Lyreco UK Limited Group Personal Pension Plan

Lyreco UK Limited
Lyreco UK Limited Group
Personal Pension Plan
6 April 2015
6 April 2015
This guide, which is valid until 5 April 2016 or until further changes are made Lyreco UK Limited Group or legislation, has been approved by
Aon Consulting Limited whose registered office is Briarcliff House, Kingsmead, Farnborough GU14 7TE and its registered number as detailed
in the Financial Services Register is 184915.
You can check this by visiting: www.fca.org.uk/firms/systems-reporting/register or by contacting the Financial Conduct Authority on 0800 111
6768.
1
Dear Colleague
It is important to plan ahead if you want to ensure you have an income when you stop working. The more you plan for your
retirement now, the less you will have to worry about it later. Pension planning is important for all of us - even if you are just
starting your career with us and retirement seems a long way off.
We run the Lyreco UK Limited Group Personal Pension Plan (the Plan) to provide our employees with a tax-efficient and
cost-effective way to save and invest money for their retirement. Membership of the Plan is one of the most valuable benefits
we provide for our employees.
The Plan is provided by Scottish Widows and is a ‘Defined Contribution’ pension plan, which means that you know in advance
how much will be paid into it. As a member of the Plan you benefit from an employer contribution in addition to the
contribution you make. Scottish Widows offers a wide range of investment options. The choices you make about investing are
important as they will impact the value of your pension fund when you retire.
Once you are a member of the Plan you will be issued with a personal pension policy and you will receive a benefit statement
from Scottish Widows annually. You will also be able to register for online access to track the progress of your own policy
within the Plan.
This booklet gives you information about how the Plan works and the benefits available to you. We know pensions can seem
complex so we have included further information in the section ‘What else do I need to know?’ towards the end of this guide
as well as details of useful contacts and a ‘Jargon Buster’. Please remember you have access to more information and tools to
help you in your pension planning at: www.scottishwidows.co.uk/lyreco. If you do not have access to a computer to obtain
further details and need printed copies of the materials or more information please contact: Denise Smith or James Rowson at
Aon Consulting Limited on 0117 948 5005. Please note that Scottish Widows information and policy documents will always
over-rule this booklet if any differences between them come to light.
If you are unsure whether any of the benefits covered in this booklet are suitable for you please consider seeing a financial
adviser. The Financial Conduct Authority website provides information in relation to finding a financial adviser at:
www.fca.org.uk/consumers/financial-services-products/investments/financial-advice/finding-an-adviser
Please note that we have appointed Aon Consulting Limited to advise us about arranging the Group Personal Pension Plan. Aon
Consulting Limited are paid commission by Scottish Widows, details are contained within the Scottish Widows key features
documentation.
If you have any questions or need further information please do not hesitate to contact Barbara Managh.
Yours faithfully
Duane Fullwood
Finance Director
Lyreco UK Limited
Contents
Joining – Start making plans
4
Contributing – What it costs to join
6
Investing – Helping your savings grow
10
Taking your benefits at retirement
12
What happens if?
14
What else do I need to know?
15
Problems and complaints
19
Useful contacts
20
Jargon Buster
22
3
Lyreco UK Limited
Joining – Start making plans
Automatic Enrolment
By law employers must place most of their employees into a qualifying workplace pension scheme and make a minimum level
of contribution. This is known as ‘Automatic Enrolment’.
Lyreco UK Limited will enrol you into the Plan automatically, if you meet certain conditions. The Government sets the criteria
for eligible employees and Lyreco UK Limited will provide written confirmation of your eligible status once your personal
situation has been assessed.
You have the option to ‘opt in’ to the Plan if you are not automatically enrolled (see ‘Opting in’ overleaf).
When you are automatically enrolled into the Plan or if you opt in to the Plan, you will receive policy documentation as
evidence of your membership. At outset your policy will be set up with a selected retirement age (SRA) of age 65.
If you already have a personal pension you can still be a member of the Plan; you are allowed to contribute to more than one
pension at the same time.
Opting out
If Lyreco UK Limited enrols you in to the Plan automatically but you do not want to be a member of the Plan, you can ‘opt out’
by following the instructions Scottish Widows will send you. You will have a month from the date stated in the instructions to
opt out. If you opt out you will be treated as if you had never joined the Plan. You and Lyreco UK Limited stop contributing to
the Plan and any contributions paid from your salary to the Plan will be refunded in the next available payroll run. If you opt
out you will lose your employer’s contributions and will not be building up a retirement fund in the Plan.
If you opt out you can re-join at a later date by completing an Opt In form which is available from the HR Team in Telford.
If you opt out or stop contributions to the Plan and do not re-join the Plan while in this employment, current regulations state
