DC section Explanatory Booklet. MMC UK Pension Fund. Guide. for Members. Marsh

Transcription

1 DC section Explanatory Booklet MMC UK Pension Fund A Guide for Members Marsh

2 Contents Page Section 1 How the DC section of the Fund works 1 Section 2 The DC section of the Fund in brief 3 Section 3 The DC section of the Fund in detail 4 Contributions 4 Investment 5 Retirement benefits 6 Early and late retirement 7 Death in service 8 Death after retirement 8 Leaving 9 Section 4 Further information 10

3 Section 1 How the DC section Fundworks of the The Company believes that the provision of a pension fund is an important part of your pay and benefits package and offers a flexible pension arrangement designed to help you plan for the future with confidence, whatever your age or personal circumstances. The purpose of the DC section of the Fund is to: give you a secure income when you retire provide financial protection for you and your dependants should you die before retirement. Who can join The Fund provides benefits on a defined contribution (DC) or money purchase basis and is open to all employees* under age 63, as notified by the Company. If you are a permanent employee, you will be automatically entered into the Fund unless you indicate to the contrary (see Opting out of the Fund on page 10). If you are employed on a temporary contract, you will be advised by the Company whether you are eligible to join the Fund and will need to complete an application form to join. Definitions Certain terms have special meanings which are given in a table of definitions on the fold out flap at the back of this guide. Where a defined word is used in the main text it appears in italics. Contributions Both your own and those contributions paid or credited to you on behalf of the Company are allocated to an Individual Account in your name. This money will be invested on your behalf and the value of the fund you have built up will be used to provide your benefits at retirement. Annual statement Each year you will receive a personal statement showing the value of your Individual Account, the contributions credited or paid into it during the year and the estimated pension that could possibly be provided. The estimated pension will be based on expected future investment returns, among other factors. You will be able to request a Fund annual report with more details and performance figures. Benefits from the Fund Your pension, and any pension for a Spouse, Children or Qualifying Dependant, will be payable through an annuity bought from an insurance company. The pension you receive will normally be paid in monthly instalments, direct to your bank account. Pensions are subject to income tax and, if appropriate, this will be deducted before payment. In addition, subject to your National Insurance contribution history, you should also receive the Basic State Pension and the pension you have earned under State Second Pension (S2P) from State Pension Age (see page 13). 1 Transfer of pension from a previous arrangement Transfers from previous pension schemes are not being accepted into the Fund. *New employees of the Marsh Affinity Benefits call centre are not eligible to join the Fund. Instead access to a stakeholder pension arrangement will be provided.

4 Expression of Wish forms One of the duties of the Trustee is to decide who should receive any lump sum if a member dies. To help the Trustee make this decision, you should complete the Expression of Wish form which accompanies this guide if you have not already done so. Although the Trustee is not bound to follow your wishes it will take them into account. You should at all times ensure that your Expression of Wish form is up-to-date. If you wish to change your beneficiaries, you should complete a new form immediately. Forms can be downloaded from the Fund website, details of which can be found below. 2 Leaving the Fund If you leave the DC section of the Fund, no further contributions will be made, either by the Company or by you. Details of the benefits payable from the DC section of the Fund on leaving can be found on page 9. Administrator contact details: MMC UK Pension Fund PO Box 476 Westgate House 52 Westgate Chichester PO19 3WZ Tel: Fax: mmcpensions.uk@mercer.com Website:

5 Section 2 The DC section of the Fund in brief Your contributions Core: 2% of Pensionable Salary Plus Optional Age Related Match Contributions: 1% to 3% of Pensionable Salary Company contributions Age Related Core Contributions: 4% to 10% of Pensionable Salary (6% to 16% for members in Grade G or above) Plus Optional Age Related MatchPlus Contributions: 3% to 5% of Pensionable Salary Plus Investment returns Your Individual Account 3 Leaving service Under 2 years Pensionable Service: Refund of the value of member s own contributions (less deductions) or transfer payment (for those with at least 3 months Pensionable Service) 2 or more years Pensionable Service: Investment of Individual Account maintained or a transfer payment Retirement Annual pension Option of Cash sum, currently tax free Pension increases Spouse s / dependants pensions Death in Service Lump sum: 4 X Reckonable Salary (or other multiple selected under Options) Spouse s pension*: 30% of Final Pensionable Salary Children s Pensions: 5% of Final Pensionable Salary per Child (maximum 4 Children to count) *Dependant s Pension payable at Trustee s discretion where no Spouse

