GENERAL DYNAMICS UNITED KINGDOM RETIREMENT AND DEATH BENEFIT SCHEME BOOKLET

Transcription

1 GENERAL DYNAMICS UNITED KINGDOM RETIREMENT AND DEATH BENEFIT SCHEME BOOKLET May

2 INTRODUCTION At a time when we are living longer and the State is reducing its commitment to provide pensions for us all, planning for our retirement has never been more important. The General Dynamics United Kingdom Retirement and Death Benefit Scheme is designed to help you save for your retirement and at the same time provides valuable life assurance protection for your family. The way the Scheme works is straightforward. As soon as you become a member a Retirement Account is opened in your name and the money that is received is invested on your behalf. The money comes from the contributions paid by the Company (including contributions that come from your salary sacrifice) plus any voluntary contributions you choose to make. When you apply for the total value of your Retirement Account to be paid it will be used to provide you with an income with the option of receiving part as a one-off tax-free cash payment. The money available to provide your benefits will depend on how much has been saved, the investment returns earned and the cost of buying the benefits when they start to be paid. This Booklet outlines how the Scheme operates but the definitive guide is the Scheme s governing Trust Deed and Rules and any overriding legislation. These will take precedence over the Booklet. If you have any questions about the Scheme or wished to see the governing documents you should write to: The Pensions Administrator General Dynamics United Kingdom Limited Castleham Road St Leonards-on Sea East Sussex TN38 9NJ Phone Alternatively you can access further information about the Scheme from the Trustees website at In addition, on the website you will have secure and confidential access to view your own Retirement Account. 2

3 JOINING THE SCHEME Who Is Eligible? Application Form Contracting Out Expression of Wish Form Other pension schemes You may apply to join the Scheme if you are a permanent employee, subcontractor or temporary employee, and are aged at least 16 but under age 65. Membership is voluntary and you may join the Scheme at any time in the six months after you are first eligible. An Eligible Employee who does not complete the form within six months of first becoming eligible will only be admitted to Active Membership with the consent of the Trustees, subject to such conditions as they may impose. If you choose not to join the Scheme, you will only be covered for a lump sum death benefit. To join the Scheme you need to complete the Application Form included in the Membership Pack. You will also be asked to produce your birth certificate, and if applicable, your marriage certificate. The Scheme is no longer contracted out of the State Second Pension (S2P). Protected Rights that is rights to a particular form of pension payable to you from any contracted-out rebates and contributions paid prior to 1 October 2009 will be preserved in the Scheme for you. When a member dies the Trustees have discretion as to whom the Death Benefit cash sum is paid. Your "Expression of Wish" lets the Trustees know to whom you would prefer this money to be paid. You can nominate any person and the money can be divided in two or more ways. Please make it clear whether you wish the amount to be divided proportionately between the people you have named by including a proportion, or whether you wish the amount to be paid in order of preference, by not including a proportion and adding "If no longer alive. If the person that you wish to nominate is under 18 then the trustees can assist in arranging for a trust fund to be set up for that person. If you have only named one person you may wish to consider adding an alternative in case the original person dies before you. Once you have completed your form, please obtain the appropriate Expression of Wish envelope from the Pensions Administrator. Then hand the sealed envelope to HR who will keep it, in strictest confidence, with your records. If your circumstances change or you want to alter your wishes, please collect a new form from either HR or the website. When you hand this in, your old envelope will be destroyed. You may be able to transfer the value of any pension you have earned in a previous scheme or arrangement, including a personal pension, into the Scheme to provide benefits from the Scheme. The Pensions Administrator will give you more information. The Trustees decide whether or not transfers will be accepted. In 3

4 some cases they will not be able to accept a transfer and it will not always be in your interests to transfer. Contributions/Salary Sacrifice When you apply to join the Scheme and as part of each subsequent annual update of your Dynamics benefits you will be asked to decide on the overall rate of contribution to be paid into your Retirement Account using the website currently provided by Motivano. In order to contribute, you agree to sacrifice part of your Pensionable Salary. The Company will then pay into your Retirement Account the amount by which your Pensionable Salary has been reduced plus a contribution of its own. The following table sets out the Salary Sacrifice option rates available to you and the total contribution the Company will pay, inclusive of your Salary Sacrifice. Salary Sacrifice Rate Option 1 3% 7.25% Option 2 4% 9.25% Option 3 5% 11.25% Employer Contribution Rate inclusive of your Salary Sacrifice rate Tax and National Insurance Contributions Annual Statement The Employer Contribution Rate will be applied to your Pensionable Salary before your Salary Sacrifice. In addition to the Optional contributions you may apply to sacrifice a Top Up Contribution at the rate of 2% of your Pensionable Salary over the Threshold Salary. If you elect to make the Top Up Sacrifice the employer will pay into your Retirement Account a total Top Up Contribution of 8% (inclusive of your Top Up Salary Sacrifice) of your Pensionable Salary over the Threshold Salary. You will not pay tax or National Insurance Contributions on the contributions paid into your Retirement Account by your Employer. You will receive each year a statement showing the value of your Retirement Account (including any Protected Rights), plus a forecast of the pension you could receive, expressed in present day terms. 4

