STAKEHOLDER PENSION SCHEME (UK, N+ & Global staff) A Guide to the Stakeholder Pension Scheme

Transcription

1 STAKEHOLDER PENSION SCHEME (UK, N+ & Global staff) A Guide to the Stakeholder Pension Scheme The Stakeholder scheme is a money purchase scheme - this means it does not offer guaranteed benefits related to your salary, the scheme is a money purchase pension arrangement, to which both employee and employer contribute. The size of the pension will depend upon how much has been paid into the plan and on investment returns. The Stakeholder Pension scheme is: Simple to Understand You build up a fund while you are working from which you draw an income when you retire. Low Cost Stakeholder pensions have a maximum charge of only 1% of the fund value each year. However, the Nurture scheme which Oxfam has adopted has a maximum charge of only 0.8% p.a. and this rate will reduce as you fund grows in size. Flexibile You can stop, start or change your contributions as often as you like with no penalty. Affordable You can start a stakeholder pension from as little as 20 per month even if you are not working. Tax Efficient All contributions to stakeholder pensions qualify for tax relief and all interest, dividends and capital gains that accrue to your fund are virtually tax free. Transferable If you want to move your stakeholder pension to another pension provider you can at any time with no penalties. Similarly you can move pension funds accumulated elsewhere to your Stakeholder pension although the ceding scheme may penalise you. Joining the Scheme You can join the Oxfam Nurture Scheme if you are under age 75 and resident* or ordinarily resident** in the UK. *Resident: if you are physically present in the UK for six months in a tax year, then you will be resident in the UK. **Ordinarily resident: if you are abroad only temporarily, or if you spend an average of three months a year in the UK for four years, you are treated as ordinarily resident. National Insurance Number Members of the Stakeholder Pension Scheme need to have a permanent National Insurance (NI) number. If after two years, the member does not have a NI number, Aviva will cancel their policy and return contributions to employee. Employees are advised to apply for a National Insurance number as soon as possible after joining the scheme. Your Contributions Your contributions are flexible, the amount you wish to contribute will be deducted as a % of your pensionable pay, subject to Inland Revenue restrictions. However, the actual cost to you is less because you get tax relief on your contributions. You may, if

2 you wish, increase your contributions in order to boost your retirement benefits. The minimum contribution is 2% for gross paid staff or 2.6% for net paid staff. What Can You Pay In? There are no limits on the amount that can be paid into a pension. Tax relief is only available on payments up to a certain amount. How does this affect me? The old rules on how much you could pay into your pension have gone. We will only accept payments from you which qualify for tax relief. Annual Allowance You'll be charged tax if payments to all your pensions exceed 215,000 in a year. This allowance will rise to 255,000 by 2010/2011. Lifetime Allowance You will be charged tax if the value of benefits from all your pensions is over a certain amount. This is called the lifetime allowance and will be 1.5 million in the tax year 2006/07. This amount will rise to 1.8 million by 2010/2011. Most people will be within this limit and don't need to do anything. If you expect to go over this limit you can protect your existing funds by registering with HM Revenue and Customs. Oxfam s Contributions Oxfam will double your specified contributions up to a maximum of 10% of your gross pensionable salary or 13% if you are paid a net pensionable salary. For example if you are gross paid and contribute 4%, then Oxfam will contribute 8%. If you contribute 5% then Oxfam will contribute 10%. If you are net paid and contribute 6.5% Oxfam will contribute 13%. This is not applicable to the staff members who are already Oxfam Final Salary Pension members. Tax Relief There will be tax relief on your payments up to: 3,600 a year for everyone living in the UK, if you have no earnings, or 100% of earnings as a UK tax payer, whichever is higher. There is a change to the way you make payments and get tax relief. You may be able to pay more into your plan, or start paying again if you've stopped. There is no limit to how many types of pensions you can have. Your contributions to the Stakeholder Pension are collected from your net salary. For example, if you are a basic rate taxpayer and you pay 78 ( 80 from the 5th April 2008) into the Stakeholder Pension the Inland Revenue will add 22 ( 20 from the 5th April) to this, so the total invested is 100. Even if you don't currently pay any tax, you will still benefit from this very valuable tax boost to your savings.

