explanatory booklet - aa pension s · 6 the aa pension scheme management 2 section the trustee, on...

EXPLANATORY BOOKLET

July 2015

MANAGEMENT 2

The AA Pension Scheme – Management 2 section2

Contents Page

Welcome to the Management 2 Section of the AA Pension Scheme 3

What is it? 4

Can I join? What do I pay? 4

What do I get? 5

What about increases? 8

Is my family protected? 9

What if I leave? 11

Can I pay more? 12

The limits to tax-efficient pension savings 13

Pension benefits from the State 14

Getting further help 15

The legal background 17

Information, help and advice 19

Technical terms explained 19

The AA Pension Scheme – Management 2 section 3

This booklet describes the benefits offered to members of the Management 2 Section of the AA Pension Scheme employed in the UK. It has been designed to give members a broad outline of the benefits of the Scheme and how it works and, as such, is only a guide and not a legal document. The Scheme is governed by the Trust Deed and Rules, a copy of which is available from the Pensions Department or the Aon Hewitt Pensions Team. If there is any conflict between this booklet and the Trust Deed and Rules, then the Trust Deed and Rules will take precedence.

Retirement may seem a long way off, but planning how to provide for the future, for you and your family, is one of the most important decisions you will have to make.

You need to decide how best to provide yourself with a pension in retirement. This booklet explains the benefits provided by the Management 2 Section of the AA Pension Scheme ‘the Scheme’.

The AA provides a good pension scheme with a wide range of benefits. Your pension is based on the level of your pensionable earnings near retirement and the number of years you have been a member of the Scheme. This means that, as your pensionable earnings increase, so does the value of your pension (subject to this increase remaining within a certain limit).

The Scheme also provides other benefits which will cover your family or dependants if you die whilst you are still working, in retirement and even after you have left the Scheme with a deferred pension. Also, if you have to retire because of ill-health, an immediate pension may be paid to you.

All in all, the Management 2 Section of the AA Pension Scheme provides excellent protection whilst you are working and a good income in retirement.

Welcome to the Management 2 Section of the AA Pension Scheme

AA Pensions Department


MembershipThe Management 2 Section is closed to new entrants. The information in this explanatory booklet is therefore only relevant to those who are already members of the Management 2 Section. If you are not a member of the AA Pension Scheme and are considering joining then you will need to read the information on CARE which is available on the website www.AApensions.com

ContributionsYou pay either 5% or 6% of your pensionable earnings towards the cost of your benefits. The amount you pay depends on your membership category and the rate selected at 1 September 2003. Your contributions are automatically deducted from your pay and you receive full tax relief on them. Also,

as a member of the Management 2 Section you are contracted-out of the additional State Pension Scheme (see page 14) and therefore pay reduced National Insurance contributions, so the overall cost of belonging to the Scheme is lower than it first appears.

The Company meets the remainder of the costs for the benefits available. The Company’s contribution is determined by the Trustee after consulting with the Scheme Actuary and is reviewed regularly.

Transfers inSome members may have previously transferred benefits into the Scheme, in return for which they were granted an additional period of pensionable employment. However no further transfer payments can be accepted into the Scheme.

About the Management 2 SectionThe Management 2 Section provides benefits for you and your dependants both before and after your retirement.

Your retirement benefits are calculated using your final pensionable earnings and length of pensionable employment.

You can also top up your pension by paying Additional Voluntary Contributions as described on page 12.

Membership of the Scheme will not affect your entitlement to the Basic State Pension, which is payable from State Pension Age.

The Trustee is responsible for running the Management 2 Section in accordance with the Trust Deed and Rules. The names of the Trustee Directors are available in the latest Report and Accounts.

On a day to day basis the Management 2 Section is administered by the AA Pensions Team and their contact information can be found on the back cover.

What is it?

Can I join? What do I pay?


Payment of pensions

Your pension is payable for your lifetime by monthly instalments in advance. It is paid directly into your bank or building society account.

Cash option at retirement

You may, if the Trustee agrees, choose to exchange up to 25% of the ‘value’ of your pension benefits for tax-free cash when you take your pension, providing you are over the minimum pension age of 55 or if you retire due to ill-health. This is often referred to as “commutation”.

