G4S Personal Pension Plan Employee Guide Expiry 05/04/16
Section Page number Introduction 1 Contacts 1 What the Plan can offer you 2 How does the Plan work? 3 Contribution levels 4 Contribution limits 4 How your policy is invested 5 Plan charges 6 Other investment options 7 Keeping track of your policy 7 Retirement benefits 8 State pension provision 9 Important information 9 Plan regulation 10 Frequently asked questions 11
Introduction This guide outlines the features and benefits that will be provided for you and your dependants if you are a member of the G4S Personal Pension Plan (the Plan). The Plan is a qualifying workplace pension scheme for auto enrolment purposes. G4S will pay contributions on your behalf, on top of your normal salary. You will have your own policy under the Plan and have control over how much you contribute, where your money is invested and flexibility over how you take your pension when you choose to retire. All money paid into your policy will belong to you and you will benefit from tax relief from the government. If you die before you start to receive your pension, the value of your fund as at the time of your death will be payable to your dependants or your estate. This guide complements the Key Facts documents and investment information which can be found on Friends Life website. Please ensure that you read these documents. Contacts If you would like to speak to someone about the Plan, you can call the pension helpline on 0345 600 8712. The helpline is run by Friends Life. If you prefer, you can email your query to g4s@friendslife.co.uk Friends Life PO Box 1550 Milford Salisbury SP1 2TW Telephone: 0345 600 8712 Email: g4s@friendslife.co.uk 1
What the Plan can offer you 1 Contributions from the company and tax relief on your contributions Contributions from the company as set out in your contract of employment Full tax relief on your contributions for most UK employees Up to 25% of your fund value as tax-free cash if taken either as a one-off payment or in instalments 2 Protection for your family If you die before you reach 75 then the value of your pension fund is payable, taxfree, to your beneficiaries If you die after 75, and have not purchased an annuity, then your beneficiaries will receive the value of your pension fund, although this will be subject to a tax charge The option to secure a dependant s income if you purchase an annuity with your pension pot In addition you may be covered by the company s separate life assurance scheme* * You should refer to your employment contract for details of your entitlement to life assurance. 3 Personal ownership Your policy and all contributions belong to you, not the company You can suspend your membership at any time, however by doing this you will then be subject to the requirements of the auto enrolment legislation, which may result in you being automatically enrolled into a compliant pension arrangement. Further information would be provided at the time along with details of how to opt-out if you do not want to remain a member of the Plan. You do not need to stop working to access your pension pot You can transfer funds from other pension arrangements into your policy and your fund is transferrable to other suitable pension arrangements. It is recommended that you take advice to ensure that you fully understand the decision being taken. 2
How does the scheme work? There are three main areas for you to consider. 1) How much you pay in (your contributions): As a general rule the more you save the higher your pension is likely to be. It is therefore important that you review the level of contributions being made every year. When deciding how much to contribute you should think about the level of income you will need when you retire. 2) Where you invest your contributions: When you join the Plan your contributions are automatically invested in the default investment option, which is explained in greater detail later on this guide. There are also a number of investment funds available for you to choose from if you do not think that the default fund meets your investment preferences or personal circumstances. It is therefore important that you understand your investment preferences and there are tools on the Friends Life website that can help you. In the context of pension saving investment concepts are relatively straightforward. - Firstly, the funds have different levels of risk. The higher the risk the higher the potential level of return but equally there is a greater chance of making a loss. - Secondly, the funds have different levels of volatility. Funds that are more volatile are likely to have larger differences between the highs and the lows of the value of the funds. Funds with lower volatility will not have such extremes between the highs and the lows and therefore your fund value should increase but with lower levels of fluctuation. - Thirdly, investment manager charges reduce the value of your fund and therefore your overall pension. Generally, the charges are linked to the complexity of the fund and the level of skill needed by the investment manager to meet the objectives of the fund. Only you can decide the level of risk and volatility that you re prepared to accept and in turn whether you think the associated costs are good value. It is also likely that your attitude changes as you get older because certainty over your fund value becomes more important. The important point is that you give some consideration to your preferences so that you can select investment funds that match your preferences. 3) The choices you make at retirement When you retire your pension pot does not automatically convert into a pension. When you retire there will be a number of options available to you and these are explained in more detail on Pages 7 & 8. With effect from April 2015 those over 55 will be able to withdraw as much money from their pension pot as they wish without the previous restrictions. Unless you choose to take all of your tax free cash in one go then each time you take cash from your pension account you will receive 25% of the amount taken tax-free. You will receive more information about the options available to you as you approach retirement. 3