3 Higher rate tax relief isn't added to your pension fund, but instead, an adjustment will be made to your personal tax allowance. You will need to notify your local H M Inspector of Taxes. Total Pensionable Pay The following payroll elements count as pensionable pay: gross basic annual salary hard to fill allowance market supplement Hotspot Allowance other work (where the employee does more than one Oxfam job) Maternity pay (SMP and Oxfam Maternity Pay) Adoption Pay (SAP) Sick pay (SSP and Oxfam Sick Pay) Back pay on any of the above Pension contributions are also paid on Permanent Health Insurance benefits in the UK The following deductions will also have an impact on pensionable pay: overpayment incapacity benefit days lost (unpaid leave) Scheme Investment Funds The value of the investments in your pension fund before retirement can go down as well as up and is not guaranteed. You do not have to choose an investment fund unless you wish to do so. If you don t choose a fund, your contributions will be invested in the Stakeholder With-Profit Fund which has been chosen as Aviva s Default Investment Fund. Once you have joined the scheme you will be able to go on-line at any time and make any changes to your chosen funds as well as investigating the various Lifestyle Options available. With-Profit Fund (Default Investment Fund) The fund invests in a mix of assets, including company shares, property, government bonds, company bonds and deposits. The fund aims to provide Stakeholder With-Profit policyholders with a smoothed investment return. As a result of smoothing and guarantees, the investment risk is lower than that of many other ways of investing in company shares. Balanced Managed Fund The aim of the Balanced Managed Fund is to provide a good return through a combination of investment income* and capital growth. The fund invests in a wide range of assets to spread and control risk by using any of Aviva's other appropriate funds. The fund manager will decide the allocation of investments between different funds. The prospects for capital growth are generally good without significant exposure to extreme fluctuations in value. Sustainable Future Managed Fund The aim of the Sustainable Future Managed Fund is to provide a good return through a combination of

4 investment income and long-term capital growth. The fund invests in a wide range of assets to spread and control risk. All investments will be expected to conform to our social and environmental criteria. The potential for growth is high with a corresponding level of risk aiming to provide the greatest return over terms of more than five years. UK Index Tracking Fund This fund will invest in UK equities and futures with the objective of tracking the performance of the FTSE Actuaries All-Share Index (prior to the deduction of management fees and allowance for taxes and other expenses). The potential for growth is high with a corresponding level of risk aiming to provide the greatest return over terms of more than five years. Retirement Protection Fund The Retirement Protection Fund will invest in British Government fixed interest securities with a similar profile to that of the FTA Government over 15 year gilt index. The fund aims to track the performance of this index (prior to the deduction of management fees and allowance for taxes and other expenses). The fund is most suitable for terms up to ten years, with greater emphasis being put on security than on maximising potential return. Deposit Fund The Deposit Fund invests in deposit type instruments placed mainly with first-class banks and major UK companies. There is virtually no risk to capital, but returns are generally low. The fund is most suitable for terms up to five years. Transfer of Previous Pension Benefits into the Scheme Transferring funds from one Pension Plan to another can often involve a lengthy and complicated process. Staff should carefully consider the benefits they would be losing by effecting a Transfer, particularly if the funds originate from Final Salary Schemes. Regent Pensions Limited can help the member of staff make an informed choice and guide them through the procedure. HR should refer Staff to Regent Pensions Limited. Please note there may be a fee payable for this service. Maternity Leave Provided that you are paid during maternity leave, you will: Pay your normal percentage of pay contribution, but based on the pay you actually receive during maternity leave and Oxfam will continue to make employer contributions based on your normal salary. E.g. if you are gross paid and normally make a contribution of 5% you will pay 5% employee contributions on the maternity pay you receive and Oxfam will continue to make a contribution of 10% based on your normal salary before maternity leave for a maximum of 39 weeks. Absent from Work If you are receiving reduced or no pay, your contributions and Oxfam's contributions will reflect your change in salary. Approved leave of absence: unpaid leave is NOT pensionable unless before your leave your manager agrees that, exceptionally, your period of unpaid leave should be pensionable. In this case if you pay 5% employee contributions, Oxfam will pay a maximum total contribution of 10% of your gross pensionable salary or 13% of your net pensionable salary.