If you have paid Additional Voluntary Contributions (AVCs), then you may also take up to 25% of the value of your accumulated AVC fund as a tax free cash sum, subject to the total cash sum from all sources not exceeding HM Revenue & Customs maximum tax free cash sum limits.

What do I get?Your benefits at retirement

How your pension is calculated

The normal retirement age under the Management 2 Section is 65. If you retire on your Normal Retirement Date (NRD) you will be entitled to an annual pension income equal to 1/57th of your final pensionable earnings for each full year (and proportionately for each complete month) of pensionable employment. If you are a reduced accrual member who has elected to pay 5% of pensionable earnings until your pensionable employment ends, benefits on and from 1st September 2003 accrue at the reduced rate of 1/60th of your final pensionable earnings for each year (and proportionately for each complete month) of pensionable employment.

Examples:Example 1:

A member contributes to the Management 2 Scheme for 20 years and retires at normal retirement date with final pensionable earnings of £30,000. The

normal retirement pension is calculated as:

20/57 x £30,000 = £10,526 per year

Example 2:

A member contributes to the Management 2 Scheme for 20 years, however, elected on 1st September 2003 to become a reduced accrual member. The member had been in the Scheme for 5 years on 1st September 2003 and therefore had a further 15 years as a reduced accrual member. The member has a final pensionable earnings at retirement of £30,000. The normal retirement pension is calculated as:

5/57 x £30,000 = £2,631.56 per year

15/60 x £30,000 = £7,500 per year

£2,632 + £7,500 = £10,132 per year

Please note: If you are a part-timer, your pension benefits will be directly proportional to the number of hours you are contracted to work. For instance, if you work half the full-time hours, you will pay contributions based on your actual pensionable earnings and build up half the pension of an equivalent full-time employee.

If you work both full-time and part-time during your career, each period will be treated accordingly. The part-time service and pensionable earnings will be adjusted to the full-time equivalent and added to the full-time entitlement. This means that your pension is protected if your hours change.


The Trustee, on a basis certified as reasonable by the Actuary, will decide the amount of pension you will have to give up in exchange for a cash sum when you commence your pension; this will depend on your age. The terms for exchanging pension income for cash may be reviewed and altered by the Trustee from time to time.

Although any cash sum taken will reduce your pension, it will not affect any spouse’s or dependant’s pension payable on your death.

Early retirement

You may retire earlier than the Normal Retirement Date provided that you are above minimum pension age which is currently 55. The early retirement pension is calculated in the same way as for normal retirement, but using pensionable employment and final pensionable earnings at the date of actual early retirement. A reduction to allow for early payment will apply if you retire before your Normal Retirement Date.

Flexible retirement

You do not have to retire from work before receiving a pension - as long as you are over your minimum pension age of 55. You can choose to take 50% or 100% of your pension whilst continuing to work for the Company and as long as the pension is put into

payment, you can receive part of your benefits as a tax free cash sum.

If you choose to take flexible retirement, you cannot continue to contribute to, or accrue further benefits under the Management 2 Section of the Scheme. You can join the CARE section of the Scheme to accrue pension in respect of future service.

Ill-health retirement

With the agreement of the Company, you may retire at any time on grounds of ill-health (incapacity).

Incapacity

You may be entitled to an annual pension, payable immediately if;

n Your ill-health prevents you from working in your current job but you are still able to do some kind of work;

n Although your earnings capacity is adversely affected, it is expected to continue.

Serious incapacity

n If you become so ill that you will be unable to do any kind of work again, an enhanced ill-health pension may be paid immediately. Your pensionable employment will include all the years you could have worked up to your normal retirement date.

Please note: the decision on whether to grant ill-health benefits is taken by the Company after considering medical evidence. The Trustee must also be satisfied that you are and will continue to be incapable of carrying out your occupation because of physical or mental impairment. Once an ill-health pension has been granted it is subject to periodic review by the Trustee and may be reduced or suspended at any time.

You can choose to take 50% or 100% of your pension whilst continuing to work for the Company.


Serious commutation

If you have less than 12 months to live, you may be able to commute all of your pension to a lump sum, subject to evidence of your limited life expectancy from a Registered medical practitioner.

Late retirement

If you retire from employment after Normal Retirement Date you will be entitled to an immediate annual pension.

