Introduction/summary of benefits

Transcription

1 Introduction/summary of benefits Membership of a company pension scheme is a valuable benefit it provides protection whilst you are working and a pension when you retire. Skanska has two schemes to help you achieve this; the Skanska 2010 Career Average Scheme (CA2010) and the Skanska 2010 Defined Contribution Scheme (DC2010), both sections of the Skanska Pension Fund (SPF). The key features of these two arrangements are summarised in the table below. More information is set out in the following supplements and you should not simply rely on the summary contained in the table. Additionally, you must bear in mind the key points to note set out at the end of this introduction. Age at joining Scheme Skanska 2010 Career Average Scheme (CA2010) Skanska 2010 Defined Contribution Scheme (DC2010) Type of Scheme Defined Benefits - Career Average Basis (core scheme) Money Purchase (optional top up scheme for CA2010 members) Pension when you retire You build up a benefit of 1% of your Pensionable Salary for each year you are in the scheme as an Active Member. At retirement you receive a pension for life, with a pension for your Spouse on your death. You and the Company contribute to your Investment Account. The contributions are invested until you retire, at which time you buy an annuity (pension for life) using the funds in your Investment Account less any amount which you take as a lump sum on retirement. Death in Service benefits Ill health benefit (for Active Members only) A lump sum of 3 x Pay (4 x Pay if no Spouse or Child s pension). A Spouse s pension/child s pensions, where applicable, based on accrued and, up to a maximum of 35 years, prospective service to age 65. A pension for life based on accrued and, up to a maximum of 35 years, prospective service to age 65.

2 As you can see, these arrangements are not just about providing you with a pension in retirement, important though that is. They also provide benefits if you die while employed by Skanska, or if you have to give up working for Skanska because of serious illness or injury. Some words are in bold type throughout this guide please see the Glossary (Jargon Busting) sheet for their meaning. Please take time to read the information sheets, and, if you have any questions, feel free to contact the Pensions Department in Maple Cross, telephone / This Guide relates to the benefits provided by the SPF for Active Members on and from 1 April Key points to note The CA2010 and the DC2010 are both sections of the SPF which is set up under trust and are governed by a Trust Deed and Rules. This guide is a summary of these arrangements, which may change from time to time. Every effort has been made to reflect accurately the provisions of the Trust Deed and Rules in this guide, but if there are any differences the Trust Deed and Rules will take precedence; The SPF is a Registered Pension Scheme for HM Revenue & Customs (HMRC) purposes. As a result, the schemes and your benefits under them enjoy various tax advantages. However, your benefits may also be subject to restrictions or affected by allowances imposed by HMRC and/or by legislation which may change from time to time; The CA2010 and the DC2010 are both Contracted In to the State Second Pension (S2P) and, as a result, while a member of the CA2010, you build up a S2P benefit under the State Scheme in addition to your benefits under the CA2010 and, if applicable, the DC2010. Further information on S2P is contained in the Glossary.

3 I want to join, what do I do next? If you are aged between 18 and 64 and your contract of employment states that you can join, you can become a member of the CA2010 and the DC2010. You will have to complete an application form before you can be enrolled as a member of the CA2010, and you must do so within 2 months of becoming eligible. If you do not do this, you will have to wait until the following April before you can join. The DC2010 is a top up money purchase scheme and so you can join at any time whilst you are an Active Member of the CA2010. You will need to complete an application form. What if I do not join? You do not have to join if you do not wish to. However, if you do not join the CA2010 at your earliest opportunity, then restrictions may apply if you wish to join at a later date. If you do not join the Company pension arrangements when you are eligible to do so you are forfeiting a valuable benefit for you and your family and you should be aware that the Company will not provide: Pension benefits for you when you retire. Neither will it contribute towards the cost of any alternative arrangements you may make; Benefits for your Dependants should you die while working for Skanska. It will not contribute towards the cost of any alternative life assurance policy that you may arrange; A pension for you if you have to give up work early because of serious ill health or injury. Neither will it contribute towards the cost of any alternative insurance policy that you may arrange to provide this benefit.

4 How much does it cost me to join the CA2010 Scheme? The contribution rate to the CA2010 is 4.5% of your Pensionable Salary. Pensionable Salary is your Basic Salary (subject to the Earnings Cap) less the Lower Earnings Limit. You have the option whether you wish to pay your contribution as an employee contribution which is deducted from your gross salary each month by payroll or whether you wish a contribution to be made through salary sacrifice. What is salary sacrifice? It is a contractual adjustment to your Basic Salary so that it is reduced each month by an amount which is equal to the contribution that you would otherwise have paid into the pension scheme. Your own contribution to the pension scheme is treated as nil. The Company pays a ( sacrificed salary) contribution into the pension scheme. Why choose salary sacrifice? On the salary that you have sacrificed, National Insurance contributions are not payable and so both you and the Company benefit from a saving in National Insurance contributions. The example below shows how your Basic Salary is adjusted through Salary Sacrifice. Per Year Per Month Basic Salary 35,044 2,920 Less: Lower Earnings Limit* 5, Pensionable Salary 30,000 2,500 Amount of reduction to Salary 1,350 (4.5% of 30,000) (4.5% of 2,500) Adjusted Salary after salary sacrifice 33,694 ( 35,044 less 1350) 2, ( 2,920 less ) *The Lower Earnings Limit figure shown is that for 2010/11