5 ADDITIONAL VOLUNTARY CONTRIBUTIONS AND OR ADDITIONAL SALARY SACRIFICE THERE ARE TWO WAYS TO MAKE ADDITIONAL PAYMENTS INTO THE SCHEME. TO PROVIDE ADDITIONAL INCOME IN RETIREMENT AVCs ADDITIONAL SALARY SACRIFICE Limits to additional Payments You can pay extra contributions to the Scheme. These are known as Additional Voluntary Contributions (AVCs) and will be paid into your Retirement Account. The advantage of AVCs is that you receive tax relief on the contributions and growth in the pension fund is also free of tax. You can vary your AVCs as you wish. As an alternative or in addition to AVCs you can increase the amount of Salary Sacrifice the employer pays into your Retirement Account. In this way you will also reduce your National Insurance contributions. You will however, only be able to express the payments as a percentage of your Pensionable Salary. The opportunity to arrange an Additional Salary Sacrifice is only available to you each March as part of your annual Dynamics (flex) benefits review. It is possible to increase your Salary Sacrifice and still make occasional payments as a straightforward AVC deduction from pay. If you make additional Salary Sacrifice contributions then the company will increase those contributions by 6.25% (part of the National Insurance contribution refund). You can choose how much you want to pay, up to 100% of your earnings each tax year and receive full tax relief on those contributions. There is an upper limit, called the Annual Allowance, which is the amount that you or your employer can put into all pension arrangements in the course of a year on a tax efficient basis. This increases each April and changes to the upper limit will be included on the Pension Scheme website. You should also satisfy yourself that by making these additional payments you do not risk exceeding the Lifetime Allowance. This is outlined on page [12]. You will not pay any tax on the AVCs or additional Salary Sacrifice you pay into the Scheme. However, after 2011 members earning more than 150,000 annually may receive relief only on basic rate tax. If you earn more than 150,000 annually, you should consult an independent financial adviser concerning taxation of pension contributions, and particularly the tax consequences of changes in contributions on or after 22 April

6 To make an extra payment Annual Statement of Additional Payments AVCs can be paid through the payroll system regularly, as a single payment or a combination of the two. However, you will need to give one month s advance notice of any changes to your AVCs, or if you intend to make a single payment. An additional Salary Sacrifice is made through the payroll system and usually cannot be changed until the following March, when it can be reviewed with your Dynamics benefit options. To make additional payments you need to complete either an AVC form or an additional Salary Sacrifice form from the web site and return it to the Pension Administrator. Your Annual Statement will include details of the value of your AVCs or additional Salary Sacrifice and the additional benefits they could provide. 6

7 INVESTMENTS Scheme s Assets Investment Strategy The Scheme s assets are held in a trust entirely separate from those of the Company. The Trustees are responsible for the investment of the contributions. All of the investments are managed by Legal & General (L&G), the Trustees appointed investment managers. The Trustees also determine the general investment strategy after consultation with their advisors: details of the strategy are contained in their Statement of Investment Principles, a copy of which is held by the Pensions Administrator or can be found on the website. As part of the general investment strategy, the Trustees have chosen to offer a number of index tracking (also known as passively managed) funds. In an index tracking fund, the fund manager buys shares in the major companies that are listed in the market described. The number of shares held in each company or sector is set by reference to the market value of the company. This spreads your investment across that market so that it should perform in the same way that the market performs. The exceptions are the Property Fund where L&G take active decisions over the properties to include and the Cash Fund, which is invested primarily in bank deposits and other low risk, low return vehicles The Investment Manager has certain investment targets, which the Trustees monitor at regular intervals. The strategy is reviewed at regular intervals but can only be changed by the Trustees. The existing strategy offers members a choice between leaving all the decisions to the Trustees or selecting where to invest contributions within a range of L&G funds offered by the Trustees. The investments that are offered by the Trustees have different levels of risk, and as a member you need to consider what level of risk is appropriate for you, keeping in mind that less risky investments will often have a lower rate of return. 7

