Your scheme guide Please note the following important information. Ill health benefits The information on ill health benefits in this guide is out of date. Please refer to the Bank s Group Income Protection (GIP) employee guide for details, which you can find within My Benefits @ https://hsbc.tbs.aon.com/benefits/benefits-overview-full-width Transfers in Please note that it is no longer possible to transfer benefits from another pension scheme into your section of the DBS. Pension increases Any information in this guide about pension increases does not apply to benefits built up after 1 July 2009. For benefits built up after this date, pensions will increase in line with RPI, subject to maximum of 3% a year. Updated 13 May 2015 For members of the James Capel D&SE Section of the HSBC Bank (UK) Pension Scheme futurefocus D HSBC Pensions James Capel D&SE Section DBS member guide
Introduction This guide is for members of the James Capel D&SE Section of the HSBC Bank (UK) Pension Scheme. This section of the Scheme is closed to new entrants and it has been designed to provide benefits for all of those people who were members of the James Capel & Co Directors and Senior Executives Pension and Life Assurance Scheme on 16 January 2000, before its merger with the HSBC Bank (UK) Pension Scheme. This guide summarises: the main benefits of the James Capel D&SE Section that are set out in the Trust Deed and Rules, the legal documents governing the HSBC Bank (UK) Pension Scheme. The guide does not cover every aspect of the James Capel D&SE Section and confers no rights to benefits. Please remember that it is only intended as a guide. the main benefits of the James Capel Supplementary Section (see Appendix 1). Under the terms of the transfer agreement, the Trustee and the Principal Employer confirmed that they intended to exercise their powers of discretion on a no less favourable basis than had previously been exercised by the trustee of the James Capel & Co Directors and Senior Executives Pension and Life Assurance Scheme. Examples of discretionary provisions are included throughout this guide. In the event of any difference between this guide and the Trust Deed and Rules, the Trust Deed and Rules will override this guide. Members can request a copy of the Trust Deed and Rules and an administration charge may be made to cover the costs of copying, printing and postage. Or you can visit the HSBC DBS Administration Team offices to view the Trust Deed and Rules at no charge. This guide is being issued to all members (including those who are pensioners or deferred pensioners). In broad terms the guide describes the benefits payable to all categories of member, although differences do apply to pensioners and deferred pensioners in certain circumstances. This guide differs from previous guides because it refers to the flexible retirement policy, introduced in 2007. Different options are now available to you on reaching your normal retirement age, for example, you could decide to take your pension benefits and carry on working. Please see the Flexible Retirement Options guide for more details. This is a separate guide and you can get a copy from the, or if you are currently in the service of the Group you can download a copy from the pensions website. Please note that another new guide will be issued shortly, which will include the changes to the Scheme from 1 July 2009. June 2009 ii
Important information for high earners In his 2009 Budget, the Chancellor announced changes to restrict the tax relief available on pension savings for individuals whose annual total income is 150,000 or higher. These changes are intended to apply from 6 April 2011. In anticipation of the change, the Government has announced measures that apply now to prevent such individuals bringing forward pension savings to obtain additional tax reliefs for the 2009/10 and 2010/11 tax years. These transitional measures restrict higher-rate tax relief for individuals: whose income is 150,000 or more in any tax year from 2007/08; whose total pension savings exceed 20,000 in that tax year (or 30,000 in certain limited circumstances), and who change their ongoing regular pension savings. These measures have been included in the Finance Act 2009. You can find out more in HM Revenue & Customs' Guidance for Individuals 'Pensions: Limiting Tax Relief for High Income Individuals', available at http://www.hmrc.gov.uk/budget2009/pensions-individuals-1550.pdf The Principal Employer has already issued some information on the Budget in the Reward Proposal. This is available at http://home.uk.hsbc/uk/home.nsf/byref/ukcm7ldem510445614112008 Once the Trustee has worked through the detail, it intends, in due course, to issue a general summary, for your information. If you have an annual total income of 150,000 or more in any tax year from 2007/08, you should consider the impact of the Budget before making any changes to your pension savings (for example: changing your regular contributions or by making a bonus or redundancy payment sacrifice). Please note: income is defined very widely for this purpose and we recommend that you get your own professional or independent financial advice. iii
Contents page Terms you need to know vii Planning for your retirement 1 Key features 1 Benefits: what will you get when you retire? 2 Your retirement options 2 If you retire at your normal retirement age 2 If you worked part-time 2 If you retire early 4 If you have to retire because of ill health 4 If you retire later 5 Flexible retirement 5 Pension increases 6 What about State pensions? 7 Contracting out SERPS and State Second Pension 7 Protection: what happens when you die? 8 If you die before your normal retirement age 8 If you die while working part-time 10 If you die after you retire 10 If you die having chosen to retire later 12 If you die having chosen one of the options available through the flexible retirement policy 12 Leaving employment: what happens to your benefits? 13 If you leave 13 If you die with a deferred pension 14 Membership 16 Contributions: maximising your benefits 17 James Capel Supplementary Section 17 Saving outside of the Scheme 17 Anything else? 18 Amending the Scheme 18 Annual report 18 Complaints procedure 18 Divorce or dissolution of civil partnership 19 Payment of benefits 19 Registered status 19 Scheme limits 20 The Trustee 20 Winding up the Scheme 20 iv
Help and information 21 Finding out 21 more about the Scheme 21 about State Pensions 21 about pensions in general 21 about previous pension benefits 22 Appendix 1 23 James Capel Supplementary Section 23 What happens when you retire? 24 Appendix 2 26 Terms you need to know 26 Forms 31 v
