DEFINED BENEFIT SECTION Metal Box AVC Plan Member s Booklet June 2007
A Glossary of special pension terms used in this booklet can be found on the fold-out flap at the back
Contents Planning for your future An Introduction to the AVC Plan 2 The AVC Plan in brief A summary of the main provisions 3 Membership Contributions Who can join the AVC Plan? How do I join? Can I subsequently opt out? Is my Normal Retirement Age affected? 4 What do I pay? Does the Company pay any Contributions to the AVC Plan? How much of my contribution will be Matched? Do I get any tax relief? Is there a limit to how much I may contribute to the Scheme? Are there any deductions from these Contributions? 5 4 4 4 5 5 5 5 5 Investments How is my Account invested? 6 Retirement Death What choices do I have when I retire? What options are available if I transfer my AVC Plan benefits to the DB Section? What about a cash option, if I transfer my AVC Plan benefits to the DB Section? How does the Open Market Option work? Are there any limits on my benefits? How is my pension taxed? 7 What benefits are payable on death? How does this work in practice? 8 7 7 7 7 7 8 Leaving What benefits are payable on leaving? 9 Help and Other Information What things should I think about if I am interested in saving for my retirement? What are the advantages of saving through the AVC Plan? What other ways can I accumulate savings for my retirement? Who manages the AVC Plan? What is the tax status of the AVC Plan? How secure is my Account? Is the personal information about me held in accordance with the Data Protection Act? Can the Scheme be amended or discontinued? Can I assign my benefits? What happens if I go on Family Leave? What happens if go on approved unpaid leave? What happens if I get divorced? Apart from this booklet, is any other AVC Plan documentation available? Can the Company take money out of the Scheme? What happens if I have a complaint or have to enter into a dispute over my benefits? Are there any external bodies to which I can turn for assistance? Where do I get more information about the AVC Plan? How do I contact the Pensions Department? How do I contact Standard Life? 13 10 10 10 11 11 11 11 11 11 12 12 12 12 12 12 12 13 13 Conclusion Why should I join the AVC Plan? 14 1
Planning for your future You will be used to making plans to meet whatever you want out of life - food, entertainment, exercise, holidays, family needs, the list is endless. What about your retirement? As a Contributing Member of the DB Section of the Scheme, you will have scope to increase your benefits. This booklet summarises basic details about the AVC Plan. It is intended to help you to understand your benefits, and to plan and save effectively for your retirement. Please note that, while every care has been taken to ensure that this booklet sets out the key features of all the benefits of the AVC Plan as simply and clearly as possible, it is intended as a guide only. In the event of any discrepancy with the Trust Deed & Rules - the legal documentation governing the AVC Plan - the provisions formally set out in the Trust Deed & Rules, as well as any changes in Pension Regulations or taxation provisions after April 2007, will override this booklet. Please read the following pages of the booklet with care, so that you become familiar with the main features of the AVC Plan, which is available to help you to invest long-term tax-effective savings to augment your retirement benefits from the Scheme. A separate booklet, called The Metal Box Pension Scheme and AVC Plan Investment Guide, contains useful information about investing and the options available to you. Any questions should be directed to your Human Resources Department in the first instance. 2
The AVC Plan in brief An Account is opened for you when you join the AVC Plan. You decide what rate of Contributions to pay to your Account. The more you contribute, the greater will be your benefits when you retire. Additional Contributions are made to your Account by the Company, depending on how much you contribute. You decide how to invest your Account, from a wide range of funds made available to you. The value of your Account can be used to provide benefits:- on retirement: o o a pension during your life (you may include a pension for your Spouse or Civil Partner if you wish) an amount of tax-free cash on death in service: o the accumulated value of your Account; and after leaving the Company: o keep your Account invested in the AVC Plan until you retire and draw your pension from the Scheme, or die; or o transfer your Account to another registered pension scheme. 3
