in the Final Salary Section of the Scheme based on your Final Earnings at retirement. You currently earn a pension of 1/60 th of your Final Earnings for each year that you are a member of the Scheme (plus any transferred-in service). After 30 September 2016, you will no longer build up a pension in the Final Salary Section. Your benefits in this section will be calculated based on your Service and Final Earnings as at 30 September 2016. This pension will then be increased mainly in line with inflation (known as statutory revaluation ) until you retire. Benefits in the Money Purchase Section From 1 October 2016, you will build up benefits in the Money Purchase Section of the Scheme. Both you and the Company will pay contributions to the Scheme and this money will be invested between now and retirement (you can choose how this money is invested). At retirement, you can choose what to do with the money you could convert it into a pension or withdraw it as cash. The minimum that the Company would be required to contribute to the Money Purchase Section by law is currently 1%. The Company's contributions and your contributions to the Money Purchase Section are set out in full below. 4
Ordinary contributions All active members and the Company shall contribute at the following rates: % of Earnings Age Member Company Under 30 3 3 30-49 3 4 Matching contributions 50 and over 3 5 In addition to the contributions detailed above, if an active member pays a level of additional contributions, the Company will match this at the following rates: % of Earnings Age Member 6 Company Under 30 1 1 30-49 1, 2 or 3 1, 2 or 3 50 and over 1, 2, 3, 4 or 5 1, 2, 3, 4 or 5 In addition to 'ordinary' and 'matching' Money Purchase Section contributions referred to above, members can pay additional voluntary contributions (AVCs). B - The benefits you have built up to 30 September 2016 in the Final Salary Section will be protected, although they will no longer be linked to your Final Earnings. Instead, they will be based on your Final Earnings as at 30 September 2016 and then linked to inflation. At present, the benefits you build up in the Final Salary Section of the Scheme are linked to your Final Earnings when you retire (or leave service if earlier). From 1 October 2016, the benefits you have built up to that date will be calculated based on your Final Earnings at 30 September 2016 and will then be increased, broadly in line with inflation, up to the point you retire or access your pension. The measure of inflation that will be adopted is called "statutory revaluation", which currently references the Consumer Price Index of inflation with caps of 5% and 2.5% pa 6 On reaching ages 30 and 50, the rate of additional contributions payable by and in respect of an active member who is paying additional contributions shall be increased by 2%. An active member who is paying additional contributions may choose to pay a different rate of additional contributions in which case the Company will match the member's additional contributions at that rate. 5
applying depending on when parts of your benefits were built up. Part of your pension, known as the Guaranteed Minimum Pension, will increase at a fixed rate of 4.75% pa. Pensions in payment (in excess of Guaranteed Minimum Pension) under the Final Salary Section are increased by reference to the Index of Retail Prices with caps of 5% and 2.5% pa applying depending on when parts of your benefits were built up. The Company is not proposing any change to increases to pensions in payment. C - The earliest age at which you will be able to receive your Final Salary Section benefits if you retire early with consent whilst in employment with the Company without reduction will be changed from 60 to 63. Currently, as an active member, you are able to access your pension on early retirement at your request but with Company consent without facing a reduction at age 60. The proposal is to change this age to 63 for early retirement with Company consent as a 2016 Special Deferred Member. Members who are aged 59 and over as at 31 October 2016 will be able to continue to draw their deferred Final Salary Section benefit from the age of 60 without reduction on early retirement with Company consent, provided they access their pension on or before 31 October 2017. On redundancy after age 50 at the Company's request, as an active member of the Final Salary Section, your pension is paid without reduction from age 55 and with a 3% pa reduction for each year it is taken before age 55. 2016 Special Deferred Members who retire after age 50 at the Company's request will continue to be able to retire on the same terms as part of the Company's proposals. Note that these proposals are enhancements to the usual Final Salary Section deferred benefit (which is normally reduced for early payment before age 65 in all cases) and these enhancements will be made available to 2016 Special Deferred Members as part of the proposals, if implemented. Please also note that the pension reduction factors are to be set by the Company (subject to the five year guarantee - see below) and are subject to review from time to time. D - If you retire, with consent, from employment with the Company (or choose to access your pension whilst remaining in employment with the Company) before age 63, an early retirement reduction of 4% for each year you retire under age 63 will be applied, rather than the current reduction factor of 3% per year. Currently, if you were to retire from active membership of the Final Salary Section of the Scheme after Minimum Pension Age