that your employer must automatically enrol you again every three years if you are an eligible employee. Lyreco UK Limited
will advise you if this happens. If you are automatically enrolled again you will be able to opt out if you still do not want to be a
member of the Plan.
If you decide that you want to leave the Plan any time after the initial statutory opt out period, please advise the HR Team.
Your benefits will be treated as if you had left employment – please refer to the section ‘What happens if?’ later in this booklet.
4
Lyreco UK Limited
Opting in
To opt in to the Plan you need to complete an Opt In form which is available from Barbara Managh.
If you opt in to the Plan, the Plan provider will include details of your right to change your mind and a cancellation form with
your membership confirmation letter. You then have 30 days from the date you receive the letter to cancel. You should only
return the form if you want to cancel your membership of the Plan. Please note that if you do cancel during the 30-day
period, the amount returned may be less than what was paid in. You will then receive this amount as salary and you will
pay Income Tax and National Insurance on it in the normal way.
Pension protection
If you have Primary, Enhanced, Fixed Protection, Fixed Protection 2014 or have applied for/are going to apply for Individual
Protection 2014, please read the important information contained in the ‘What else do I need to know?’ section before making
any decisions about whether to join your employer’s pension and/or life assurance arrangements.
Other pension benefits
Once you are a member of the Plan you may be able to transfer in benefits from a previous pension arrangement(s). However,
this is a complex area and you should seek financial advice beforehand. If you wish to review your previous pension
arrangement(s), please contact the Aon Transfer Team in the first instance on 0117 945 3559 or by email to
[email protected].
5
Lyreco UK Limited
Contributing – What it costs to join
Postponement
The Plan uses a period of postponement from the date when an employee first joins Lyreco UK Limited before they are auto
enrolled into the Plan (assuming they meet certain criteria). During this postponement period employees can join the Plan
using the opt in route – as described earlier. The period of postponement will be two months but will depend on the date of
the month that you start employment (before or after the monthly payroll cut off point). Your actual postponement period
will be confirmed to you by Lyreco UK Limited.
Tax relief
To encourage savings the Government allows tax relief on pension contributions. Under current tax rules if you pay basic rate
Income Tax every £1 you contribute costs you 80p. Contributions are deducted from your net pay but are grossed up by the
basic rate Income Tax relief before they are invested into your policy in the Plan, as shown in the example below.
Monthly contribution – Breakdown to show benefit of tax relief
Your contribution
£100
Income Tax relief at 20%*
£20
Cost to you deducted from net pay
£80
Employer contribution**
£100
Total amount paid into your policy
£200
*Based on tax rates for the year starting 6 April 2015.
**Assuming you and your employer contribute the same percentage of your salary.
Salary Sacrifice basis
As a member of the Plan your contributions are paid on a Salary Sacrifice basis. This means that you select the level of salary
you wish to “sacrifice” for a pension contribution and your salary reduces by this amount. Your employer then pays this
amount into the Plan on your behalf, in addition to their employer contribution. As a result, the amount you have given up
never becomes part of your salary. The total amount paid into your pension policy is the same as it would be if you did not
participate in Salary Sacrifice, but as you do not pay National Insurance on the salary you have given up, your take-home pay
will increase slightly. Please see below for an example comparison between Salary Sacrifice and paying via the contributory
method. The example shows how National Insurance is calculated depending on whether you are taking part in Salary Sacrifice
or not.
When you are automatically enrolled in to the Plan or if you opt in to the Plan, you must sacrifice a minimum of 1% of your
basic salary to receive a 2% contribution of your basic salary from Lyreco UK Limited.
Contributions will be paid via PSS unless Lyreco UK Limited opts you out of PSS because it is not in your financial interest or you
choose to opt out of PSS and pay via the Contributory method.
You can give up higher levels of salary if you wish. Please contact the HR Team for further details. You need to bear in mind
some tax rules and limits which are confirmed in the ‘What else do I need to know?’ section of this booklet.
6
Lyreco UK Limited
Reference salary
Your higher salary, before the reduction in "exchange" for a
pension contribution, is called your ‘Reference salary’. This
is kept on record and is used for pay reviews, calculating
pension contributions, mortgage references and benefits
such as life assurance.
Important note
Changing how much you sacrifice
You can arrange to amend the level of salary you exchange
on 1st January or if you experience a ‘life event’ and you
should contact the HR Team . You need to bear in mind
some tax rules and limits (see the section ‘What else do I
need to know?’).
Life events
You can change the amount of salary you give up during the
annual review period or if you experience a life event.
Examples of life events include:

Birth/adoption of a child

Divorce/separation

Death of a partner

Marriage/civil partnership

Notice or start of maternity leave
Salary Sacrifice reduces your earnings which will reduce
the maximum level of contributions you can make to
any other pension arrangements. It may also affect your
entitlement to some State benefits which are based on
your income or the National Insurance you pay. These
include Employment and Support Allowance and the
State Second Pension (‘S2P’). For 2015/16, if the salary
you receive (less the contributions you have given up)
falls between £15,300 (the ‘Low Earnings Threshold’)
and £40,040 (the ‘Upper Accrual Point’), membership of
the Plan will involve a small reduction in your S2P.
If you are unsure how Salary Sacrifice might affect your
State benefits, you should contact Her Majesty's
Revenue and Customs (HMRC). You can find out more
information about Salary Sacrifice at:
www.gov.uk/salary-sacrifice-and-the-effects-on-paye.
Opting out of Salary Sacrifice
You can choose to opt out of the Salary Sacrifice
arrangement and make contributions on a contributory
basis. You should contact the HR team to change the
method of your contribution.
If you do not experience a life event, the level of salary you
give up must stay the same until the next review date.
Please refer to the HR Team for information on how maternity or paternity leave, or sickness absence may affect your
contributions to the Plan.
7
Lyreco UK Limited
Paying Contributions from your salary
This applies if you have opted out of salary sacrifice and pay contributions from your monthly salary.
This is an alternative way of making personal pension contributions. You receive your salary each month in full and then pay
your contribution from it.
Your contributions are taken from your pay and paid into the Plan each month along with Lyreco UK Limited’s contributions.
You can change the amount you contribute or make a one-off contribution by contacting the HR Team in writing.
When you pay contributions into a pension plan, you may need to bear in mind some tax rules and limits – see the section ‘Tax
and your benefits’.
Will I receive tax relief on my contributions?
If you don’t pay Income Tax: You will automatically get tax relief of 20% on the first £2,880 net (£3,600 gross) you pay into a
pension each tax year on contributions up to £2,880 net (£3,600 gross) or 100% of your relevant UK earnings, if these are
greater.
Pay Income Tax at 20%: If you are a basic rate taxpayer you will automatically receive tax relief on your personal pension
contributions up to 100% of your relevant UK earnings , because your pension provider claims tax relief for you at your basic
rate of 20% and adds this to your policy.
Pay Income Tax at 40%: You will receive basic rate tax automatically. You can claim an extra 20% tax relief on contributions up
to 100% of your relevant UK earnings in your Self-Assessment tax return. If you don’t fill in a tax return, call or write to HMRC.
Pay Income Tax at 45%: You will receive basic rate tax automatically. You can claim an extra 25% tax relief contributions up to
100% of your relevant UK earnings in your Self-Assessment tax return. If you don’t fill in a tax return, call or write to HMRC.
8
Lyreco UK Limited
Comparing Salary Sacrifice and contributing from pay (Contributory Method)
This example shows how Income Tax and National Insurance is worked out, depending on whether you are taking part in Salary
Sacrifice or by the contributory method. The example uses a salary figure of £25,000 and assumes contributions of 1% from
you and 2% from Lyreco.
Salary Sacrifice Member
Contributory Method Member
£25,000
£25,000
£250
Nil
Tax and National Insurance based
on salary amount of
£24,750
£25,000
You pay tax and National Insurance of
£4,833
£4,913
Contribution from your pay
Nil
£200 (this is £250 less £50 tax
relief)
Your employer contributes
£750
£500
Total payment into pension
£750
£750
£19,917 (includes increase from
National Insurance saving)
£19,887
Salary
Salary amount given up
Take-home pay
Please note: The calculations in the example are based on a yearly personal allowance of £10,600 (2015/16 tax year) and are
estimates only. They may not reflect the Plan’s actual contribution rates.
Is there a limit on how much I can sacrifice each year?
You will be subject to a tax charge if the total contributions exceed the Annual Allowance, which is £40,000 for pension input
periods ending on or after 6 April 2015.
For further details on the Annual Allowance please refer to the ‘What else do I need to know?’ section at the back of this
booklet.
9
Lyreco UK Limited
Investing – Helping your savings grow
There is a range of funds available to you for investing your contributions. The Scottish Widows Pension Funds - Investor’s
Guide, available on: www.scottishwidows.co.uk/lyreco, gives you full details of the funds available including external fund links
and the applicable fund charges.
The ‘default’ option
Contributions will automatically be invested in the ‘default’ option.
This option automatically moves your investments gradually from the higher risk Scottish Widows SSgA 50:50 Global Equity
Index Fund into the lower risk Scottish Widows Conventional Gilts Over 15 Years Index Fund and Scottish Widows Cash Fund
over the 7 years before your SRA. Such an approach is called a lifestyle strategy.
Full details of each component fund are provided in the Scottish Widows Pension Funds - Investor’s Guide, along with further
details on selecting your own funds and/or removal from the lifestyle strategy.
Please note that a ‘lifestyle’ approach, where the investment is automatically switched to lower risk funds as you approach
retirement, may not be suitable if you do not intend to fully draw benefits at your SRA – perhaps because you wish to utilise
Flexi Access Drawdown or Uncrystallised Fund Pension Lump Sums.
It is important that you review your SRA from time to time and advise Scottish Widows as soon as possible if you want to
change it. Otherwise, the fund switching may start at the wrong time - too late, and you could end up being exposed to
unnecessary risk or too early, and your investments may miss out on potential higher returns.
Please note that investment decisions you make at the outset are not final – at any time, you can switch existing funds, redirect
future contributions to other funds, or both. You should contact Scottish Widows if you wish to make any such fund switches.
Types of funds
Unit-linked funds
These funds are divided into units of equal value. The contributions from your account are used to buy a number of these units,
depending on how much the units are worth at the time. These units will go up and down in value, which in turn will make
the value of your plan rise and fall accordingly; if unit prices fall, your plan may be worth less than you have invested.
10
Lyreco UK Limited
With Profits Fund
With Profits Funds work differently to unit-linked funds, so it is important that you thoroughly read the investment guide (and
details of the charges applicable) available from Scottish Widows.
If you decide to invest in with-profits and then withdraw your money before the Plan matures, the provider may reserve the
right to:

reduce the selling price at which your units are sold; or

withdraw part of the bonus (if the provider adds returns to the fund in this way).
This is often called a ‘market value reduction’ (MVR). The provider can decide how much to take away from the unit price or
bonus, but it will normally reflect market conditions at the time.
Important information
Some funds invest in a particular market, with the investment manager for that fund choosing the assets. You may only
want to choose specialist funds like this if you are familiar with investing (and the risks it involves), or if you are familiar
with that market or how the funds might behave.
If you invest in overseas funds, changes in currency exchange rates may affect the value of your investments. Some funds in
regions where markets are still developing (often called ‘emerging markets’) may be especially volatile, with dramatic falls
and rises in value.
Property funds can carry extra risk because of the time it takes to buy and sell property – this may make the funds more
volatile and you may find that there are delays with moving money you have 'tied up' in property to another type of
investment.
Some cash or deposit funds are actually ‘money market’ funds that invest in different types of assets. As a result, these
funds can be more volatile than ordinary cash investments and may rise and fall in value. This means the value of your
capital – the original amount you invested – is not guaranteed.
Charges
Aon Consulting Limited has negotiated terms with Scottish Widows on Lyreco UK Limited’s behalf. The single Annual
Management Charge (AMC) that is made for the default option will be 0.33% of your fund value, that is 33 pence for each
£100 of your fund value. If you leave the Plan, the AMC will increase to 0.75% of your fund value. Please see the 'What
happens if?' section for further details.
The AMC will be automatically incorporated into unit prices for the funds you invest in within your policy and funds managed
by other fund managers may incur a higher AMC, as detailed in the Scottish Widows literature.
The AMC level reflects the fact that commission is paid by Scottish Widows to Aon Consulting Limited and details are contained
within the Scottish Widows key features documentation.
11
Lyreco UK Limited
Taking your benefits at retirement
At retirement you use the value of your fund to provide income and/or cash sums. Retirement can be anytime from age 55
and you do not need to stop working to draw your benefits. The minimum age at which you can start taking your benefits will
increase to age 57 in 2028.
Having spent years building up your pension fund it is vital to understand the options available when starting to take your
benefits. From April 2015 new rules apply and you will be able to take full responsibility for the money you have saved and
access your retirement fund however you like. Your options will be:


You can take up to 25% of your pension pot as a tax free cash sum and with the remaining 75% of the fund:

Take a further lump sum (which will be taxed at your marginal Income Tax rate)

Leave it invested and take regular and/or occasional amounts that will be taxed as income (this is
known as Flexi Access Drawdown) or;

Buy an annuity which provides you with a guaranteed income either for life or a fixed term that will
be taxed as income (you have lots of options in terms of how the annuity can be set up and you can
shop around to ensure you get the best annuity deal for your circumstances).
You can draw money from your fund when you need it and take 25% of each payment as a tax free cash sum and
the rest of the payment will be taxed as income (known as Uncrystallised Fund Pension Lump Sum).
You can use all or some of your fund for the above options and/or use a mixture of the options above.
Although it is great to have these choices, it is also important to understand all your options and the implications, particularly
around taxation. It is strongly recommended that you take financial advice at the right time. Please note that you can take
your benefits partially or in full and still continue in the Plan. However, please note that in certain circumstances this will
trigger the ‘Money Purchase Annual Allowance’ (see the section headed ‘What else do I need to know? – What if I pay too
much in?’).
You should note that there is a limit, known as the Lifetime Allowance, which applies to the value of all the pension benefits
you build up from all sources (apart from the State) over your working life. For the 2015/16 tax year the allowance is £1.25
million. For further details on the Lifetime Allowance please refer to the 'What else do I need to know?' section.
12
Lyreco UK Limited
Scottish Widows will contact you as you approach your SRA with details of your fund value and more information on the above
options. Additionally the Aon Retirement Service can provide support through the process of deciding how to take your
pension benefits. Five years before your SRA you will be contacted with log on details for the online portal which contains lots
of useful information on your options and tools to help you start thinking about what you might wish to do. At 12 months
before your SRA you will be contacted by the Aon Retirement Service team who will provide further guidance and support.
Although you should be contacted automatically, you can contact the team directly on 0800 107 0392 (available 8am to 6pm
Monday to Friday).
Pension Wise
The Government introduced Pension Wise from April 2015. Pension Wise is a free and impartial service to help individuals
with defined contribution funds understand what their choices are and how they work. This guidance is available online, over
the phone or face to face and covers:

what you can do with your pension pot

the different pension types and how they work

what’s tax-free and what’s not
Pension Wise will not, however, provide you with advice regarding which option is the most appropriate for you based on your
circumstances. It is therefore recommended that you seek financial advice before you make decisions on how you will take
your benefits.
13
Lyreco UK Limited
What happens if?
What happens when I leave this employment?
If you leave employment you keep the fund you have built up under your policy within the Plan. You may:

Leave your benefits in your policy where they will continue to be invested

Continue to pay contributions direct to Scottish Widows (although Lyreco UK Limited’s contributions will
stop)

Transfer your fund to another pension arrangement

Access your fund if you are aged over 55
If you leave Lyreco UK Limited the AMC on your policy will increase to 0.75% of your fund value. If you continue to pay the
minimum premium of £20 per month into the Plan, you will retain the lower AMC of 0.33%
The most suitable option for you will depend on your situation at the time you leave. You may want to seek financial advice
before deciding what route you will take.
What happens upon death?
If you die before taking your benefits the fund you have built up to the date of your death would be payable to your
beneficiaries as a cash lump sum and is usually free of any tax liability.
Your wishes
It is important that you complete a nomination form outlining who you would like to receive any benefits following your death.
Equally, if your personal situation changes, for example, you marry, divorce or become a parent, you may need to complete
another nomination form. These forms are available from Scottish Widows and should be returned direct to Scottish Widows
after completion.
If you die after taking benefits from the Plan the amounts payable to your beneficiaries will depend upon how you have taken
benefits. This is an important aspect to consider and should be part of the financial advice you seek when you start to draw
your benefits.
14
Lyreco UK Limited
What else do I need to know?
Changing your details
Once you have been opted in to the Plan, if you wish to make amendments to your investment choice or retirement age you
may do so by contacting the Scottish Widows Helpline.
When you are automatically enrolled into the Plan or if you opt in to the Plan, your SRA is set at age 65. It can be any age from
55 onwards, and you can change it at a later date to reflect the age you intend to draw benefits. The SRA is important because
it can affect how your pension contributions are invested – please refer to the sections ‘Investing – Helping your savings grow’
and ‘Taking your benefits at retirement’ for more details.
Other pension arrangements
If you already have a personal pension you can still be a member of the Plan; you are allowed to contribute to more than one
pension at the same time. Please refer to the ‘What if I pay too much in?’ text later in this section for further details. Please
note that your employer will not contribute to any other pension arrangement.
Consolidating pensions
You may be able to transfer in benefits from a previous pension arrangement(s). However, this is a complex area and you
should seek financial advice beforehand. If you wish to review your previous pension arrangement(s), please contact the Aon
Transfer Team in the first instance on 0117 945 3559 or [email protected].
State benefits
The State Pension is currently made up of two parts, payable from State Pension Age:

The Basic State Pension – a flat rate amount payable to everyone who has paid enough National
Insurance contributions.

The State Second Pension (S2P formerly SERPS) – which provides mostly earnings-related benefits.
State Pension Ages have been under ongoing review by the Government, and your own State Pension Age depends on both
your sex and date of birth. You can use the State Pension Age calculator on the Government’s website:
www.gov.uk/calculate-state-pension to find your State Pension Age, based on the rules currently in force.
The new State Pension will replace the above arrangements for those individuals who reach State Pension Age after 1 April
2016. The new State Pension will be up to £151.25 per week, but the exact amount will be confirmed later in 2015.
15
Lyreco UK Limited
To find out more about State pensions in general, you can visit the Government’s website:
www.gov.uk/state-pension/eligibility or call: 0845 606 0265.
Please note that joining the Plan may not be appropriate for everyone as contributing to it may affect entitlement to State
benefits (which may change themselves in future). If you are unsure you should seek financial advice.
Death benefits
The type and level of benefits payable in the event of your death after taking some or all of your retirement benefits is
dependent upon how you have taken benefits and how old you are.
Drawdown (Flexi Access Drawdown or Uncrystallised Fund Pension Lump Sums)
Date of death
Format of benefits
Before age 75
All benefits
From age 75 onwards
Lump sum (paid out of
the Plan)
Income (continuation of
Drawdown)
Tax position
Tax-free
Can be paid to
45% (taxable at marginal
Income Tax rate from
2016/17 onwards)
Taxable at marginal
Income Tax rate
Any beneficiary
Annuity
Death before age 75
Joint-life annuity
Guaranteed term annuity
Value protected annuity
Any beneficiary can receive
payments tax-free
Death from age 75
Any beneficiary can receive payments at
marginal Income Tax rate
45% (taxable at marginal Income Tax from
2016/17 onwards)
What if I pay too much in?
The Annual Allowance
The Annual Allowance applies to all contributions, from you or any employer, paid into all of your pension arrangements over a
pension input period (PIP). This is normally a period of 12 months and is set by the pension provider(s). You can check the PIP
that applies to you by contacting your pension provider(s). The tax year in which the PIP ends determines the assessment of
the Annual Allowance. For example a PIP that runs from 1 June 2014 to 31 May 2015 will be assessed in the 2015/16 tax year.
If the contributions going into your policy during the pension input period exceed £40,000, then the amount you have
contributed above the Annual Allowance is added to your taxable income. You will pay tax on this at your highest rate, unless
you carry forward any unused Annual Allowance from the previous three tax years.
16
Lyreco UK Limited
It is also possible, once each tax year to change your PIP (this can sometimes allow contributions to be made to your policy that
would otherwise be ‘caught’ by the allowance).
If the total payments into the Plan made by you and your employer, plus contributions made to any other pension
arrangements, are likely to be close to £40,000 in any PIP please seek financial advice before making any decisions.
If you draw your benefits due to ill health then provided you satisfy the requirements set by HMRC, or if you die while still
building up your fund, the Annual Allowance will not apply in that year.
The Money Purchase Annual Allowance (MPAA)
From 6 April 2015, tax relievable contributions to defined contribution arrangements are limited to a Money Purchase Annual
Allowance of £10,000 per annum - if certain trigger events occur. Trigger events include income paid from a Flexi Access
Drawdown fund, payment of an Uncrystallised Fund Pension Lump Sum, income more than the permitted maximum income
under a Capped Drawdown or Flexible Drawdown taken prior to 6 April 2015.
Please seek financial advice before you proceed with a trigger event if you are close to the £10,000 MPAA.
The Lifetime Allowance
The Lifetime Allowance applies to the value of all the pension benefits you build up from all sources* (apart from the State)
over your working life. For the 2015/16 tax year the allowance is £1.25 million. As announced in the spring 2015 Budget this
will reduce to £1 million from the 2016/17 tax year.
* Widow’s pensions and other pensions paid following the death of someone else may be ignored. Overseas pensions may or may not be
included, depending on the circumstances.
You can build up benefits over the Lifetime Allowance, but you would have to pay a tax charge on the excess. This charge is
25% if you take these excess benefits as a pension or annuity, which would then be subject to Income Tax. It rises to 55% if you