Terms you need to know The following words and phrases are used throughout this guide; here s what they mean: Accrued pension The pension which you have earned at any time during your membership of the Scheme. It is particularly relevant at the date you leave pensionable service, whether you: retire at normal retirement age; take early retirement; are entitled to an incapacity pension; or leave service and become entitled to a deferred pension. The way your accrued pension is calculated differs depending on whether you joined the James Capel D&SE Section before or on or after 1 April 1988. Please see Appendix 2 at the back of this guide for more details. Civil partner Your legally registered civil partner. Dependant A person who, in the Trustee s opinion, is financially dependent or interdependent on you. Employment Employment with the Principal Employer or any other participating employer in the Scheme. Final pensionable salary The average of your highest three consecutive pensionable salaries in the last ten years (or fewer than ten years, if you have less then ten complete years of pensionable service) immediately before you retire, die or leave pensionable service. This is subject to the Scheme earnings cap for members who joined the James Capel D&SE Section on or after 1 June 1989. Guaranteed minimum pension (GMP) The part of your pension that is broadly equivalent to the pension you would have received from the State Earnings Related Pension Scheme (SERPS), if any, between April 1988 and April 1997, had you not been in contracted-out employment. GMP date The age from which the GMP is payable, currently 65 for men and 60 for women. The Group HSBC Holdings plc and all subsidiary companies in the United Kingdom, Channel Islands and the Isle of Man that participate in the Scheme. James Capel D&SE Section The section of the Scheme that provides benefits for members who joined the Scheme as a result of a transfer from the James Capel & Co Directors and Senior Executives Pension and Life Assurance Scheme. Depending on the context, reference to the date of joining the James Capel D&SE Section means the date of joining that scheme or, if earlier the James Capel & Co Directors and Senior Executives Pension and Life Assurance Scheme (1965). James Capel Supplementary Section The separate section of the Scheme that provides additional benefits for members on a defined contribution basis. Details are shown in Appendix 1. Normal retirement age Age 60. Please note: for members who joined the James Capel D&SE Section before 1 April 1985, normal retirement age may vary. Pensionable salary Your basic annual salary as at 1 April each year, excluding bonus and commission and other fluctuating income, but including territorial allowance and such other upward adjustments as the Principal Employer may approve and confirm in writing. vi
Pensionable service The number of years and complete months of James Capel D&SE Section membership, during which you are in employment, up to a maximum of 40 years. Pensionable service, as a member of the James Capel & Co Directors and Senior Executives Pension and Life Assurance Scheme, will also count as pensionable service in the Scheme, together with any period that qualified as pensionable service as a member of the James Capel & Co Pension and Life Assurance Scheme (1965) immediately before you transfered to the James Capel & Co Directors and Senior Executives Pension and Life Assurance Scheme. Please note: if you left pensionable service under the James Capel & Co Directors and Senior Executives Pension and Life Assurance Scheme before 1 April 1988, your pensionable service will be based only on complete years of membership. Principal Employer HSBC Bank plc, the Principal Employer of the Scheme. Qualifying child Your natural child or a dependent child who is under age 18 (or under 22 if in full-time education or vocational training), or your child or a dependent child who is, in the Trustee s opinion and irrespective of age, likely to be permanently incapable of self-support because of physical or mental disability. Scheme The HSBC Bank (UK) Pension Scheme. tax years it may increase as agreed between the Principal Employer and the Trustee. For the tax year 2009/10 it is 131,250. Scheme limits Limits that are imposed on the level of benefits that can be paid to or in respect of you under the rules of the Scheme. Broadly, these limits reflect the limits that were imposed by HM Revenue & Customs before 6 April 2006 with some changes for those who have not drawn their benefits. Spouse Your husband or wife. State Pension age Currently it is age 65 for men and 60 for women, but is to be equalised at 65 over a 10 year phasing-in period starting in 2010. Surviving civil partner Your civil partner at the date you die. Surviving spouse Your spouse at the date you die. Transfer agreement The agreement dated 15 December 1999 (including annexed announcements) to transfer the assets and liabilities of the James Capel & Co Directors and Senior Executives Pension and Life Assurance Scheme to the Scheme. Trustee Means HSBC Bank Pension Trust (UK) Limited, the Trustee of the Scheme. Scheme earnings cap The upper limit on final pensionable salary (and salary/pensionable salary for the purposes of calculating the lump sum on death benefits in pensionable service before normal retirement age) that applies to members who joined the James Capel D&SE Section on or after 1 June 1989. The level of the Scheme earnings cap is equal to 7.5% of the Lifetime Allowance (see page 3) for the tax year 2006/07 up to the 2010/11 tax year. In following vii
