Members’ AVC’s booklet - blackrock.co.uk · 2. All AVC applications are subject to any period of notice required by your employing company in order to make the necessary payroll

Members’ AVC’s bookletAdditional Voluntary Contributions (AVCs)(Applicable to ALL Scheme members)From 1 October 2015

GKN Group Pension Scheme 2012

Page 2

GKN Group Pension Scheme 2012

Members’ Booklet (Applicable from 1 July 2015)

Index

1. Introduction 3

2. penSAVE 4

3. Pension Freedom 2015 – General 5

4. Additional Voluntary Contributions (AVCs) 7

5. Transfers in 14

6. Financial Advice 15

7. Important Information 16

Page 3

Welcome to your guide to the Defined Contribution Section (“the DC Section”) of the GKN Group Pension Scheme 2012 (the “Scheme”). It is an arrangement in which your AVCs contributions are invested into your individual pot until you retire.

This booklet explains how the arrangement works.

You can decide where to invest your individual pot, and you can change:

> how much you contribute

> your investment choices, both for future contributions and the amount you have already built up in your individual pot and

> your Target Retirement Age

You can do this at any time either by requesting a copy of the ‘DC Section Option Form’ which is available online through BenPal or from your HR department.

Each of the choices above will affect the final value of your individual pot and therefore the amount of your pension or cash in retirement. We encourage you to regularly review your options to get the most benefit from the Scheme.

You will need to read this information carefully, along with the ‘Investment Options’ booklet.

This booklet is only a guide and does not cover every aspect of the Scheme. Full details are set out in the Trust Deed which will always overrule this booklet if any question of interpretation should arise. This booklet does not automatically grant any rights to benefits. A copy of the Scheme’s Trust Deed is available from your HR manager at your Employing Company.

When you retire, you will be able to convert your individual pot into a pension and, should you choose to do so, you can take part of it as a tax-free cash lump sum.

You may have heard about Pension Freedom, if you wish to take your benefit in a different way to that outlined below in the GKN Scheme then you will need to transfer your benefit elsewhere. For more details on Pension Freedom please see Section 3.

1. Introduction

Page 4

2. penSAVE

penSAVE is a salary sacrifice arrangement. Participating in penSAVE will reduce your National Insurance contributions and GKN’s National Insurance contributions.

AVCsCertain types of AVCs are included in penSAVE – See section 4 for more details.

Page 5

There have been significant changes to pensions resulting from the Government’s changes to pension laws implemented in April 2015.

The Government reforms mean that you will be able to transfer the money out of your pension fund and use it as you choose.

Your pension options are:-

A guaranteed income for lifeYou could get a set amount every month for the rest of your life, so you’ll know exactly how much you’re getting and when.

You could:

> Combine the value of your pension pots from GKN and elsewhere

> Take up to 25% tax free

> Use the rest for a guaranteed income

Example:Fund of £100,000 at retirement > £25,000 is tax free, the rest can be exchanged for a pension

Converting £75,000 into pension may give approximately £3,500 a year *

* Based on July 2015 conditions.

Flexible accessYou can take out what you like when you like. The rest is left invested.

You could:

> Take some money tax free (25%)

> Leave the rest invested

> Take other amounts when you need it (subject to tax)

Example:Fund of £100,000 at retirement > £25,000 is tax free, the rest is taxable

Each amount taken from the £75,000 is then taxed at the tax rate applicable for your total earnings in the tax year (6th April to 5th April) so includes any earnings you have earned when tax is calculated.

For a basic rate tax payer, if you took £10,000 as a second payment after the tax free cash, this would result in £2,000 tax leaving a net £8,000 payable to you.

The remaining £65,000 (£100,000-£25,000-£10,000) would be treated in the same way but taxed at a rate determined using all of your earnings in the tax year so might move you into a higher tax bracket.

If you do cash in your pension pot but then want to continue to pay into a pension, any future contributions that receive tax relief will be limited to £10,000 per annum.

3. Pension Freedom – General

Page 6

Take it all in cashYou could:

> Combine the value of all your pension pots

> Take up to 25% tax free

> Get the rest of your pot back in one go, subject to income tax

Example:Fund of £100,000 at retirement > £25,000 is tax free, the rest is taxable

If the remaining £75,000 is taken at once – this could result in £30,000 of tax being paid as higher rate tax will apply, whereas for a normal basic rate tax payer who spreads the taking of cash over more than one tax year, the tax might be £15,000 as basic rate tax would be due.