Membership Who can join the AVC Plan? If you are a contributing Member of the DB Section, you are eligible for membership of the AVC Plan. How do I join? If you wish to join the AVC Plan, you must complete an AVC Plan Contribution and Investment Choices form. This is available from your Human Resources Department. You will then become a Member from the first day of the following month. Can I subsequently opt out? You may stop and start paying Contributions to the AVC Plan on the first day of any month by completing an AVC Plan Contribution and Investment Choices form. Is my Normal Retirement Age affected? If you started paying AVCs to the AVC Plan before 26 November 2001, your Normal Retirement Age under the DB Section is reduced from age 65 to age 60. However, if you remain in service beyond age 60, you may further increase your retirement provision by continuing to pay AVCs until the earlier of your 65th birthday or the date of your actual retirement. If you started paying AVCs on or after 26 November 2001, your Normal Retirement Age is age 65. 4
Contributions What do I pay? The more you contribute, the greater will be your benefits on your retirement or death. You choose the rate of regular Contributions, which will normally be based on your Normal Pay. You can also choose to make one off payments, on the first day of any month. Does the Company pay any Contributions to the AVC Plan? Yes. Every contribution that you make will be split into two components, a Matched AVC and an Unmatched AVC. The Company will contribute at the rate of 10% of your Matched AVC. How much of my contribution will be Matched? Do I get any tax relief? The Matched AVC is limited to 15% of your gross Earnings and taxable P11D benefits, less your normal contribution to the DB Section. For Example: Earnings (as defined in the AVC Plan Rules): 30,000 Additional Taxable Income (from P11D): 3,000 Total: 33,000 Contributions to the DB Section (5.6% of Earnings = 5.6% x 30,000) 1,680 Contributions to the AVC Plan (say, 20% of Earnings): 6,000 Company Contribution to the AVC Plan 10% of AVCs (but the Company Contribution is based on AVCs limited to 15% of total income from employment, calculated as shown above, less your Contributions to the DB Section) 10% x (15% x 33,000 less 1,680) 327 Total Contributions to the AVC Plan 6,327 Yes. Under current regulations, any Contributions that you make are deducted from your pay before tax is calculated and are therefore eligible for tax relief at the highest rate you pay. So, in the above example, if you are a Basic Rate taxpayer, you will receive basic tax relief (22% for 2007/2008) on your Contributions to the AVC Plan, that is (22% x 6,000) = 1,320. Thus, for a net contribution of ( 6,000 less 1,320) = 4,680, your Account increases by 6,327 - an increase of 35% on your net savings. Please note that the Basic Rate of tax reduces to 20% from 6 April 2008, which will reduce this advantage slightly. On the above example, the immediate increase would then be 31.8%. Is there a limit to how much I may contribute to the Scheme? Are there any deductions from these Contributions? Under current legislation, you are able to pay Contributions to the DB Section and AVC Plan of up to 100% of your UK taxable earnings and P11D benefits. You must always have sufficient remuneration for the Company to be able to deduct the requisite National Insurance Contributions and any other deductions made from your remuneration. There is a limit to how much your pension savings can grow (the Pension Input Amount) each year (the Pension Input Period) without incurring tax penalties. This is known as the Annual Allowance. All investment expenses relating to your Account are charged to your Account and are described in the separate Investment Guide. 5
Investments How is my Account invested? The Trustee, after taking appropriate advice, has appointed Standard Life to administer your Account, and to make available an appropriate range of different funds. If you joined the AVC Plan prior to 1 January 2001 and were, at that time, already contributing to the Equitable Life With Profits or Managed Fund, you may continue to do so. There is a wide range of different investment funds available for you to select. Each has different characteristics, and you should seek advice on the potential risks as well as the potential rewards of each fund that you select. Investment returns are volatile. Positive returns will increase the accumulated fund, while negative returns will reduce it. By law, neither the Company nor the Trustee can give you advice, and the choice of funds for investing the Contributions made by you and the Company to your Account is your responsibility. When making your investment choice, your current age is an important factor, as the level of risk that you can tolerate typically depends on the length of time until retirement. There are no hard and fast rules when it comes to investing your Account but these basic guidelines will help you make a decision that s right for you. You must choose at least one fund before you can become a Member. Before making this decision, you should refer to the detailed information available in a separate booklet called The Metal Box Pension Scheme and AVC Plan Investment Guide. This is available from your Human Resources Department. 6