6 Section 3 The DC section of the Fund indetail 4 The contributions paid or credited in respect of you and the Company are allocated to your Individual Account, and the money is then invested on your behalf. When you join, you will need to complete the Investment Choice form that accompanies this guide indicating your choice of investment options. Contributions Your contributions The Fund is designed to provide for your financial security, both now and in the future. You pay a Core Contribution of 2% of your Pensionable Salary to the Fund. If you are age 31 or over, you will also be able to pay a further optional Match Contribution of between 1% and 3% (depending on your age) which will attract a MatchPlus Contribution paid or credited to your Individual Account on behalf of the Company. You can pay the higher level of Match Contribution from the 1 April following the relevant birthday. The actual cost to you will normally be much less than your gross contribution, because you receive full tax relief on your contributions at the maximum rate to which you are liable. So if you pay tax at 22%, each 1 you contribute only costs you 78 pence. The PAYE system automatically adjusts for tax without any action on your part. Company contributions The Company will pay contributions so that your Individual Account can be credited with a Core Contribution, which depends upon your age, and a MatchPlus Contribution, which will depend on both your age and whether you opt to pay a Match Contribution. The table below shows the contributions which are payable for members in Grade F or below: You will be able to decide in April each year whether you wish to pay optional Match Contributions, but you need to agree to pay them until the following April (unless you leave or retire). On reaching age 31, the maximum Match Contribution you can pay is 1% of Pensionable Salary which will attract a Company MatchPlus Contribution of 3% of Pensionable Salary as shown in the table. If you are age 31 or over on 1 April preceding the date you joined the Fund, you may start paying Match Contributions straight away, rather than waiting to the following 1 April. An application form accompanies this guide. At ages 41 and 51 you will have the option of paying a higher amount (and attracting increased MatchPlus Contributions from the Company). As an example, a member who is age 51 could pay a Match Contribution of 3% of Pensionable Salary which will attract MatchPlus Contributions of 5% of Pensionable Salary. Alternatively, the same member has the option to pay a Match Contribution of 2% with MatchPlus Contributions of 4% or a Match Contribution of 1% with a MatchPlus Contribution of 3%. Regardless of the level of Match Contributions you decide to pay (if any), the Core Contribution will remain the same, as described in the table below. Your age at 1 April Your Core Contribution Core Contributions Company Core Contribution Optional Contribution Your maximum optional Match Contribution Company maximum MatchPlus Contribution Total maximum including your Core Contribution Under 31 2% 4% - - 6% 31 to 40 2% 6% 1% 3% 12% 41 to 50 2% 8% 2% 4% 16% 51 and over 2% 10% 3% 5% 20%

7 Your age at 1 April Your Core Contribution Core Contributions Company Core Contribution Optional Contribution Your maximum optional Match Contribution Company maximum MatchPlus Contribution Total maximum including your Core Contribution Under 31 2% 6% - - 8% 31 to 40 2% 10% 1% 3% 16% 41 to 50 2% 13% 2% 4% 21% 51 and over 2% 16% 3% 5% 26% If you are Grade G or above, a different scale will apply to you. The table above shows the contributions which apply to members in Grade G or above. Contributions normally cease at Normal Retirement Age. All the assets of the Fund are held in Trust, separate from the Company s assets under the responsibility of the Trustee. Additional voluntary contributions and other methods of saving If you wish to boost your retirement benefits, you may choose to do so by paying additional voluntary contributions (AVCs) into your Individual Account over and above your Core and optional Match Contributions. From 6 April 2006 you will be able to pay up to 100% of your taxable earnings from the Company into the Fund as normal contributions and AVCs, inclusive of any contributions to other pension arrangements and receive tax relief. The Annual Allowance will act as a limit by which your pension benefits and/or savings can grow in a year before being subject to tax. You may also pay into a personal or stakeholder pension plan. Although AVCs and personal or stakeholder pension arrangements may be an appropriate method of saving for retirement, there may be more flexible forms of investment available to you and we strongly advise you to seek independent financial advice before you make any decisions. Should you wish to pay AVCs, please download the Application to pay AVCs form from the website. Costs The Company currently pays for all reasonable administration costs of the DC section. This will include any administration costs for two investment switches per calendar year. Should you request more than two investment switches in any year you will be required to pay any administration costs related to the additional switches, which will be deducted from the value of your Individual Account. In addition, the Company will pay investment management charges whilst you are a Contributing Member of the Fund. Please see Choosing your Investments for further information. The way administration costs and investment charges are met may be changed from time to time. Investment Investment funds The Trustee has chosen a number of different investment funds in which your Individual Account can be invested. The funds are explained in more detail in the investment leaflet entitled Choosing your Investments, which accompanies this guide. It is important that you decide how much of your Individual Account goes into each of the available funds and that you complete the Investment Choice form. If you do not complete a form your Individual Account will be invested as decided by the Trustee. The Trustee and the administrator are not able to provide advice in connection with your investments. If you are in any doubt about your investment choices you are strongly recommended to seek independent financial advice. Investment manager The Trustee is responsible for the investment of your Individual Account and for the selection of the investment managers from which you may choose. 5