Contribution levels You will normally be required to contribute a percentage of your Pensionable Salary. You will receive a separate letter from the company confirming the percentage you are required to pay, and the definition of Pensionable Salary. This percentage is the minimum amount you must pay in order to receive a company contribution. You can pay more if you wish, subject to certain limits (see below). Your regular pension contribution will be deducted from your take-home pay, net of basic rate tax at 20%. For example, if you pay personal contributions of 10, then 8 will be deducted from your take-home pay. When your contribution reaches Friends Life they will claim basic rate tax relief (in this example it will be 2) on your behalf and immediately credit this to your account. This means that, in the example, the total member contribution invested will be 10, but only 8 will have been deducted from your take home pay. If you are a higher rate tax payer, you will normally be entitled to additional tax relief which you can claim through self-assessment, or by requesting a change to your tax code from your local tax office. You can also make single contributions directly to your policy. See the Frequently asked questions section for further details. If your employer operates a Salary Sacrifice scheme then you will receive separate communication about how the Salary Sacrifice scheme operates. Contribution limits There is a limit on the level of contributions that can be made to a pension plan and receive tax relief, which is the greater of 3,600 or 100% of your earnings per annum. Contributions to all pension plans in your name are subject to an overall limit known as the Annual Allowance. The annual allowance for the 2015/16 tax year has been set at 40,000. Any contributions in excess of the annual allowance are subject to a variable tax charge of up to 45%. You should seek independent financial advice if you believe you may be affected by the Annual Allowance in this or any future tax years. There may be a charge for this service. 4
How your policy is invested The Plan is invested through Friends Life, who provide a range of funds for you to choose from. When you join the Plan you will be automatically invested in the default investment option which is called the G4S Investment Programme (you may see this described as a lifetime investment programme on some Friends Life systems). The G4S Investment Programme is designed so that your contributions are invested in different funds depending on the amount of time you have left until retirement: At first, all your contributions are invested in the FL G4S Long Term Capital Growth Fund (unless you are within 4 years from your selected retirement age). The FL G4S Long Term Capital Growth Fund invests in a range of asset classes including equities, gilts, bonds, cash and derivatives. It aims to achieve long term capital growth with less volatility than conventional equity funds. As you get closer to retirement your pension pot will be gradually moved, on a monthly basis, into bonds and gilts which have a lower investment risk. The reason for this is to protect the level of pension you can buy with your fund. Your pension pot will be switched into a Cash fund, which is widely regarded as having the least level of investment risk. By the time you reach retirement 25% of your pension pot will be invested in the Cash fund with the remainder being held in bonds and gilts. The chart below highlights the stages outlined above: The move from being invested entirely in the FL G4S Long Term Capital Growth Fund to the final asset allocation takes four years and starts automatically based on your selected retirement age. This is automatically set at 65 when you join the Plan, but you can change it at any point by contacting Friends Life. Under the current law the minimum age you can select is 55. If your pension pot is invested in the G4S Investment Programme, it is not possible to invest in other funds at the same time. You can choose to remain in the G4S Investment Programme or you can select other funds (see Other Investment Options below). For further information on your investment options please contact Friends Life, whose details can be found on Page 11 of this guide. Please note that the default option does not represent a recommendation from the company or the company s investment advisers and you should select the appropriate funds to suit your own needs. 5
Plan charges As a member of the Plan, you will pay a charge, known as the Annual Management Charge (AMC). This covers the cost of administration and your investment in the funds you have chosen. The AMC is calculated each day based on the value of your account. On a monthly basis, Friends Life adds up the amount of the AMC and deducts this from your account with all deductions being shown on your annual statement. The AMC is made up of two core elements: The core plan AMC which covers the cost of administration. G4S has negotiated an AMC with Friends Life of 0.40% per annum for its employees investing through the Plan. Some fund managers (typically those who offer actively managed funds, where the level of skill in managing the fund, and the complexity of the investment vehicles used to meet the objectives of the fund are greater) charge an additional AMC for investing in their funds. If you choose to invest in one of these funds, you will pay an additional AMC. The AMC for each of the funds available to you