8 Lifestyle investments Lifestyle Funds The Trustees also offer some lifestyle options, which allow you to choose to move to investments that involve less risk automatically as you age. There are three options: (a) Lifestyle 10, which operates over a 10 year period to de-risk your investment profile beginning at age 55; (b) Lifestyle 5, which operates over a 5 year period to de-risk your investment profile beginning at age 60; and (c) Freestyle, which allows you to remain invested as you choose from among the Freestyle investments offered under the Scheme. If you do not choose Lifestyle 5 or Freestyle, you will be enrolled in Lifestyle 10. Both Lifestyle 10 and Lifestyle 5 involve the investment of your Retirement Account in one, two or three specialist funds Growth, Secure and Cash. The Growth Fund is invested in established equity markets around the world, within limits set by the Trustees. Over a number of years research shows that investing in company shares has produced better rates of return than most other forms of investment available. Of course, this cannot be guaranteed as equity markets can fall as well as rise. In addition to market volatility risk, overseas investments will sometimes include currency risk on conversion into sterling when units are sold. This can either add to or reduce the value of your investments at the time of payment. The Growth Fund is used for the investment of all the contributions paid into your Retirement Account up until either 10 years or 5 years before your Normal Retirement Date. However, the Trustees believe that the volatile nature of investing in equities carries too much risk as you approach retirement. Once you reach age 55 (if you are invested in Lifestyle 10) or age 60 (if you are in Lifestyle 5) your funds will gradually be moved into more cautious investments, that is the Secure Fund, which is invested in Government gilts and other fixed interest forms of investment and the Cash Fund which is invested typically in bank deposits. The use of the Secure and Cash Funds is also expected to match the benefit options available to you when you retire. This means around 75% of your Retirement Account will be in the Secure Fund at Normal Retirement Date (age 65) and will be used to buy your pension while the remainder in the Cash Fund will normally be paid as your tax free cash sum. 8

9 Lifestyle 10 Switches In the year you reach age 55, the Trustees will arrange for your Retirement Account to be switched gradually over the following 10 years into the Secure Fund and Cash Fund. A set amount is moved each month and by the end of each year will be in the following percentage splits: Years to Retirement Secure Fund Cash Fund Growth Fund Lifestyle 5 Switches A similar process is followed but not until you reach age 60. The Trustees will then arrange for your Retirement Account to be switched from the Growth Fund at a higher rate over the following 5 years into the Secure Fund and the Cash Fund. Again a set amount is moved each month and by the end of each year there will be the following percentage splits: Years to Retirement Secure Fund Cash Fund Growth Fund

10 Freestyle Investments Equity funds Once the process of switching has started under either Lifestyle option, all new contributions will be split and invested in each fund in the same percentages as your assets are invested at that point. You may use either Lifestyle option to target a retirement age other than 65. Further details can be obtained from the Pensions Administrator The Freestyle funds are designed to give members investment choice and some control over where all or part of their Retirement Account is invested. As with any investment there is an associated risk and the following describes how each Freestyle fund is managed and its investment objectives. In summary the equity funds are similar to the Growth Fund but are specialist rather than general funds and the Fixed Interest funds are akin to the Secure Fund but again offer a degree of specialisation. In addition to risk of market volatility, overseas investments include currency risk on conversion into sterling when units are sold. This can either add to or reduce the value of your investments at the time of payment. World (ex UK) Equity Index Fund This fund is aimed at members with long-term investment horizons who wish to further diversify risk by investment in companies around the world outside of the UK. The geographic split is typically around 65% US, 20% Europe, 9.5% Japan, 5% Asia (ex Japan) and 1.5% Emerging Markets. It is designed to track the FTSE World ex UK index. UK Equity Index Fund This fund is aimed at members with long-term investment horizons. It only invests in companies listed on the UK stock exchange and in proportions which reflect the market value of each company. It is designed to track the performance of the UKFTSE All-Share Index. Property Fund This fund is aimed at investors with long-term investment horizons. Unlike the other funds it is an actively managed fund, because it can only invest in a limited number of properties selected by L&G. The properties held are all non-residential. The fund s performance is measured against the returns produced by other property investment managers. Asia Pacific (Ex Japan) Equity Index Fund This fund is aimed at members with long-term investment horizons. It only invests in Asia Pacific companies excluding Japan. It is designed to track the performance of the FTSE World Asia Pacific (ex Japan) Index offering access to one of the four main regional overseas equity markets. 10

11 Fixed Interest Funds Global Emerging Markets Equity Index Fund This fund is aimed at members with long-term investment horizons who wish to further diversify risk by investing in the world s emerging markets. However, these markets are influenced by their local economies and involve exposure to currencies other than Sterling. Emerging markets and their currencies have been extremely volatile in recent years causing the value of investments to fluctuate and there is therefore a higher level of risk associated with this fund. It is designed to track the performance of the S&P/IFC Investable Composite Global Emerging Markets Index. UK Smaller Companies Index Fund This fund is aimed at members with long-term investment horizons and aims to capture the returns of the UK Smaller Companies equity market. It tracks the FTSE Small Cap index and invests only in UK equities. The FTSE Small Cap Index accounts for approximately the entire lower half of the 700 plus companies listed on the UK stock exchange. The reference to Cap means the market capital value of all the shares that can be traded. In total the Small Cap Companies represent approximately 2% of the total market. Over 5 years Index-Linked Gilts Index Fund This fund is aimed at members nearing retirement and provides some protection against the cost of buying an annuity, which increases in payment. This fund is invested in over 5 year Government index-linked gilts. AAA-AA-A (6A) Fixed Interest Over 15 years Fund This fund is similar to the existing Over 15 year gilt index fund, but in addition to Government gilts also holds corporate bonds. Like gilts, these pay regular interest payments, but because they are invested in companies there is an increased risk which offers the potential for higher returns. This is a fund which is aimed at offering protection for members approaching retirement. The 6A reference denotes an independent investment grading starting with AAA, which is the lowest risk corporate bond available. The next two grades are AA and A. The investment grade is the measure of risk that an interest payment may not be made (for example, if a company fails). The fund does not invest in any stocks with an investment grade lower than A. Over 15 year gilts index Fund This fund is only invested in Government gilts, which will pay interest for at least 15 years. An insurance company will invest in gilts to back your pension as they need to know there is a certain level of income for all the time you are receiving your pension. This is the fund described as the Secure Fund within the Lifestyle funds. 11