8 6 Retirement benefits Any examples given to you concerning the value of your Individual Account or your possible benefits at retirement depend on the assumptions made about contribution levels, investment returns and the cost of buying a pension when you retire. Whether the examples accurately predict the benefits ultimately payable depends on whether these assumptions are borne out in practice. The amount of your benefits cannot be guaranteed. Choosing your benefits at retirement Your pension, and any pension for a Spouse, Children or Qualifying Dependant, will be payable through an annuity bought from an insurance company. You will be given details shortly before retirement of the options and costs of converting your Individual Account into a pension and the fees for arranging this. At retirement you will need to decide the form of benefits you wish to provide for yourself and your dependants. The process of setting up your pension may take several weeks because of the procedures involved. You can help to reduce this delay by telling the Trustee which options you want to take and by returning any forms as soon as possible. Your retirement benefits may include the following: Five year guarantee If you die within the first five years of your retirement, the unpaid balance of five years pension payments will be paid to your dependants or estate as a lump sum. Spouse s/dependants pensions Pension increases You may use your Individual Account to buy a pension with any level of pension increases or none at all. Cash sum You may be able to take up to 25% of the value of your Individual Account (including any AVCs) as a cash sum when you retire, subject to a maximum of 25% of the Lifetime Allowance. Under current legislation your cash sum will be tax free unless the value of your benefits from all pension arrangements exceeds the Lifetime Allowance. You should note, however, that any cash you take will reduce the amount available in your Individual Account to purchase your pension. If you have built up benefits above the Lifetime Allowance they will be subject to additional tax, which may be deducted from your benefits or collected through self-assessment tax returns. The Government will allow employees to protect their pension rights where they are likely to have benefits that are in excess of the Lifetime Allowance. However, this is a complex area and you should contact an independent financial adviser for further information.

9 MMC UK Pension Fund Early and late retirement Choosing to retire early from Company service Currently, you may choose to retire with an immediate pension from the Fund at any time after your 50th birthday, subject to the agreement of the Company and the Trustee, although you should note that, from 6 April 2010, the earliest age at which it will be possible to start receiving your pension will increase to 55. Your benefits will depend on the value of your Individual Account, the sort of pension you choose and the cost of buying a pension at the time you retire. Generally speaking, the younger you are when you retire the shorter the time your Individual Account will have been invested and the more it will cost to buy each 1 of pension per annum. So, if you plan to retire early, you should ensure your financial planning meets your retirement needs. To assist you in this you may wish to seek independent financial advice. Retiring early on medical grounds The Company operates an Income Protection Scheme, which may provide an income on disability, subject to insurer acceptance. This benefit is not provided from the Fund. Full details are available from your Human Resources department. Under exceptional circumstances, it may be possible for you to retire with an immediate ill-health pension from the Fund. The pension may be reduced due to the higher cost of buying the pension at an earlier age. If the cost of annuities is high, this may result in a lower pension, depending on your age and the nature of your illness. Late retirement Employment after Normal Retirement Age is entirely at the discretion of the Company. If the Company were to exercise this discretion, your own and the contributions paid or credited to your account on the Company s behalf will cease. Your Individual Account will normally remain invested and will be used to purchase a pension at your actual retirement date. AVC benefits deferred payment When you retire and start taking your main benefits under the Fund, you may defer taking your AVC benefits up to, but not beyond, your 75th birthday. Your AVCs will remain invested during any period of deferment. If you die while you are receiving your main benefits but deferring your AVCs, the AVCs will normally be paid as an additional lump sum death benefit as decided by the Trustee. You cannot normally pay any further AVCs to the Fund once you retire. There are possible financial risks in choosing this option. Your AVCs that remain invested may not grow as you hope. When you wish to use the AVCs to provide retirement benefits, the cost of doing so may have increased. Before choosing to defer payment of AVC benefits, you may want to obtain independent financial advice on whether this is a suitable option for you. 7 Provision of an ill-health pension is subject to the consent of the Company and the Trusteee and the provision of appropriate medical evidence.