Planning for your retirement is more important today than it s ever been People are now living for decades after they retire, giving them time to do the things they never had time to do when they were working. So providing financial security for your future is vitally important. The James Capel D&SE Section provides a wide range of valuable benefits designed to help you live the life you want when you retire. It also gives you and your spouse, civil partner and dependants financial protection while you re working, as well as when you ve retired. This guide summarises how the James Capel D&SE Section works, the choices you have and the benefits available to you. You may not have come across some of the words and phrases used in this guide before, or they may have special meanings. They appear in bold type and are explained on pages vii and viii. Under the terms of the transfer agreement, the Trustee and the Principal Employer confirmed that they intended to exercise their powers of discretion on a no less favourable basis than had previously been exercised by the Trustees of the James Capel & Co Directors and Senior Executives Pension and Life Assurance Scheme. Examples of discretionary provisions are included throughout this guide. Key features the James Capel D&SE Section is non-contributory which means that you don t have to pay anything towards your pension; unless, of course, you want to build up bigger benefits; your pension is based on your final pensionable salary and your pensionable service; if you want to, you can take some of your benefits as a tax-free lump sum. You can take up to broadly 25% of the value of your retirement benefits as a tax-free lump sum (subject to a maximum of 25% of your available Lifetime Allowance see page 3 for more information); you can choose to pay contributions to boost your benefits at retirement, either by paying additional voluntary contributions (AVCs) or by making a bonus sacrifice to the James Capel Supplementary Section referred to in Appendix 1. These contributions may be used as all or part of a tax-free lump sum, or to buy additional pension; if you die in pensionable service, a lump sum of four times your pensionable salary (subject to the Scheme Earnings cap) will be payable. Your surviving spouse/civil partner would also receive a pension; if you die in retirement your surviving spouse/civil partner will receive a pension which is payable for life; and if you are unable to carry on working due to ill heath, you may also receive a pension. 1
Benefits: what will you get when you retire? When you retire, you will get a pension based on your final pensionable salary and your pensionable service. If you want, you may take some of your benefits as a tax-free lump sum. Your retirement options Depending on your circumstances, you may choose one of the options below or you may choose one of the options under the flexible retirement policy, the current terms of which are detailed in the separate flexible retirement guide. If you retire at your normal retirement age Pension If you both leave service and retire at your normal retirement age and you have completed 20 or more years pensionable service, you will get a pension equal to 2/3 rds x your final pensionable salary. So, for example, if you leave service at your normal retirement age and you have been a member of the James Capel D&SE Section for more than 20 years and your final pensionable salary when you retire is 60,000, you would get a pension of: 2/3 rds x 60,000 = 40,000 a year If you both leave service and retire at your normal retirement age and you have completed less than 20 years pensionable service, you will get a pension equal to 1/30 th x your final pensionable salary x your pensionable service. So, for example, if you leave service at your normal retirement age and you have been a member of the James Capel D&SE Section for 15 years and your final pensionable salary when you retire is 60,000, you would get a pension of: 1/30 th x 60,000 x 15 or to put it another way: 15/30 ths x 60,000 = 30,000 a year If you worked part-time If your contracted hours varied over your working life, any period of pensionable service when your contracted hours were less than the full-time hours will be scaled down to its full-time equivalent. In addition, if at normal retirement age your contracted hours are less than full-time, your final pensionable salary will be scaled up to its full-time equivalent. This will affect the calculation of your accrued pension and your pension at normal retirement age. Please refer to Appendix 2 for details. 2
Tax-free lump sum If you think a lump sum would help you at retirement, you can give up some of your pension, and take it as a tax-free lump sum instead. This must be taken at the same time as your pension. This would reduce your annual pension and we strongly recommended that you seek independent financial advice if you are considering this option. The maximum tax-free lump sum you can take at retirement will be broadly 25% of the value of your benefits (subject to a maximum of 25% of your available Lifetime Allowance). If you have paid AVCs or your employer has contributed to the James Capel Supplementary Scheme through bonus sacrifice, at the date that you take your pension you will have the additional choice of: using your AVCs to provide some or all of the tax-free lump sum, and using your bonus sacrifice to provide some or all of the lump sum. For more information, see the section on AVCs on page 17 and the section on the James Capel Supplementary Scheme in Appendix 1. You can request a copy of the Additional Voluntary Contribution (AVC) and Bonus Sacrifice guide from the. Please note: if the maximum tax-free lump sum that you could have received for membership up to 5 April 2006 is greater than 25% of the value of your benefits at that time, you will be able to receive this amount plus broadly up to 25% of the value of your benefits built up from 6 April 2006. Lifetime Allowance This is an allowance for the total value of pension benefits you can build up tax efficiently during your lifetime. When you take any benefits from the Scheme, their value will be checked against your available Lifetime Allowance. The Lifetime Allowance for the 2009/10 tax year is 1.75 million. It will rise to 1.8 million in 2010/11 and then remain at this level until 2015/16. After that, the Government intends to review it every five years. Benefits built up above the Lifetime Allowance will be taxed, currently at an overall tax rate of 55%. When your benefits are checked against the Lifetime Allowance, the value of your Scheme benefits will be calculated as the value of any lump sum you take, plus the annual amount of your remaining pension multiplied by a factor of 20. The value of any pensions in payment at the time will be calculated by multiplying the amount of the annual pension by a factor of 25. The value of any money purchase benefits (such as an AVC fund if you have one) will simply be the fund value of your pension account. Specific provisions, subject to the rules of HM Revenue & Customs, apply for members relying on primary or enhanced protection. You should notify the if you have registered for this protection with HMRC. Please note: if you do want to take some of your benefits as a tax-free lump sum, your reduced pension cannot be less than your guaranteed minimum pension (GMP) at the GMP date. If you would like to know more about taking a tax-free lump sum at retirement, please contact the who will be able to give you more information. 3