Retirement What choices do I have when I retire? When you retire, for whatever reason, you may choose to transfer the market value of your Account in the AVC Plan at that time to the DB Section to enhance the benefits payable. Alternatively, at that time, you may choose to exercise an Open Market Option and purchase an Annuity with an alternative provider. What options are available if I transfer my AVC Plan benefits to the DB Section? You can use your AVC fund to purchase additional Scheme pension. You can currently choose between a Single Life, or a Joint Life pension, which has an attached 50% pension to your Spouse or Civil Partner. The pension factors used to convert cash funds accumulated in the AVC Plan to Scheme pensions, are determined by the Trustee and the Actuary and are subject to the application of a Market Value Adjuster. They are also subject to change from time to time, dependent upon changes in financial conditions and life expectancy. What about a cash option, if I transfer my AVC Plan benefits to the DB Section? The maximum amount of tax-free cash that you will be able to take will normally be 25% of the total value of your retirement benefits from the DB Section and the AVC Plan. You will be advised of the amount of cash that you are able to take before you retire. If your Account value at the date of your retirement is less than this, it can be paid to you as part of the tax free cash sum. If your Account value is more than the maximum cash sum payable, the balance will be used to purchase additional pension from the DB Section. How does the Open Market Option work? You will be able to take up to 25% of your Account as a tax-free cash sum. The balance of your Account would then be transferred to an Insurance Company of your choice, and used to purchase an Annuity. You will be able to decide whether that Annuity will be subject to any increases to protect against the effects of inflation. You will also be able to decide on the provision that you wish to make for a pension for your Spouse, Civil Partner or other financial dependant. The amount of pension and tax-free cash payable from the DB Section will be affected if you take the Open Market Option. If you are interested in this option, we recommend that you seek advice from an Independent Financial Adviser. Are there any limits on my benefits? The value of benefits payable from all tax-registered pension arrangements is compared against the Standard Lifetime Allowance. If the value exceeds this amount, additional tax will be payable by you. How is my pension taxed? Your pension is taxed under the PAYE system, as if it were earned income. 7
Death What benefits are payable on death? Your Account will be used to provide additional benefits for your family in the event of your death. On Death Before Retirement A lump sum equal to the accumulated value of your Account. On Death After Retirement If you chose to purchase a Joint Life pension from the DB Section, a pension equal to 50% of the pension payable to you from your AVCs, at date of death, will become payable to your Spouse or Civil Partner. If you chose to purchase a Single Life pension from the DB Section, there will be no pension payable from your AVCs to your Spouse or Civil Partner after your death. If you chose the Open Market Option, the benefit payable will depend upon the terms agreed between you and your chosen provider. How does this work in practice? To ensure that any cash lump sum may be paid tax-free, the Trustee has total discretion to decide to whom the lump sum payment should be distributed. To let the Trustee know to whom you would like the money paid, please complete a Nomination for Lump Sum Death Benefit form, which is available from your Human Resources Department. You should ensure that, when your personal circumstances change, this form is updated. 8
Leaving What benefits are payable on leaving? If you leave service or opt out of Contributory Membership of the DB Section, you may no longer contribute to the AVC Plan. Instead, you have the following options:- You may leave your Account invested in the AVC Plan until retirement. You won t be able to make any more Contributions to your Account. Your Account will still attract investment returns in line with your investment choices and you will still be able to switch funds. If you subsequently choose to transfer your benefits from the DB Section to an alternative pension arrangement, your AVC Account will be transferred at the same time. In certain circumstances, a unit price adjustment may be applied to any With-Profits investments, which could reduce the value of your Account at that time. Your benefits on retirement are described on page 7 under the Retirement section of this booklet. 9