10 MMC UK Pension Fund 8 Death in service If you die in service as a Contributing Member of the DC section of the Fund the following benefits will be payable: Death in service lump sum The core death in service lump sum is equal to 4 times your Reckonable Salary at the date of your death (together with the value of any AVCs you have made) although you may select a different multiple through Options, subject to a maximum of the Lifetime Allowance. It is important that you complete an Expression of Wish form to assist the Trustee in the distribution of this lump sum payment. Please refer to the section on Inheritance tax on page 14 for further details of how this benefit will be paid. If you earn in excess of the Fund-specific Salary Cap, your total death in service lump sum will be equal to 4 times your uncapped Reckonable Salary (or other multiple as selected through Options), subject to a maximum of the Lifetime Allowance. Any lump sum benefits payable on your death will be paid from the Fund where possible. You will be advised separately if any of your cover will be provided outside the Fund. Spouse s pension Your Spouse will receive a pension equivalent to 30% of your Final Pensionable Salary at the date of death. If, at the date of your death, your Spouse is at least 15 years younger than you, the pension may be reduced. Children s pensions In addition to the Spouse s pension, Children s pensions are payable for up to a maximum of 4 Children. Each Child will receive a pension of 5% of your Final Pensionable Salary at date of death. This pension will stop once the Child reaches age 18 (or 23 if in full-time education). It can continue beyond this age if, at the time of your death, the Child was dependent on you through physical or mental impairment. Dependant s pension If you do not have a Spouse, the Trustee may choose to pay a pension to a Qualifying Dependant where there is financial interdependency at the date of your death, subject to certain criteria. Any pension paid to a Spouse, Qualifying Dependant or Child will be subject to income tax but its value does not count towards your Lifetime Allowance or the recipient s own Lifetime Allowance. Death after retirement In the event of your death after retirement, your dependants will be entitled to the benefits you specified on retirement (see page 6). For example: When you retired you may have chosen to have a pension that pays a lump sum if you were to die within 5 years of your pension starting. Alternatively, you may have chosen to have a pension with no lump sum payable on death. You may have chosen to provide a pension payable to a Spouse, Qualifying Dependant or Children upon your death. You may have chosen to buy a pension with any level of annual increase, or none at all and any pension payable to a Spouse, Qualifying Dependant or Child will be increased accordingly. Pension increases The timing of any annual increases applied to the pension will be determined by the insurance company with whom the pension has been purchased.

