LLOYDS BANK PENSION SCHEME NO.2 SCHEME BENEFITS SUMMARY This document has been prepared on behalf of Lloyds Banking Group Pensions Trustees Limited (the Trustee ) to provide a summary of some of the benefits available to Active and Deferred members of the Lloyds Bank Pension Scheme No. 2 ( the Scheme ). This is a summary of the benefits provided under the Main section of the Scheme. If after reading this document you have further queries about your benefits under the Scheme there is further information available on the Group Pensions website (www.lloydsbankinggrouppensions.com) or you can contact the administrators for the Scheme. You can find contact details and useful links at the back of this document. HOW TO USE THIS BENEFIT SUMMARY The benefits that the Scheme will pay to you or your beneficiaries will often depend on whether you are an Active Member of the Scheme or a Deferred Member of the Scheme. An Active Member of the Scheme is a Group employee who is currently building up benefits in the Scheme. This includes any colleagues who are currently on long term absence who are still building up benefits in the Scheme. A Deferred Member of the Scheme is a person that is not an Active Member of the Scheme or being paid a pension, but who still has benefits in the Scheme (typically a former employee who has yet to start to receive their pension, or a current employee who has chosen to leave the Scheme). This benefit summary provides a guide to the main differences between the benefits you might receive from the Scheme as an Active Member or a Deferred Member. However, please note that this is not a complete summary of the benefits payable from the Scheme. Please also note that if you leave the Scheme: you will not be able to rejoin it at a future date, and you don t have to join the Group s Defined Contribution scheme,. If you do leave the Scheme and decide not to join straight away, you can join it at a later date. Legislation introduced by the Government means that in some circumstances you may be automatically enrolled into Your Tomorrow even if you choose not to join immediately, however, you can then opt out if you wish. Additionally, the Group will not contribute to any alternative pension scheme and you will not be entitled to any cash payment instead. At the end of this document you will find links to more information about.
PAYING CONTRIBUTIONS Feature or benefit While you are an Active Member of the Scheme If you leave pensionable service Member contributions The Group meets all the costs of running the Scheme and providing your benefits you don t have to pay anything. You will not have to pay anything to the Scheme. You choose how much you would like to contribute. The lowest amount you can contribute to the scheme is 3% of your base pay. The Group also pays contributions into your account up to a maximum of 13% depending on the rate you contribute at. Your contribution rate Group contribution rate 3% 8% 11% 4% 10% 14% 5% or higher 13% 18% + Total invested in your account Deductions are made from your pension account within to meet certain investment and administration expenses. Additional Voluntary Contributions (AVCs) You can boost your pension by paying AVCs to the Scheme. For most members your AVCs are used to build up an individual AVC savings account, like in a Defined Contribution scheme. This fund is invested and when you retire you use it to buy a pension or take some (or all of it) as a cash lump sum (currently payable tax free), subject to legal limits. You will be unable to make Additional Voluntary Contributions (AVCs) to the Scheme. You can choose to contribute more than 5% if you wish, although the maximum contribution from the Group is 13%. You can make AVCs to the Scheme via the Group s Flexible Benefit Scheme, Flex. If you do this you can make National Insurance contribution savings on the value of your AVCs. In addition, paying AVCs via Flex entitles you to a further enhancement to your contribution of 5% (paid for by the Group) so for every 100 of AVCs you pay via Flex, the Group will add 5.