5 Divorce If your divorce proceedings start on or after 1 December 2000 the courts may order that your pension rights must be shared with your ex-spouse. Further Information can be obtained from Regent. Leaving the Scheme If you leave the Scheme, this will normally be because you change jobs. You may also leave the Scheme and continue to work for Oxfam. If you choose this option, you must give Oxfam one month s written notice, if at a later date you wish to rejoin the scheme you will need to contact HR. Rejoining the Scheme Staff who were members of the Stakeholder pension Scheme have the flexibility to cease paying into the scheme and then rejoining at a later date. Transfer of Your Benefits You may transfer your benefits to another pension arrangement (such as your new employer s pension scheme or to a personal pension plan) at any time after you leave the Scheme. Refund of Your Contributions Any contributions made to a stakeholder pension scheme cannot be refunded. Flexible Retirement In most cases members are able to take part of their pension whilst continuing to work and, should they wish to, accrue further pension benefits. Exceptions to this are ill-health retirements, and from 6 April 2010, those members with a Protected Pension Age (see Definitions ) who retire before age 55. Enquiries in the first instance should be directed to the Reward Team, Oxfam GB, Oxfam House. Note: This should not be confused with the right to have your pre-1 May 2002 benefits paid with no reduction from age 60. This option is also sometimes referred to as flexible retirement. Retirement Age Although a retirement age is selected at outset on the application, the member may draw the retirement benefits even if you choose to continue working, between the ages of 50 and 75. This age range will change to between 55 and 75 on 5/4/2010 (unless you have a "Protected Pension Age" see Definition - or you may be able to take benefits earlier if you are unable to work because of serious ill health). If the member is still employed by Oxfam at the time he/she decides to draw the benefits, the client should either contact Aviva directly or through Regent Pensions Limited for details of retirement options, having informed Oxfam HR of their intention to retire. HR should advise Payroll Department to make appropriate changes to the Schedule. See below for further details of retirement options and procedures.

6 Retirement Options Aviva will contact the member shortly before the selected retirement date. Provided the member wishes to draw benefits at that time, Aviva will provide details of the retirement options available. Under current legislation, up to 25% of the Fund may be taken as a tax free cash lump sum, with the balance of the fund used to provide an income in retirement. Aviva and Regent Pensions Limited will provide more information at the time. You no longer need to take all your benefits by the time you're 75 but after this age, you can only take benefits as income. If you want tax free cash you must take it before you're 75. The member is free to try to achieve a higher retirement income from other insurance companies with the funds available. The member should, therefore, be referred to Regent Pensions Limited to help with retirement planning. The retiring employee should be highlighted on the Schedule as leaving the Scheme in the normal way. Aviva will contact the member shortly before the originally selected retirement date. However, if the member does not wish to draw benefits at that time, a new retirement date should be selected and contributions will continue as before. The member should continue to appear on the Schedule, as before. Ill Health Retirement If you become seriously ill and are informed that you're likely to live for less than a year, you can take your whole fund as a lump sum. This is tax free provided the benefits are not greater than the Lifetime Allowance Small Pension Funds If your total pension funds are below a certain limit and you are taking benefits after you are 60, you may be able to take them all as a lump sum. The limit for the tax year 2006/07 is 15,000. There could be a tax charge. Pension Payment Pensions will be paid direct to your bank account, building society account or Giro account from the annuity provider. You will have the option to determine how often you receive your pension, e.g. monthly, quarterly, annually. Death Benefits In the event of your death, the value of your pension fund is payable as a tax free lump sum to your nominated beneficiary (you will be able to nominate beneficiaries on joining the scheme). In addition to this, you will be entitled to the Oxfam Life Assurance Death in Service benefit. The Committee The Committee acts as an advisory body to Oxfam s Corporate Management Team on pension matters, such as recommending pensions strategy and changes in the benefits structure. It recommends changes, monitors the applications of pension arrangements and Scheme finances, and reviews the performance of the scheme administrators. The Committee comprises a Chair appointed by CMT, an Oxfam

