YOUR pensionYOUR future

YOUR way

YOUR pensionYOUR future

YOUR way

YOUR pensionYOUR future

YOUR way

Michelin Pension and Life Assurance Plan Factsheet for members who are in both the Defined Benefit Section and Defined Contribution Section

2014 Budget - freedom and choice in pensions The Chancellor announced significant changes to the pension landscape as part of his 2014 Budget. These changes include giving members of defined contribution schemes more flexibility in how they use their pension savings at retirement.

Some of these changes took immediate effect. However, there will be a pension industry consultation before others become law. Our records show that you are a member of both the Defined Contribution (DC) Section and Defined Benefit (DB) Section of the Plan. This leaflet outlines the changes and what they may mean for you.

What were your options at retirement before the Budget changes?You are a member of two sections of the Plan and your options are different in each:

DB SectionThis section closed in December 2008. Your benefits in this section are based on your DB pensionable salary and service. Until the Budget changes, at retirement you would generally receive:

• a pension from the Plan which pays you a regular income for life; and

• the option to take 25% of the value of your total benefits (in each section) as a tax free cash lump sum.

To take a cash lump sum at retirement from the DB Section, you exchange some of your annual pension income for cash. However, as you also have benefits in the DC Section, you can choose to use the money in that section for your cash lump sum instead. The total amount you could take from either section was limited to 25% of the total value of your benefits.

DC SectionIn this section, you build up savings in your own DC retirement account. At retirement, you then choose how you want to use the money you have saved.

Until the Budget changes, most members’ choices at retirement were limited. You could generally either:

• use your DC retirement account to buy an annuity (a kind of insurance policy which pays a guaranteed income for life); or

• take 25% of the value of your total benefits (in each section) as a tax free cash lump sum. Or, as mentioned above, you could choose to take some or all of this lump sum from the DC Section. If you had any money left over in your DC Section retirement account, you could then use this to buy a smaller annuity.

Rather than buy an annuity, if you had very large retirement benefits, you could transfer your retirement account to another pension arrangement and then take your income using either capped drawdown or flexible drawdown (see the box opposite).

Additional options were available to members with very small pension benefits who could take their entire accounts in cash.

These options changed on 27 March 2014 and are expected to change further from April 2015.

10 second summaryHere are the key things you need to know: • The Budget changes will affect

you immediately if you have either recently received a retirement quote or if you plan to retire in the next 12 months.

• You need to think carefully about how you want to take your DC Section savings at retirement. Will you want to take an annuity, income drawdown, and / or cash?

• Even if you’re a long way from retirement, there are some actions you should consider now – like reviewing your target retirement age and whether your investment choices in the DC Section are still right for you.

What is income drawdown?

Under income drawdown, each year you withdraw your retirement income and then leave the rest invested. Before the Budget changes, there were two key types of income drawdown and each had restrictions to help ensure your savings last through your retirement:

• Capped drawdown – Limits how much you can withdraw each year.

• Flexible drawdown – There’s no limits on how much you can withdraw, but you must demonstrate that you already have an adequate income.

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What’s changing?The focus of the Government’s reforms is on DC pension plans, so the impact on your benefits in the DB section is low.

Members with low pension benefits at retirementSome members who have earned only a small annual pension in the DB Section and have only small savings in the DC Section may prefer to take their benefits as a cash lump sum.

The rules around this have been relaxed if you’re over age 60 and we will tell you if you qualify for this option when we send you your retirement pack.

Your options in the DC Section from 27 March 2014You will still be able to buy an annuity with your DC retirement account if you want to. However, if you’re interested in securing an income other than an annuity, the rules have been relaxed:

• The minimum income requirement for flexible drawdown has reduced from £20,000 to £12,000 each year. This means that you can now explore this option if you can demonstrate you have an income of £12,000 each year from the State and other pension sources.

• The capped drawdown limit (this is how much you can withdraw each year) has increased from 120% to 150% of the amount you would have received if you had bought an annuity.

Income drawdown is not directly available from the Plan. If you would like to choose income drawdown, you must transfer your DC Section retirement account to another suitable arrangement (but remember, you can also use the money in your DC Section retirement account to take a cash lump sum of up to 25% of the value of your total benefits excluding those transferred to the drawdown arrangement) Hargreaves Lansdown has been appointed by the Trustee to help you understand your options at retirement – see page 4.

Changes expected to come into effect in April 2015More significant changes are proposed to take effect from April 2015. The proposals include:

• Allowing you to take your entire DC Section retirement account as cash. The first 25% of your total benefits would be tax free and the balance taxed at your marginal rate of income tax.

• Completely removing the caps and limits on income drawdown.

• Ensuring that members of DC pension plans receive free, impartial, face to face guidance at the point of retirement.

Have you stopped working for the Company?