12 Freestyle Switches Charges Cash Fund This fund is managed actively and invests in sterling cash deposits and other short-term investments. Effectively this fund only increases with interest additions. It is suitable for those close to retirement and considering taking part of their Retirement Account as a cash sum. You may move any of your existing investments at any time of your choosing, subject to a minimum transfer of 10% of your investment in that fund between funds. Each year you will be allowed one switch free of administration charges. There will then be a charge of 25 to arrange any further transfers in the same year. For this purpose a scheme year runs for 12 months from 6 April each year. Details of each fund s performance and any changes to strategy will be provided in the Trustees annual report to members. The day to day investment charges are an additional expense met by the Company. The only charges taken from your Retirement Account are when you are either buying or selling. This is known as the bid offer spread. The spread changes periodically and up to date details can be obtained from the Pension Scheme website on the Internet. 12

13 PENSION BENEFITS Taking your pension Members in Pensionable Service prior to 6 April 1997 Normal Retirement Date It is no longer necessary for you to retire before you start to receive your benefits. The pension you receive will depend on a number of factors, including: The total value of your Retirement Account, including AVCs, transfers and Protected Rights The amount of tax free cash you decide to take from your Retirement Account, if any The pension provision you wish to make for your dependants The level of inflation protection Your age and your health The annuity rates, which determine the cost of providing your pension at the time you take your benefits. There are a number of other features and options. These will be explained to members close to retirement who will be invited to attend an annual pre-retirement planning presentation. As you move closer to retirement you will be encouraged to obtain independent financial advice. If you are eligible for the Underpin, your benefit at retirement may include a pension for yourself and your dependants equivalent to benefits payable under the Scheme prior to 6 April Similarly, if you did not transfer your Pre Benefits to a Retirement Account, you will receive a pension for yourself and your dependants based on the terms of the Scheme prior to that date in addition to the benefits in your Retirement Account. Your Normal Retirement Date is your 65 th birthday. Alternatively you may apply to receive your benefits at any time from age 50 (55 from April 2010), but can expect to receive a smaller pension. You may put your benefits into payment while remaining employed by General Dynamics and even continue to contribute to the Scheme. If the Company agrees that you may remain in employment after age 65 you may delay receiving your pension or choose to take your pension and carry on working. Six months before your Normal Retirement Date, annuity advisers appointed by the Trustees will provide you with examples of your pension options. The accuracy of any example given to you will depend on the assumptions made about future contributions, investment returns and the anticipated cost of buying an annuity from an insurance company at the date you receive your benefits. The cost of an annuity changes daily as it is closely linked to interest rates at the time and other investment market conditions. For this reason an annuity price is normally only guaranteed for 7-28 days. This means that final figures cannot be confirmed until you are ready to take your benefit. All previous illustrations are best estimates and cannot be guaranteed. This includes the 13

14 Incapacity Pension Exceptionally Serious Ill Health Lump Sum Tax Free Cash Option (Pension Commencement Lump Sum) Lifetime Allowance illustration you will receive six months before your Normal Retirement Date. The value of your Retirement Account also changes by the day but movement into the Secure Fund and Cash Fund through either Lifestyle 10 or Lifestyle 5 is designed to reduce the risk of a significant change in the value in the important period just prior to putting your pension into payment. Details of your Protected Rights Benefits will be included in your options letter. You may be eligible to take your benefits earlier than age 55 if in the opinion of the Trustees you suffer sufficiently serious ill health to meet the definition of Incapacity under the Scheme rules. You must provide sufficient written evidence from a medical practitioner that this is the case. A member who is expected to live for less than one year may apply to the Trustees for payment of their Retirement Account in cash. The Trustees will obtain certain medical information, including written evidence from a medical practitioner, before reaching their decision. You will also be advised of the maximum tax-free cash sum you can take from your Retirement Account and how this will reduce the pension that you can buy with the remaining funds. The taxfree cash sum could be up to 25% of the value of your retirement account, and those in service prior to 6 April 2006 may be eligible for a greater tax-free cash sum. It is up to you to decide how much cash, if any, you receive and the type of pension(s) required. It is recommended that you take independent financial advice. There are no longer any limits on the amount of pension that can be paid to you from your retirement account but there will be a tax charge if your benefits from all pension schemes in which you participate exceed the Lifetime Allowance. Details of the Lifetime Allowance can be found on the web site The percentage of the Lifetime Allowance that you have used will be assessed at the time benefits are put into payment. Each time you take benefits from a pension scheme, you should receive a statement from the administrator of that scheme telling you how much of the Lifetime Allowance you have used. A tax charge will be assessed when and if you have used your entire Lifetime Allowance. You may have applied for either Primary or Enhanced Protection in place of the Standard Lifetime Allowance. If you have done so, please inform the administrator so that these protected levels will be recognised in the final assessment. Members who need further information concerning the Lifetime Allowance or Primary or Enhanced Protection should write to the administrator via the contact address at the beginning of this booklet. Contact can also be made via the Scheme website or members may wish to obtain financial advice from their own financial adviser. 14

