HBOS FINAL SALARY PENSION SCHEME SCHEME BENEFITS SUMMARY
This document has been prepared on behalf of Lloyds Banking Group Pensions Trustees Limited (the “Trustee”) to provide a summary of some of the benefits available to Active and Deferred members of the HBOS Final Salary Pension Scheme (“the Scheme”). If after reading this document you have further queries about your benefits under the Scheme there is further information available on the Group Pensions website (www.lloydsbankinggrouppensions.com) or you can contact the administrators for the Scheme. You can find contact details and useful links at the back of this document. HOW TO USE THIS BENEFIT SUMMARY The benefits that the Scheme will pay to you or your beneficiaries will often depend on whether you are an Active Member of the Scheme or a Deferred Member of the Scheme. An Active Member of the Scheme is a Group employee who is currently building up benefits in the Scheme. This includes any colleagues who are currently on long term absence who are still building up benefits in the Scheme. A Deferred Member of the Scheme is a person that is not an Active Member of the Scheme or being paid a pension, but who still has benefits in the Scheme (typically a former employee who has yet to start to receive their pension or a current employee who has chosen to leave the Scheme). This benefit summary provides a guide to the main differences between the benefits you might receive from the Scheme as an Active Member or a Deferred Member. However, please note that this is not a complete summary of the benefits payable from the Scheme. Please also note that if you leave the Scheme: you will not be able to rejoin it at a future date, and you don’t have to join the Group’s Defined Contribution scheme, ‘Your Tomorrow’. If you do leave the Scheme and decide not to join ‘Your Tomorrow’ straight away, you can join it at a later date. Legislation introduced by the Government means that in some circumstances you may be automatically enrolled into ’Your Tomorrow’ even if you choose not to join immediately, however you can then opt out if you wish. Additionally, the Group will not contribute to any alternative pension scheme and you will not be entitled to any cash payment instead. At the end of this document you will find a glossary of terms and links to find more information about ‘Your Tomorrow’.
PAYING CONTRIBUTIONS
Feature or While you are an Active Member of the Scheme If you leave pensionable service and If you join the Group’s Defined Contribution benefit become a Deferred Member scheme ‘Your Tomorrow’
Member You currently pay 4% of your Pensionable Pay to the Scheme, You will not have to pay anything to the You choose how much you would like to contributions unless you are a Non-Contributory Member (in which case you Scheme. contribute each month. The lowest amount you do not have to pay anything to the Scheme). can contribute to the scheme is 3% of your base pay. The Group also pays contributions into your account up to a maximum of 13% depending on the rate you contribute at.
Your Group Total contribution contribution invested in rate rate your account 3% 8% 11% 4% 10% 14% 5% or higher 13% 18% + Deductions are made from your pension account within ‘Your Tomorrow’ to meet certain investment and administration expenses.
Additional You can boost your pension by paying Additional Voluntary You will be unable to make Additional You can choose to contribute more than 5% if Voluntary Contributions (AVCs) to the Scheme. Voluntary Contributions (AVCs) to the you wish, although the maximum contribution Contributions Scheme. from the Group is 13%. Your AVCs are used to build up an individual AVC account like (AVCs) in a defined contribution scheme. This fund is invested and when you retire you use it to buy a pension or take some (or all of it) as a cash lump sum (currently payable tax free), subject to legal limits. You can make AVCs to the Scheme via the Group’s Flexible Benefit Scheme, Flex. If you do this you can make National Insurance contribution savings on the value of your AVCs. In addition, unless you are a Non-Contributory Member, paying AVCs entitles you to a further enhancement to your contribution of up to 4% of Pensionable Pay (paid for by the Group).