is shown in the Choosing your own investment funds brochure. The FL G4S Long Term Capital Growth fund (the Plan s default option) is an example of such a fund and includes an additional charge of 0.19%. This higher charge reflects the fact that the fund is less volatile than might otherwise be expected. Whether you want to remain in this fund will be determined by your personal preferences and overall attitude to investment risk. Additionally, some funds carry additional expenses these are costs that are incurred by the fund manager in managing the assets in the fund, and include things such as fees to auditors, trustees and valuers. These expenses are not taken as an explicit deduction rather, they are taken into account when the fund manager calculates the daily unit price and is therefore automatically built into the value of your account. Details of where these additional expenses apply are also shown in the Choosing your own investment funds brochure. The level of AMC taken depends on the value of your account and the funds in which you have chosen to invest. Where you have chosen to invest in more than one fund, the AMC will be deducted proportionately across all of the funds you have chosen (based on the value invested in each fund and the AMC for the fund you have chosen). For full details of all funds available to you in the Plan and their charges, including expenses, please refer to the Friends Life Choosing your own investment funds brochure. 6
Other investment options You can invest in any one (or more) of the investment funds, up to a maximum of ten at any one time, listed in the Friends Life Choosing your own investment funds brochure, including the FL G4S Long Term Capital Growth Fund. There is a wide selection of funds available for you to invest in, ranging from very high risk to very low risk and covering different asset classes such as bonds, equities, property and cash. In addition, there are two lifestyle investment programmes offered by Friends Life. These have a similar structure to the default G4S Investment Programme (i.e. your investments are automatically switched to lower risk funds as you approach retirement), but with different timescales and mixes of investment funds. It is important to bear in mind that past performance of funds is not a guide to future returns. The value of your investment can fall as well as rise, and you may get back less than you invested Changing your investment decision You are able to change your investment decision at any time without charge. A fund switch form can be obtained on request from Friends Life, or changes can be made via Friends Life s website which can be found at www.friendslife.co.uk/membersite Friends Life can discuss your options regarding fund selection through the pension helpline on 0345 600 8712. The helpline can provide information only and is unable to recommend any particular fund(s). Keeping track of your policy You are able to access your policy details online and request changes, as well as use Friends Life s interactive pension planning tools. Details of how to do this will be provided once you join the Plan. It is your responsibility to ensure that the information held by Friends Life is up to date. This includes changes of name and/or address. Each year you will receive a written benefit statement from Friends Life, which will show all contributions paid, the value of your policy and an illustration of the benefits which may be available to you at retirement. Details of the investment performance of your chosen fund(s) will also be available from Friends Life s website www.friendslife.co.uk/membersite 7
Retirement benefits The normal retirement age for the Plan is 65 but you can access your pension pot at any point from the age of 55. You can choose to access your pension pot even if you continue to work. No guarantee is given regarding the future income that this Plan will provide. The final value will depend on factors such as the amount of money paid into your plan, any additional funds that may have been transferred in, the investment returns achieved, and the options you select when you retire. It is important to understand that the pension pot that you build up with Friends Life will not automatically pay you an income on retirement. When you reach retirement age you will have a number of options available to you and some of these are summarised below: Annuity purchase provides a secure, guaranteed taxable income for life. It is important to understand you do not need to buy your annuity with Friends Life. You may find you are able to secure a higher income by shopping around - this is known as the Open Market Option ( OMO ). You do not need to convert all of your pension pot into an annuity as the current legislation allows you to take up to 25% of your pension pot as a tax free lump sum. From April 2015 those over 55 will be able to withdraw as much money from their pension pot as they wish without the previous restrictions. You can choose to take all of your tax free cash in one go or you can take your money in instalments such that each time you take cash from your pension account you will receive 25% of the amount taken tax-free. Income drawdown enables your pension pot to remain invested whilst providing an income under either a capped or flexible arrangement. Points to consider when purchasing an annuity You may prefer to purchase an annuity as this provides the security of a guaranteed income for life. When purchasing an annuity it is important to remember that you will have an open market option, which means that you will be able to purchase your pension from the provider offering the best terms to you. In addition you can add additional features to your annuity including: Payments can be guaranteed for a minimum period The pension may continue, in whole or in part, to