If you retire early If you leave employment on or after age 50 you may apply to take your benefits immediately. Please note: from 6 April 2010 the minimum age at which you can retire is increasing from 50 to 55. Pension If your employer and the Trustee agree to the immediate payment of your benefits, your pension will be the amount of your accrued pension but reduced by such amount as the Trustee and your employer decide because it is being paid for longer. The examples in Appendix 2 show you how accrued pensions are calculated. If you have completed more than 40 years employment, your pension will not be reduced for early payment with the agreement of your employer. In addition, your employer and the Trustee have the discretion to provide an enhanced early retirement pension to members who meet certain criteria. In broad terms, the current criteria are: you are aged 50 or over at the date of leaving employment; and you are leaving employment at the request of your employer (not dismissal) or with the agreement of your employer; and except on redundancy, you are retiring from the City and you are not leaving to take up employment with a competitor. The same discretion to provide an enhanced early retirement pension may also be used where you are made redundant under the age of 50 but you have completed 20 years service. Please note: your reduced pension cannot be less than your GMP at the GMP date. Tax-free lump sum You may take some of your benefits as a tax-free lump sum as described on page 3. If you have to retire because of ill health If you leave employment before your normal retirement age because you ve had an accident, or you re suffering from ill health, you may receive an ill-health/incapacity pension, provided that you fall within the definition of incapacity in the James Capel D&SE Section Rules and the Trustee agrees. Pension Your ill-health pension will be the amount of your accrued pension, reduced by such amount as the Trustee and your employer decide to take account of the fact that it is being paid for longer. The examples in Appendix 2 show you how accrued pensions are calculated. 4
Please note: Ill-health benefits are determined in line with your employer's policy to provide members with cover under the James Capel Permanent Health Insurance Schemes. Their purpose is to provide an insured ongoing salary until normal retirement age for members who are incapacitated from work. While you are receiving ill-health benefits you will remain a full member of the Scheme, and will continue to build up additional pension benefits based on your pensionable salary immediately before your absence. In these circumstances, the James Capel D&SE Section would not pay an illhealth/incapacity pension but the Trustee, with the Principal Employer's consent, retains the discretion to pay an unreduced pension, based on full prospective pensionable service to your normal retirement age, if no payment is being made under the James Capel Permanent Health Insurance Schemes. Tax-free lump sum You may take some of your benefits as a tax-free lump sum as described on the page 3. If you retire later You may continue to work after your normal retirement age, as long as your employer agrees. Pension If you continue to work after your normal retirement age, your benefits will be calculated using your pensionable service and final pensionable salary established at your normal retirement age in exactly the same way as described on page 2. You will be able to take your benefits at your normal retirement age but will also have the option to defer taking your benefits until your retire. If you choose to defer your pension, it will be increased by such amount as the Trustee decides because it is being paid late. Alternatively, if you continue to work after your normal retirement age, you may choose to continue to accrue benefits under the Scheme. Your pension would then be based on the greater of, your actuarially increased pension and your pension based on your final pensionable salary and pensionable service at the date you retire. Tax-free lump sum You may take some of your benefits as a tax-free lump sum as described on page 3. Flexible retirement The sections on pages 2-5 explain what happens when you retire from employment, having been an active member of the James Capel D&SE Section who has not opted-out of membership. Under the flexible retirement policy, it is possible for you to take your pension and lump sum from the James Capel D&SE Section but remain in employment. Alternatively, you can stop building up benefits in the James Capel D&SE Section and defer taking your benefits. For more details about the options available to you under the flexible retirement policy, please refer to the Flexible Retirement Options guide. You can get a copy from the HSBC DBS Administration Team or if you are currently in the service of the Group you can download a copy from the pensions website. If you are interested in any of the options available, please contact the HSBC DBS Administration Team who will be able to give you more information. 5
Pension increases Once in payment, the whole of your pension will increase on 1 January each year, in line with the Retail Prices Index (RPI), subject to a maximum of 5%. In addition, the Principal Employer and the Trustee review the level of pension increase each year and may, at their discretion, award a higher or additional increase. For more information, please contact the. 6
State pensions The State Pension is currently made up of two parts: 1. Basic State Pension This is a flat-rate pension paid to all employees at State Pension age who have an adequate record of National Insurance contributions. It is paid by the State in addition to any benefits that you may receive from the Scheme and is increased each year. 2. State Second Pension The State Second Pension replaced the State Earnings Related Pension Scheme (SERPS) in April 2002, and currently provides three levels of benefits based on an individual s earnings. Contracting out SERPS and State Second Pension The James Capel D&SE Section contracted-out from SERPS from 6 April 1988. This means you paid a lower rate of National Insurance contributions, but did not qualify for SERPS benefits for this period of your employment. Because of this, the Scheme has to pay a pension that is broadly no less than what you would have received from SERPS. This is known as the guaranteed minimum pension (GMP) and applies to pensionable service between April 1988 and April 1997. The James Capel D&SE Section remained contracted-out after April 1997, although the basis on which it was able to do so changed. It was able to remain contracted-out of the State Second Pension as long as its benefits are broadly equivalent or better than the benefits provided under the Reference Scheme Test, a quality of benefits test set by the Government. The Scheme is contracted-out of the State Second Pension. As a result you pay a lower rate of National Insurance contributions and do not build up State Second Pension. 7
