Mitchells & Butlers Pension Plan Salary Contribution Scheme NICwise

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1 Mitchells & Butlers Pension Plan Salary Contribution Scheme NICwise NICwise is a National Insurance contribution efficient way of paying contributions to the Pension Plans. NICwise reduces the amount of National Insurance contributions payable and so increases your take home pay and also reduces the amount of National Insurance contributions payable by the Company. If you participate in NICwise: You will not make any pension contribution to the Pension Plan. Your contractual pay will be reduced by the amount of your notional pension contribution. The Company will pay an amount equal to your notional pension contribution direct to the Pension Plan on top of the normal Company contributions to the Pension Plan. Your take home pay will increase because you are paying less National Insurance contributions as a result of the adjustment to your contractual pay. Your Notional Salary (which is your contractual pay before taking account of any adjustment to reflect your participation in NICwise) will continue to be used in the calculation of your other benefits such as bonus, annual pay review and Pension Plan benefits. The attached guide explains NICwise in more detail. You are advised to carefully consider this information and if you have any concerns as to whether participation in NICwise is appropriate to your personal circumstances then it is recommended that you take independent financial advice. As your take home pay will increase as a result of your participation, you will, if you become a member of the Pension Plans automatically be opted into NICwise from your date of joining; no action is required on your part. However this is not a compulsory scheme and if you decide that do not wish to participate in NICwise then you should complete an opt out form as set out in the guide. Except where you have a lifestyle change as defined in Section 3 of the employee guide, you will have an opportunity to amend your decision to participate in NICwise with effect from Period 8 (being the beginning of the tax year) each year by notifying Payroll Control. If you have any further questions not covered in the guide then please contact Judith Deeley ( ) or Sheila Mellish ( ) who will be pleased to be of assistance.

2 NICwise Employee Guide Introduction: NICwise is a more efficient way for Mitchells & Butlers ( the Company ) to make contributions to the Mitchells & Butlers Pension Plans ( the Pension Plans ). NICwise provides a significant reduction in National Insurance costs for the Company and increases take home pay for participants. This guide explains how NICwise works and aims to answer any questions you may have. We recommend that you read all sections of this guide, and in particular the section entitled Is it in my interest to participate? which explains who may not benefit from NICwise and may therefore wish to opt out. If you choose not to be included from your date of joining the Pension Plan you must request an opt out form from Payroll Control and return it with your DC Choice application form otherwise you will be automatically included in NICwise. Only those employees who are members of the Pension Plans and who will benefit from an increase in take home pay will be automatically opted into NICwise. If you have any questions after reading this guide then please contact Judith Deeley ( ) or Sheila Mellish ( ). Unless you complete an opt out form to notify the Company that you want to opt out, you will, from the date of joining the Pension Plan, automatically be included in NICwise. This means that you will be agreeing to a change in your terms and conditions of employment with effect from your date of joining the Pension Plan. Details of how to opt out are in section 3. Please note that all examples shown in this guide are calculated by reference to the tax and National Insurance Contribution rates applicable for 2009/10 and are subject to future change in line with legislation.

3 Section 1: What is NICwise? NICwise is simply a more efficient way of paying contributions to your Pension Plan. NICwise reduces the amount of National Insurance contributions payable and so increases your take home pay and also reduces the amount of National Insurance contributions payable by the Company. If you participate in NICwise: Your contribution to the Pension Plan will be nil. Your contractual pay will be reduced by the amount of your notional pension contribution. The Company will pay an amount equal to your notional pension contribution direct to the Pension Plan. This amount is in addition to the normal Company contributions to the Pension Plan. This additional contribution will be invested in your Retirement Account. Your take home pay will increase because you are paying less National Insurance contributions as a result of the adjustment to your contractual pay. The term Notional Salary will be used to describe your contractual pay before taking account of any adjustment to reflect your participation in NICwise. Your Notional Salary will continue to be used in the calculation of other benefits such as bonus, annual pay review and pension plan benefits. Examples of the potential increase in take home pay as a result of participation in NICwise are summarised below: Basic rate tax payer Not participating in NICwise: Payments Amount Deductions Amount Take home pay per annum Salary 25,000 Tax 3,437 NI 2,113 (based on 25,000) 5% Pension 1,250 Contribution Total 25,000 Total 6,800 18,200 Basic rate tax payer Participating in NICwise: Payments Amount Deductions Amount Take home pay per annum Notional 25,000 Tax 3,437 Salary Pension Adjustment -1,250 NI 1,976 (based on 23,750) Total 23,750 Total 5,413 18,337 In this example, take home pay increases by 137 per annum when the employee participates in NICwise.