5 By adjusting your salary in this way, you save income tax and National Insurance contributions as they can only be levied on the pay you actually receive in other words, on your adjusted salary. The Company also pays a significant further contribution to the SPF, which is set after having received advice from the Scheme Actuary. Within that contribution rate are the costs of the retirement, death and disability benefits, as well as scheme management costs. Please note that your full Basic Salary (subject to the Earnings Cap) will be used for the calculation of your Pensionable Salary for benefits purposes under the CA2010. Your Scheme benefits are unaffected by any Salary Sacrifice decision.

6 Benefits when you retire CA2010 How does my benefit build up? For each Fund Year that you are a member of the CA2010, you will earn a unit of pension equal to 1/100 (1%) of your Pensionable Salary in that year, and pro-rata for each complete month. Whilst you are an Active Member your pension units are then revalued in line with the change in the Retail Prices Index (subject to a maximum of 5% per annum) for each Fund Year up to the date on which you start to draw your pension. Where the Retail Prices Index is negative in any year the value of your pension units will not be reduced. However, the Company reserves the right to then have applied a lower increase than the actual increase in the Retail Prices Index in any subsequent Fund Year to offset the effects of the reduction. The total of the re-valued units makes up your annual pension. It will increase once payment commences at the lesser of the rate of increase in the Retail Prices Index and 2.5% per year. Example This example shows how the CA2010 pension is calculated. It shows a member who starts on a Pensionable Salary of 30,000, and assumes increases of 1,000 per year over the 9 years remaining until Normal Retirement Date. It also assumes that inflation is 3% per year over the whole period. Pensionable Salary One Fund Year s unit of pension Number of Fund Year s to Normal Retirement Date Re-valued pension unit assuming 3% inflation 30,000 31,000 32,000 33,000 34,000 35,000 36,000 37,000 38,000 39, Total: 3,928 In this example, the member s pension is 3,928 per year. In the negative RPI situation described above, if, for example, the RPI increase in year 1 was -1.0%, the revaluation applied would be 0.0%. However, in year 2 if the RPI increase was 3%, the Company may apply a 2% increase to offset the effect of the negative rate not having been applied the year before.

7 Is there a cash sum instead of a pension benefit? When you draw your pension approximately 25% of the capital value of your pension benefit will be converted into a cash sum. Cash sums taken in this way are tax-free under present legislation. The capital value will be calculated by the Scheme Actuary. The balance of your pension benefit is paid to you as a pension for life. When can I take my pension and tax free cash? You normally retire and start to draw your benefits when you reach your Normal Retirement Date (the last day in the month in which your 65th birthday falls). However, you may, subject to certain conditions, be able to take your benefits from the age of 55. If, however, you have to retire on the grounds of ill health you may be able to take your benefits from any age. You may also take your benefits later than on your Normal Retirement Date, again, subject to certain conditions. If you wish to take your benefits earlier or later than Normal Retirement Date, this will be subject to the consent of both the Company and the Trustee. What happens if I elect to draw my benefits early? Your pension is calculated in the same way as shown in the Example above, up to the date you begin drawing your pension, but your pension will be reduced to reflect the fact that your pension is being paid earlier and will therefore be paid for longer. Different rules apply where early retirement is due to ill health (see Benefits as a result of Ill Health/Disability sheet). Can I take my benefits from the CA2010 and continue to work for Skanska? Provided you have reached age 55, you may start to draw your benefits from the CA2010 while still working for Skanska. This is subject to the consent of the Company and of the Trustee. No further benefits build up in the CA2010 for you, once the benefits are put into payment, if you decide to take your benefits in these circumstances. Can I retire after Normal Retirement Date? If the Company agrees, you may continue working after your Normal Retirement Date. If you have already taken your pension, no further benefits will accrue for you under the CA2010. However, if you have not taken your pension, you will continue to build up pension under the CA2010. You must take your pension by the time you reach age 75. The State Second Pension and the CA2010 Further information on this issue is contained in the Glossary, under the heading State Second Pension. Please refer to the sheet headed DC Detail if you have also built up DC2010 benefits, with regard to what happens to those benefits at retirement.