Protection: what happens when you die? If the worst were to happen, it s good to know that your dependants will be provided for. The James Capel D&SE Section offers a range of benefits for your family and dependants. If you die before your normal retirement age If you die while in pensionable service, before you have reached your normal retirement age, the following benefits would be paid: a lump sum a pension for your surviving spouse/civil partner a qualifying children s allowance, where you do not leave a surviving spouse/civil partner or following the death of your surviving spouse/civil partner a discretionary dependant s pension, where you do not leave a surviving spouse/civil partner or qualifying child. There is an option to restructure how your total death benefits are paid. Please see the form at the back of this guide for more details. Keeping your nominations up to date Please make sure you complete the Expression of Wish form at the back of this guide. And, if your circumstances change, ensure your Expression of Wish form is up to date. Additional copies of the form are available from the HSBC DBS Administration Team or if you are currently in the service of the Group you can download a copy from the pensions website. Lump sum A lump sum would be payable to your surviving spouse/civil partner, dependants, relatives or other beneficiaries. The lump sum would be made up of: four times your pensionable salary; plus any member contributions that were transferred into the James Capel D&SE Section and/or the Scheme from any previous schemes you may have belonged to; plus the current value of any AVC fund held for your benefit under the Scheme (adjusted to reflect investment performance); plus the current value of any bonus sacrifice fund held for your benefit under the Scheme (adjusted to reflect investment performance and that the Trustee, at its discretion, has decided not to use to provide a surviving dependant s pension). Please note: Pensionable salary is subject to the Scheme earnings cap for members who joined the Scheme on or after 1 June 1989. If you were a member of the James Capel & Co Directors and Senior Executives Pension and Life Assurance Scheme on 30 June 1991, the part of your lump sum payable which represents a multiple of your pensionable salary would not be less than the amount that would have been paid had you died on that day. The Trustee has discretion as to who receives the lump sum. You should have already completed an Expression of Wish form, indicating to the Trustee to whom you would like the lump sum paid; the Trustee will take account of your wishes but, for tax reasons, cannot be bound by them. 8
Surviving spouse s/civil partner s pension Your surviving spouse/civil partner would receive a pension equal to two-thirds of the pension you would have received had you retired at normal retirement age, but calculated using your final pensionable salary on the date you died. Their pension will be paid for life and will increase in the same way as your own pension would have increased. If your surviving spouse/civil partner then dies, your qualifying children would receive an allowance equal to the surviving spouse/civil partner s pension. The allowance would be divided between your qualifying children and the whole allowance would continue until the last qualifying child ceases to be eligible and would increase in the same way that your own pension would have increased. Qualifying children s allowance If, when you die, you do not leave a surviving spouse/civil partner, your qualifying children would receive an allowance equal to two-thirds of the pension you would have received had you retired at normal retirement age, but calculated using your final pensionable salary on the date you died. The allowance would then be divided between your qualifying children and the whole allowance would continue until the last qualifying child ceases to be eligible and would increase in the same way that your own pension would have increased. Discretionary dependant s pension If you die without leaving a surviving spouse/civil partner or qualifying children, a pension may be granted to a dependant, with the approval of the Trustee. If you would like to nominate someone for the Trustee to consider as your dependant, please complete the Nomination of Specified Dependant form. Anyone you nominate must qualify as a dependant at the date of your death. The Trustee will not be bound by your nomination and, if they decide to pay a dependant s pension, they will check to ensure the person nominated (or any other person) fits the definition of dependant. Please make sure that your Nomination of Specified Dependant form is up to date especially if your circumstances change. Additional copies of the form are available from the or if you are currently in the service of the Group you can download a copy from the pensions website. Increases to pensions and allowances Once in payment, the whole of your surviving spouse s/civil partner s pension or discretionary dependant s pension, and the whole of any qualifying children s allowances, will increase on 1 January each year in line with the Retail Prices Index (RPI), subject to a maximum of 5%. For more information, please contact the. In addition, the Principal Employer and the Trustee review the level of increase from time to time and may, at their discretion, award a higher or additional increase. 9