4 Higher rate tax payer Not participating in NICwise: Payments Amount Deductions Amount Take home pay per annum Salary 50,000 Tax 8,869 NI 4,257 (based on 50,000) 5% Pension Contribution 2,500 Total 50,000 Total 15,626 34,374 Higher rate tax payer Participating in NICwise: Payments Amount Deductions Amount Take home pay per annum Notional 50,000 Tax 8,869 Salary Pension Adjustment -2,500 NI 4,232 (based on 47,500) Total 47,500 Total 13,101 34,399 In this example, take home pay increases by 25 per annum when the employee participates in NICwise. Note that: The amount of income tax you pay will not change as employee pension contributions made into an HM Revenue & Customs approved pension plan already attract income tax relief. The increase in your take home pay depends on your total earnings and on your pension contribution rate. Your pension contribution rate will not change as a result of participation in NICwise. Indicative levels of increase in take home pay for employees who participate in NICwise for a range of earnings levels are summarised below (pensionable earnings are assumed to be the same as earnings in these examples). Total earnings p.a. Annual increase in take-home pay p.a. for NICwise members (5% contribution rate) 10, , , , , , For employees with total earnings in excess of the National Insurance Upper Earnings Limit ( UEL ), which is 43,875 per annum for 2009/10 your NICwise savings will be equivalent to 1% of your annual pension contribution. This is due to employees National Insurance contributions reducing to 1% of pay in excess of the UEL.

5 Section 2: Is it in my interest to participate? Nearly all employees who are members of the Pension Plans will benefit from participation in NICwise. However, there are some individual situations where it is not beneficial to participate. These include: Members who earn less than 6,475 per annum (in the 2009/10 tax year) and / or work fewer than 16 hours per week. If this applies to you please refer to Section 3 for information on how to opt out. Members who are concerned about the potential reduction in their State Second Pension. Please refer to Q. 9 in the Q&A for more information. Members over the state pension age. If any of the above apply to you then you may want to consider opting out of NICwise. If you are in any doubt as to whether participation in NICwise would be beneficial to you, we recommend that you take independent financial advice. Note also that if as a result of your participation in NICwise or any other salary sacrifice scheme (e.g. childcare benefit) your salary would fall below the level of the National Minimum Wage ( 5.73 per hour increasing to 5.80 per hour from 1 October 2009 for employees aged 22 and above), your participation will, in any period where this occurs, be suspended. Section 3: What do I need to do now? To participate: To take part in the NICwise arrangement you do not need to take any action, as you will be included automatically from your date of joining the Pension Plan. Once you have been automatically enrolled you will have the option to opt out from Period 8 each year (i.e. from the beginning of each new tax year) by notifying Payroll Control (payroll.control@mbplc.com) and completing an opt out form by 31 March each year. Additionally participants who experience a lifestyle change (marriage, birth of a child, separation, divorce, death of a partner or child, or change from full time work to part time work) may opt out when that event occurs. If this applies to you and you wish to consider opting out then please contact Payroll Control as above. To opt out: Please contact Payroll Control (payroll.control@mbplc.com tel: ) to request an opt out form. You must complete the opt out form and return it with your DC Choice application form. If you opt out of NICwise you can subsequently decide to opt in from Period 8 each year (i.e. from the beginning of each new tax year) by notifying Payroll Control (as above) and completing an opt in form by 31 March each year.

6 Questions & Answers: Questions 1. How long will NICwise remain in place? 2. Will participation affect any of my salary related Company benefits? 3. Is there any impact on my Pension Plan benefits? 4. How will I know that the Company has made the pension contribution on my behalf? 5. Will my new contractual pay affect my application for a mortgage or loan application? 6. Will my income tax position be affected? 7. What happens to my pension if I leave the Company? 8. Will AVC contributions be included in NICwise? 9. Will participation have any impact on the level of any future state pension or state second pension ( S2P )? 10. Will participation in NICwise affect any other current or future state benefits? 11. Will I continue to be eligible to participate in NICwise whilst on Maternity Leave or absent from work as a result of long term sickness absence? 12. Will Child Support Agency (CSA) assessments, Court Orders and Student Loans be affected?