Leave it for now and take it at a later date

> Do nothing now

> Decide what to do later

> The same options will apply at the later date

In all circumstances the tax treatment depends on your individual circumstances.

3. Pension Freedom – General (continued)

Page 7

4. Additional Voluntary Contributions (AVCs)

As a member of The GKN Group Pension Scheme 2012 (“the GKN Scheme”), you may secure extra benefits by paying additional contributions to the Scheme over and above your normal Scheme contributions. This booklet describes the basis that applies from 1 July 2015.

If you wish to start paying voluntary contributions, or vary your existing voluntary contributions, you should complete the DC section option form and hand it to your HR Manager. If you have any questions please contact your HR Manager.

Paying AVCs means:

> You can build up your individual pot and supplement your GKN pension

> If you are a member of the DB Section, your AVCs will be invested separately by the Trustee from the main Scheme assets as per your wishes, to build up a fund for your retirement

> At retirement part, and in some cases all, of your accumulated AVCs can be taken as a tax-free cash sum

> Where taken as pension, you may use your AVCs to gain extra income at retirement to meet your personal circumstances

> Your AVCs qualify for income tax relief just like your ordinary Scheme contributions and regular AVCs will be included in penSAVE, thus reducing the National Insurance Contributions you pay

> You have the facility to increase, decrease or stop your AVCs at any time. Increases during the year will not be included in penSAVE until the following April

> You also have the opportunity to pay one off lump sum AVCs; however, one off lump sum AVCs will not be included in penSAVE

> If you are a member of the Defined Benefit section, your AVC’s will be invested separately by the Trustee from the main Scheme assets as per your wishes, to build up a fund your retirement

You may start or stop your AVCs at any time during the tax year. You must give sufficient notice to your employing company for the payroll adjustment to be made.

You may change the amount of your AVCs on a quarterly basis subject to agreement from your employing company. Increases in AVCs during the Scheme Year will not be classed as regular contributions and will not be included in penSAVE until the following April.

How do I apply to make AVCs?If you wish to start making AVCs into the DC Section please complete the DC Section Option Form and return it to your HR Manager.

Page 8

How much AVCs can you pay?AVCs qualify for income tax relief at your highest rate, in the same way as your normal Scheme contributions. You can pay up to 100% of your gross taxable earnings in each tax year (including your regular contributions), subject to certain restrictions.

Some members may be affected by the Annual Allowance, if you are affected you will be contacted.

You may pay a lump sum voluntary contribution > Any lump sum when added to regular AVCs must not exceed

100% of your annual earnings

> Any lump sum AVC payment will not be included in penSAVE

Amounts > If you are paid weekly, your minimum regular contribution

must be £2 per week. If you wish to pay more, the excess must be a multiple of 50p per week

> If you are paid monthly, your minimum regular contribution must be £10 per month. If you wish to pay more, the excess must be a multiple of £2 per month

The minimum lump sum contribution is £150.

4. Additional Voluntary Contributions (AVCs) (continued)

Notes1. Your AVCs, like ordinary contributions, are paid to the Trustee of

the Scheme. The Trustee invests your AVCs on your behalf into your individual pot according to your investment choices. The benefits payable are governed by the policy issued by Blackrock to the Trustee and by the Scheme Trust Deed and Rules.

2. All AVC applications are subject to any period of notice required by your employing company in order to make the necessary payroll amendments.

3. If you pay AVCs, details of the units and values of your accumulated AVCs as at 6 April will be incorporated into your Annual Statement of Benefits.

4. The Trustee is not responsible for any investment fund details that are supplied by fund providers, or for how members have chosen to invest in the funds offered.

Page 9

Benefits from your AVCsOn Retirement (including early retirement)All your accumulated AVCs become available to purchase additional retirement benefits.

For members of the Scheme who are only members of the DC Section, up to 25% of your individual pot (including your accumulated AVCs) can be taken as a tax-free cash sum. If you are an AVC only member (i.e. you only use the DC Section to pay AVCs), up to 25% of the value of your total pension benefits under the Scheme (including your DB/CARE benefits and your accumulated AVCs) can be taken as a tax-free cash sum.

In the unusual case where the value of the accumulated AVCs as a proportion of a member’s total pension benefit exceeds the maximum amount which

can be taken by a member as tax-free lump sum (currently 25%), any excess could be taken as you choose (subject to tax).