The amount of pension payable will depend upon whether on reaching Normal Retirement Date you decided to continue as a contributing member of the Scheme.

If you choose to cease to be a contributing member of the Scheme on or after reaching Normal Retirement Date, you may choose to draw your pension, or you may defer drawing your pension until a later date. The pension payable will be calculated as the pension at the date pensionable employment ceased increased up to the date payment commences at a rate decided by the Trustee after consulting the Actuary.


What about increases?Pension increases in payment

For pension benefits built up between 23 September 1999 and 30 June 2010:

Your pension (above your GMP) is guaranteed to increase each year on 1 April (or such other date as the Trustee and the Principal employer agree) in line with inflation (as measured by the Retail Prices Index, over the 12 months ending on the previous 30 September) up to a maximum of 6%.

For pension benefits built up on or after 1 July 2010:

Your pension (above your GMP) is guaranteed to increase each year on 1 April (or such other date as the Trustee and the Principal employer agree) in line with inflation (as measured by the Retail Prices Index, over the 12 months ending on the previous 30 September) up to a maximum of 2.5%.

Guaranteed Minimum Pension (GMP)

The GMP element of your pension will be subject to statutory increases, the exact basis differs depending upon when you left ‘Active’ Status, when your pension commenced and your age.

Keeping pace with inflation

Pensions in payment are reviewed each year by the Company, which may award discretionary increases to help keep pace with inflation.


If you die in deferment

If you die after ceasing to be a contributing member of the Scheme, but your pension has not yet come into payment, the following benefits will be paid:

n Cash sum A cash sum equal to the contributions you paid to the Scheme (excluding any AVCs) with interest determined by the Trustee after consulting the Actuary. The Trustee has discretion as to whom payment is made.

n Spouse or dependant’s pension Your spouse or dependant may receive a lifetime pension, calculated as half the pension you would have received if you had retired the day before you died.

If your spouse or dependant is more than ten years younger than you, the pension may be reduced to take account of their longer life expectancy.

n Child’s pensions A pension is paid to each child (up to a maximum of 4). Each pension is equal to one quarter of the spouse’s or dependant’s.

Pensions may be paid at the Trustee's discretion to children up to the age of 23, if they are still in full-time education.

Family benefits

If you die before retirement

If you die whilst still a contributing member of the Scheme, the following benefits will be paid:

n Cash sum A cash sum equal to 3.5 times your pensionable earnings at the date of your death or 3.5 times your earnings in the previous tax year, if greater will be paid. The Trustee has discretion as to whom payment is made.

n Spouse or dependant’s pension Your spouse or dependant may receive a lifetime pension, calculated as half the pension you would have received if you had retired the day before you died, except that pensionable employment includes the period between death and normal retirement date.

If your spouse or dependant is more than ten years younger than you, the pension may be reduced to take account of their longer life expectancy.

n Child’s pensions A pension is paid to each child (up to a maximum of 4). Each pension is equal to one quarter of the spouse’s or dependant’s pension.


Please note: Any reference to spouse’s benefits in this section could also apply to a civil partner.

Is my family protected?


If you die after retirement

If you die after taking your pension, the following benefits will be paid:

n Pension guarantee Your pension, excluding any early retirement supplement, is guaranteed for five years, so if you die within five years of commencement of your pension, the remainder of the five years’ pension payments is paid. The Trustee has discretion as to whom the payment is made (see next column).

n Spouse or dependant’s pension Your spouse or dependant may receive a pension equal to half the pension you were entitled to at the date of commencement of your pension (excluding any early retirement supplement) before any part of it was exchanged for a cash sum. The spouse or dependant’s pension will include 50% of any pension increases granted to your pension after it commenced.

n Children’s pensions A pension is paid to each child (up to a maximum of 4). Each pension is equal to one quarter of the spouse’s or dependant’s pension.


Payment of cash sum death benefits

Where a cash sum is paid in the case of death, the recipients will be at the discretion of the Trustee but they will take into account any nominations on your Expression of Wish form.

An online Expression Of Wish form can be found online at www.AApensions.com

You can also download the form, complete it by hand and send to Aon Hewitt at:

The AA Pensions teamAon HewittPO Box 196HuddersfieldHD8 1EG

Please note: it is no longer possible to accept an Expression of Wish form in a sealed envelope to be opened on death.