March 2017 For internal use only
BUILDING UP PENSION
Feature or While you are an Active Member of the Scheme If you leave pensionable service If you join the Group’s Defined Contribution benefit and become a Deferred Member scheme ‘Your Tomorrow’
How your Each year that you remain an Active Member of the Scheme If you leave you will be entitled to a Your contributions, together with the Group’s pension you will build up a proportion of your Final Pensionable Pay. deferred pension. This will be contributions, are invested in your individual pension increases in based on your Pensionable Service account by the Trustees. Any positive investment size In the Scheme this proportion (known as the "accrual rate") is and Final Pensionable Pay at the return achieved on your pension account helps it grow usually 1/60th of your Final Pensionable Pay (subject to the 1 date you leave the Scheme. Your in value over time. Pensionable Pay Cap ) for each year of Pensionable Service. deferred pension would then You will have been notified if a different accrual rate applies or increase, for each full year until you The size of the pension you can buy at retirement has applied to you. retire, broadly in line with annual depends on: For example: consider a colleague with an accrual rate of increases in a National Inflation the contributions paid to your pension account, 1/60th, Final Pensionable Pay of £24,000 and 15 years of Index called the Consumer Prices Pensionable Service. Over the next year his pension builds up Index (subject to a maximum, the investment returns achieved by your pension in the following way: typically 5% a year). account, and These increases are required the cost of buying a pension at retirement and the Year Pensionable Accrual Final Pension under legislation and have type of pension you choose to purchase. Service rate Pensionable built up changed in the past. This means Pay This is difficult to predict with any real certainty as it that some of your pension which depends on a number of things which can change. 2017 15 years 1/60 £24,000 £6,000 you have already built up for earlier 2018 16 years 1/60 £24,000 £6,400 Pensionable Service may increase Using the value of your account to buy a pension from at a different rate. a provider outside of Your Tomorrow is not the only If a State Pension Reduction applies to you then your pension option at retirement. You could instead choose to take If a State Pension Reduction will be calculated as set out above but subject to the State your benefits as a cash lump sum, part tax-free and applies to you then your pension Pension Reduction. part taxed (not permitted in the Isle of Man or Channel subject to the State Pension Islands), or transfer the value of your account out of Reduction. Your Tomorrow to a drawdown plan where you can choose how much to withdrawn and when. Or a combination of these options.
1 In 2010 the Group introduced a limit (or a “cap”) to the amount your Pensionable Pay can increase each year. From 2 April 2010 to 1 April 2014, your Pensionable Pay was increased on each 1 April (where increases were awarded) by the lowest of: the actual percentage increase in your base pay over the previous 12 months ending on 1 April, the percentage increase in the Retail Prices Index (RPI) over the 12 months ending on the previous 31 December, and 2%. Following a review of the cap to Pensionable Pay and consultation with affected members, the Group reduced the cap to 0% on and after 2 April 2014. This means that your Pensionable Pay will not increase with increases in base pay on or after 2 April 2014.
March 2017 For internal use only
IF YOU DIE BEFORE YOU TAKE YOUR PENSION
Feature or benefit While you are an Active Member of the Scheme If you leave pensionable service and If you join the Group’s Defined become a Deferred Member Contribution scheme ‘Your Tomorrow’
Pension Contributory Members Contributory Members No pension would be payable from ‘Your Tomorrow’ A spouse’s/partner’s pension equal to two thirds of the A spouse’s/ partner’s pension equal to pension you would have received if you had stayed in two-thirds of your pension at the date you service until your Normal Retirement Date, but based on left the Scheme, with increases to the your Final Pensionable Pay at the date of your death. date of death. A children’s pension equal to one third of your pension as A children’s pension equal to one third of described above would generally be paid until age 18 (or your pension as described above would 23 if in full-time education or training). generally be paid until age 18 (or 23 if in full-time education or training). Non-Contributory Members Non-Contributory Members A spouse’s/partner’s pension equal to 50% of the pension you would have received if you had stayed in service until A spouse’s/partner’s pension equal to your Normal Retirement Date, but based on your Final 50% of your pension at the date you left Pensionable Pay at the date of death (and subject to any the Scheme, with increases to the date of State Pension Reduction). death (and subject to any State Pension Reduction). A children’s pension equal to one fifth of the partner’s pension described above for the first child and one tenth A children’s pension equal to one fifth of of the partner’s pension for additional children (up to a the partner’s pension for the first child and maximum of three additional children). one tenth of the partner’s pension for additional children (up to a maximum of Where you have been both a contributory and a Non- three). Contributory Member, the benefits above will be awarded in proportion to, and in respect of, the service in each Where you have been both a contributory respective category. and a Non-Contributory Member, the benefits above will be awarded in Pre 1 July 2006 Service proportion to, and in respect of, the Spouses/partners benefits in respect of service accrued to service in each respective category. 1 July 2006 will be based on the provisions of your Former Pre 1 July 2006 Service Scheme. Spouses/partners benefits in respect of service accrued to 1 July 2006 will be based on the provisions of your Former Scheme.