Should this circumstance apply to you the Scheme Administrator will supply further details of the options available to you.

Where your AVC account is applied towards providing pension, there will be a number of options available, including the purchase of spouse’s or dependant’s pension and / or a pension which increases each year in payment.

Your AVCs in the event of Death in ServiceIn the event of your death while you are making AVCs, a lump sum equal to the value of your AVCs will be payable in the same way as described above.

On Leaving ServiceIf you have less than two years’ Qualifying Service, you may receive a refund of your AVCs. Restrictions will apply from 6 October 2015 depending on service.

Otherwise your accumulated AVCs remain invested until paid out on retirement, or earlier death.

If your main benefits are transferred out of the Scheme then all your accumulated AVCs will also be transferred.

NoteThe accumulated AVCs will include the contributions paid under penSAVE.

Page 10


Example:The calculations and options can become extremely complicated. The following example goes through some of the options available.

> Employee retiring age 65

> Full Scheme Pension £8,000

> AVC account £10,000

Option 1 –(No Cash) £

Option 2 –(Max Cash) £

Scheme Cash - 29,832

AVC Cash - 10,000

Total Cash - 39,832

Scheme Pension 8,000 6,210

AVC Pension* 385 -

Total Pension 8,385 6,210

Spouse’s Pension 4,193 3,105

*AVC pension based on current (April 2014) pension conversion factors, with annual increases and spouse’s pension. Conversion factors are subject to change.

Page 11



Scheme Cash - 29,832

AVC Cash - 10,000

Total Cash - 39,832


AVC Pension* 658 -




If you choose an AVC pension that didn’t increase in payment or provide a spouse’s pension on death then the following would be payable:-

In practice, quotations of options 1 and 2 will automatically be provided at retirement and other options will be available on request.

You will also be able to select any cash sum up to the maximum quoted. If you select a lower cash amount your pension will be increased accordingly. To maximize your benefits, any cash you select is always taken from the AVC Account first.

Page 12




Total Cash - 36,716


AVC Pension* - -




As a comparison, the example below shows the options with the same Full Scheme Pension of £8,000, but where no AVCs were paid:

The example demonstrates that, because of the complicated HMRC formula, the increase in the maximum cash available when AVCs are paid can sometimes be more than one quarter of the AVC fund. (£39,832 - £36,716 = £3,116. One quarter of £10,000 = £2,500.)

Page 13

AVC LimitsUnder HM Revenue & Customs rules, it is possible to pay pension contributions of up to 100% earnings (subject to some restriction for very high earners).

If your AVCs when added to your ordinary contributions reduce your gross contractual pay below £13,000 (2015/2016) then your AVCs will have to be restricted and you will not be included in penSAVE. Your employing company will let you know if you are affected.

The Scheme allows AVCs to be taken as the first call on cash when calculating your tax-free lump sum. Where AVC funds exceed the overall limit for a tax-free lump sum, the excess AVCs

cannot be taken as pension through the Scheme, and you must buy a pension on the open market outside of the Scheme.

Benefits exceeding the HM Revenue & Custom’s Lifetime Allowance, set at £1.25m from April 2014, are taxed at a special rate of 55% (if taken as a lump sum) or 25% (if taken as an income).

This covers all benefits including main scheme pension, AVCs and any other pension arrangements. Very high earners may need to take advice as to whether AVCs are suitable in their particular circumstances. The Lifetime Allowance will reduce to £1m from 6 April 2016.

There may be other ways of saving for your retirement which suit you and your personal circumstances better than paying AVCs.

Before investing in any financial product you should consider taking independent financial advice or visit www.pensionwise.gov.uk. See page 15.

Page 14

5. Transfers In

It may be possible to transfer your previous pension arrangements into the Scheme.

You may transfer other registered UK pension benefits in to the GKN Defined Contribution section only.

The Defined Contribution Section will only accept transfers in on a Defined Contribution basis.

Current members of the defined benefit sections of the Scheme may also consider transferring previous pension arrangements in to the Scheme.

If you wish to investigate a transfer of your existing pension rights into the Scheme, you should contact the Scheme Administrator for further information.

However, transferring benefits from other pension arrangements may not always be in your best interests.

It is strongly recommended that you obtain independent financial advice. See below.

Page 15

The Trustee, GKN and its employees are not authorised under the Financial Services and Markets Act 2000 to give you investment advice. The information in this and the ‘Investment Options’ booklet is intended to help you make your own decision. If you are in any doubt you should consult an Independent Financial Adviser (IFA) who may charge a fee for the service.