BUILDING UP PENSION Feature or benefit While you are an Active Member of the Scheme If you leave pensionable service How your pension increases in size Each year that you remain an Active Member of the Scheme you will build up a proportion of your Final Pensionable Pay. In the Scheme this proportion (known as the "accrual rate") is typically 1/60 and your Final Pensionable Pay is your highest 12 consecutive months Pensionable Pay (subject to the Pensionable Pay Cap 1 ) in the three years immediately before retirement, leaving or death. You will have been notified if a different accrual rate applies or has applied to you. For example: consider a colleague with Final Pensionable Pay of 24,000 a year and 20 years of Pensionable Service. Over the next year his pension builds up in the following way: Year Pensionable Service Accrual rate Final Pensionable Pay Pension built up 2017 20 years 1/60 24,000 8,000 2018 21 years 1/60 24,000 8,400 If you leave then you will be entitled to a deferred pension. This will be based on your Pensionable Service and Final Pensionable Pay at the date you leave the Scheme. Your deferred pension would then increase, for each full year until you retire, broadly in line with annual increases in a National Inflation Index called the Consumer Prices Index (subject to a maximum of 5% a year). These increases are required under legislation and have changed in the past. This means that some of your pension which you have already built up for earlier Pensionable Service may increase at a different rate. Your contributions, together with the Group s contributions, are invested in your individual pension account by the Trustees. Any positive investment return achieved on your pension account helps it grow in value over time. The size of the pension you can buy at retirement depends on: the contributions paid to your pension account, the investment returns achieved by your pension account, and the cost of buying a pension at retirement and the type of pension you choose to purchase. This is difficult to predict with any real certainty as it depends on a number of things which can change. Using the value of your account to buy a pension from a provider outside of Your Tomorrow is not the only option at retirement. You could instead choose to take your benefits as a cash lump sum, part tax-free and part taxed (not permitted in the Isle of Man or Channel Islands), or transfer the value of your account out of Your Tomorrow to a drawdown plan where you can choose how much to withdrawn and when. Or a combination of these options. 1 In 2010 the Group introduced a limit (or a cap ) to the amount your Pensionable Pay can increase each year. From 2 April 2010 to 1 April 2014, your Pensionable Pay was increased on each 1 April (where increases were awarded) by the lowest of: the actual percentage increase in your base pay over the previous 12 months ending on 1 April, the percentage increase in the Retail Prices Index (RPI) over the 12 months ending on the previous 31 December, and 2%. Following a review of the cap to Pensionable Pay and consultation with affected members, the Group reduced the cap to 0% on and after 2 April 2014. This means that your Pensionable Pay will not increase with increases in base pay on or after 2 April 2014.
IF YOU DIE BEFORE YOU TAKE YOUR PENSION Feature or benefit While you are an Active Member of the Scheme If you leave pensionable service Pension A Spouse s/ Dependant s pension equal to two thirds of the pension you would have received if you had stayed in service until your Normal Retirement Age, but based on the greater of Final Pensionable Pay or Pensionable Pay at the date of death. A child under age 18 (or under age 23 and in full-time education or vocational training) would receive a pension equal to one quarter of the pension you would have received. If there is more than one child, then one third of your pension would be apportioned between the children. A Spouse s/ Dependant s pension equal to two thirds of your deferred pension that would have been payable at the date of your death. A child under age 18 (or under age 23 and in full-time education or vocational training) would receive a pension equal to one quarter of the pension you would have received at the date of your death. If there is more than one child, then one third of your pension would be apportioned between the children. No pension would be payable from. Lump sum A tax-free cash lump sum equal to four times your base pay. The Pensionable Pay Cap does not apply to the calculation of lump sum death in service benefits. A lump sum will be payable equal to three times your deferred pension at the date you left the Scheme. A tax-free cash lump sum of four times your base pay. (This would be payable even if you do not join Your Tomorrow.) A refund of any contributions you made to the Scheme would also be payable. A lump sum of the value of your pension account would also be payable. In addition, if the Group agrees, if you have a qualifying dependant when you die, a further lump sum of four times your base pay will also be payable. Example Mark joined the Scheme 20 years ago, is currently 40 years old, his Pensionable Pay/Final Pensionable Pay is 30,000 a year and his base pay is 32,000 a year. Mark has a spouse and 1 child but hasn t paid AVCs into the Scheme.