7 Trustee, the Human Resources and Finance Directors or their nominees, two staff representatives nominated by OJTUS and one pensioner representative. Scheme Approval The Oxfam Stakeholder scheme is managed by Aviva so you will benefit from the financial strength of the largest insurer in the UK with over 200 billion of funds under management. Aviva investment strategy is to use its financial strength to achieve superior long term growth. You have the freedom to select the Aviva Investment Funds to suit your needs or moral beliefs. Alternatively you can simply decide to leave the investment decisions to the specialists at Aviva and your contributions will go to the With Profits fund. The State Pension The State provides pensions on two levels: the basic State pension; and the additional State pension. The basic State pension is a flat rate pension and is based on your National Insurance contributions. It is payable from age 65, except that a lower age applies to women born before 6 April Before April 2002, the additional State pension was known as SERPS the State Earnings Related Pension Scheme. From April 2002, it is S2P the State second pension. Data Protection Act The Act is designed to give individuals rights and protection in respect of the use of personal data concerning them. Data Controller: as the Trustees employ their own staff, not third-party administrators, the Trustees are the data controllers for the purposes of the Act. Use of personal data: the data provided by individuals or their employers, or obtained with the consent of individuals, will be used by Aviva or its Actuary to calculate pension scheme benefits, eligibility for benefits and scheme valuation liabilities. Annual Report and Accounts: members receive a summarised version of the Annual Report and Accounts each year, but are entitled to the full version on request. Amendment or discontinuance: while Oxfam intends to continue the Scheme indefinitely it reserves the right to amend or discontinue the whole, or any part of it, at any time. However, no amendment will be made which will reduce the benefits you have built up to the date of the amendment. Complaints In the first instance, specific enquiries should be referred to the client manager who is responsible for your pension administration at Aviva. Complaints Procedure If you are dissatisfied you may at any time write to the Head of Customer Services who will attempt to resolve the issue.

8 If you fail to get satisfaction from the Head of Customer Services, you may request a formal resolution from the Chief Executive. A decision should be provided within two months of your formal request. If you remain unhappy or disagree with the formal resolution from the Chief Executive, within six months of the above you have the right to appeal to the Trustees. The result of your appeal should be provided within two months of your request. OPAS OPAS is available at any time to assist members and beneficiaries of the Scheme in connection with difficulties they have failed to resolve. The address is: OPAS The Pensions Advisory Service 11 Belgrave Road London SW1V 1RB Tel: Pensions Ombudsman The Pensions Ombudsman may investigate and determine any complaint or dispute of fact or law in relation to the Scheme where OPAS has not resolved the issue. The address is: The Pensions Ombudsman 11 Belgrave Road London SW1V 1RB Tel: OPRA The Occupational Pensions Regulatory Authority (OPRA) is able to intervene in the Scheme administration where Trustees, employers or professional advisers have failed in their duties. The address is: OPRA Invicta House Trafalgar Place, Brighton East Sussex BN1 4DW Tel: Tel: Definitions Normal Pension Age: is age 65. Protected Pension Age: members who joined the scheme before 6 April 2006 will have a Protected Pension Age of 50 from 6 April This will allow these members to retire from age 50 after 5 April 2010, but if they retire before age 55 they will be required to leave the employment to which the pension relates. Pensionable Salary: is your basic annual salary plus certain other allowances that are set out in Oxfam s policy and procedures manual. Deferred Pension: is the pension secured for you on leaving pensionable service and is payable on retirement. AVCs: Additional Voluntary Contributions (AVCs) is the name given to any contributions you pay above your normal contributions to the Scheme to secure extra benefits. Annual Allowance: the annual allowance came into effect on 6 April 2006 and is 215,000 for the tax year 2006/07, and will increase by 10,000 each year to 255,000 in 2010/11.

9 If the amount by which the value of your pension benefits increase in any one year (known as the input value explained below) exceeds the annual allowance, you will be liable for an annual allowance tax charge, even if your contributions are less than 100% of your earnings. This tax charge is payable (through self assessment) at 40% on any increase in benefits above the annual allowance. You will be responsible for reporting any excess growth on your annual tax selfassessment return and also for paying the annual allowance tax charge. If you are concerned about this we recommend that you seek independent financial advice. The Trust will, on request, supply you with information on the increase in the value of any pension rights held with us. Lifetime Allowance: Due to changes introduced by the Finance Act 2004, from 6 April 2006 each individual in the UK is allowed to accumulate pension benefits up to a value of 1.5m (the limit for the 2006/07 tax year) without incurring tax charges. You must also take into account the value of any pension benefits you have from previous pension arrangements in estimating whether you have scope to pay AVCs without any danger of breaching the Lifetime Allowance. If the Lifetime Allowance is exceeded a tax charge of 55% will be levied on the excess fund if the benefits are taken as a lump sum. If the excess benefits are taken as pension then a tax charge of 25% will be levied, as well as the usual income tax payable on the pension instalments. If you are concerned that your benefits from all sources may breach the Lifetime Allowance you should consult an Independent Financial Adviser as to your best course of action.