A transfer payment You may request to transfer the value of your deferred pension to another registered pension scheme.

The value of your deferred pension - the cash equivalent transfer value (CETV) - is calculated as the amount which needs to be invested in order to provide your future pension. It takes account of the number of years before retirement and financial conditions at the date of payment of the CETV.

You have the right, each year, to ask for the value of your current pension entitlement under the Scheme, i.e. the CETV.

Opting out of the Scheme whilst still in employment

You may opt out of the Scheme at any time. If you decide to leave, your benefits are calculated in the same way as if you had left employment. If you choose to opt-out you will not be able to rejoin the Management 2 section of the AA Pension Scheme at a later date.

If you are considering doing this, we recommend that you seek independent financial advice before doing so.

You will need to complete an Opt out of the Scheme form which is available from the Pensions Department at [email protected].

Benefits if you leave the schemeIf you leave you may choose between a deferred pension, early retirement or a transfer payment.

A deferred pension This pension is calculated in the same way as a pension at normal retirement date, but is based on your final pensionable earnings and pensionable service at the date of leaving. Your deferred pension is payable from normal retirement date.

You will continue to receive increases to your deferred pension to help protect it against inflation. The guaranteed minimum pension included in your deferred pension will be increased at a rate set by the Government.

Your pension (above your guaranteed minimum pension) will increase over the period until your normal retirement date broadly in line with inflation (as measured by the Retail Prices Index) up to a maximum of 5%.

Precise details will be given to you if you leave.

See page 9 for details of the benefits payable on death in deferment.

Early retirement from deferred status Having left the AA with an entitlement to a deferred pension, it is possible to commence payment of your pension before your normal retirement date. The earliest date at which your pension can commence is age 55, and your deferred pension will be reduced due to the fact that it will be paid for a longer period. The rate of reduction is decided by the Trustee after consulting the Actuary.

What if I leave?


Boosting your benefits

Additional Voluntary Contributions (AVCs)

In addition to the contributions payable to the Management 2 section of the Scheme, you can pay AVCs as described below.

AVCs are a good way of increasing your benefits, particularly if you joined the Company mid-career or plan to take your pension early. They are a tax-efficient way of saving. This is because they are deducted from your pay before tax, in the same way as your pension contributions, so you receive full tax relief on them at your highest rate of tax.

You can also access the flexibilities available for defined contribution pensions.

Full details of the AVC arrangements can be found at www.AApensions.com along with details of where you can find more information and guidance about to the options you will have in relation to your AVC fund at retirement.

You will need to be aware of the Annual Allowance limits before deciding to pay AVCs. See page 13 for more information.

Can I pay more?


The Lifetime Allowance

Your pension benefits are also subject to an overall Lifetime Allowance, which is the overall amount of pension savings than an individual can have at retirement without incurring a tax charge. The Lifetime Allowance for the 2015/2016 tax year is £1.25 million.

For defined benefit schemes the ‘value’ of the member’s pension is calculated by multiplying the initial annual pension by 20 and adding it to the pension commencement lump sum received. This would be added to the value of any other pension funds you have outside the AA to determine whether the Lifetime Allowance has been reached.

In practice it is expected that few members of the Management 2 Section (if any) will reach the Lifetime Allowance, but you should take independent financial advice if you believe that you may be affected by it. If the Lifetime Allowance is exceeded then excess benefits are subject to the Lifetime Allowance Charge. This would currently mean a tax charge of 25% if the benefits are taken as additional pension or a tax charge of 55% if the benefits are taken as a lump sum.

The Government made sweeping changes to the tax regime for pension savings effective from 6 April 2006. These changes mean that there is now no maximum to the amount of your pension savings but there is a limit to the tax-efficiency of saving in a registered pension scheme. HM Revenue & Customs (HMRC) will allow you to receive tax relief on your total pension contributions up to a maximum of 100% of your earnings in the tax year (or £3,600 if greater). But you may incur a tax charge if your contributions are substantial - see below. There is no limit on the contributions on which you can receive tax relief in the tax year in which your pension benefits commence.