Help and other information What things should I think about if I am interested in saving for my retirement? It s up to you to take responsibility for your own long term financial planning and savings. Typical questions that you will need to answer include:- How much will you need in retirement? Assess your spending needs. People often have different spending patterns in retirement but not necessarily lesser needs. This may be due to plans for your leisure time which balance otherwise lower spending on home (e.g. mortgage) and family. So think carefully - remember that in retirement you get 52 weeks holiday a year! How much will you need for all that free time? What have you saved so far? Assess what you have saved to date and consider all the other savings and other sources of wealth you might have access to. What you need to establish is a rough idea of how much more you think you will need to save for your retirement. How can you bridge the gap? With a rough idea of the gap between what you have saved and the level of income you would like to have in your retirement, you can assess your options. It s one thing to get an idea of how much income you want in retirement and how much you need to save to get there, but quite another to put money away regularly for the long term. But remember that saving a little each month as early as possible is better than delaying, as you will give your money more time to work for you. Generally, the more that you can save over as long a period as possible, the better. What are the advantages of saving through the AVC Plan? The AVC Plan is a very tax-effective way of saving for your retirement. In particular, under current regulations:- All your savings through the AVC Plan will receive tax relief at your top marginal rate; and All the investment returns on the funds invested in your Account in the AVC Plan accumulate tax-free while you are saving for your retirement (except for dividends on UK equities). In addition, the Company Contributions payable to your Account give a significant boost to your savings (see page 5). What other ways can I accumulate savings for my retirement? Other than through the AVC Plan, there are many ways to save, over both the short term and over the long term, such as:- Personal savings and investments (from building society deposit accounts and National Savings certificates to Individual Savings Accounts (ISAs) and Unit Trusts). Property (e.g. increasing your monthly re-payments to your mortgage provider, which should be applied to reduce the outstanding balance more rapidly). Personal or stakeholder pension plans which can be run alongside your membership of the Scheme. Occupational pensions from other employment and State pensions. If you want to think about extra ways of saving for your retirement like these, you should contact an independent financial adviser. 10
Who manages the AVC Plan? The AVC Plan is administered by Metal Box Pension Trustees Limited (the Trustee) whose ten Directors (commonly called the Trustees) comprise five Directors nominated by Management and five Directors (including at least two Pensioners of the DB Section) nominated by Members. It is the responsibility of the Trustee to run the AVC Plan according to the legal Trust Deed & Rules governing the plan and in the best interests of all the Members and their dependants. The assets of the AVC Plan are held entirely separately from the assets of the Company. The assets in your Account are held by Standard Life (and possibly by Equitable Life) and are individually attributed for your benefit. What is the tax status of the AVC Plan? The AVC Plan is a registered pension scheme under the Finance Act 2004. At present, this means that, subject to the Annual Allowance, your Contributions will receive full tax relief and most of the investment earnings of the assets in your Account will accumulate tax free. How secure is my Account? The assets in your Account are separately earmarked for your benefit. The market value of your Account will depend upon both how much you have contributed and how well the funds you have chosen have performed. On your retirement or death, or in the event that the AVC Plan has to be wound up, the total market value of the assets in your Account at that time will be applied for your benefit. Is the personal information about me held in accordance with the Data Protection Act? The Data Protection Act 1998 imposes various obligations on organisations which process information about you - this includes a requirement to notify you that information is held about you. Having joined the AVC Plan, the Trustee, and Standard Life and / or Equitable Life, are data controllers in terms of that Act. They hold and process personal data about you in order to administer the AVC Plan, to calculate and pay benefits, and for statistical