15 Annuities/ Open Market Option Dependant s Benefits Increasing Annuity Protected Rights Benefits Cash in Lieu of Trivial Pension The Trustees will purchase a pension in the form of an annuity for you, to be paid by a reputable insurance company. The type of annuity will be established in accordance with your instructions. You are also entitled to transfer your Retirement Account to a provider of your choice using the Open Market Option. It is possible to provide a pension, payable on your death, for a financial dependant. The definition of dependant includes your Spouse or Partner or Child and may include others who are financially dependent on you or interdependent with you. The cost of a dependant s annuity varies according to the amount required and the ages of you and your dependant(s). These are decisions you must make when you take your benefits. There is no longer any requirement to secure an annuity from your Retirement Account that increases in payment. The inclusion of any level of inflation protection in relation to benefits from this account is optional and comparisons will be provided before you decide on the annuity you receive. The exception to this is if you were a member before 6 April 1997 as your pension will include a Guaranteed Minimum Pension (GMP). Part of the value of your pre April 1997 Retirement Account must be used to provide the GMP with the required rate of inflation protection. If you were contracted-out of S2P or SERPS for some or all of your service, the value of that part of your Retirement Account that consists of Protected Rights will be used to provide Protected Rights benefits. Your Protected Rights Benefits are subject to certain restrictions and a proportion of your Protected Rights benefits must be paid as Spouse's pension. If your Retirement Account plus the additional value, if any, of your entitlement to Underpin or Pre 1997 Benefits, is less than 2000, this amount can be paid as a lump sum. 25% of this will be tax free. Alternatively, if the value of all your pension benefits (including those held or paid from other pension plans) is less than 1% of the Standard Lifetime Allowance at the time you become entitled to your benefit, your benefit under the Scheme can be paid as a lump sum instead of a lifetime income. 25% of the cash payment will be free of tax while the balance will be taxed. (Entitlement to this payment is subject to further restrictions under the tax laws.) 15

16 Independent Advice Underpin The Trustees recommend that you take independent financial advice before putting your pension into payment. An advisor will also be able to explain other options, which may be available to you but will need to be arranged outside of the Scheme. If you were in Pensionable Service prior to 6 April 1997 and you elected to transfer your Pre-1997 Benefits to your Retirement Account; invested your Pre-1997 Benefits plus any bonus you received on transfer in the Lifestyle funds; and put benefits into payment on or after your Normal Retirement Date you are eligible for the Underpin. The Underpin allows you to take the greater of: the pension to which you would have been entitled under the Scheme as of 5 April 1997 had you ceased Pensionable Service on that date; or the current value of the Pre-1997 Benefits transferred to your Retirement Account plus related bonus in your Retirement Account in addition to benefits attributable to post-5 April 1997 service in your Retirement Account. 16

17 DEATH IN SERVICE If you die in the Company's service before your Normal Retirement Date the following benefits will be payable: All current employees Lump Sum Benefit Active scheme members (that is, those for whom contributions were being paid by the Company at the date of death) The Trustees have in place an insurance policy that will provide a cash sum death benefit of three times your Insured Salary at the rate in force on the date of your death (or as selected in our Dynamics benefits package). This lump sum usually is payable tax free if you have not used your Lifetime Allowance. The Trustees will pay this benefit only to the extent that the insurer covers it. In addition to the lump sum benefit, if you are an employee in Pensionable Service under the Scheme rules, the Trustees will pay the greater of: (a) the benefit that can be secured with your Retirement Account or (b) pensions payable to -- (i) your Spouse or Partner of 25% of your Insured Salary at the rate in force on the date of your death, and (ii) each Child, to a maximum of four, of 6.25% of your Insured Salary at the rate in force on the date of your death [to the extent that the insurer covers them], plus any AVCs. Some other features of this benefit are that: If no Spouse's or Partner s pension is payable, the Children's pensions will be doubled. The Spouse or Partners pension and any Children s pension will be increased each year in line with the rise in the Retail Prices Index up to a maximum of 2.5% per annum. Children s pension is also extended to include eligible children of your nominated Partner, subject to the same upper age limits and the child permanently residing at the Member's home address and being financially dependant on the Member. Please note that all references to a Partner s death in service pension will include a nominated dependant s death in service pension provided there is no legally recognised Spouse. It will be for the Trustees to decide if the nominated dependant qualifies to receive the pension. Each of these benefits is insured under a policy arranged by the Trustees. Full cover is normally provided without you needing to provide any evidence of your health. There may be certain exceptional circumstances where you are asked to provide some form of evidence. This may result in the cover provided being restricted. You will be informed if you need to provide any medical evidence or if the cover is restricted. Where a Spouse's, Partner's or Child's pension is paid, your Retirement Account will be retained by the Scheme. 17