11 Leaving If you leave the Fund, your own contributions and the contributions paid or credited to you on behalf of the Company will cease. Less than two years Pensionable Service Less than 3 months Pensionable Service You will be entitled to a refund of the value of your Individual Account built up from your own Core and Match Contributions together with any AVCs, less tax. More than 3 months but less than 2 years Pensionable Service You will be entitled to a refund of the value of your Individual Account as described above. As an alternative to taking a refund, you may transfer the value of your Individual Account to another pension arrangement. You will receive a transfer value quotation when you leave and you will have three months in which to decide whether to transfer your pension or to take the cash refund less deductions. See Transferring your Individual Account in the next column for further details. You may not leave your Individual Account in the Fund. Two or more years Pensionable Service Your Individual Account will remain invested until your Normal Retirement Age and a pension will be bought at that time. On leaving the Fund, investment management charges will, going forward, be deducted from your Individual Account. In practice this means your Individual Account will, going forward, be switched into funds where the investment management charges are reflected in the price. Transferring your Individual Account You may ask the Trustee to transfer the value of your Individual Account to one of the following pension arrangements as long as the transfer takes place at least one year before your Normal Retirement Age: a registered pension plan with your new employer; or a registered approved personal or stakeholder pension plan of your choice, or an individual insurance policy in your name (commonly known as a buy-out policy). The transfer value will be equal to the value of your Individual Account at the date of transfer. If you have made any AVCs, their value will be in addition to the transfer value. A deduction may be made for expenses. You should seek independent financial advice before proceeding with a transfer. Death before retirement If you leave the Company but keep your benefits in the Fund, the full value will be used to provide a pension for your Spouse or Qualifying Dependant and Children in the event of your death before retirement. 9 As an alternative to leaving your Individual Account invested in the Fund, you may transfer it to another pension arrangement. You may ask the Trustee for a statement of the value of your Individual Account at any time. The Fund is not obliged to provide another statement within 12 months of the date of your last request.

12 Section 4 Furtherinformation 10 Looking after your interests The Fund is established under a trust and administered by a corporate trustee, MMC UK Pension Fund Trustee Ltd. Amongst other things, this means that the Fund s assets are legally separate from those of the Company and the Trustee is responsible for ensuring that members interests are protected, as required by law. The administration of benefits and the investment of the Fund s assets fall within the responsibility of the Trustee. The members of the board of MMC UK Pension Fund Trustee Ltd serve as individual Trustee Directors. Most of the Trustee Directors are appointed by the Company but at least a third of them are Member Representative Trustee Directors ( MRTDs ). The procedure for appointing MRTDs is through their nomination by the Pensions Forum from among its elected staff members and subject to approval by the other Trustee Directors. The Pensions Forum is a committee established by MMC UK Pension Fund Trustee Ltd., to which a number of active members of the Fund and pensioners are elected by active Fund members and pensioners from the same constituency. You can contact the Trustee through the administrator at the address on page 2. Keeping you in the picture Knowing where you stand with your pension is very important. As a Contributing Member of the Fund, you will be sent regular information designed to keep you in the picture about your benefits and the Fund in general. You will also receive details of specific changes, events and options relating to the Fund. Opting out of the Fund If you are employed on a permanent contract, you will be automatically entered into the Fund unless you indicate to the contrary. You may decide not to join the Fund at all or to opt out at a later date and make your own pension arrangements. This decision should not be taken lightly and you are encouraged to take independent financial advice before doing so as the Company will no longer provide pension benefits for you or your dependants, other than standard benefits for leavers (see page 9) in respect of any benefits accrued to the date of opt out. Your core level of life assurance cover will remain at 4 times your Reckonable Salary, although you may select a different multiple through Options. Should you decide to opt out of the Fund, you will need to complete a form, which can be obtained from the administrator at the address shown on page 2. If you wish to rejoin the Fund subsequently, you will only be able to do so with the Company s and the Trustee s consent, and you may be subject to special terms. If you leave the Fund to take out a personal or stakeholder pension arrangement the Company will not contribute towards it on your behalf. For further information, you should contact the administrator at the address on page 2.