your spouse, civil partner or dependant(s) after your death The pension can increase in payment each year You should note that the more options you add to your pension, the lower your initial pension will be. Maximum benefits If the total value of your pension benefits (i.e. the value of your policy plus the value of any other pension benefits you may have) exceeds the Lifetime Allowance then benefits in excess of the allowance will be subject to a tax charge. The allowance is 1.25m for the 2015/16 tax year and it will fall to 1m for the 2016/17 tax year. Please note that at the point of your death, any death in service benefits you may be entitled to will also be included in the Lifetime Allowance test. If you think you could be affected by the Lifetime Allowance in this or any future tax years, you should seek independent financial advice. There may be a charge for this service. 8
State pension provision Following on from government proposals, it has been announced that the introduction of a single tier state pension will be brought forward by one year to 6 April 2016. This will replace the Basic and Second State Pensions. The amount of flat-rate pension paid would depend on the number of years you have worked for and subsequently paid National Insurance Contributions for (known as qualifying years). To receive the maximum pension you need 35 qualifying years and would receive pro-rata amounts for fewer qualifying years, subject to a minimum of 8 years. Rights already earned to a Second State Pension will not be lost. The new single tier State pension will be 144 a week (in 2012-13 terms) plus a protected amount that would be calculated for any Second State Pension greater than 37 a week. Important information This guide is intended to be a summary. Whilst every effort has been made to ensure that it is accurate, if there is any difference between the terms and conditions of your individual policy with Friends Life and this guide, the policy will apply. All information provided in this guide is based on HM Revenue & Customs (HMRC) figures and regulations for the 2015/16 tax year. If you have any queries regarding the guide, you should contact Friends Life in the first instance. Friends Life will able to provide general information in respect of this guide. You can contact them on either 0345 600 8712 or at g4s@friendslife.co.uk Please ensure you read all accompanying literature provided to you with this guide. More general information on pensions and finance can be found at www.moneyadviceservice.org.uk Amendment or termination The company reserves the right to amend or withdraw the Plan at any time. This is inclusive of the right to increase or decrease employer contributions provided that these do not fall below the minimum required to comply with legislation. However, by law, the company must continue to maintain your membership of a scheme that meets certain government standards. Therefore if your membership of such a scheme ends (and it is not because of something you do or fail to do), you will be put into another scheme that meets government standards straightaway. Cancellation rights You have the right to cancel your policy within 30 days of receiving your cancellation notice. If you decide to cancel your policy, your personal contributions will be returned net of basic-rate tax relief. This may be subject to any fall in value. 9
Plan regulation Please ensure you read Friends Life s Key Facts documents and accompanying literature before joining the plan. Your policy is covered by the Financial Services Compensation Scheme (FSCS). You may be entitled to compensation from the scheme if the administrators of the pension scheme cannot meet their obligations. The amount of compensation depends on the type of business, the funds you are invested in and the circumstances of the claim. Further information about compensation scheme arrangements is available from the FSCS on 020 7892 7300 or by email: enquiries@fscs.org.uk Making important decisions It is recommended that you obtain financial advice when making decisions about your retirement as it is a complex area and in order to obtain the best income in retirement it is important that you make the correct decision for you. The company has appointed a company to help with your retirement planning who are specialists in securing the best annuity rates and are also experienced in the area of income drawdown. Further details can be found on the G4S intranet site www.retirementservice.co.uk/g4spension 10
Frequently asked questions What is the G4S Personal Pension Plan? It is a pension plan to which you can contribute and receive contributions from your employer. You will have your own policy under the plan, which belongs to you. The plan is administered by Friends Life. Is this plan linked to automatic-enrolment? G4S is required by law to automatically enrol certain staff into a workplace pension scheme and it has selected this Plan for that purpose. Further information on the process for automatic enrolment will be provided to you where relevant. Further information on automatic enrolment can be found at www.pensionsadvisoryservice.org.uk How much will my pension pot be worth? The value of your pension pot will depend on the contributions paid to your policy by you and the company, the investment performance of the funds in which contributions are invested, the effect of the annual management charge and the options you select when you retire. How is my policy invested? You have control over how your funds are invested and can choose from a wide range of investment funds. A default fund has been established if you do not wish to make investment decisions yourself. Please refer to the section of this guide entitled How your policy is invested. Can I make single contributions to the plan? If you wish to make a single