take the excess as cash.
Please note that the Lifetime Allowance also applies to death benefits paid in lump sum form. If these benefits, along with any
other pensions or cash sums being paid, go over the allowance, a charge of 55% will apply to the excess, unless it is used to
provide dependants’ pensions.
If you think your contributions or benefits may be close to any of the allowances, please consider taking financial advice.
17
Lyreco UK Limited
Important note – do you have Primary, Enhanced, Fixed Protection, Fixed Protection 2014 or have applied for / are going to
apply for Individual Protection 2014?
If you join an employer’s pension plan and/or life assurance scheme, either by completing an application form or as a result of
automatic enrolment, you will lose your Enhanced or Fixed Protection. If you join an employer’s pension plan through
automatic enrolment but opt out within the month period, you will be treated as if you have never been a member and you
will not lose your protection.
If you have Primary Protection or if you have applied for / are going to apply for Individual Protection 2014, pension
contributions can continue to be paid into your pension policy. Please note that any pension savings in excess of your
protected Lifetime Allowance will be subject to a Lifetime Allowance charge.
More information on Lifetime Allowance protection and automatic enrolment is available on the HMRC website at:
www.gov.uk/tax-on-your-private-pension/lifetime-allowance
Neither your employer nor the Plan provider are responsible for any tax charge or loss of tax relief you incur through joining or
being automatically enrolled into any pension or life assurance arrangement(s).
18
Lyreco UK Limited
Problems and complaints
If you have a complaint please write to:
Aon Consulting Limited
The Compliance Department
3 The Embankment
Sovereign Street
Leeds
LS1 4BJ
Tel:
0113 394 3445
E-mail: [email protected]
If you cannot settle your complaint with Aon Consulting Limited you may be entitled to refer it to the Financial Ombudsman
Service; visit www.financial-ombudsman.org.uk/ or call 0800 023 4567 for further information.
About Aon
Aon Consulting Limited’s advice is to Lyreco UK Limited, so unless you request Aon Consulting Limited to provide you with
advice with regard to the Plan, you will not receive any advice or a recommendation from Aon Consulting Limited.
Should you wish to receive advice from Aon Consulting Limited on products other than the Plan, you would need to agree with
Aon Consulting Limited the basis of its remuneration. Aon Consulting Limited will tell you how it gets paid, and the amount,
before it carries out any business for you.
About Scottish Widows
Scottish Widows is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the
Prudential Regulation Authority.
19
Lyreco UK Limited
Useful contacts
The Pensions Advisory Service (TPAS)
TPAS is an independent non-profit organisation that provides free information, advice and guidance on all pensions, including
State, company, personal and stakeholder schemes. TPAS is available to help at any time if you have questions about your own
pension arrangements.
TPAS
11 Belgrave Road
London
SW1V 1RB
Tel: 0300 123 1047
www.pensionsadvisoryservice.org.uk
You can also find more information about the Automatic Enrolment rules on the TPAS website at:
www.pensionsadvisoryservice.org.uk/automatic-enrolment
The Financial Services Compensation Scheme (FSCS)
Aon Consulting Limited and Scottish Widows are covered by the
FSCS. You may be entitled to compensation from the FSCS if
Aon Consulting Limited or Scottish Widows cannot meet their
obligations. This depends on the type of business and the
circumstances of the claim.
Most types of investment business are covered in full up to
£50,000. Insurance advising and arranging is protected for 90%
of the claim with no upper limit (increasing to 100% from 3 July
2015). Your personal policy within the Group Personal Pension
Plan falls into the ‘insurance advising and arranging’ category
for compensation entitlement purposes.
For further information about compensation scheme
arrangements please contact the FSCS at:
10th Floor
Beaufort House
15 St Botolph Street
London
EC3A 7QU
Tel: 0800 678 1100 or 0207 741 4100
www.fscs.org.uk
20
Lyreco UK Limited
The Pensions Regulator (TPR)
TPR oversees the running of workplace pension schemes in the UK. It has wide ranging legal powers and can step in if
employers are failing in their duties towards pension schemes. Their website contains a useful section for Individuals who
want to know more about automatic enrolment or have concerns in respect of their pension arrangements.
www.thepensionsregulator.gov.uk/individuals
Tel : 0845 600 7060
GOV.UK
The Government website contains a State Pensions Guide, details about the Pension Tracking Service (if you have lost track of