Further details can be found at www.unbiased.co.uk or via the Association of Independent Financial Advisers www.aifa.net (020 7628 1287).

A new guidance website has been set up between the Citizens Advice Bureau and the Pensions Advisory Service.

This website is available at www.pensionwise.gov.uk. Alternatively you can contact your Scheme Administrators JLT by contacting the support team using the details on page 18.

6. Financial Advice

Page 16

7. Important information

HM Revenue & CustomsThe Scheme is a ‘registered’ scheme for HM Revenue & Customs purposes. As a registered scheme, the Scheme enjoys various tax advantages:

> contributions paid into the Scheme are generally subject to tax relief

> the investments in the Scheme largely accumulate free of tax and

> lump sum benefits are usually payable tax-free, up to a certain limit

No limits are imposed by HM Revenue & Customs on the amount of benefits that can be provided from the Scheme nor on the amount of contributions that can be paid in. However, after a certain level the benefits and contributions paid will become taxable. Any benefits paid in excess of the Lifetime Allowance or contributions paid in excess of the

Annual Allowance will be taxed. You can see the current limits on the HM Revenue & Customs website: www.hmrc.gov.uk/rates/pensions.htm

Any statements about tax made in this guide are subject to any changes made from time to time by legislation or HM Revenue & Customs practice.

You are responsible for monitoring your own position regarding the Lifetime Allowance and the Annual Allowance (across all of the registered pension arrangements where you hold benefits) and submitting the relevant information to HM Revenue & Customs. You will be provided with information from the Trustee to assist with the completion of tax returns. Shortly before your benefits become payable the Trustee will ask you for information about the amount

of Lifetime Allowance you have used in respect of other pension arrangements. Once your benefits start to be paid, you will then receive a certificate from the Trustee detailing the amount of your Lifetime Allowance your benefits from the Scheme have used up. You should keep all certificates issued to you concerning the Lifetime Allowance in a safe place.

Periods of absenceDuring periods of paid maternity, paternity, parental, or adoption leave, GKN will continue to pay contributions based on your normal Pensionable Earnings; however, your own contributions will be based on the actual amount of pay you receive during this period. Your life insurance and ill health benefit cover continues during this period.

Page 17

Divorce or dissolution of a civil partnershipIf you get divorced or dissolve your civil partnership, your benefits under the Scheme may become subject to a Court Order. In this event, the Trustee would be required to allocate a specified part of your retirement benefits and death benefits under the Scheme to your ex-spouse or your ex-civil partner.

Your state pension benefits may also be affected.

If a Court Order applies to your Scheme benefits, information will be provided of any reduction that will impact you. Any pension deducted from your own entitlement will count towards your ex- spouse’s or ex-civil partner’s Lifetime Allowance rather than your own.

You should tell the Trustee about the changes in your personal details as result of divorce or dissolution. You may

also decide to change your Expression of Wish Form.

The Trustee may charge you for the cost of any work to do with a divorce or dissolution of a registered civil partnership.

Part-time serviceIf you switch from part-time to full-time service, or from full-time to part-time service, or if your hours of part-time service change, you will be advised by your HR Manager of the effect on your benefits and contributions at the time.

Data ProtectionStrict regulation is followed by the Trustee and the Scheme administrators acting on the Trustee’s behalf to ensure the information about you and your entitlements is kept secure and is only disclosed in limited circumstances. For instance, information may be disclosed to:

> the Administrator to advise you and GKN in connection with entitlements under the Scheme

> to insurance companies to arrange particular entitlements

> to advisors to advise the Trustee; and to GKN and any future potential employers

If the Trustee is obliged to do so, information may also be given to the Government or other regulatory organisations in accordance with the law. Some of this data is categorised as ‘sensitive data’ under the Data Protection Act 1998. By joining the Scheme you agree to this data being held and used in this way.

The Annual Report and Accounts the Scheme’s Annual Report and Accounts are available upon request from your HR Manager.

Page 18

7. Important information (continued)

Resolving disputesInternal dispute resolution procedureMost disputes stem from a misunderstanding of information and normally can be sorted out quickly and informally, and without the need for any formal procedures. However, where this is not possible a formal complaint can be made using the Scheme’s internal dispute resolution procedure.