8 Benefits upon leaving CA2010 Opting out of membership You may opt out of membership at any time, but you must give at least one month s notice of your intention to do so. This is so that your record can be amended by the Administrators and so that your pay is adjusted accordingly. Before you decide to opt out, we would urge you to call the Pensions Department in Maple Cross to discuss your reasons. Very often, decisions to opt out result from misunderstandings, and a discussion can sometimes correct these. Please remember, though, that if you do opt out: You will be opted out of the DC2010 as well, if you are also an Active Member of that section; You will cease to be covered for benefits on death and serious ill health; No more retirement benefits will build up for you under the CA2010 and you will be treated as a leaver; The Company will not help to finance any alternative arrangements that you may make in order to replace these benefits; You will have to wait until the following April before being allowed to rejoin and restrictions may apply. So, please think very carefully about what you will be giving up by opting out of the CA2010. Benefits on leaving the Company before drawing your pension If you leave the Company before you start to draw your pension your membership of the CA2010 will cease. If you rejoin the Company later you will normally be allowed to rejoin the CA2010 on the terms then applicable. A new period of service in the CA2010 after you have rejoined will generally be treated separately from any previous period of service. Your benefit entitlement for any period before you leave the Company or opt out depends on how much Pensionable Service you have completed by the time you leave the CA2010*. It also depends whether you elected to use the salary sacrifice arrangement: If you have completed less than 3 months Pensionable Service, and you elected to use the salary sacrifice arrangement there is no entitlement to any benefit or refund of contributions; If you have completed 3 months but less than 2 years Pensionable Service, you will be entitled to transfer to another registered pension arrangement the cash equivalent value of the benefit that you have built up under the CA2010. If you do not take a transfer value, and you elected to use the salary sacrifice arrangement, no benefits will remain under the CA2010.

9 For the above periods, if you did not elect to use the salary sacrifice arrangement, you will be entitled to a net refund of your own contributions, unless, having completed 3 months Pensionable Service, you have chosen to transfer to another registered pension arrangement the cash equivalent value of the benefit that you have built up under the CA2010. If you have completed at least 2 years Pensionable Service, you will be entitled to a deferred pension payable from your Normal Retirement Date. The deferred pension will be based on your re-valued pension units up to the date of leaving. It will then be increased by the change in the Retail Prices Index (up to a maximum of 2.5% per annum) for the period between your date of leaving and your Normal Retirement Date. Alternatively, you may transfer the value of your deferred pension to another registered pension arrangement. *For Active Members in the existing sections of SPF or DC07 as at 31 March 2010, who joined CA2010 on 1 April 2010, the current continuous period of membership of the SPF or DC07 will be taken into account when determining the length of Pensionable Service. Can I draw my deferred pension before Normal Retirement Date? You may be able to draw your pension at any age from 55, subject to the consent of the Trustee. However, your pension will normally be reduced to reflect early payment. What happens if I become seriously ill or disabled before I draw my deferred pension? You may be able to elect to draw your pension at any age if you are forced to retire due to ill health. This will be subject to the consent of the Trustee and also subject to all the necessary conditions (including evidence as to ill health) being satisfied. However, your pension will normally be reduced to reflect its early payment and will not be uplifted in the way in which it would have been had you remained in active service. Once in payment, does my pension increase? Your pension will increase, once payment starts, at the rate of increase in the Retail Prices Index, subject to a maximum increase of 2.5% in any one year. What happens if I die before I draw my deferred pension? Your Spouse will receive a pension equal to 50% of your deferred pension, including increases that have been given up to the date of your death. If you have Pensionable Children, they will each receive a pension of 1/3 of your Spouse s pension (subject to a maximum of 3 children). This will be doubled if no Spouse s pension is payable. Pensions to Pensionable Children will cease to be paid when a Pensionable Child reaches the age of 18, or the age of 23 where the child is in full time education. Please refer to the sheet headed DC2010 Detail if you have also built up DC2010 benefits, with regard to what happens to those benefits on leaving.

10 Benefits on death CA2010 Your membership of the CA2010 and if applicable, the DC2010, also means that generous benefits may be payable on your death. This gives additional financial security for your family. The level and type of benefits which are payable will depend on whether or not you die while working for the Company as an Active Member and whether you have started to take your pension from the CA2010. On death as an Active Member of the CA2010 and before you start to take your pension from these schemes, the benefits are: A lump sum equal to 3 times your Pay. If you do not leave a Spouse or Pensionable Children, the lump sum will be increased to 4 times your Pay. For this purpose, Pay does not have the Lower Earnings Limit deduction applied; A pension for your Spouse equal to: (a) 50% of your accrued Career Average pension at the date of your death, plus (b) 1/200 (0.5%) of your Pay, multiplied by your Potential Pensionable Service; A pension for your Pensionable Children equal to 1/3 of your Spouse s pension, as calculated above. This will be payable to each child, up to a maximum of 3. If you do not leave a Spouse, the child s pension will be doubled. Pensions to Pensionable Children will cease to be paid when a Pensionable Child reaches the age of 18, or the age of 23 where the child is in full time education. On death, having stopped working for the Company or having opted out of Skanska pension arrangements so that you are no longer an Active Member of either the CA2010 or the DC2010, and before you take your pension from either of these schemes, the benefits are: As set out in Benefits upon Leaving CA2010 sheet for CA2010 benefits; As set out in DC2010 Detail sheet for DC2010 benefits; On death after you have started to take your pension from the CA2010, the benefits are: A pension for your Spouse of 50% of the pension that you were drawing at the date of your death. For this purpose, we calculate the Spouse s benefit based on the full value of your initial pension before the reduction to allow for the tax free cash that you took when you retired. We also include any increases that have been added to your pension during retirement; A pension for your Pensionable Children (up to a maximum of 3), equal to one third of your Spouse s pension for each child, calculated on the same basis as above; If you die within 5 years of starting to draw your pension, a lump sum equal to the unpaid balance of 5 times your initial annual pension. Please refer to the sheet headed DC2010 Detail if you have also built up DC2010 benefits, with regard to what happens to those benefits on death.