March 2017 For internal use only
Feature or benefit While you are an Active Member of the Scheme If you leave pensionable service and If you join the Group’s Defined become a Deferred Member Contribution scheme ‘Your Tomorrow’
Lump sum A tax free cash lump sum of four times your base pay at A tax free cash lump sum will only be paid A tax-free cash lump sum of four times your the date of death. The Pensionable Pay Cap does not if no pensions are payable to any base pay. (This would be payable even if you apply to the calculation of lump sum death in service dependants as set out above. do not join ‘Your Tomorrow’.) benefits If a lump sum is payable, the amount will A lump sum of the value of your pension A refund of the value of any AVCs you have made may be equal to five times your pension at the account would also be payable. also be payable. date you left the Scheme, with increases to the date of death. In addition if the Group agrees, if you have a qualifying dependant when you die, a further A refund of the value of any AVCs you lump sum of four times your base pay will made may also be payable. also be payable.
Pre-2006 Service You may be entitled to a lump sum in respect of any service under a Former Scheme, please see your Former Scheme Guide for more information.
Example Mark is a contributory member who joined the Scheme 16 years ago. He is currently 40 years old with a retirement age of 60, his Pensionable Pay/Final Pensionable Pay is £30,000 a year and his base pay is £32,000 a year. Mark has a spouse and 1 child but hasn’t paid AVCs into the Scheme.
If Mark was to die whilst still an Active member of the If Mark had left the Scheme before his If Mark had left the Scheme and had joined Scheme the following benefits would be payable from the death the following benefits would be ‘Your Tomorrow’ before his death the Scheme: payable from the Scheme instead: following benefits would be payable in addition to those he would be entitled to as a a lump sum of £128,000 (i.e. four times his base a Spouse's/ Dependant's pension of deferred member of the Scheme: Pay); £5,333 a year, and a lump sum of £128,000 (i.e. four times a Spouse’s/ Dependant’s pension of £12,000 a year, a children's pension of £1,778 a year his base pay); and a lump sum of the value of his pension a children’s pension of £4,000 a year account, and
if he has a qualifying dependant and additional lump sum of £128,00 may be paid subject to the agreement of the Group
March 2017 For internal use only
WHEN YOU TAKE YOUR PENSION
Feature or benefit While you are an Active Member of the Scheme If you leave pensionable service and If you join the Group’s Defined become a Deferred Member Contribution scheme ‘Your Tomorrow’
Normal Retirement The Scheme’s Normal Retirement Age is 60 or 62 (unless you have been notified that yours is different) The Normal Retirement Age is 65. Age and this applies to both Active Members and Deferred Members. Early Retirement With the Group’s consent, you may retire at any time from With the Trustee’s consent, you may Subject to the consent requirements under age 55. If you are able to retire from age 50 we will have retire at any time from age 55. If you are the scheme rules you can choose to take written to you to let you know this. able to retire from age 50 we will have your benefits from age 55, but the value of written to you to let you know this. your pension account will normally be lower Your pension will be calculated based on your Final than if you had waited as there will be less Pensionable Pay and Pensionable Service at your actual Your pension will be reduced to take time for you and the Group to contribute and date of retirement. Your pension will be reduced to take account of the fact that it will be paid for for your savings to grow. Also the younger account of the fact that it will be paid for longer. The longer. The reduction applied to any early you are, the more expensive it will be to buy reduction for an active member is different to that of a retirement pension for a deferred member an immediate pension with your pension deferred member. is different to that applied for an active account. member
Ill health early The Group may allow you to take early retirement due to With the agreement of the Group, you are You may use your pension account to buy a retirement ill health. There are two levels of ill-health pension: able to draw your pension at any age, pension. subject to satisfactory medical evidence. Total incapacity – you receive the pension you If you have completed a minimum of 5 years would have received if you had stayed in service Your pension will be reduced to allow for continuous pensionable service (this includes until your Normal Retirement Date but based on the fact that it is likely to be paid for a your Pensionable Service in your Defined your Final Pensionable Pay at the date of your ill- longer period than if you had retired at Benefit scheme), there may be an health retirement. your Normal Retirement Age. enhancement to this to reflect the contributions that would otherwise have been Partial Incapacity – you receive the pension you paid in the future. The size of any would have received if you had stayed in service enhancement will depend on your age and for half the period until your Normal Retirement the severity of your illness. Date but based on your Final Pensionable Pay on the date of your ill-health retirement. You may be able to buy a pension from a provider on enhanced terms depending on The Group will decide, in the light of independent medical the reasons for your ill health retirement. advice, which level applies to you Alternatively you could instead choose to take your benefits as a cash lump sum, part tax- free and part taxed (not permitted in the Isle of Man or Channel Islands), or transfer the value of your account out of Your Tomorrow to a drawdown plan where you can choose
March 2017 For internal use only
Feature or benefit While you are an Active Member of the Scheme If you leave pensionable service and If you join the Group’s Defined become a Deferred Member Contribution scheme ‘Your Tomorrow’ how much to withdrawn and when. Or a combination of these options. Pre-2006 Service You may be entitled to an ill health pension under the rules of your Former Scheme for this period of service.