contribution from your own bank account into your policy, you should contact Friends Life directly on 0345 600 8712 or in writing at the address below. In some instances, you will be required to provide proof of identity for antimoney laundering purposes. You will automatically receive basic-rate tax relief on any single contributions you make, provided that your total contributions are within the limits applicable at the time of payment. Your payment should therefore be for the amount you wish to invest, less basic-rate tax relief. You can work this out by multiplying the amount you wish to be invested by 0.8. Are there any limits to the amount I can contribute or save in my pension? Yes, there are limits on both the amount you can contribute and the amount you can save. See the sections of the guide entitled Contribution limits and Retirement benefits for further details. Can I transfer existing pension arrangements into the plan? Yes, however you should be certain that doing so would be in your best interests and you may wish to seek independent financial advice, for which there may be a charge. Some pension arrangements have guarantees or additional benefits that would be lost on transfer. What happens if I leave the company? Because your policy belongs to you, in the event of leaving the company you will retain your policy at its full value. Unless you are eligible to draw benefits, your fund must remain invested in a suitable pension policy but you have the option to transfer it away from Friends Life or carrying on making personal contributions should you wish. If you are considering transferring, you should consider the charges, options and rules under the receiving pension policy or scheme and be comfortable that transferring is in your best interests. You may wish to seek independent financial advice regarding this choice. There may be a charge for this service. When can I access my pension pot? You can access your pension pot from age 55. You may be able to take your benefits earlier if you retire through serious ill health. The decision whether to allow early retirement in these circumstances will be made by HM Revenue & Customs. How can I access my pension pot? Please refer to the Section called Retirement Benefits on pages 7 & 8 of this guide. 11
How much state pension will you get? A projection of your state pension(s) can be obtained either online or via post. Details of how to do this can be found at: www.gov.uk/statepension-statement How does joining this plan affect Pension Credit? Depending on your total level of retirement income, you may also be eligible for Pension Credit. This has two elements; a guarantee credit to ensure a minimum level of income for those aged over 60, and a savings credit which will provide an additional income from age 65 for pensioners who have made some provision for their retirement. The minimum level of income provided under the guarantee credit will be means tested and therefore will take into consideration any private pension savings, including income arising from a group pension. The retirement benefits arising from your membership of the plan could therefore affect either Pension Credit payments. For further information please refer to the Department for Work and Pensions website at www.dwp.gov.uk What happens to my pension fund if I die and have not purchased an annuity? If you die before the age of 75 then the value of your pension fund, as at the time of your death, will be paid to your dependants or estate. This will normally be paid free of tax but will be measured against your Lifetime Allowance please see the section entitled Retirement benefits in this guide. If you die after the age of 75, the value of your pension fund at the time of death can still be paid to your dependents. Any payments will be subject to a tax charge. The level of the tax charge will depend on whether the beneficiary takes the money as a lump sum or as an income stream. If taken as a lump sum then a tax charge of 45% will be applied. If taken as an income stream then the income will be taxed based on the beneficiaries marginal rate. The decision on whom the benefits will be paid to is at the discretion of Friends Life, however you can nominate a chosen beneficiary or beneficiaries by completing a nomination form and sending this to Friends Life. This will then be taken into consideration when a decision is made. The form will be provided with your policy documents upon joining but it is important that this form is updated should your personal circumstances or requirements change. What happens to my pension if I die and have bought an annuity? This will depend on the benefits you selected when purchasing your annuity. You can elect to have your pension paid in full for a guaranteed period. You can also secure a pension payable to your spouse, civil partner or dependants in the event that you die before them. The more benefits you add to your annuity, the lower your initial pension will be. If you purchase a single life annuity without a guaranteed period then there will be no further payments to your dependents following your death. Is my pension fund secure? Your pension fund belongs to you and is not an asset of your employer. The day to day value of your fund will depend on the performance of your chosen investment fund(s) and may go down as well as up you should therefore ensure you select investment funds that suit your attitude to risk. Your policy is covered by the Financial Services Compensation Scheme. Please refer to the section in this guide entitled Plan regulation for further information. My question is not answered here who should I speak to? If you have a question about the pension scheme, please contact Friends Life. Friends Life PO Box 1550 Milford Salisbury SP1 2TW Telephone: 0345 600 8712 Email: g4s@friendslife.com 12