11 Notes 1 In order that the lump sum benefits are not included with your estate for Inheritance Tax purposes, the Trustee decides which of your Beneficiaries will receive the benefit and in what proportions. You should let the Trustee know to which of your Beneficiaries you would like the benefit paid; you may do this by completing the Nomination Form in this pack. Not only does this procedure avoid Inheritance Tax complications, but it also enables the benefit to be paid without waiting for the grant of probate. 2 In most cases, the lump sum which is paid should you die within 5 years of starting to draw your pension will not incur a tax charge. 3 For the purposes of the Spouse s pension payable on death under the CA2010, where there is no legal spouse or civil partner, a Nominated Partner may be eligible instead. In order to assist the Trustee, if applicable, a Nominated Partner Form must be completed and submitted (available on line or from HrDirect). 4 All death benefits which are paid in pension form (i.e. monthly) from the SPF will increase each year in line with rises in the Retail Prices Index, subject to a maximum annual increase of 2.5%.

12 Benefits on ill health/disability CA2010 If you are unfortunate enough to be forced to give up working for the Company due to ill health or incapacity you may be eligible to receive an immediate pension benefit. This is both enhanced to take account of some of your potential service to age 65 and is not reduced to reflect early payment. If you are an Active Member of the CA2010 your ill health pension is calculated as follows: The total re-valued pension units that you have earned from the date you joined the Career Average to the date of your early retirement; Plus, a credit of up to 50% of the pension units that you could have earned between the date of your early retirement on ill health grounds and Normal Retirement Date. However, all of the credited pension units will be calculated using your highest Pensionable Salary in the last 2 Fund Years before the date of early retirement; The sum of these two calculations makes up your immediate ill health pension. It will not be reduced, even though payment commences early; The maximum period of Pensionable Service for which credit can be given in calculating your pension is 35 years; Your pension will increase once payment starts at the rate of increase in the Retail Prices Index, subject to a maximum increase of 2.5% in any one year. To qualify for a full ill health/disability pension you have to satisfy all the following conditions (which will be determined by the Company): You must have been a member of the CA2010 for at least 2 years (for Active Members in the existing sections of SPF or DC07 as at 31 March 2010, who joined CA2010 on 1 April 2010, the current continuous period of membership of the SPF or DC07 will be taken into account in determining the period of at least 2 years); You must be leaving work at the request of your Employer and after at least six months absence from work due to injury or ill health or, in any other circumstances, after at least one year s absence from work due to injury or ill health; The cause of your illness or disability must have happened after you joined the SPF; Both the Company and the Trustee must receive evidence from a qualified medical practitioner that you are, and will continue to be, incapable of carrying on with your occupation because of a physical or mental impairment, and that you are unlikely to be able to undertake any other paid work in the future; You must have had to cease to carry on your normal occupation because of your illness or injury; Your illness or injury must not have been self-inflicted, or caused by any other act by you which is willful or criminal; You must not be entitled to any other compensation from any person (including the Company) in respect of the cause of your ill health. The Company may disregard any of these conditions where it thinks fit (but will be under no obligation to do so). The decision of the Company and (where relevant) the Trustee in this matter will be final.

13 Other things you should know If you do not meet all the conditions to receive a full ill health pension you may qualify for a lesser benefit at the discretion of the Company and the Trustee. Your disability pension may be terminated or reduced if, in the opinion of the Company, you no longer qualify for one. Should you die after retiring on disability grounds but before Normal Retirement Date, your Beneficiaries will receive a lump sum benefit equal to the amount that would have been payable had you died on the date you retired, less the value of any tax free lump sum you took instead of part of your pension. Furthermore if you die within five years of your pension commencing, the lump sum which would normally be payable in these circumstances (equal to the unpaid balance of five times your initial pension) will only be payable to the extent it is larger than the lump sum result described here (please see note 2 to the Benefits on death sheet regarding guaranteed lump sum payments). Please refer to the sheet headed DC2010 Detail sheet if you have also built up DC2010 benefits with regard to what happens to those benefits in the event that you become seriously ill or disabled.