7 Answers 1. How long will NICwise remain in place? It is our intention to operate NICwise indefinitely. However, if tax, National Insurance or pensions law changes, or it is no longer viable for the Company to operate this arrangement then the Company reserves the right to withdraw it. Should this happen your salary will be adjusted accordingly and you will begin making pension contributions. There will be no requirement to pay back any of the additional take home pay you have received through a reduction in your National Insurance contributions. 2. Will participation affect any of my salary related Company benefits? Your Notional Salary will continue to apply for the purpose of calculating all of your salary related benefits with the exception of shareable earnings (on which your allocation of Free Shares is based). 3. Is there any impact on my Pension Plan benefits? Your benefits under the Pension Plan will remain as set out in the DC Choice booklet; however please refer also to question How will I know that the Company has made the pension contribution on my behalf? The payment of contributions is closely monitored by the Plans Trustees. Your annual statement clearly shows on a period basis the contributions invested in your account. 5. Will my new contractual pay affect my application for a mortgage or loan application? Your Notional Salary will be used for mortgage reference letters and should not therefore impact the amount of any mortgage or loan you take out. 6. Will my income tax position be affected? No, there will be no change. 7. What happens to my pension if I leave the Company? If you leave the Company after having been a member of the Pension Plan for two or more years then NICwise will not change the options available to you. If you have been a member of DC Choice for less than 2 years at your date of leaving you are entitled to a refund of your own contributions; as you will not be making contributions there will be nothing to refund. However you can transfer your DC Choice account, including Company contributions to another pension arrangement or leave the funds in DC Choice and become a deferred pensioner. 8. Will AVC contributions be included in NICwise? No, if you pay AVCs these will continue to be made via a payroll deduction.

8 9. Will participation have any impact on the level of any future state pension or state second pension ( S2P )? Participation should not affect your basic state pension provided your earnings remain over the National Insurance Lower Earnings Limit ( 4,940 in 2009/10). DC plan members are opted into S2P. If you are earning more than 40,040 (after salary sacrifice is adopted) or less than 13,900 per annum (in tax year 2009/10) there will be no impact on your S2P on retirement. If you earn between 13,900 and 40,040 (after salary sacrifice is adopted) per annum (in tax year 2009/10) there could be a small reduction in your entitlement to S2P because of your reduced National Insurance Contribution. However by participating in NICwise you will receive an increase in your take home pay which you can, if you wish, invest to offset any reduction in your S2P. The impact of NICwise on S2P is dependent upon your age, sex, your total pay and your normal DC Choice contribution rate (i.e. 3%, 4% or 5%). By way of illustration the table below gives an indication of the reduction in S2P for a man making a 5% contribution to DC Choice who is participating in NICwise together with the savings he would make by such participation. Total Gross Pay Per Annum Approximate reduction in annual S2P pension for each year of participation in NICwise Increase in take home pay per year under NICwise At age 30 At age 40 At age 59 10, , , , , If you are concerned about the impact on your S2P and do not consider the benefit of an increase in your take home pay under NICwise is sufficient to outweigh any reduction in your S2P you may wish to consider opting out. For confirmation of this or further advice regarding state pensions, you can visit your local social security office or Pensions Centre. Alternatively, visit Will participation in NICwise affect any other current or future state benefits? Certain state benefits are based on the earnings on which you pay National Insurance (including higher-rate Statutory Maternity Pay ( SMP ) or Statutory Sick Pay ( SSP )). NICwise reduces the amount of gross earnings liable to Class 1 NIC s and therefore the amount of benefit that you are entitled to may be reduced. Any such reductions should be considered by you, prior to joining NICwise. Note that neither your entitlement to nor the amount of Company Sick Pay payable will be affected by your participation in NICwise. You should be aware that participation in NICwise may also affect your entitlement to income related benefits such as income support, incapacity benefit, housing benefit and / or Council Tax benefit. Working Tax Credit and Child Tax Credit could be increased. You can obtain more information about the possible effect on your benefit entitlement by contacting your local social security office or visiting

9 The impact of NICwise is particularly significant if your gross earnings would be brought below the National Insurance Lower Earnings Limit ( 4,940 in the 2009/10 tax year). If you believe your gross annual earnings will fall below this threshold please contact Payroll Control (payroll.control@mbplc.com or tel: ). 11. Will I continue to be eligible to participate in NICwise whilst on Maternity Leave or absent from work as a result of long term sickness absence? Whilst on Maternity Leave or long term sickness you will participate in NICwise subject to you being in receipt of sufficient Company maternity or sick pay to enable the NICwise reduction to be applied. Your participation in NICwise will be suspended where this does not apply. On your return to work your participation in NICwise will automatically resume (unless, if pregnant you have chosen to opt out under the lifestyle change provision referred to in section 3). 12. Will Child Support Agency (CSA) assessments, Court Orders and Student Loans be affected? CSA assessments and Court Orders are normally based on your net pay. NI savings generated by NICwise will increase your net pay. Accordingly, any child maintenance payments or payments under a Court Order may also increase. We recommend that you contact the CSA or your legal representative if you require more information. Student loan payments are calculated on P60 earnings, which will reduce slightly by virtue of participating in NICwise. The effect is that it may take longer to repay the loan as the period over which it is paid may be extended.