but before age 60 at your own request (but with the consent of the Company), your pension would be reduced by 3% for each year it is taken before age 60. As a deferred member of the Final Salary Section, your pension would normally be reduced by 6% for each year you retire after age 60 but before age 65 and 4% for each year you retire after Minimum Pension Age but before age 60. Under the proposed changes, as a 2016 Special Deferred Member, if you were to request early retirement and the Company were to consent, your pension would be reduced by 4% for each year it is taken before age 63. Therefore, if the proposals go ahead and you were to retire from employment at age 60, your pension would be reduced by 12%. Again, please note that these pension reduction factors are to be set by the Company (subject to the five year guarantee - see below) and are subject to review from time to time. For those Members who are aged 59 and over as at 31 October 2016, the reduction applied on early retirement with Company consent will be 3% for each year their pension is taken before age 60, provided they access their pension on or before 31 October 2017. 6
E - The 1 for 7 service credits payable on retirement from active membership of the Final Salary Section on or after age 60 will no longer be paid from the Scheme. Instead, these benefits will be replaced with a benefit paid directly by the Company. Active members who started employment with the Company on or before 1 September 1996 (i.e. had 7 years of service by 31 August 2003), and were, immediately prior to 1 September 2003, members of the British Steel Pension Scheme ("BSPS") and who transferred their BSPS benefits into the Scheme with effect from 1 September 2003 currently have a benefit known as the '1 for 7' credit that is payable if they retire from active membership of the Final Salary Section whilst in employment with the Company on or after age 60. The benefit is not payable on retirement as a deferred member. Under the proposed changes, you will cease to be eligible for the '1 for 7' credit as it will no longer be possible to retire from active membership under the Final Salary Section. Instead, the Company will pay a replacement benefit to those 2016 Special Deferred Members who were eligible for a '1 for 7' credit. The replacement benefit to be paid by the Company will be a one-off cash sum, in relation to which you will be taxed in line with the relevant tax legislation in force at the time payment is made. You will be able to choose either: A. a payment upon reaching age 55 or older and accessing your pension as explained in G below, or actually retiring having attained the age of 55 or older, a payment of 2,500 per full year of 1 for 7 credit that you are entitled to; OR B. a payment equal to the statutory redundancy payment that would apply on redundancy, calculated in line with legislation at the time the you reach the age of 60 or older and retire with consent from the Company. Some illustrations of the amount of replacement benefit that could be payable under A and B above in certain scenarios will provided during the member presentations. F - You will be able to use the fund you build up in the Money Purchase Section of the Scheme (including any additional voluntary contributions (AVCs) you make) to fund the tax-free cash lump sum that is available as part of your retirement options. Under the Final Salary Section of the Scheme you are able to exchange some of your pension for a tax-free cash lump sum when you retire. You will continue to be able to do this if the proposed changes go ahead. From 1 October 2016 it is proposed that you will build up benefits in the Money Purchase Section of the Scheme. Under the Money Purchase Section you would build up a fund and you would currently be able to take up to 25% of this fund as tax-free cash when you retire. The total amount of tax-free cash you can take depends on a complex formula set by HMRC (Her Majesty s Revenue and Customs). Depending on your age at retirement, you may be able to receive more tax-free cash under the proposed changes than if the current Final Salary Section benefits had continued to retirement. You will also be able to use your Money Purchase Section benefits to fund your Final Salary Section tax-free cash. This will mean that you have to give up a lower amount of your Final Salary Section pension. The potential benefit of this for you will be shown in a personal illustration that you will receive in June 2016. 7
G - Upon reaching the minimum age for accessing your occupational pension (as set down in legislation and the Scheme Rules) you will be able to access your pension whilst continuing to work for the Company if you wish to do so. Currently, the Company does not allow active members to access their Final Salary Section pensions from the Scheme whilst still in employment with the Company. As part of the proposals, as a 2016 Special Deferred Member, subject to the provision of six months' prior written notice, you will be allowed to access the pension you have built up (including your Final Salary Section benefits) whilst you are working for the Company including the tax-free cash lump sum that forms part of your pension package - provided you have reached Minimum Pension Age. If you choose to do this, you will then build up further pension benefits (under these proposals, in the Money Purchase Section of the Scheme) and will continue to be covered for death-in-service benefits. 