If you die while working part-time If, at the date of your death, you are not in full-time service and your contracted hours vary, any lump sum paid will be based on your actual part-time pensionable salary. In addition, when calculating the surviving spouse s/civil partner s pension, the potential years to your normal retirement age will be treated as if you had continued working your current hours. These will be converted into their full-time equivalent and the calculation adjusted to reflect your periods of full and part-time service. The full-time equivalent of your final pensionable salary will be used. If you die after you retire If you die in retirement, once you have started to receive your pension, the following benefits would be paid: a lump sum, if you die within five years of taking your benefits, a pension for your surviving spouse/civil partner, provided that they were also your spouse/civil partner at the date your pension began, a qualifying children s allowance, where you do not leave a qualifying surviving spouse/civil partner or following the death of your qualifying surviving spouse/civil partner, a discretionary dependant s pension where you do not leave a surviving spouse/civil partner or qualifying children. Lump sum Your surviving spouse/civil partner, dependants, relatives or other beneficiaries would receive a lump sum equal to: the discounted value of the instalments of pension (if you die within five years of taking your pension benefits) you would have received from the date of your death for the remainder of five years and had the amount of payment remained unchanged; the current value of any AVC fund held for your benefit under the Scheme (adjusted to reflect investment performance); plus the current value of any bonus sacrifice fund held for your benefit under the Scheme (adjusted to reflect investment performance and that the Trustee, at its discretion, has decided not to use to provide a surviving dependant s pension). Please note: only the AVCs and bonus sacrifice funds not already used to buy a pension or taken as a lump sum, would be paid as an additional lump sum. The Trustee has discretion as to who receives the lump sum. You should have already completed an Expression of Wish form indicating to the Trustee to whom you would like the lump sum paid; the Trustee will take account of your wishes but, for tax reasons, cannot be bound by them. Please make sure that your Expression of Wish form is up to date especially if your circumstances change. Additional copies of the form are available from the HSBC DBS Administration Team or if you are currently in the service of the Group you can download a copy from the pensions website. 10
Surviving spouse s/civil partner s pension Your surviving spouse/civil partner (if they were also your spouse/civil partner at the date your pension began) would receive a pension equal to 2/3 rds of the pension you were receiving when you died (ignoring any reduction because you gave up some of your main Scheme benefits for a lump sum). Please note: for members who left the Scheme before 1 April 1983 the level of the surviving spouse s/civil partner s pension and qualifying children s allowance was 50% of your pension. If your surviving spouse/surviving civil partner then dies, your qualifying children would receive an allowance equal to the surviving spouse/civil partner s pension. The allowance would be divided between your qualifying children and the whole allowance would continue until the last qualifying child ceased to be eligible and would increase in the same way that your own pension would have increased. Qualifying children s allowance If you do not leave a qualifying surviving spouse/civil partner, your qualifying children would receive an allowance equal to two-thirds of the pension you were receiving when you died (ignoring any reduction because you gave up some of your benefits for a tax-free lump sum). The allowance would be divided between your qualifying children and the whole allowance would continue until the last qualifying child ceased to be eligible and would increase in the same way that your own pension would have increased. Discretionary dependant s pension If you die without leaving a surviving spouse/civil partner or qualifying children, an allowance may be granted to a dependant, with the approval of the Trustee. If you would like to nominate someone for the Trustee to consider, please complete the Nomination of Specified Dependant form; you can find a copy at the back of this guide. Anyone you nominate must qualify as a dependant at the date of your death. The Trustee will not be bound by your nomination and, if they decide to pay a dependant s pension, they will check to ensure the person nominated (or any other person) fits the definition of dependant. Increases to pensions and allowances Once in payment, the whole of your surviving spouse s/civil partner s pension or discretionary dependant s pension, and the whole of any qualifying children s allowances, will increase on 1 January each year in line with the Retail Prices Index (RPI), subject to a maximum of 5%. For more information, please contact the. In addition, the Principal Employer and the Trustee review the level of increase from time to time and may, at their discretion, award a higher or additional increase. 11
If you die having chosen to retire later If you die while in employment, on or after your normal retirement age, having chosen not to take your benefits, you will be treated as if you had retired on the day before you died. The benefits payable will be the same as those set out previously, except that the lump sum benefit payable to your surviving spouse/civil partner, dependants, relatives or other beneficiaries would be equal to: the discounted value of the instalments of pension you would have received for the period of five years from the date of your death, had you retired on the day before you died and had the amount of payment remained unchanged; and any member contributions that were transferred into the James Capel D&SE Section and/or the Scheme from any previous schemes you may have belonged to; the current value of any AVC fund held for your benefit under the Scheme (adjusted to reflect investment performance); plus the current value of any bonus sacrifice fund held for your benefit under the Scheme (adjusted to reflect investment performance and that the Trustee, at its discretion, has decided not to use to provide a surviving dependant s pension). If you die having chosen one of the options available through the flexible retirement policy If you die after having opted for flexible retirement, then different benefits may apply in respect of you and your dependants, depending on the option you have chosen. More information will be provided to you when you opt for flexible retirement but please also see the Flexible Retirement Options guide. You can get a copy from the or, if you are currently in the service of the Group, you can download a copy from the pensions website. 12