Flexible or late Subject to consent of the Group, you can take your pension from age 55 (age 60 if you are based in You can choose to take your benefits up to retirement Jersey) whilst continuing to work under the Flexible Retirement Option. If you take flexible retirement age 75. you will not be able to build up any further pension benefits in the Scheme though you would be able to join the Group's defined contribution scheme ‘Your Tomorrow’. You can choose to take your pension and continue working for the Group from age 55, If you stay in service after Normal Retirement Age, you will receive a pension on leaving service based provided the Group agrees. on all of your Pensionable Service up to the date of you leaving (or age 75, if earlier). If you do this, you can also choose to rejoin Pre-2006 Service Your Tomorrow and start to contribute again. If you do, the Group will make contributions You may be able to apply to have any pension you are entitled to under a Former Scheme postponed too. This is known as flexible retirement. past your Normal Retirement Age. This may be at the discretion of the Trustees and/or the Employer, depending on the rules of the Former Scheme, please see your Former Scheme Guide for more information. Tax free cash lump You can normally take up to 25% of the value of your pension as a cash lump sum, within the Lifetime You can take up to 25% of your pension sum Allowance (LTA)1. This is currently tax free. account as a one-off cash lump sum. This is currently tax free. The rest can be used to buy If you choose to take a cash lump sum, your annual pension will be reduced. However, taking cash a pension or be taken as cash, (not permitted from the Scheme will not reduce the amount of any Spouse's pension payable on your death after in the Isle of Man or Channel Islands), or taking benefits. transfer the value of your account out of Your If you have paid AVCs, you can currently take all or part of your AVC fund as cash (provided that your Tomorrow to a drawdown plan where you can AVC fund does not exceed the overall limit on cash). Any amount taken in cash from your AVC fund will choose how much to withdrawn and when. Or use up part of your tax-free allowance. a combination of these options. If you take the remaining 75% of your pension account as cash and it will be taxed as income. Depending on your other income, this could be subject to a higher tax rate, or an emergency tax rate initially.
1 The Lifetime Allowance (LTA) is the total amount of pension savings you can build up without paying an additional tax charge. The LTA for the 2017/18 tax year is £1million.
AFTER YOU RETIRE
Feature or benefit While you are an Active Member of the Scheme If you leave pensionable service and If you join the Group’s Defined become a Deferred Member Contribution scheme ‘Your Tomorrow’
If you die after you Contributory Member A pension may be paid to your beneficiaries retire and/or a lump sum may be payable, if you A spouse’s/partner’s pension equal to two thirds of your pension (based on the amount of your original chose those benefits to form part of the terms pension calculated when you took the benefits on retirement, before any reduction for taking a cash of the pension you bought when you took lump sum at retirement). your pension. Your own pension would be A children’s pension equal to one third of your pension as described above would generally be paid reduced compared to what it would have until age 18 (or 23 if in full-time education or training). This amount will be shared between your been if you had not made such a choice. children as the Trustees decide. Non-Contributory Member A spouse’s/ partner’s pension equal to 50% of your pension, as described above, subject to any State Pension Reduction. A children’s pension equal to one fifth of the partner’s pension described above for the first child and one tenth of the partner’s pension for additional children (up to a maximum of three). Where you have been both a contributory and a Non-Contributory Member, the benefits above will be awarded in proportion to, and in respect of, the service in each respective category. Pre-2006 Service Spouse’s/partners benefits in respect of service accrued to 1 July 2006 will be based on the provisions of your Former Scheme. You may be entitled to additional benefits under a Former Scheme on death in retirement, please see your Former Scheme Guide for more information. Lump Sum If you die within five years of retirement, a cash lump sum equal to the balance of five years’ pension would be paid. Pension increases Any pension earned from the Scheme after 30 June 2006 will increase in line with changes to the Retail Your pension may increase after it has come Prices Index (RPI), capped at 5%. into payment, if you chose increases to form part of the pension you bought when you took Those parts of your pension which relate to Former Schemes may increase at different rates to that set your pension. Your own pension would be out above, please see your Former Scheme Guide for more information. reduced compared to what it would have been if you had not made such a choice.