2016 Special Deferred Members You will be treated as a 2016 Special Deferred Member for the purposes of the proposals if you meet the following conditions: you are an active member of the Final Salary Section on 30 September 2016; you cease to be an active member of the Final Salary Section owing to the closure to accrual of the Final Salary Section and you join the Money Purchase Section of the Scheme with effect from 1 October 2016; before you retire as a member of the Money Purchase Section of the Scheme you do not: o opt-out of active membership of the Money Purchase Section; o leave employment with the Company (other than as a result of redundancy on or after age 50); or o transfer any of your Final Salary Section benefits (other than AVCs) out of the Scheme. If you are a 2016 Special Deferred Member and you opt-out of active membership (even if you subsequently re-join the Money Purchase Section), leave employment with the Company (other than as a result of redundancy on or after age 50) or transfer any of your Final Salary Section benefits (other than AVCs) out of the Scheme, you will cease to be treated as a 2016 Special Deferred Member, and will instead be treated as an ordinary deferred member of the Scheme. Important information about death-in-service and ill health benefits Death-in-service On death, the Company proposes that, rather than the death benefits that would ordinarily apply to deferred members, 2016 Special Deferred Members who die whilst in active membership of the Money Purchase Section will remain eligible for the same Final Salary Section death benefits that they are currently entitled to on death as an active member (with the lump sum calculated by reference to your Life Assurance Earnings at the date of your death, rather than as at 30 September 2016, the Final Salary Section closure date) except that: spouse's and children's pensions will be calculated based on your Service and Final Salary as at 30 September 2016; and there will be no double-counting of the death in service lump sum. The total lump sum payable from the Scheme to your Eligible Recipients (as defined in the Trust Deed and Rules) will be four times Life Assurance Earnings, plus the value of your Money Purchase Section account. 8
Benefits payable on ill health The Company proposes that, rather than the ill-health benefits that would ordinarily apply to deferred members, 2016 Special Deferred Members who retire due to ill-health whilst in active membership of the Money Purchase Section will remain eligible for the same ill-health benefits to those that they are currently entitled to on ill-health early retirement as an active member of the Final Salary Section, except for the fact that they will be based on Service and Final Salary as at 30 September 2016. On retirement due to Incapacity there would be no reduction to these benefits. On retirement due to Serious Ill-health, in line with the current approach, the benefits would be reduced by an amount certified as reasonable by the Scheme Actuary. In addition, you would be able to use the value of your Money Purchase Section account to provide an income or a lump sum. The Money Purchase Section explained If the proposals go ahead, on 1 October 2016 you will automatically be enrolled into the Money Purchase Section of the Scheme but will have the option to opt-out if you wish (although note you will cease to be a 2016 Special Deferred Member if you do this). Please refer to the enclosed Money Purchase Section handbook, which provides a full description of the Money Purchase Section. A leaflet is included in the handbook providing some guidance relating to investment choices. However, the Company cannot provide financial advice and you should consider consulting an independent financial adviser if you want to receive expert advice on financial matters (see page 11 of this Fact Sheet). Changes to your pension contributions If the proposals go ahead, you will become a member of the Money Purchase Section of the Scheme and your pension contributions will change as a result of this (see pages 4 and 5 of this Fact Sheet). The table below sets out the impact of paying different levels of contribution to the Money Purchase Section of the Scheme on the take home pay of a sample member. Current benefits Proposed changes (Maximum contributions 7 ) Proposed changes (Minimum contributions) Earnings 25,000 25,000 25,000 Pension contributions - Percentage 8% 8% 3% - Amount 2,000 2,000 750 Taxable earnings 23,000 23,000 24,250 (Total earnings less pension contributions) Estimated Income Tax 2,400 2,400 2,650 National Insurance 1,792 1,792 1,942 Take home pay 18,808 18,808 19,658 7 In addition to 'normal' and 'matching' Money Purchase Section contributions referred to here, members can pay additional voluntary contributions (AVCs) 9
No further changes to your benefits under the Final Salary Section for five years The Company would like to assure you that it will make no further changes to your benefits under the Final Salary Section of the Scheme for the next five years on and from 1 October 2016 until 1 October 2021 (unless required by legislation). Timetable for this benefit change consultation The letter that accompanies this Fact Sheet marks the start of a formal consultation period on the proposed benefit changes that, by law, must run for at least 60 days. The table below sets out the timetable of events over the remainder of the year. Start of formal consultation 1 June 2016 Individual impact statements During June 2016 Member presentations During June and July 2016 End of formal consultation 31 July 2016 Company considers comments made on proposed changes August and September 2016 Company