a pension) and a Pension Scheme Administration Guide.
21
Lyreco UK Limited
Jargon Buster
Annual Allowance
Maximum amount of pension contributions an individual can invest in any tax year while still receiving tax relief.
Annual Management Charge (AMC)
The charge to cover set up and management costs, administration and day-to-day fund management.
Annuity
An annuity is what most people call their ‘pension’. It’s a financial product that will provide you with an income for the rest of
your life. You can use all or part of your pension fund to buy an annuity from an insurance company.
Automatic Enrolment
Automatic Enrolment is a Government initiative to encourage people to save more for their retirement. Employers will
automatically enrol their eligible employees into their pension scheme. Employees then have the option to opt-out.
Benefits
What you can take when you choose to take your retirement options.
Contributions
A payment into your pension plan made by you, your employer or any other person.
Default Investment Option
Where your contributions will be invested at outset or if you do not make a choice yourself.
GPP (Group Personal Pension)/GSHP (Group Stakeholder Pension)
An arrangement made by an employer for employees of that company to participate in a personal pension scheme on a group
basis.
Her Majesty’s Revenue and Customs (HMRC)
A department of the UK Government responsible for the collection of taxes.
Income Tax
The amount of tax you pay from your earnings.
22
Lyreco UK Limited
Pooled Investment Fund
A collection of assets that you can invest in. Money is pooled together from various sources and managed by a professional
investment fund manager. This means that you can invest a fairly small amount while still enjoying the benefits of a larger
investment fund.
Income Drawdown
Income Drawdown means taking income directly from your pension fund. Income Drawdown is only available on certain
pension plans and up to certain limits. We would recommend you seek financial advice before starting Income Drawdown.
Inflation
This is the increase in the cost of living over time. Inflation means that the value of money reduces over the years. So, if you
choose a level annuity, over time it will gradually buy you less and less, as the price of everything else increases.
Lifestyling
An investment strategy used in Defined Contribution (DC) schemes. Under lifestyle, a member’s investments are changed
based on their age and the length of time until they are due to retire. As members approach retirement monies are moved into
funds with less risk and that are less likely to change dramatically in value.
Lifetime Allowance
The Lifetime Allowance (also known as the Statutory Lifetime Allowance (SLA)) is a limit on the total value of pension benefits
that you can build up, without facing a tax charge on the value of the benefits.
Pension fund
A pot of money you have built up to provide your benefits.
Salary Sacrifice
The amount of your salary that will be sacrificed in return for a pension contribution from your employer.
Selected Retirement Date
The date you have chosen to take your benefits. This is normally any age from age 55.
23
Lyreco UK Limited
State Pension
The basic State Pension is a regular payment from the
Government that you can get when you reach State
Pension Age. To get it you must have paid or been credited
with a certain level of National Insurance contributions.
Tax-free cash
A lump sum available to members when they take their
pension benefits, normally up to 25% of the value of their
pension pot. Taking a lump sum means that the amount
left to buy an annuity or use for drawdown will reduce. The
lump sum is paid free of tax - sometimes called a ‘tax-free
lump sum’.
Tax relief
An amount that can be deducted from your annual income
to reduce the amount on which you pay tax.
Transfer
You can transfer the value of some pensions between
providers.
Unit
A unit is a share of an investment fund. Each investment
fund is split into units. The number of units you hold is your
share of the investment fund.
Volatility
The degree of unpredictable change over a period of time,
normally short term, in the investment market.
24
Lyreco UK Limited
Aon Consulting Limited
25 Marsh Street
Bristol
BS1 4AQ
Tel: +44 (0) 117 945 3532
www.aon.co.uk/employee-benefits
Published by Aon Consulting Limited
Registered office Briarcliff House, Kingsmead,
Farnborough, Hampshire, GU14 7TE
©Copyright Aon Consulting Limited 2015. All
rights reserved.
No part of this publication may be reproduced,
stored in a retrieval system, or transmitted in
any way or by any means, including
photocopying or recording, without the
written permission of the copyright holder,
application for which should be addressed to
the copyright holder.
Aon Consulting Limited is authorised and
regulated by the Financial Conduct Authority.
25