If you’ve stopped working for the Company, your

benefits will be left in the Plan until you retire or decide

to transfer your benefits elsewhere. Although you’re

no longer contributing to the Plan, the information in this

leaflet is still important.

More updates on the way!We’ll be providing additional updates when more becomes known about the proposals. Please stay tuned for more

information on our website at www.michelin-pensions.co.uk

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Update your planned retirement age with

Friends Life If your money is invested in a lifestyle option, your selected

retirement age determines when you move into lower

risk investments.

Update your retirement age by contacting Friend’s Life –

see page 4.

Lifestyle options under review

We’ll be reviewing your lifestyle investment options

to ensure they’re still suitable following the Budget

changes.

We’ll update you in the coming months.

Gilts A form of loan to the UK Government. The

Government pays interest and pays back the loan

when it matures.

EquitiesMade up of company shares traded on stock

markets in the UK or overseas (e.g. BP or Apple).

How could these changes affect you?Are you due to retire within the next 12 months?Any proposals could change significantly before they are introduced, so please think carefully before taking action. If you are due to retire before 6 April 2015 you may wish to consider whether you should delay making a decision on how you want to take your pension benefits until the Government’s proposals are confirmed in legislation.

A lot of the detail in the Budget is still to be confirmed, so this leaflet is a summary of some of the key points known so far.

Are your DC Section savings invested in a lifestyle option?If your DC Section retirement account is invested in a lifestyle option, your investments will switch automatically as you approach retirement, based on your selected retirement age.

Given the changes, it will be important to ensure:

1. You have selected the retirement age at which you realistically expect to retire (i.e. you have not simply defaulted to age 65) – Please remember:

• If you intend to retire before age 65 and you haven’t selected this earlier retirement age, your money won’t be moving into lower risk investments fast enough.

• If you intend to retire after age 65, your money may be moved into lower risk investments too soon.

The State Pension ages are rising and many members will receive their State Pension at age 68 or beyond, so may want to delay retirement further.

2. You still intend to purchase an annuity at retirement with your DC retirement account. Gilt funds are used in our lifestyle options for members approaching retirement, because the price of purchasing an annuity is broadly linked to the market value of gilt investments. However:

• if you don’t intend buying an annuity you may consider investing in equity funds for longer; or

• if you intend taking more than 25% of your DC retirement account savings as a cash lump sum, you may consider investing more in cash.

You can check your latest pension benefit statement to see what age you have selected for your retirement. To check your State Pension age go to www.gov.uk and click on the ‘Working, jobs and pensions’ link.

Cooling off periods for annuity purchasesYou have a cooling off period which runs for 30 days from the day you sign up to an annuity. However, some annuity providers recognise that some members who now have more options available to them may want more time to consider their options and are extending their cooling off periods. Buying an annuity may remain your preferred option but if you would like more time to consider your options, you should contact your annuity provider as soon as possible.

Transferring DB benefits to a DC planIn the past it has rarely been beneficial to transfer benefits from a DB plan, because you’re giving up the certainty of the level of benefits you get for the rest of your life. However, when the Government proposals are implemented, some members may feel that they would benefit from the greater flexibility that DC pension plans offer.

These transfers between plans are highly complex and you should always seek financial advice before taking any action. You can find a financial adviser at www.unbiased.co.uk – you will be responsible for paying for any advice you receive.

Please note that the Trustees are awaiting further clarification from the Government to determine if any other restrictions will apply to these transfers.

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Designed and produced by Hymans Robertson 4064/MicDB/MIC0714

Important informationFind out more about your retirement optionsHargreaves Lansdown has been appointed by the Trustee to provide you with a retirement service.

To understand your options, visit the Hargreaves Lansdown website at www.retirementservice.co.uk/michelinpension where you can:

• Understand the different retirement options available.

• Use the annuity quote tool to compare the level of income you might receive with each option.

• Learn more about retirement planning.

Warning – keep your savings safe!We’ve become aware of a number of organisations who are making cold calls to the general public claiming to have been sent personal information so that they may offer advice as a Government approved adviser. It is extremely likely that these are fraudulent calls.

The Trustees will only provide information to Hargreaves Lansdown, unless you have issued specific instructions authorising the Trustees to deal with your own adviser.

You should always check your own personal tax and financial situation before making any final decisions. If you want to consult a financial adviser you can find one near you at www.unbiased.co.uk

Further information about the Budget and help with general money matters can be found online at www.moneyadviceservice.org.uk

Defined Contribution Section

Post: Michelin Pension and Life Assurance Plan

Friends Life PO Box 1550 Salisbury SP1 2TW

Email: Michelin@friendslife.co.uk

Call: 0845 602 9221

Contact us

Defined Benefit Section

Post: Michelin Pensions Administration Capita

PO Box 2281 Stoke on Trent ST4 4ZT

Email: Michelin@pensionsoffice.com

Call: 0844 391 2460