and reference purposes. This may include passing on data about you to the Scheme s professional advisers, administrators and other third parties involved in the running of the AVC Plan. Unless you advise the data controller to the contrary, it will be assumed that you agree to such data being held and used for such purposes. The data controller responsible for data processing is the UK Pensions Manager. You have the right to see the data held about you on request, which may involve payment of a small fee, by application to the data controller. Can the Scheme be amended or discontinued? The Trustee, with the consent of the Company, can alter the Trust Deed & Rules of the Scheme. Whilst the Company intends to maintain the Scheme and the AVC Plan, because future legislation and other factors affecting pensions cannot be predicted, it has the right to amend or discontinue the Scheme and / or the AVC Plan at any time. Can I assign my benefits? No. Your benefits in the AVC Plan are held in trust and so you may not dispose of or promise them to anyone else, and you may not use your Account as security for a loan. If you attempt to do so, your benefits will automatically cease to be payable. 11
What happens if I go on Family Leave? Your Contributions will continue during paid Family Leave unless you choose to amend, or stop them. What happens if I go on approved unpaid leave? In the case of absence for which you do not receive Earnings, if you wish to consider making Contributions, you should first contact the Pensions Department. What happens if I get divorced? Your benefits under the AVC Plan may be affected if you get divorced. Further information is available from the Pensions Department. Apart from this booklet, is any other AVC Plan documentation available? The Annual Report and Accounts of the Trustee is available on request from your Human Resources Department. A benefit statement is issued to every Member each year. A copy of the legal Trust Deed & Rules governing the operations of the AVC Plan and the benefits payable, can be inspected at your Human Resources Department, or is available on request. Can the Company take money out of the Scheme? The Contributions and payments of whatever nature made by the Companies to the AVC Plan may not revert to the Companies in any circumstances. No money may be taken from your Account for payment to the Company. What happens if I have a complaint or have to enter into a dispute over my benefits? The Trustee has put in place a formal two stage procedure for the resolution of disagreements which may arise in relation to the Scheme and the AVC Plan. A copy of the Internal Dispute Resolution Procedure can be obtained from the Pensions Department. Are there any external bodies to which I can turn for assistance? There are a number of external organisations available to help you. The Pensions Advisory Service (TPAS) TPAS is available to assist Members and beneficiaries of the AVC Plan in connection with:- any pensions query they may have at any time; and any difficulty which they have failed to resolve with the AVC Plan Administrator, the UK Pensions Manager, or the Trustee. TPAS can be contacted at:- The Pensions Advisory Service 11 Belgrave Road London SW1V 1RB Telephone: 0845 601 2923 (all calls charged at local rate) E-mail: enquiries@pensionsadvisoryservice.org.uk Internet: http://www.pensionsadvisoryservice.org.uk The Pensions Ombudsman If TPAS fails to resolve any difficulty, the Pensions Ombudsman is available. The Ombudsman can help settle complaints and disputes of fact or law in relation to pension schemes. The Pensions Ombudsman can be contacted at the same address as TPAS:- Telephone: 020 7834 9144 E-mail: enquiries@pensions-ombudsman.org.uk Internet: http://www.pensions-ombudsman.org.uk 12
The Pensions Regulator The Pensions Regulator can intervene in the running of schemes where trustees, employers, or professional advisors have failed in their duties. The Pensions Regulator Napier House Trafalgar Place Brighton BN1 4DW Telephone: 0870 606 3636 E-mail: customersupport@thepensionsregulator.gov.uk Internet: http://www.thepensionsregulator.gov.uk The Pensions Registrar The AVC Plan is registered with the Registrar of Occupational and Personal Pension Schemes. The Registrar acts as a tracing agency for members of pension schemes who have lost touch with the trustees or providers of their previous schemes. The address of the Tracing Service is:- Pension Tracing Service The Pension Service Tyneview Park Whitley Road Newcastle-upon-Tyne NE98 1BA Telephone: 0845 6002 537 (all calls charged at local rate) Internet: http://www.thepensionservice.gov.uk Where do I get more information about the AVC Plan? If you have any queries about your benefits or about the operation of the AVC Plan you should ask your Human Resources Department in the first instance. You may request detailed explanations or further information from the Pensions Department or the Standard Life Helpline, as appropriate. How do I contact the Pensions Department? Further information about the AVC Plan can be obtained by writing to the Scheme Secretary:- Metal Box Pension Trustees Limited Elgar House Shrub Hill Worcester WR4 9EE Telephone: 01905 613133 Fax: 01905 610033 E-mail: administrator@metalboxpensions.co.uk How do I contact Standard Life? Information about the range of investment funds available to you may be obtained by contacting the Standard Life Helpline on 0845 60 60 047. Alternatively, information can be found on the Metal Box website pages provided by Standard Life:- Internet: http://www.mypensioninfo.com/metalbox 13