Feature or benefit While you are an Active Member of the Scheme If you leave pensionable service If Mark was to die whilst still an Active Member of the Scheme the following benefits would be payable from the Scheme: a lump sum of 128,000 (i.e. four times his base pay); a Spouse s/ Dependant s pension of 13,333 a year, and a children s pension of 5,000 a year If Mark had left the Scheme before his death the following benefits would be payable from the Scheme instead: a lump sum of 30,000 (i.e. three times his deferred pension); a Spouse s/ Dependant s pension of 6,667 a year, and a children s pension of 2,500 a year If Mark had left the Scheme and had joined Your Tomorrow before his death the following benefits would be payable in addition to those he would be entitled to as a Deferred Member of the Scheme: a lump sum of 128,000 (i.e. four times his base pay); a lump sum of the value of his pension account, and if he has a qualifying dependant an additional lump sum of 128,000 may be paid, subject to the agreement of the Group
WHEN YOU TAKE YOUR PENSION Feature or benefit While you are an Active Member of the Scheme If you leave pensionable service Normal Retirement Age Early Retirement The Scheme s Normal Retirement Age is 60 and this applies to both Active Members and Deferred Members. In most cases, you are able to draw your pension from age 50 if you retire directly from employment (subject to the consent requirements under the scheme rules). Your pension will be calculated based on your Final Pensionable Pay and Pensionable Service at your actual date of retirement. In addition, your pension will be reduced to allow for the fact that it is likely to be paid for a longer period than if you had retired at your Normal Retirement Age. You will be able to draw your pension from age 50 (subject to the consent requirements under the scheme rules). Your pension will be reduced to allow for the fact that it is likely to be paid for a longer period than if you had retired at your Normal Retirement Age. The Normal Retirement Age is 65. Subject to the consent requirements under the scheme rules you can choose to take your benefits from age 55, but the value of your pension account will normally be lower than if you had waited, as there will be less time for you and the Group to contribute and for your savings to grow. Also the younger you are, the more expensive it will be to buy an immediate pension with your pension account. Ill health early retirement If you are unable to continue working because of ill health, the Group may decide that you are entitled to receive an immediate pension. Your pension will be based on your Final Pensionable Pay and Pensionable Service at the date you have to retire. The Group also has the discretion to increase the number of years of Pensionable Service to the maximum you could have completed had you retired at Normal Retirement Age. With the agreement of the Group, you are able to draw your pension at any age, subject to satisfactory medical evidence. Your pension may be reduced to allow for the fact that it is likely to be paid for a longer period than if you had retired at your Normal Retirement Age. You may use your pension account to buy a pension. If you have completed a minimum of 5 years continuous pensionable service (this includes your Pensionable Service in your Defined Benefit scheme), there may be an enhancement to this to reflect the contributions that would otherwise have been paid in future. The size of any enhancement will depend on your age and the severity of your illness. You may be able to buy a pension from a provider on enhanced terms depending on the reasons for your ill health retirement. Alternatively you could instead choose to take your benefits as a cash lump sum, part tax-free and part taxed (not permitted in the Isle of Man or Channel Islands), or transfer the value of your account out of Your Tomorrow to a drawdown plan where you can choose how much to withdrawn and when. Or a combination of these options.
Feature or benefit While you are an Active Member of the Scheme If you leave pensionable service Late and flexible retirement Members have a right to continue to work past their Normal Retirement Age, up to age 65 and continue to build up Pensionable Service in the Scheme. Your pension will be based on your Final Pensionable Pay and your Pensionable Service at your actual date of retirement. The Flexible Pension Option allows Members to start taking some or all of their pension from age 55 whilst continuing to work and build up pensionable service. You can delay taking your pension after your Normal Retirement Age. The amount of your pension will be increased to reflect its late payment. You are not able to take flexible retirement as a Deferred Member and the whole of your pension must be taken at the same time. You can choose to take your benefits up to age 75. You can choose to take your pension and continue working for the Group from age 55, provided the Group agrees. If you do this, you can also choose to rejoin Your Tomorrow and start to contribute again. If you do the Group will make contributions too. This is known as flexible retirement. Tax free cash lump sum You can normally take up to 25% of the value of your pension as a cash lump sum, within the Lifetime Allowance (LTA) 2. This is currently tax free. If you choose to take a cash lump sum, your annual pension will be reduced. However, taking cash from the Scheme will not reduce the amount of any spouse s pension payable on your death after taking benefits. You can take up to 25% of your pension account as a one-off cash lump sum. This is currently tax free. The rest can be used to buy a pension or be taken as cash, (not permitted in the Isle of Man or Channel Islands), or transfer the value of your account out of Your Tomorrow to a drawdown plan where you can choose how much to withdrawn and when. Or a combination of these options. If you can take the remaining 75% of your pension account as cash and it will be taxed as income. Depending on your other income, this could be subject to a higher tax rate, or an emergency tax rate initially. 2 The Lifetime Allowance (LTA) is the total amount of pension savings you can build up without paying an additional tax charge. The LTA for the 2017/18 tax year is 1million.