18 Death Benefits AVCs Additional Salary Sacrifice Contributions Taxation of lump sums DEATH WHILE IN RECEIPT OF PENSION LEAVING THE SCHEME Less than 2 years pensionable service The full value of your AVCs will normally be paid as a lump sum, although the Trustees may use their discretion to provide a dependant s pension. The full value of your Additional Salary Sacrifice Contributions will normally be paid through the company payroll and be subject to Tax and National Insurance deductions. Under existing UK law, any lump sum payable on your death will be free of income tax, provided that it, along with your benefits from other pension schemes, do not exceed the Lifetime Allowance. The Trustees must decide who receives the money, but generally they will take account of your wishes as given in your Expression of Wish form. The benefits payable on your death will depend on the choices you made when your benefits were put into payment. If you were contracted-out of S2P for any part of your service, a minimum widow's or widower's pension will be paid to your widow, widower or civil partner. If you end active membership in the Scheme before Normal Retirement Date the trustees will notify you of any rights and options available to you in writing. This will be done as soon as possible and, in any event, within two months of the Trustees being advised that your Pensionable Service has ended. If you leave the Company with less than 2 years' membership of the Scheme, the value of any Protected Rights will remain in the Scheme. The portion of your Retirement Account built up from your AVCs (but not Company contributions including salary sacrifice contributions) will be refunded to you. The amount paid will be subject to a deduction for tax. If you have completed more than three months' membership you will have the option to arrange a transfer of the full value of your Retirement Account to another pension arrangement. This option will only be available for six months from the date you are advised of your leaving service options. If you have not initiated a transfer within the 6 months then a refund of any contributions you have paid, as described above, will be arranged. If you have transferred benefits into the Scheme, then you will be treated as having 2 or more years Pensionable Service. 18

19 2 or more years Pensionable Service Leaving active membership but not the Company Partial transfers The full value of your Retirement Account will remain fully invested in the Scheme and will continue to benefit from any investment growth. It will also be subject to Lifestyle investment switches unless you select the Freestyle strategy. You will receive an annual statement showing the value of your Retirement Account and a forecast of the pension it could provide. Alternatively you may ask for the full value of your Retirement Account to be transferred at any time to: a new employer's pension scheme, or a personal pension scheme or Stakeholder arrangement of your choice. If you transfer your Retirement Account it must include any Protected Rights and AVCs. You may ask the Trustees for details of the value of your Retirement Account at any time. This applies whether or not you have actually left the Scheme. The transfer value of any defined benefits is calculated in accordance with legal requirements and actuarial guidance. The Trustees have decided that transfer values will not be increased to take account of any discretionary benefits that might be granted to members. The Trustees will give you a written statement showing your entitlement within two months of your request. The transfer value will not be guaranteed as it will be the value of your Retirement Account at the date on which it is transferred. The Trustees are not obliged to give you another statement within twelve months of the date of your last request unless you opt to take a transfer value. If you decide to stop active participation in the Scheme while continuing to work for the Company, you must give the Trustees one month's notice of your intention to do so. If you stop active participation in this way, your Retirement Account will be treated in the same way as if you had left the Company. You will, however, continue to be covered for the lump sum death benefit If you opt out of membership for retirement benefits, you will be allowed to rejoin at a later date with the Trustees consent and subject to any conditions which they may impose. Any member may arrange for all or part of the value of their Retirement Account to be moved to another provider while remaining a member of the Scheme for future investments. Death in deferment when no longer in Service In the event of your death before starting to receive a pension, the value of your Retirement Account will be used to purchase a pension or annuity for your Spouse/Partner and/or dependants. Where there is no Spouse, the value of your Retirement Account may be paid as a lump sum as an alternative to providing a dependant s pension. Any lump sum will be settled in the same way as the death in service benefit, outlined on page [14.] 19

20 TEMPORARY ABSENCE Sickness Other Absences Maternity, Paternity or Adoption Leave Most absences from work are for a relatively short period of time and do not affect your membership of the Scheme. However, if you are absent for a long time your membership may be affected, as set out below: If you are away due to illness or injury, your active membership in the Scheme will continue for as long as the Company continues to pay you, or you are receiving benefits from the permanent health insurance scheme. If you are away from work, for any reason, for a period not exceeding ten years (or such longer period as shall not prejudice the Scheme's status as a registered pension scheme for tax purposes) the Trustees, with the Company's consent, will decide whether your membership should continue and whether you will be covered for the lump sum death benefit and Spouse/dependant's pension. If, at the end of the relevant period, you have not returned to work, your benefits will be dealt with as though you had left employment. The Trustees will decide to what extent your contributions will be maintained while you are away, but these will normally be based on the pay you actually receive rather than the pay which would have applied had you continued working normally. If you take maternity, paternity, parental or adoption leave and reserve the right to return to work afterwards, your active membership of the Scheme will continue. During any period of paid Maternity Leave, Paternity Leave, Parental Leave or Adoption Leave, the Company will continue to pay contributions into your Retirement Account (excluding AVCs) at the level paid immediately before you went onto paid leave. You will pay the same proportion of your income as you did immediately before you went onto paid leave. Any increase in your Pensionable Salary while on leave will be recognised in the contributions the employer pays. If you decide not to return to work, you will be treated as having left active membership in the Scheme. Your benefits and options will be as described in this booklet. 20