Conclusion Why should I join the AVC Plan? These days, people are living longer than ever before, and are also aiming to retire early. Having retired, you could receive your pension for over twenty years; that could be more than half your working life! That s why disciplined planning for your retirement and making adequate and regular contributions towards saving for your retirement over your full working career are some of the most important financial decisions you will ever make. The AVC Plan is designed to help you do precisely that. Joining the AVC Plan will enable you to:- decide how much you want to save towards your retirement - the more you save, the better will be your retirement benefits; enjoy significant financial advantage from the Contributions made by the Company to your Account; enjoy important tax advantages; and augment your benefits from the DB Section on your retirement or death. While there are other ways to save, the AVC Plan is probably an option that you should consider carefully, in making long-term tax effective savings for your retirement. 14
The following forms / leaflets are currently available from your Human Resources Department or the Pensions Department:- Investment Guide (for the DC Section and AVC Plan) Contribution & Investment Choices Form Investment Switches Form Standard Life Helpline 15
Glossary of special pension terms used A number of words and phrases that are used in this booklet have special meanings. They are explained below, and are shown in bold burgundy type and begin with a capital letter when used in this booklet. Please fold out this page so that you can refer to it while reading this booklet. Account Annual Allowance Annuity AVC Plan Civil Partner Company Company Contributions Contributions DB Section Earnings Family Leave Normal Pay Normal Retirement Age Pension Input Amount Pension Input Period Scheme Special Bonuses Spouse Standard Lifetime Allowance Trustee The total accumulated assets separately identified to provide benefits for you. The maximum amount of pension savings that can be built up in any one tax year without incurring a tax charge. The Annual Allowance is set by the Government. It is 225,000 for the tax year ending 5 April 2008, and will increase periodically. The pension you may buy from an insurance company on retirement. The Annuity is normally paid in a series of regular monthly instalments for the rest of your life. The Metal Box AVC Plan. The person with whom you have a Civil Partnership. Your employer, being a Company in the CROWN Group of Companies in the United Kingdom that participates in the Scheme. The Contributions made by the Company to the AVC Plan. The Contributions that you make to the AVC Plan. The Defined Benefit Section of the Scheme. This section is closed to new Members. Your gross annual Earnings taxable under the PAYE system, excluding any Special Bonuses. Includes ordinary or additional maternity and adoption leave, parental leave and paternity leave. Your basic pay including efficiency and merit payments, long service bonuses, and shift allowances. Age 65, unless you joined the AVC Plan before 26 November 2001, in which case it is age 60. The total Contributions made by you and, on behalf of you, to all Defined Contribution arrangements (e.g. the AVC Plan), plus the increase in the value of benefits in all Defined Benefit arrangements (e.g. the DB Section). 1 April (or the date you joined the Scheme, if later), to the next 31 March. The Metal Box Pension Scheme. Bonuses normally paid under the Management Incentive Programme and any payments from the Company on leaving service that are taxable. The person to whom you are legally married. The overall limit on the amount of tax privileged pension savings for any one person. Most individuals will be subject to the Standard Lifetime Allowance. This is 1.6 million for the tax year ending 5 April 2008, and will increase periodically. Metal Box Pension Trustees Limited.
Open this flap to see a Glossary of special pension terms used in this booklet
This booklet is published by Metal Box Pension Trustees Limited, the Trustee of the Metal Box AVC Plan June 2007