13 MMC UK Pension Fund Staying in touch Keeping in touch while you are with the Company is one thing, but it s easy to lose touch if you move on. If you leave the Company and your benefits remain in the Fund, the Trustee will keep a record of your last known address so that you can be contacted about your benefits or any issues affecting the Fund. It is important that you keep the administrator informed of any change of address once you have left. If for any reason you lose track of the Trustee s or the Company s address, you will be able to contact them through the Pension Tracing Service. In common with other pension schemes, the Trustee provides information about the Fund, including a contact address for inclusion in a pension registry. The address to write to is: Pension Tracing Service Tyneview Park Whitley Road Newcastle upon Tyne NE98 1BA Help at hand The aim of the Trustee is to give you clear, straightforward information which is timely and easy to understand. However, communication is a two way process and we recognise that there may be occasions when there are questions you want to ask, or issues you would like to discuss with someone. In the first instance, please contact the administrator at the address on page 2. Seeing eye to eye Most queries or problems can be dealt with and resolved, informally, as they arise. However, in rare cases a disagreement may occur which requires a more formal procedure for its resolution. In these circumstances a formal request may be made to invoke the Fund s Internal Dispute Resolution Procedure (IDRP). The IDRP does not apply to disputes between employees and the Company, or the Company and the Trustee. Also, it cannot be used for complaints or disputes which are already the subject of court proceedings or under investigation by the Pensions Ombudsman. The IDRP is a two-stage process. Under the first stage your complaint or dispute will be considered and decided upon by the Pensions Manager of the MMC UK Pension Fund. If you are happy with the decision, the process ends there. However, if you are not satisfied with the result of the first stage, you will have six months in which to ask the Trustee to reconsider and decide upon your complaint under stage two. Normally, a decision under either stage will be made within two months. Complaints and appeals must be made in writing and must provide some specific information. If you are unable, or you do not wish, to make the complaint or an appeal yourself, you can nominate someone else to act on your behalf. The Trustee aims to make the need for formal complaints the exception rather than the rule. However, should the need arise, full details of the procedure are available from the administrator at the address on page 2. 11

14 MMC UK Pension Fund 12 Outside help In addition to the Fund s own arrangements, the Government has established two independent agencies to help, should an issue arise which cannot be resolved directly between a pension scheme and a member or beneficiary. They are The Pensions Advisory Service (TPAS) and the Pensions Ombudsman. TPAS is available to assist members and beneficiaries of the Fund in connection with queries at any time, or difficulties encountered at any stage of the disputes procedure. TPAS will offer advice on a particular case and, if necessary, may refer it to the Pensions Ombudsman who acts as an independent arbitrator in disputes between pension schemes and their members. The address of both TPAS and the Pensions Ombudsman is: 11 Belgrave Road London SW1V 1RB The Pensions Regulator The Pensions Regulator was set up by the Pensions Act 2004 to help ensure that work-based pension schemes in the UK are properly run. It is able to intervene in the running of schemes where trustees, employers or professional advisers have failed in their duties. The Pensions Regulator can be contacted at the following address: The Pensions Regulator Napier House Trafalgar Place Brighton East Sussex BN1 4DW Tel: customersupport@thepensionsregulator.gov.uk Website: Data protection legislation The Trustee works together with the Company to provide the benefits as set out in this guide. The information shared will be used to administer any benefits under the Fund. Only such details as are required to fulfil obligations to members and legal and regulatory obligations will be collected and stored. Your personal data will be treated in strictest confidence and will only be disclosed to others in limited circumstances, for example to product providers in the course of preparing or implementing advice or to meet legal or regulatory requirements. Where you are asked to supply information relating to your dependants, you should inform those individuals first; they might like to read this guide to find out how personal data is handled. Where information from your doctor is required, this will not be sought without your permission. If you have a financial representative or independent financial adviser, the Trustee will liaise with that person or firm and share information only on your written instructions. If you die while you are a member of the Fund the Trustee will liaise with your personal representative(s), relatives and possibly your work colleagues who may supply us with information relating to you. If information is used to conduct statistical analysis and surveys, you would not be identified personally. Please note that all the information asked for is necessary and without it the Trustee would not be able to administer your benefits under the Fund. Supplementary fund Any assets in the DC section of the Fund which are not allocated to a particular member s Individual Account and AVCs are held in a supplementary fund within the Fund. This fund, or any other assets of the Fund, may from time to time be used to credit a member s Individual Account with the contributions due from the Company.