21 DEFINED TERMS Child Company Gross Salary Insured Salary Lower Earnings Limit Normal Retirement Date Partner Pensionable Salary Pensionable Service This means the child of the member including a step-child or adopted child who is: (a) maintained or partially maintained by you and is (b) under age 18, or under 21 if in full-time education. This means General Dynamics United Kingdom Limited and any other companies which participate in the Scheme. Your gross earnings from the Company in the last tax year as identified on your P60 before any salary sacrifice and Dynamic benefit deductions Your Insured Salary is the greater of: (a) your Gross Salary as defined above less any stock options (b) your Reference Salary paid in the month of death (on an annualised basis) plus any overtime and bonus payments received during the current tax year to the date of death (c) the average of your last three years earnings calculated in (a) or (b) above, or (d) your latest Reference Salary as notified to you by the Company. This is the level of earnings at which you start paying National Insurance contributions, it is adjusted by the Government with effect from 6 April each year. Your 65th birthday. Your civil partner as defined in section 1 oaf the civil Partnership Act or a nominated dependant with whom you are in a relationship akin to marriage, who is financially dependent upon or interdependent with you. Monthly Reference Salary plus any bonus and overtime This is your period of completed years and months of membership in the Scheme. Pre-1997 Benefits Benefits earned in the Scheme prior to 6 April 1997 Protected Rights That part of your Retirement Account that is attributable to contracting out of state second pension between 6 April 1997 and 1 October Reference Salary Annual salary at 1 April each year before any adjustments are made due to your Dynamic benefit selections, including pension Salary Sacrifice. Retirement Account The account established in the name of the member to accept all contributions. Salary Sacrifice See page [ 4 ]. Spouse Means your lawful Spouse including a Registered Civil Partner. 21

22 Top Up Contributions Threshold Salary Additional contributions may be made by the Company if: Your previous year s Gross Salary exceeds that year s Threshold Salary, or Your previous year s Reference Salary plus any overtime and bonus exceeds that year s Threshold Salary, or You join the Company during the tax year and your Reference Salary exceeds the Threshold Salary and You elect to sacrifice a further 2% of your salary on these earnings. This is a salary level set by the Company each year (currently aligned to the Upper Accrual Point) above which Top Up contributions, if selected, of 8% would be paid by the Company which includes your additionally sacrificed 2%. Underpin See page [13 ]. Upper Earnings Limit This is the level of earnings at which you stop paying National Insurance contributions; it is adjusted by the Government with effect from 6 April each year. 22

23 GENERAL INFORMATION Scheme Fees Scheme Year Tax Discretionary Increases Amendment or Discontinuance Assignment of Benefits Pension Sharing Data Protection The costs, charges and expenses of the Scheme (except for the unit bid offer spread) are borne by the Company. The scheme year runs from 6 April until 5 April. Because the Scheme is a registered pension scheme with HMRC your contributions, and any AVC contributions, paid into the Scheme are eligible for full tax relief at the highest rate to which you are liable. (If you earn more than 150,000, this may change in tax year and tax efficient contributions from tax year are currently limited) Any growth in the value of the Schemes funds is currently free of UK taxes on investment income and capital gains. The Scheme is arranged so that the Trustees have discretion to decide who receives any lump sum death benefits. Under current legislation this can be paid free of tax. Pensions, when paid, are currently taxed as earned income. The Scheme rules give the Trustees discretionary powers to increase pensions in payment above the increases required legally, in consultation with the Company. Apart from the above, there are no discretionary benefits within the Scheme. Provided the Company consents, the Trustees may amend the provisions of the Scheme. The Company fully intends to keep the Scheme in force but reserves the right to discontinue it. In either case, if your benefits or rights are affected you will be given written notice. If the Scheme is discontinued the Trustees will use the assets of the Scheme in the way set out in the Trust Deed and Rules. You are not allowed to assign your benefits under the Scheme or to use them as security for a loan. The Trustees will pay to another pension arrangement for the benefit of your former Spouse, the share of the value of your Retirement Account determined by the Courts. The details given on your Application Form and any additional personal information provided by the Company and others, is used by the Trustees (Data Controllers) and others (Data Users) involved in the running of the Scheme. The Trustees and the users are registered with the Data Protection Registrar under the Data Protection Act The Act gives you certain rights to ensure that the information is accurate and that proper security is maintained. The information can only be released to someone included in the registration. It is your responsibility to keep the Trustees up to date with your personal details, including your marital status and address. Without this information, it may not be possible to pay benefits to you or your beneficiaries. 23