GLOSSARY OF TERMS
Basic State Pension means the pension available from State Pension Age to everyone who has made or been credited with sufficient National Insurance contributions during their working life. Consumer Prices Index an index published by the Office of National Statistics which measures changes in the price level of consumer goods and services purchased by households. Used as a measure of inflation. Employer means an employer participating in the Scheme (including HBOS). Final Pensionable Pay means your highest yearly amount of Pensionable Pay, subject to the Pensionable Pay Cap, received in any of the last three consecutive complete years ending at the date your Pensionable Service ends. Former Scheme means one of the following: Bank of Scotland 1976 Pension Scheme Birmingham Midshires Pension Scheme Clerical Medical Staff Superannuation Fund Halifax Retirement Fund Clerical Medical International Staff Pension Scheme or any of their predecessor schemes. Former Scheme Guide means a guide to the benefits under a former scheme which can be found at: www.lloydsbankinggrouppensions.com/hbos_documents. HBOS means HBOS plc. Non-Contributory Member means a member of the Scheme who has, for some or all of their membership, not paid contributions due to being a member of the former Bank of Scotland 1976 Pension Scheme. Normal Retirement Date / mean a member's 60th or 62nd birthday (depending on the provisions of the Former Scheme) (or such other date determined by HBOS and notified to the member). Normal Retirement Age Pensionable Pay means your annual rate of basic pay, subject to the Pensionable Pay Cap. Pensionable Pay Cap means the cap on increases in Pensionable Pay implemented from 2 April 2010 and amended from 2 April 2014. Pensionable Service means service in years and days for which you have been a member of the Scheme, including any service transferred in from another pension arrangement which has been used to increase your Pensionable Service. If you work or have worked part-time, your Pensionable Service will be pro-rated for any part-time period. Retail Prices Index an index published by the Office of National Statistics which measures changes in the price level of consumer goods and services purchased by households. Used as a measure of inflation. State Pension Age means the earliest age you can take your State Pension benefits. State Pension Reduction means a deduction from your Scheme pension to take account of the Basic State Pension. Where this applies you will have been notified through your annual pension statement.
CONTACT DETAILS & USEFUL LINKS
Online Modeller. To access the Online Modeller visit: www.lloydsbankinggrouppensionsmodeller.co.uk Group Pensions website. If you would like to find any of the below please visit the Group www.lloydsbankinggrouppensions.com Pensions website: Contact details for your scheme administrator Details of the benefits provided in your Defined Benefit scheme or in 'Your Tomorrow'
Scheme administrator – if you would like to contact your scheme administrator you can Email: [email protected] do so in the following ways Tel: 01737 227 522
DISCLAIMER
This document is produced by Lloyds Banking Group Pensions Trustees Limited (the Trustee of the Scheme). It provides information about some of the provisions of the Scheme and does not confer any entitlement to benefits. It is not a substitute for the trust deeds and rules which constitute the legal basis of the Scheme. If there is any inconsistency between the terms of the rules of the Scheme and this document, the rules as amended from time to time, and as modified by formal agreement between you and the Group, will prevail. This document does not constitute financial advice and is provided for your information only. Please note that the information provided in the document is based on the legislation and taxation regime in force at the time of drafting. Contributions and benefits will be paid and taxed in accordance with tax and regulatory requirements at the relevant time. Please note that contributions and benefits for members living offshore (for example, in Jersey) may be restricted in order to comply with the requirements of the authorities in those jurisdictions.