14 DC2010 Detail The DC2010 Scheme (known as the DC2010) is a top up money purchase arrangement. Within the scheme, you have your own Investment Account. You may join the scheme at any time if you are an Active Member of the CA2010. You will need to complete an application form, which is contained in your pack. Alternatively, the form is available from HrDirect. How much can I pay? If you join the DC2010, you choose what percentage of your Pensionable Salary you wish to pay as a contribution into the scheme on a monthly basis. The Company will then match your monthly contribution up to 4% of your Pensionable Salary. You can choose to pay a higher percentage figure, but any additional percentage will not be matched by the Company. Alternatively, (or in addition, if you so wish) you can pay a one-off lump sum amount at any time. Lump sum contributions will not be matched by the Company. Your contributions must comply with any HMRC rules. Thus, subject to those rules, tax relief is normally given automatically through payroll on your contributions. Can I use salary sacrifice? Regular monthly contributions can be made through salary sacrifice. Once you have decided what percentage of Pensionable Salary you wish to sacrifice, you cannot usually change the salary sacrifice percentage for at least a year, unless there are exceptional circumstances. One-off lump sum amounts cannot be made through salary sacrifice. Can I vary the monthly percentage or cease paying altogether? Once you have chosen the monthly percentage contribution, we would normally expect it to be maintained at this level. However, if you subsequently find you are unable to maintain the contribution at this level, you can reduce or stop it but you must give at least one month s notice. Please see above however for the impact that this may have on salary sacrifice. You can increase the percentage contribution at any April. How are DC2010 contributions invested? Contributions are credited to your Investment Account at the beginning of the following month after they have been deducted from your pay. You may choose how the contributions are to be invested from a range of options chosen for you by the Trustee. These options are reviewed from time to time by the Trustee to ensure that they remain appropriate. Full details of the current range of investment options available are set out within the sheet headed DC2010 Investment Options. When can I take my benefits? You will normally draw your Investment Account when you retire from the CA2010. Alternatively, you may decide to draw your Investment Account at a different time from the date on which you take your benefits from the CA2010. Provided that you are over age 55, you will be able to do this (see below How much pension will I receive). However, should you do so, you will not be able to make further contributions to DC2010. If you retire on the grounds of ill health or incapacity, you may, subject to certain conditions being met, take your benefits from any age. How much pension will I receive? When you retire or draw DC2010 benefit, your pension must be bought from an insurance company or annuity provider. The amount of your pension is likely to depend primarily on the following four factors: How much has been paid into your Investment Account; The value of your Investment Account when you take your pension; The rate at which your Investment Account can be converted into a pension;

15 The form in which your pension is to be paid; e.g., you decide whether to provide a pension for your Spouse upon your death, and/or you can choose a pension which increases once payment commences, or a pension which remains fixed. Can I take my Investment Account as a cash sum? At the same time as you draw your pension, you will (if the current legislation still applies) have the option of taking approximately 25% of your Investment Account as a cash lump sum, which is normally payable tax-free. The remaining funds must be used to buy a pension for you. Further information on the choices available to you will be provided when you are about to retire. What happens to my Investment Account if I opt out of the CA2010 or opt out of the DC2010? If you opt out of the CA2010, or opt out of the DC2010 before you start drawing your benefits, your Investment Account will remain invested until you retire or until you transfer it out to another registered pension arrangement. What happens to my Investment Account if I leave the Company? Your entitlement to a benefit from the DC2010 is dependent on your Pensionable Service in the CA2010. If you have completed less than 3 months Pensionable Service in the CA2010 and you elected to use the salary sacrifice arrangement there is no entitlement to any benefit or refund of contributions; If you have completed 3 months but less than 2 years Pensionable Service in the CA2010, you will be entitled to transfer to another registered pension arrangement, the cash equivalent value of the benefit that you have built up under the CA2010 and your Investment Account. If you do not take a transfer value, and you elected to use the salary sacrifice arrangement, no benefits will remain under the CA2010 and your Investment Account; For the above periods, if you did not elect to use the salary sacrifice arrangement, you will be entitled to a net refund of the value of your own contributions, unless, having completed 3 months Pensionable Service, you have chosen to transfer to another registered pension arrangement, the cash equivalent value of the benefit that you have built up under the CA2010 and your Investment Account. If you have completed at least 2 years Pensionable Service in the CA2010, your Investment Account will remain invested until you retire or until you transfer it out to another registered pension arrangement. You will receive a statement shortly after you leave, and annually thereafter. Further details may be provided if you send in a written request. If at any time you transfer out your CA2010 benefits to another registered pension arrangement, you will also have to transfer out your Investment Account. What happens if I die or become seriously ill or disabled? On death, the value of your Investment Account will normally be paid as a lump sum to your Spouse or Dependants although the Trustee can also consider payment to your Beneficiaries. Please see the death benefits section of the guide for information on Beneficiaries of lump sums and nomination forms; On serious illness/disability it may be possible to use your Investment Account to buy you a pension for life and provide you with a lump sum at an earlier age than would normally be allowed. This will be subject to the consent of the Trustee and also subject to all necessary conditions (including evidence as to ill health) being satisfied. If you die after you have started to take your pension from the DC2010, the benefits will depend upon the type of annuity purchased at retirement and may consist of: A pension for your Spouse; and/or The balance of a guarantee period (normally payable as a lump sum). If you have any questions about the DC2010 before you decide to join, please address them to the Pensions Department in Maple Cross, telephone / We shall be pleased to help but we will not be able to provide financial or investment advice.