Leaving employment: what happens to your benefits? The benefits you get when you leave will depend on how long you have been in the Scheme. If you leave Deferred pension If you leave employment before your normal retirement age or opt out of the Scheme, and do not receive an immediate early retirement or ill-health/incapacity pension, you will be entitled to receive a deferred pension. The deferred pension will be equal to your accrued pension calculated using your final pensionable salary and pensionable service as at the date you leave or opt out. The examples in Appendix 2 show you how accrued pensions are calculated. Where applicable, your deferred pension will then be re-valued for the period before it starts to be paid. You can ask for your deferred pension to be paid at any time on or after age 50 (this will rise to 55 on 6 April 2010), or earlier if you are suffering from ill health or disablement. If the Trustee agrees to pay your pension before your normal retirement age, remember that it will be reduced because it is being paid early. You may choose to take part of your benefits as a tax-free cash sum. Your pension will increase every year once it starts to be paid (see page 5 for more information). Please note: you can choose to delay taking your deferred pension up to age 75. Transfer value Instead of a deferred pension, you may choose to have the cash value of your deferred pension paid to: a new employer s pension scheme (if you leave the employer); or a personal pension scheme. If you are interested in transferring out of the Scheme, please contact the HSBC DBS Administration Team for more information. If you ask for a written statement of your entitlement to a cash equivalent transfer value, the will send it to you, calculated as at a specified guarantee date, within three months of your request. You must apply for your transfer within three months of the guarantee date for this amount to be paid; otherwise it will be recalculated. Even if you re still in pensionable service, you can ask the for an estimated transfer value every six months. As the Trustee has not directed otherwise, the cash value of your deferred pension shall be increased to take account of the Scheme s practice of granting discretionary benefits. The cash value of your deferred pension is the Trustee's best estimate, having taken actuarial advice, of the expected cost to the Scheme of providing you with a pension in respect of your pensionable service. Please note: if you ve left the Scheme but stay in employment, the amount which you can transfer may, at the Principal Employer s discretion, be limited to the value of your deferred pension that relates to your membership since 6 April 1988. At the discretion of the Principal Employer and the Trustee you may, even though you're still in pensionable service, be able to make a partial transfer of your benefits, such as your AVCs and bonus sacrifices made on a money purchase basis. You have a right to transfer out of the Scheme if you leave employment or opt out of the Scheme up to one year before your normal retirement age. 13
If you die with a deferred pension If you die before normal retirement age, and before you take your benefits, having left employment or opted-out of the Scheme with a deferred pension, the following benefits would be paid: a lump sum for your surviving spouse/civil partner, a pension for your surviving spouse/civil partner, a discretionary dependant s pension. Lump sum A lump sum would be payable to your surviving spouse/civil partner, dependants, relatives or other beneficiaries equal to: the current value of any AVC fund, held for your benefit under the Scheme (adjusted to reflect investment performance); plus the current value of any bonus sacrifice fund held for your benefit under the Scheme (adjusted to reflect investment performance and that the Trustee, at its discretion, has decided not to use to provide a surviving dependant s pension); and a refund of any contributions that were transferred into the James Capel D&SE Section and/or the Scheme from any previous schemes you may have belonged to. The Trustee has discretion as to who receives the lump sum. You should have already completed an Expression of Wish form, indicating to the Trustee to whom you would like the lump sum to be paid; the Trustee will take account of your wishes but, for tax reasons, cannot be bound by them. Please make sure that your Expression of Wish form is up to date especially if your circumstances change. Additional copies of the form are available from the HSBC DBS Administration Team or if you are currently in the service of the Group you can download a copy from the pensions website. Pension Your surviving spouse/civil partner would receive a pension which meets the contracting-out requirements. The Trustee also has discretion to provide a surviving spouse/civil partner s pension or qualifying children s allowance based (as a minimum) on the lower of: 2/3 rds of your deferred pension, re-valued to the date of your death; and a pension equal in value to the transfer value that would have been payable if you had transferred your benefits out of the Scheme on the day before the date of your death, (the amount would then be reduced to take account of any contracting-out benefits referred to above). Discretionary dependant s pension If you die without leaving a surviving spouse/civil partner or qualifying children, a pension of an amount as set out above may be granted to a dependant, with the approval of the Trustee. If you die after you have taken your benefits, payable benefits will be calculated as referred to in the section entitled if you die after you retire on page 10. If you die on or after your normal retirement age but before you take your benefits, having left employment with a deferred pension, your benefits will be calculated as referred to in the section entitled if you die having chosen to retire later on page 12. 14
If you die having opted for flexible retirement, then different benefits may apply in respect of you and your dependants, depending on the option you have chosen. More information will be provided to you when you opt for flexible retirement, but please also see the Flexible Retirement Options guide for more details. You can get a copy from the or if you are currently in the service of the Group you can download a copy from the pensions website. Increases to pensions and allowances Once in payment, the whole of your pension and any spouse s/civil partner s pension or discretionary dependant s pension, and the whole of any qualifying children s allowances, will increase on 1 January each year in line with the Retail Prices Index (RPI), subject to a maximum of 5%. For more information, please contact the. In addition, the Principal Employer and the Trustee review the level of increase from time to time and may, at their discretion, award a higher or additional increase. 15