24 Queries and Problems Internal Dispute Resolution Procedure The Trustees aim to ensure the Scheme is administered and managed to high standards but it is possible there may be times when you are unhappy about something concerning your benefits or another matter relating to your membership of the Scheme. Any query or problem should initially be referred to the Pensions Administrator. Most queries and problems stem from a misunderstanding and can be quickly and informally resolved without the need for the formal procedures to come into play. If, after referring your query or problem to the Pensions Administrator, you are still unhappy about the matter, you may then wish to consider making a formal complaint through the internal dispute resolution procedures. Full details of the Scheme's internal dispute resolution procedure are contained in the Company Human Resources procedures, a copy of which can be obtained from the Pensions Administrator at the address in the introduction. Complaints and appeals must be made in an appropriate manner. If you have made your complaint to the Pensions Administrator and you remain unhappy, you may make a complaint using the special application form available for this purpose. The application form can be obtained from the Pensions Administrator. If you are unable to make the complaint or appeal yourself or for any other reason prefer not to do so, you can nominate someone else (as your representative) to make the complaint for you. Please note that the internal dispute resolution procedures only apply to matters concerning the Scheme that affect: members; prospective members others who have, or who claim to have, an entitlement to a benefit under the Scheme. A complaint can be made by persons in the above categories, or who have been in one of the above categories within 6 months of the date of the complaint. The procedures do not apply to complaints and disputes between employees and the Company or between the Company and the Trustees. Nor do they apply to complaints or disputes where court proceedings have started or which are being investigated by the Pensions Ombudsman. Pensions Advisory Service The Pensions Advisory Service ("TPAS"), is available to assist members and other beneficiaries under the Scheme in connection with any difficulties they may have in connection with the Scheme. This service may be of use to you at any time in the disputes procedure. The address of TPAS is: 11 Belgrave Road, London, SWIV IRB Phone:

25 Pensions Ombudsman The Pensions Regulator The Pension Tracing Service Annual Reports and Financial Statements Further Information The Pensions Ombudsman, appointed under the Pension Schemes Act 1993, may investigate and decide complaints concerning the administration of occupational pension schemes. Complaints or disputes that are not resolved through the Scheme's internal dispute resolution procedure may be referred to the Pensions Ombudsman (although he normally insists they are initially raised with TPAS). If you want to contact the Pensions Ombudsman, the address is: 11 Belgrave Road, London, SWIV IRB Phone: The Pensions Regulator (TPR). The Pensions Regulator is the regulatory body for work based pension schemes in the UK. The Pensions Regulator can be contacted at: Napier House Trafalgar Place Brighton BN1 4DW Tel: Website: The Pension Tracing Service keeps up to date records of all schemes which may be of assistance in enabling you to track down pension rights from previous employments. The Pension Tracing Service can be contacted at: Pension Tracing Service The Pension Service Whitley Road Newcastle-upon-Tyne NE98 1BA Website: The Trustees arrange for accounts to be produced and audited each year. These are summarised in the Trustees Annual Report to members. Copies of the full accounts are available to members on request. For further information, please contact: The Pensions Administrator General Dynamics United Kingdom Limited Castleham Road St Leonards-on Sea East Sussex TN38 9NJ Phone

26 THE STATE PENSION SCHEME The State Pension Scheme is in two parts: How much is the Basic State Pension? What are qualifying years? When is the Basic State Pension paid? The Basic State Pension, and The State Second Pension (S2P) Everyone who works (plus other special cases) will get the full Basic State Pension provided they have paid enough National Insurance contributions over their working life. State pensions can only be paid from State Pension Age. You cannot choose to opt out of the Basic State Pension. The amount of the Basic State Pension you receive depends on the number of qualifying years you have. If you have enough qualifying years you will get the full basic state pension. At least one of your qualifying years must come from national insurance you have actually paid, rather than national insurance which has been credited for any reason (see below under what are qualifying years?) If you have fewer qualifying years, you may get a proportionately smaller Basic State Pension. If this smaller amount is less than a quarter of the full basic state pension, you will not get anything. A married woman who does not have enough qualifying years may get a smaller Basic State Pension based on her husband s qualifying years. Because the pension system has changed several times in the past, these rules on qualifying years can vary, depending on when you worked. If you pay some national insurance for every week during a year, that year counts as a qualifying year. If you have missed some weeks, you can usually pay a single amount to make up those weeks. If you have not paid national insurance at some time for particular reasons (including having a baby, caring for someone who is ill or disabled, or getting certain state benefits) you may be credited with national insurance. Being credited means that you will be considered as having paid some national insurance when you have not actually paid any. Men usually start getting the Basic State Pension when they are 65. Women born before 1950 start getting the Basic State Pension when they are 60. The age at which women born after 1950 will get pension is gradually rising, and will reach age 65 by After that, the age for both men and women born after 1955 will gradually rise to