16 DC2010 Investment Options Introduction This guide tells you about the investment options available under the Skanska 2010 Defined Contribution Scheme (the DC2010). An Investment Account will be opened in your name when you join the DC2010 and all contributions made by you and the Company will build up in this Account. Your Investment Account may be invested for many years until you start receiving your pension. As it may become your most significant saving, it is important that your investment decision is right for your personal circumstances. Making an investment decision for your Investment Account can seem complicated. This guide aims to help you understand the options available. Types of investments This section provides a general introduction to the different types of investment provided by the DC2010 Fund. Before making your investment choice, it is important that you understand the different features of these investments. Equities Equities, also known as company shares, represent partial ownership of a company. Large companies in the UK will have their shares quoted on the Stock Exchange. The return on equities normally consists of regular dividends paid out of the company s profits and any change in the share price. Overseas equities are similar to UK equities except that the shares are of overseas companies and will normally be traded through stock exchanges in foreign countries. The main difference compared to UK equities is that the share price will be quoted in a foreign currency and any dividends paid will be in a foreign currency. As these shares are priced in foreign currencies, any exchange rate movements will also influence the value of your investment. Historically, the long term returns on equities have generally exceeded both price and wage inflation. It should be noted that this may not necessarily be the case in the future and over the short to medium term share prices can rise and fall sharply (this is called volatility). This can have a significant impact on your Investment Account. Bonds Bonds are a type of loan to governments or companies. Bonds issued by the UK government are called gilts. Gilts typically pay interest twice every year and repay the loan capital at the end of the agreed term. There are two types of Gilts Fixed Interest and Indexed Linked. Fixed interest gilts pay a fixed rate of interest. The level of interest payments and capital repayments for index-linked gilts are increased in line with the Retail Price Index (RPI), a measure of price inflation. Historically the return on gilts has been less volatile than the return on equities. Experience shows that over the long term gilts have provided a lower level of return than equities although this may not be the case in the future. Gilts offer modest returns, some price stability and good protection of the pension purchasing power of your Investment Account. As you approach retirement it may be appropriate for you to switch your Investment Account into investments which are more stable and secure. This switch would aim to protect the value of the Investment Account that you have built up to buy a pension. Gilts are regarded as very secure investments because they are issued by the UK government and consequently there is little risk of default. Cash Investments in cash have historically offered a low rate of return over the long term, but have provided short-term security. As you approach retirement you may plan to receive a cash lump sum in addition to a pension. Cash may be a suitable investment for the portion of your Investment Account that you choose to use for a cash lump sum payment. When you are many years from retirement, investing in cash increases inflation risk. This means the long term growth in your Investment Account is unlikely to keep pace with inflation. The main pension investment risks When choosing where to invest your contributions, you should consider what investment risk means and how it might affect your Investment Account. The three main types of investment risk that you need to bear in mind are described below, together with an indication of when they are most important and what might be done to reduce them.

17 Type of Risk What does it mean Who should worry about it? What can you do about it? Inflation Risk This is the risk that inflation will increase at a greater rate than the long term investment growth of your Investment Account. Members with a number of years still to go before they expect to retire and receive their pension. Choose investments that are expected to keep pace with or exceed inflation by providing long term investment growth for your Investment Account e.g. Equity funds. Capital Risk This is the risk that the capital value of your Investment Account will reduce. Members who expect a cash payment from the DC2010 in the near future, most usually at retirement. Choose investments that are less volatile and which are not expected to fall in value or for which any such fall is likely to be limited e.g. Cash fund. Pension Conversion Risk This is the risk that the amount of pension you can buy with your Investment Account will fall. Members who expect to buy a pension with their Investment Account in the near future, most usually at retirement. The cost of buying a pension is closely linked to returns on appropriate gilts. Choose investments which are therefore expected to be similarly affected e.g. Over 15 year Gilts fund if you plan to buy a pension that does not increase in payment, or Over 5 year Index-linked Gilts fund if you plan to buy a pension that includes some inflation linked increases. You should note that there will always be risk in every type of investment, but it is important that you are comfortable with what those risks are and the level of risk you are taking. In addition, the amount in your Investment Account is always linked to the price of the investment funds. This means that the value of your Investment Account can fall as well as rise. Hands off investment choice Lifestyle Strategy If you decide that you want to take a hands off approach to managing your investments, the Lifestyle Strategy may be the best option for you. Under the Lifestyle Strategy, an investment process is used which selects funds for your Investment Account and automatically changes the investment mix as you approach retirement. The investment funds that make up the Lifestyle Strategy are described in more detail in section 5. You still have to make an important decision: when do you plan to start receiving your pension? Your Selected Retirement Age The date you plan to start receiving your pension is called your Selected Retirement Age. It is used to start the automatic switching of your Investment Account investments. If you do not select a retirement age, your investments will be moved based on an assumed retirement age of 65. What if I retire before my Selected Retirement Age You will need to use your Investment Account to provide a pension (and possibly a cash lump sum) before the automatic investment switching is complete. This means that more of your Investment Account will be invested in the Global Equity fund than at your Selected Retirement Age. The risk is that the value of these funds may fall just before you retire reducing the size of your pension. What if I retire after my Selected Retirement Age? Your Investment Account will have been completely switched to investments that aim to provide increased pension certainty at retirement.