Membership The James Capel D&SE Section is closed to new entrants. Only individuals who were members of the James Capel D&SE Section on 16 January 2000 are members of this Section (although, with the agreement of your employer, you may transfer from the James Capel Staff Section into this Section). Transferring in benefits You are able to transfer in benefits from another registered pension scheme, provided the Trustee agrees. Please speak to the if you want to do this. You should consult an Independent Financial Adviser (IFA) before transferring any benefits into the Scheme. Working part-time If your contracted hours go down you can stay in the James Capel D&SE Section (unless you choose to opt out). Your Scheme benefits will be adjusted to reflect any change. Temporary absence Your membership of the James Capel D&SE Section will continue during ordinary and additional maternity leave, or paid adoption, paternity or parental leave. It may also continue at your employer s discretion if you are temporarily absent for any other reason. Opting out You can choose to opt out of the James Capel D&SE Section if you wish, but if you do you will not be allowed to re-join. You will only be allowed to join the Defined Contribution Section (DCS) of the Scheme. If you want to opt-out, ask the HSBC DBS Administration Team for an Opt-out form or if you are currently in the service of the Group you can download a copy from the pensions website. If you decide to opt out, you must give at least one month s written notice to the Trustee. If you opt out, you will pay higher National Insurance contributions as you will no longer be contracted-out of the State Second Pension, which means you will build up State Second Pension. Please note: if you do not return to work for your employer at the end of any additional maternity leave or additional adoption leave, your pensionable service will end from the date you stopped receiving any statutory or contractual pay. Enhanced protection If you have applied for enhanced protection in relation to the taxation of your benefits under the Finance Act 2004, please be aware that this protection can be lost in certain circumstances. As this protection is not part of the Scheme, it is your responsibility to ensure that you take the appropriate steps to maintain it. It is important that you contact the HSBC DBS Administration Team as special arrangements may need to be made for you. You will be treated as a deferred member of the James Capel D&SE Section, but, in the event of your death before your normal retirement age, while still in employment but not taking benefits as described on page 14, a lump sum of twice your pensionable salary (subject to the Scheme earnings cap for members who joined on or after 1 June 1989) will be paid. The Trustee has discretion as to who the lump sum is paid. 16
Contributions: maximising your benefits The James Capel D&SE Section is non-contributory, which means that the Principal Employer and your employer pay the full amount needed to provide your benefits. You can, however, choose to pay additional voluntary contributions (AVCs). Paying AVCs is currently a tax-efficient way of building up bigger benefits. Because you get tax relief when you pay AVCs, it won t cost as much as you might think. And, as you can now take some, or maybe all, of the fund you build up as a tax-free lump sum when you retire, paying AVCs is a really attractive way of boosting your retirement benefits. You can pay up to 100% of your earnings (up to the Annual Allowance) into any number of schemes, including this one. You can find out more about paying AVCs in the separate Additional Voluntary Contributions (AVCs) and Bonus Sacrifice guide which you can get from the, or you can download a copy from the pensions website. James Capel Supplementary Section You also have access to the James Capel Supplementary Section. This is a defined contribution section of the Scheme available to members of the James Capel D&SE Section. Further information about the James Capel Supplementary Section can be found in Appendix 1 at the back of this guide. The James Capel Supplementary Section provides you with a tax-efficient retirement savings option in addition to the James Capel D&SE Section. Saving outside of the Scheme You can now pay into any number of pension schemes at the same time as being a member of the Scheme, such as a personal pension or Stakeholder pension plan. And there are many other ways of saving for your retirement. Before deciding to save for your retirement outside of the Scheme, please consider whether they offer any tax advantages, and the charges you will pay compared with paying contributions to the James Capel Supplementary Section, or AVCs. The Trustee and your employer cannot give you financial advice. If you re not sure what s best for you, we strongly recommend you speak to an IFA. For details of how to find an IFA in your area, see page 23. Annual Allowance This is an allowance for the amount of contributions and/or benefits that you can build up each year tax-efficiently. The total amount you can pay personally into all of your pension arrangements and receive tax relief on each year is 100% of your UK earnings, subject to the maximum shown below. Each year (apart from the year you take your benefits), the increase in the annual amount of your defined benefit pension(s) (for example, your James Capel D&SE Section pension) times a factor of 10, will be tested against the Annual Allowance. This is tested over what is called the pension input period. The pension input period for the Scheme is the 12-month period ending on 30 June each year. If you (or someone else on your behalf, such as your employer) have made contributions to a money purchase scheme (for example, AVCs or contributions to a personal pension or contributions to the James Capel Supplementary Section), then the value of these contributions will also be included in the amount tested against the Annual Allowance. Any contributions paid or benefits built up over the year above the Annual Allowance will be taxed, currently at 40%. The Annual Allowance for the pension input period ending 30 June 2009 is 235,000. It will increase in steps to 255,000 for the input period ending 30 June 2011. 17