15 The State Pension Scheme The State Pension Scheme is in two parts: the Basic Pension (the old age pension) which is a flat-rate pension paid to everyone who has paid enough National Insurance contributions, and the State Second Pension (S2P) which is based on an employee s earnings between a Lower and an Upper Earnings Limit throughout his or her working life. State pensions are paid from State Pension Age, which is currently 65 for men, 60 for women. However, a common State Pension Age of 65, for both men and women, is being phased in by the Government between the years 2010 and As a member of the Fund you will participate fully in the State Pension Scheme, so you will be entitled to receive the Basic State Pension, subject to a full National Insurance record, and to earn benefits in the State Second Pension which are payable from State Pension Age. You may obtain a forecast from the Department for Work and Pensions (DWP) of how much pension you are likely to receive from the State. This can be done at any time by completing Form BR19, available from your local Benefits Agency office, and returning it to the DWP. Temporary absence If you stop receiving contractual pay or statutory sick pay, your membership of the Fund may, under certain circumstances, be continued with the Company s and the Trustee s consent. Ordinary maternity leave During ordinary maternity leave (the first 26 weeks of maternity leave) your membership of the Fund, including your cover for death benefits, will be continued. Your contributions to your Individual Account will also be continued, but will be based on your actual pay, not the pay you would have received had you been working normally. The Company will make up any difference in your Core Contributions (and any Match Contributions that you have elected to pay) and will continue to pay Company contributions based on the pay you would have received had you been working normally. Additional maternity leave Any additional maternity leave that you take will be unpaid. Your own and the Company s Core Contributions (and any Match Contributions that you have elected to pay) will stop during this period but you may be able to make up your missed contributions (and thereby the associated Company contributions) when you return to work. Your death benefits will be continued during this period. Paternity leave Subject to certain qualifying conditions, you may take up to two weeks of paid Paternity Leave on the birth (or adoption) of a child. Your death benefits and your own and the Company s contributions will be continued on the same basis as for ordinary maternity leave during this period. Adoption leave During adoption leave your death benefits and your own and the Company s contributions will be continued on the same basis as for maternity leave. 13

16 14 Marital status It is your responsibility to ensure that the Trustee is kept informed of any change in your marital status. If you are not legally married to your partner (or are not registered as civil partners) and there is no Spouse s pension payable, the Trustee may consider paying a pension to a Qualifying Dependant, subject to certain criteria. Any such payments are given at the absolute discretion of the Trustee. Divorce The Trustee must comply with any order made by a Court following a divorce or dissolution of a civil partnership. Insured benefits The lump sum benefit payable on death is secured under an insurance policy specifically to provide those benefits. In normal circumstances, the full benefit will be provided automatically without any enquiry into your state of health. Restrictions may be imposed on your benefit in certain circumstances and you will be notified if these apply to you. Income tax All Fund pensions are paid subject to income tax, as appropriate. HM Revenue & Customs registration and restrictions The Fund is registered with HM Revenue & Customs. This means that the Fund and its members receive important tax concessions. However, these tax concessions only apply to the value of your benefits up to certain levels, each year and in total. These limits are increased annually by HM Revenue & Customs. Any pension paid by the Fund is taxed under the PAYE system. Tax advantages The Fund has been registered with HM Revenue & Customs under the Finance Act Membership of the Fund currently brings with it several important tax advantages under this Act: Full tax relief on your contributions up to 100% of your earnings and the Annual Allowance. A cash sum option on retirement, which will be tax free unless the value of your benefits from all pension arrangements exceeds the Lifetime Allowance. Lump sum death benefits paid to your beneficiaries or dependants are normally tax free. You are not taxed on the Company s contributions. Favourable tax relief on the Fund s investments. Inheritance tax Under present legislation, lump sum death benefits paid under the Fund will not normally be subject to Inheritance Tax. To achieve this the Fund is arranged so that the Trustee has absolute discretion to decide who receives the lump sum payments. Normally the Trustee will follow your wishes. You should let the Trustee know who you would like to receive the money by completing the Expression of Wish form accompanying this guide. Expression of Wish forms can be downloaded from the Fund website should your circumstances change or you change your mind at any time.

17 MMC UK Pension Fund Trust Deed and Rules The Trustee administers the Fund in accordance with the Trust Deed and Rules which meet current legislative requirements. This guide provides a summary of the Fund and does not cover all the Fund s detailed provisions which are set out in the formal Rules. The Rules may be inspected at the office of the administrator by prior arrangement. Alternatively, copies may be obtained from the administrator, at the address on page 2, although a charge may be made. In the event of a conflict between the terms of this guide and those of the Rules, the Rules will prevail. Amendment and discontinuance Subject to the Fund Rules, the Company reserves the right to amend or discontinue the Fund at any time. If your benefits or rights are affected you will be given written notice. Retirement benefits to which you have already become entitled would, however, be safeguarded in accordance with the detailed provisions laid down in the Trust Deed and Rules. 15 Benefits non-assignable Your benefits under the Fund cannot be assigned or used as security for a loan.