informs members on the outcome of the consultation September 2016 If the proposals go ahead Members receive further information on Money Purchase Section benefits September 2016 Build-up of benefits in the Final Salary Section of the Scheme ceases 30 September 2016 Build-up of benefits in the Money Purchase Section starts 1 October 2016 How to respond to the Consultation You can respond to this formal benefit change consultation in the following ways: 1. by sending an email to martin.pinder@outokumpu.com 2. by writing to Martin Pinder, HR VP UK, Yorkon Office Block using the internal postal system If you wish to respond to this benefit change consultation the Company must have received your response by 31 July 2016 for it to be taken into account. Trust Deed and Rules The benefits provided by the Scheme are set out in the Scheme s Trust Deed and Rules, as amended from time to time. If a discrepancy arises between the description of your benefits set out in this document and the Trust Deed and Rules then the Trust Deed and Rules will be taken as the correct description. 10
Personal Advice The Company is unable to give you personal financial advice. If you would like personal financial advice on the impact of the proposals, you must consult an independent financial adviser. Details of independent financial advisers can be found at www.unbiased.co.uk. You will need to meet the cost of any advice you seek. The Pensions Regulator We are required to inform you that the Pensions Regulator has the power to enforce the legislation in relation to the consultation process, although it cannot reverse a change that an employer has made following consultation. If you have any concerns in relation to the Company's compliance with its obligations in relation to the consultation process (rather than the proposal itself), you can contact the Pensions Regulator. The contact details of the Pensions Regulator are: Telephone: 0345 600 7060 Email: Address: wb@tpr.gov.uk The Information Team, The Pensions Regulator, Napier House, Trafalgar Place, Brighton BN1 4DW 11
Appendix Definitions 2016 Special Deferred Member Company Deferred Member Dependent Dependent Child See page 8 above. Outokumpu Stainless Limited A member who has ceased to be in active membership other than through death or retirement with an immediate pension and who is entitled to a pension payable on retirement or earlier death. Your Spouse, same sex partner or other individual(s), whom the Trustee considers to be financially dependent on you. Your children, either born to you or legally adopted by you, who are: under the age of 16; or up to age 23 and in full time education and financially dependent upon you; or in the opinion of the Trustee suffering from such disability as to make him/her dependent upon you for so long as the Trustee so decides. Final Earnings For all Members in respect of Service after 1 September 2003, this means the average of the highest three tax years' Earnings (annualised if appropriate) out of the last 10 tax years' active membership (or the actual number of tax years if less than 10), up to the end of the last complete tax year. For existing Members of the Scheme on 1 September 2003 with accrued Service prior to that date, this means the higher of: the above; and the highest tax year s Earnings of the five consecutive tax years up to the end of the 2002/2003 tax year. Earnings that include abnormally wide fluctuations will be averaged based on the tax year in question and the two immediately preceding tax years. Earnings history within the British Steel Pension Scheme (BSPS) will be retained for former BSPS members who made a transfer in at 1 September 2003. Final Salary Section The final salary (otherwise known as defined benefit) section of the Scheme. 12
Life Assurance Earnings Earnings for the last complete tax year without the deduction of the Category A Basic State Pension (as set out in the Social Security Contributions and Benefits Act 1992). Minimum Pension Age Age 55, except where Members who joined the Scheme before 6 April 2006 meet the criteria to retain a protected pension age of 50. Money Purchase Section The money purchase (otherwise known as defined contribution) section of the Scheme. Normal Retirement Age Age 65 Service Earnings Scheme Spouse Trustee The period of your active membership of the Final Salary Section of the Scheme including any Service credits granted on transfers into the Final Salary Section. Salary or wages before tax and any other deductions : including shift premiums, bonuses and overtime payments and such other emoluments as determined from time to time by the Company (bonuses are explicitly excluded from Earnings for Service after 6 April 2016 in the Final Salary Section only); excluding any part of the value of benefits that are not in monetary form and or any sum paid in lieu thereof and any bonuses, allowances, expenses or other payments made to or in respect of a Member in respect of any duties performed outside of the United Kingdom. less the single person's category A Basic State Pension (as set out in the Social Security Contributions and Benefits Act 1992) for the relevant year. The AvestaPolarit Pension Scheme The person to whom the Member is legally married (including a same sex spouse or civil partner) and where the context allows includes a widow, widower or surviving civil partner of a Member. AvestaPolarit Pension Trustees Limited Trust Deed and Rules The governing documentation of the Scheme as amended from time to time. This includes the Final Salary Section and the Money Purchase Section. 13