You should put the complaint in writing to The Secretary to the Trustee of the GKN Group Pension Scheme 2012, PO Box 55, Ipsley House, Ipsley Church Lane, Redditch, Worcestershire B98 0TL, and you will be contacted directly.

The internal dispute resolution procedure applies to matters concerning the Scheme that affect members and others who may have an interest in the Scheme. They do not apply to disputes between employees and GKN.

You may also seek assistance from The Pensions Advisory Service at 11 Belgrave Road, London, SW1V 1RB at any time.

If neither the Trustee nor The Pensions Advisory Service can resolve the dispute to your satisfaction, you may then contact the Pensions Ombudsman. The Ombudsman’s address is the same as the address for The Pensions Advisory Service noted above.

Useful addressesThe Scheme AdministratorIf you have any queries about the Scheme or your benefits, please contact:

GKN Group Pension Scheme 2012Post Handling CentreSt James’s Tower7 Charlotte StreetManchesterM1 4DZ

Helpline: 0845 337 2456Email: [email protected]

Page 19

BenPalThe BenPal online system is available to all employees however you need to be activated on the system to access your pension and personal documents. Should you be a new joiner and you haven’t received your BenPal activation as yet, please contact your HR department.

For those members already activated, a reminder of your BenPal contact details;

Call the GKN Support Team: 0845 309 6197Email: [email protected] support team is available Monday to Friday 8am to 6pm

The Pensions RegulatorThe Pensions Regulator is a regulatory body which has a range of powers to help safeguard pension rights of members of pension schemes and is able to intervene where Trustee, employers or professional advisers have failed in their duties.The Pensions Regulator may be contacted at:

The Pensions Regulator Napier House Trafalgar Place Brighton BN1 4DW

Tel: : 0845 600 0707 (Option 2) Email: [email protected]

Page 20

7. Important information (continued)

TPAS (The Pensions Advisory Service)TPAS is an independent voluntary service that provides free help and advice to members and other beneficiaries of occupational and personal pension schemes. TPAS is available at any time to assist members and other beneficiaries with any pension query they may have or any difficulty they have failed to resolve with the Trustee or administrators of the Scheme. If you want to contact TPAS the address is:

TPAS 11 Belgrave Road London SW1V 1RB

Tel: 0300 123 1047 Email: [email protected] www.pensionsadvisoryservice.org.uk

Pensions OmbudsmanThe Pensions Ombudsman may investigate and decide upon any complaint or dispute of fact or law in relation to an occupational pension scheme referred to him. However, the Pensions Ombudsman normally insists the matter is first dealt with through the Scheme’s own internal dispute resolution procedures, and raised with TPAS. If you have any complaint or dispute that cannot be resolved by the internal dispute resolution procedures or by TPAS, you may refer it to the Pensions Ombudsman at:

Pensions Ombudsman 11 Belgrave Road London SW1V 1RB Tel: 020 7630 2200 Email: [email protected] www.pensions-ombudsman.org.uk

Page 21

The Pension Tracing ServiceThe Trustee has given information about the Scheme, including details of an address at which they can be contacted, to the Pension Tracing Service. This service may be of help to you if you need to contact the Trustee of a previous employer’s pension scheme and cannot trace them yourself. The service may be contacted at:

The Pension Tracing Service The Pension Service 9Mail Handling Site AWolverhamptonWV98 1LUTel: 0845 600 2537www.gov.uk/find-lost-pension

Financial compensation in the event of insolvency The Scheme investments are managed by BlackRock, except for the Standard Life fund below. In the event that BlackRock was unable to meet its financial obligations, the Trustee would be able to claim compensation to the value of 90% of your Scheme investments on your behalf from the Financial Services Compensation Scheme (with no upper limit). For more information on the Financial Services Compensation Scheme, please visit; www.fscs.org.uk or call 0800 678 1100 or 020 7741 4100.

However, if you are invested in the Standard Life Corporate Bond Fund, which is not managed by BlackRock but is offered on the BlackRock platform under the Scheme, then in the event of the insolvency of Standard Life, you would not be entitled to claim any compensation from the Financial Services Compensation Scheme. An indication of the risk of insolvency can be measured via a firm’s credit rating. Standard Life’s credit ratings can be viewed by visiting; www.standardlife.com/debt_investors/credit_ratings.html

Page 24

Documents

Members’ AVC’s booklet - blackrock.co.uk · 2. All AVC applications are subject to any period of notice required by your employing company in order to make the necessary payroll