18 MMC UK Pension Fund Notes 16

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20 Definitions Annual Allowance Basic Salary Children Company Contributing Member Core Contribution Final Pensionable Salary Fund Fund-specific Salary Cap Individual Account Lifetime Allowance Lower Earnings Limit (LEL) Match Contributions MatchPlus Contributions Normal Retirement Age is 65. Pensionable Salary Qualifying Dependant Reckonable Salary RPI increase Spouse State Pension Age State Second Pension (S2P) is a limit set by the Government on the amount by which your pension benefits and/or pension savings can grow in a year (1 April to 31 March) before being subject to tax. The growth in your benefits can be calculated by adding up the following: l Any money purchase contributions (e.g. contributions to the DC section of the Fund or AVCs) made by you or paid or credited by the Company during the year; and, if applicable l The amount by which any defined benefit pension entitlement has increased over the year, multiplied by 10; and, if applicable l The growth in any other pension savings (excluding statutory revaluation on deferred pension benefits). The Annual Allowance has been set at 215,000 for the 2006/07 tax year. is your current annual base salary, excluding car allowances, bonuses or any other benefits. are your children or your Spouse s children who are financially dependent on you and are under age 18, or under age 23 if still in full-time education (or beyond if mentally or physically disabled). is Marsh & McLennan Companies UK Ltd, the Principal Employer. is a member who is currently paying contributions to the Fund and building up retirement benefits. is the minimum contribution payable by you, or payable or credited by the Company to your Individual Account. The Company Core Contribution increases as you get older. is the annual average of Pensionable Salary received in the last 24 calendar months of Pensionable Service or, if greater, the best 2 consecutive calendar years out of the last 10 consecutive calendar years. is the MMC UK Pension Fund. is the upper limit on the amount of salary that can be taken into account when calculating pensions arising from and contributions payable under the Fund. The limit is normally increased annually. is an account set up in your name whilst contributing to the Fund. is a limit set by the Government on the amount of pension savings that will qualify for tax relief. This allowance will start at 1.5 million worth of benefits from registered pension arrangements from 2006, rising to 1.8 million in The Lifetime Allowance will apply to all of the pension benefits you build up over your entire working life and will be triggered by a benefit crystallisation event such as payment of retirement income or death benefits. is the level of earnings at which benefits under the State Second Pension start accruing. This figure is set by the Government and adjusted each year. It is broadly equal to the Basic State Pension. are optional contributions payable by members aged 31 and over in addition to their Core Contribution. are contributions paid or credited to your Individual Account on behalf of the Company, in addition to Company Core Contributions, when you opt to pay Match Contributions. is your Basic Salary less an amount equal to the LEL. For members working on a part-time basis, the LEL is pro-rated before being deducted. Where members earn over the Fund-specific Salary Cap, Pensionable Salary will be restricted to the Fund-specific Salary Cap less the LEL. is any adult person who immediately before your death was partly or wholly financially dependent on you. is your annual salary immediately before your date of death or, if greater, the total amount of Pensionable Salary (before the deduction of the LEL) received during the 12 months ending on 31 December immediately before your date of death. means the percentage increase in the Retail Prices Index over a defined 12 month period. is your legally married husband or wife. Under the Civil Partnership Act 2004, a registered civil partner will be treated the same as a Spouse for pension purposes. for men is 65. For women born: l before 6 April 1950 it is 60; l after 5 April 1955, it is 65; l between 6 April 1950 and 5 April 1955 it is on a sliding scale between 60 and 65. provides a pension in addition to the Basic State Pension. As a member of the DC section of the Fund you participate fully in S2P. Upper Earnings Limit (UEL) is the level of earnings at which benefits under the State Second Pension cease accruing. It is adjusted by the Government each year.

21 This booklet applies to Marsh employees eligible to join the DC section only. A separate booklet is available for other employees. Please see overleaf for Definitions

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