18 The risk is that your Investment Account may miss out on some investment growth that could have been provided by the Global Equity fund. How does the Lifestyle Strategy work? The Lifestyle Strategy aims to privide a balance between long term growth and managing risk. As you approach your Selected Retirement Age, the aims change to achieving increased pension certainty. The automatic invetsment switching starts ten years from your Selected Retirement Age and is described below. The Lifestyle Strategy option is designed to investment be suitable for most but not all members. You should note that the amount in your Investment Account is always linked to the price of the funds which make up the Lifestyle Strategy. This means that the value of your Investment Account can fall as well as rise. Period until Selected Retirement Age More than 10 years 10 to 5 years Fewer than 5 years At Selected Retirement Age Investment proportion in your Investment Account All in the Global Equity fund. Switching from the Global Equity fund to the Over 15 year Gilts fund begins. With 5 years to your Selected Retirement Age the investment mix is broadly 50% in the Global Equity fund and 50% in the Over 15 years Gilts fund. Switching from the Global Equity fund to both the Cash fund and the Over 15 year Gilts fund begins. Investment mix is 75% in the Over 15 year Gilts fund and 25% in the Cash fund. Lifestyle Strategy The diagram below shows how the mix of investments in your Investment Account changes as you approach your Selected Retirement Age. Information about each of the investment funds is provided below in the Open Choice Strategy section. Investment proportion 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Years to Selected Retirement Age Global Equity fund Over 15 year Gilts fund Cash fund Hands on investment choice Open Choice Strategy If you have decided that you want to take a hands on approach to managing your Investment Account investments the Open Choice Strategy may best meet your personal circumstances. You can choose to invest your contributions in one or more of the seven funds and to switch between them. You may find it helpful before selecting your investment funds to refer back to the earlier section on Investment Risk for an explanation of: Inflation risk. Capital risk. Pension conversion risk. The principle features of the funds available, together with information on potential returns, risks and what each fund might be appropriate for are summarised in the following table:

19 Composition of fund Made up of holdings in five index funds split roughly: 60% UK 14% Europe (excluding UK) 14% North America 7% Japan 5% Asia Pacific (excluding Japan) UK Equity Index Fund Index fund made up of UK equity holdings in companies in the FTSE All-Share Index Potential returns and charges Global Equity Fixed Weight 60/40 Index Fund the Global Equity fund Over the long-term equities are expected to outperform most other forms of investment. This fund therefore offers the highest potential rewards from the available funds. Annual management charge: 0.16% Over the long-term equities are expected to outperform most other forms of investment. This fund therefore offers the highest potential rewards from the available funds. Annual management charge: 0.10% Risks Equity prices can fluctuate up or down significantly in the short term. Some protection is provided by the diversified investment in a range of UK and Overseas equity funds. There is also the risk that currency movements reduce the value of overseas equity assets. Equity prices can fluctuate up or down significantly in the short term. Appropriate for Members looking to maximise the potential return over the long term and are willing to accept the shorter term volatility risk. Members looking to maximise the potential return over the long term and are willing to accept the shorter term volatility risk. World (excluding UK) Equity Index Fund the Overseas Equity Fund Index fund made up of Overseas equity holdings in companies in the FTSE AW-World (ex-uk) Index Ethical Global Equity Index Fund the Ethical Fund Index fund made up of UK and Overseas equity holdings in companies in the FTSE4Good Global Index Index fund investing only in index-linked gilts with 5 years or more to maturity Index fund investing in fixed interest gilts with 15 years or more to maturity This fund only invests in high quality money-market instruments Over the long-term equities are expected to outperform most other forms of investment. This fund therefore offers the highest potential rewards from the available funds. Annual management charge: 0.22% Over the long-term equities are expected to outperform most other forms of investment. This fund therefore offers the highest potential rewards from the available funds. Annual management charge: 0.30% Over 5 year Index-Linked Gilts Index Fund the Index-linked Gilts fund Over 15 year Gilts Index Fund the Gilts fund Cash fund The fund offers protection against inflation because its return is linked to expected changes in the Retail Prices Index (RPI). Annual management charge: 0.10% Expected to perform in line with long-dated UK Government fixed interest gilts. Annual management charge: 0.10% The fund should grow at a similar rate to UK base lending rates. Annual management charge: 0.125% Equity prices can fluctuate up or down significantly in the short term. Some protection is provided by the diversified investment in a range of Overseas equity holdings. There is also the risk that currency movements reduce the value of overseas equity assets. Equity prices can fluctuate up or down significantly in the short term. Some protection is provided by the diversified investment in a range of UK and Overseas equity funds. There is also the risk that currency movements reduce the value of overseas equity assets. Less risky than shares or corporate bonds because the fund s investments are backed by the UK Government. However unit prices can still fall. Less risky than shares or corporate bonds because the fund s investments are backed by the UK Government. Fund unit price can still fall. The fund unit price is not expected to keep up with increases in inflation. The underlying investments unit prices is expected to be very stable, but historically returns have been much lower than those from bonds or shares over the long term. Members looking to maximise the potential return over the long term and are willing to accept the shorter term volatility risk. Members looking to invest in companies that pass certain ethical criteria, and to maximise the potential return over the long term and are willing to accept the shorter term volatility risk. Members who want to reduce investment risk and/or who are approaching retirement. Most relevant to those members who plan to buy an pension that includes some inflation-linked increases in payment and want to protect themselves against pension conversion risk. Members who want to reduce investment risk and/or who are approaching retirement who plan to buy a pension that does not increase in payment and want to protect themselves against pension conversion risk. Members wishing to have minimal investment risk and/or as retirement approaches and for the part of their Investment Account which they plan to take as a retirement lump sum. Important Note The Trustee will keep the range of investments described in this guide under review and may, from time to time, make changes to the funds including removing some or all of the options as well as adding further options. Please note that this guide does not constitute financial advice. If you require advice you should contact your independent financial adviser. If you do not have one, you can find one in your area by visiting IFA Promotion Limited s website at

20 Additional information How are the CA2010 and the DC2010 established? The CA2010 and the DC2010 are separate sections of the SPF. The assets of the CA2010 and the DC2010 are both held under trust separately from the assets of the Company. The SPF is established under a deed of trust and governed by rules. The Trustee is the Trustee of each section. You can obtain a copy of the trust deed and rules for the scheme on application to the Skanska Pensions Department in Maple Cross. If there is a discrepancy between the trust deed and rules and this Guide, the trust deed and rules will always prevail. Can the terms of the CA2010 and the DC2010 be amended? The rules provide that the Company can discontinue these arrangements, or amend the rules (in relation only to future benefits) at any time. If that were to happen, you would be notified in writing about the effect on your benefits and/or be consulted with at the time. Should it be necessary to wind up the scheme, the Trustee will use the assets for the benefit of the members and their Dependants in accordance with the rules and any legislative requirements at that time. The Company would be legally obliged to provide additional funds to make up the shortfall between the assets and scheme s liabilities to the extent it was able. How are the CA2010 and the DC2010 administered? The CA2010 and the DC2010 are managed by a Trustee company, Skanska Construction Services Trustee Limited (the Trustee). The Trustee Directors, one third of whom are nominated by the members of the CA2010 and the DC2010, have overall responsibility for management of the CA2010 and the DC2010. However, they have delegated many of their functions to specialists in the field of pensions. Responsibility for day to day administration and record keeping is with Capita Hartshead and you should direct any general enquiries about the CA2010 or the DC2010 or any enquiries about your entitlement to benefits to them at the following address: Capita Hartshead Hartshead House 2 Cutlers Gate Sheffield S4 7TL Telephone: (Helpline) skanskapensions@capita.co.uk Policy matters concerning pensions are dealt with by the Pensions Department at: Skanska UK Plc Maple Cross House Denham Way Maple Cross Rickmansworth Hertfordshire WD3 9SW, Telephone , Skanska.pensions@skanska.co.uk. The Trustee is independent of the Company and its overriding duties are to ensure that both sections are run in the best interests of the members and in accordance with the trust deed, and the legislation which governs pension schemes. The Trustee is responsible for investing the assets of the CA2010 and the DC2010, and it is assisted by authorised investment managers whom it appoints and whose performance it continually monitors. It is also required to commission periodic valuations of the assets and liabilities of the CA2010. These valuations are performed by the Scheme Actuary, in accordance with prevailing legislation and professional guidelines. Statutory matters The SPF (of which the CA2010 and the DC2010 are both sections) is a registered pension scheme for HMRC purposes. As a registered pension scheme each section enjoys various tax advantages including the following: tax relief is generally available on contributions paid into each scheme; the money in each scheme largely builds up free of tax; lump sum benefits are usually payable tax-free.