AFTER YOU TAKE YOUR PENSION Feature or benefit While you are an Active Member of the Scheme If you leave pensionable service If you die after you retire Pension increases If you die within five years of retirement, a cash lump sum equal to the remainder of five years pension would be paid. A Spouse s/ Dependant's pension equal to two thirds of the pension you were receiving at the date of your death (before any reduction for taking a cash lump sum at retirement) would be paid. A child under age 18 (or under age 23 and in full-time education or vocational training) would receive a pension equal to one quarter of the pension you were receiving at the date of your death. If there is more than one child, then one third of your pension would be apportioned between the children. After you retire, your pension will be increased on 1 April each year. Prior to age 65 (men) or 60 (women), pensions will generally increase in line with the increase in the Consumer Prices Index (CPI), subject to a maximum of 5% per annum. From age 65 (men) or 60 (women), your pension from the Scheme may include a Guaranteed Minimum Pension (GMP) element. Increases on the GMP element of your pension will be in line with the CPI, with part of this increase paid for by the Scheme and part by the State with your State pension. A pension may be paid to your beneficiaries and/or a lump sum may be payable, if you chose those benefits to form part of the terms of the pension you bought when you took your pension. Your own pension would be reduced compared to what it would have been if you had not made such a choice. Your pension may increase after it has come into payment, if you chose increases to form part of the pension you bought when you took your pension. Your own pension would be reduced compared to what it would have been had you not made such a choice.
GLOSSARY OF TERMS Consumer Prices Index Final Pensionable Pay Normal Retirement Date / Normal Retirement Age Pensionable Pay an index published by the Office of National Statistics which measures changes in the price level of consumer goods and services purchased by households. Used as a measure of inflation. means your highest twelve consecutive months Pensionable Pay (subject to the Pensionable Pay Cap) in the three years immediately before retirement, leaving or death. If you are paid by way of commission only, then the highest annual average of your commission over three consecutive years out of the last ten will be taken. means a member s 60 th birthday. means your base pay (excluding, for example, overtime or bonuses but including commission averaged over the last three years where the Group has designated this to be a permanent part of your salary) subject to the Pensionable Pay Cap. Pensionable Pay Cap means the cap on increases in Pensionable Pay implemented from 2 April 2010 and amended from 2 April 2014. Pensionable Service means service in years and days for which you have been a member of the Scheme, including any service transferred in from another pension arrangement which has been used to increase your Pensionable Service. If you work or have worked part-time, your Pensionable Service will be pro-rated for any part-time period.
CONTACT DETAILS & USEFUL LINKS Online Modeller. To access the Online Modeller visit: Group Pensions website. If you would like to find any of the below please visit the Group Pensions website: www.lloydsbankinggrouppensionsmodeller.co.uk www.lloydsbankinggrouppensions.com Contact details for your scheme administrator Details of the benefits provided in your Defined Benefit scheme or in Scheme administrator if you would like to contact your scheme administrator you can do so in the following ways: Email: Lloyds1and2@willistowerswatson.com Tel: 01737 227 522
DISCLAIMER This document is produced by Lloyds Banking Group Pensions Trustees Limited (the Trustee of the Scheme). It provides information about some of the provisions of the Scheme and does not confer any entitlement to benefits. It is not a substitute for the trust deeds and rules which constitute the legal basis of the Scheme. If there is any inconsistency between the terms of the rules of the Scheme and this document, the rules as amended from time to time, and as modified by agreement between you and the Group, will prevail. This document does not constitute financial advice and is provided for your information only. Please note that the information provided in the document is based on the legislation and taxation regime in force at the time of drafting. Contributions and benefits will be paid and taxed in accordance with tax and regulatory requirements at the relevant time.