The Annual Allowance

The Annual Allowance limits the amount of tax privileges on a member’s ‘pension input’ each year. If the value of a member’s pension input exceeds the Annual Allowance, the excess will be subject to a tax charge. ‘Pension input’ includes:

n The capital value of any benefit accrual in defined benefit pension schemes (such as the Management 2 Section). The capital value is calculated by multiplying the increase in the level of your pension entitlement during the tax year by a factor of 16, and;

n Any other contributions to defined contribution schemes, such as Additional Voluntary Contributions (AVCs) or contributions to any other HMRC Registered Pension Scheme. This may include any pension arrangements that you contribute to on a private basis.

The Annual Allowance for the 2015/2016 tax year is £40,000.

The limits to tax-efficient pension savings


State Second Pension

With effect from 6 April 2002, a new State Second Pension (S2P) replaced the State Earnings-Related Pension Scheme (SERPS). The Management 2 Section of the AA Scheme is contracted-out of this arrangement on a salary-related basis. This means that you will not receive State Second Pension relating to the time you contribute to the Scheme.

For membership before 6 April 1997, the contracted-out schemes must provide you with at least a guaranteed minimum pension (GMP) roughly equal to the pension you would have received as a member of SERPS. On your death, the Scheme must also provide your spouse with a proportion of your GMP, as specified by legislation at that time.

For contracted-out membership after 5 April 1997, the Scheme actuary has to certify that the level of benefits provided under the Scheme overall is at least as valuable as that under contracting-out regulations. Contracted-out benefits relating to service pre and post 5 April 1997 are provided by the AA Pension Scheme.

Who can I ask about my State benefits?

For queries relating to your State benefits, you can contact The Department for Work and Pensions (DWP).

Future Pension Centre The Pension Service Mail Handling Site A Wolverhampton WV98 1LU

Telephone: 0845 3000 168

Website: www.nidirect.gov.uk

Basic State Pension (BSP)

State Pension Age (SPA) in the UK will vary based upon gender and date of birth. Under the current rules for men born before 6th December 1953 it’s 65 and for women born on or before 5 April 1950 it’s 60.

The SPA for both men and women is a changing landscape with plans to gradually increase SPA so that it rises to 68 depending on when you were born. It is very important that you keep up to date with these changes and the impact on you personally.

You qualify for the Basic State Pension if you have built up enough ‘qualifying years’ before State Pension Age. A ‘qualifying year’ is a tax year where you have sufficient income to pay National Insurance Contributions (NICs), or are treated as having paid or being credited with NICs. If you reached State Pension Age on or after 6 April 2010, you will need 30 qualifying years to receive a full Basic State Pension or the Basic State Pension will be pro-rated. The State Pension scheme is made up of two main parts:

n The Basic State Pension;

n The State Second Pension (S2P), an earnings related benefit (previously the State Earnings- Related Pension Scheme, known as SERPS).

Provided you have paid the required NICs during your working life, you will receive a Basic State Pension. The pension is a fixed amount set by the Government and is increased each year in line with price increases. It is paid from State Pension age.

You cannot opt-out of the Basic State Pension.

Pension benefits from the State


The Pensions Advisory Service (TPAS) and the Pensions Ombudsman

TPAS is available to assist you with any pension queries or any difficulties that you have failed to resolve through the Scheme’s IDRP.

You can contact TPAS by writing to:

11 Belgrave Road London SW1V 1RB

Telephone: 0300 123 1047

Website: www.pensionsadvisoryservice.org.uk

Enquiries can be submitted using their online enquiry form.

If TPAS is unable to resolve the dispute, you may contact the Pensions Ombudsman who can investigate and determine any complaint or dispute of fact or law in relation to an occupational pension scheme. The Pensions Ombudsman can also be contacted by writing to the above address or by telephoning 020 7630 2000.

Website: www.pensions-ombudsman.org.uk

Email: [email protected]

The Pensions Ombudsman will usually expect the Pensions Advisory Service to have been approached (and the Scheme’s disputes procedure to have been exhausted) before he will investigate any complaint himself.

Dealing with complaints

If you have a complaint relating to the Management 2 Section you should contact the Head of Pensions who will always try to provide a prompt and accurate response. If the matter cannot be resolved informally, the Scheme has a formal Internal Disputes Resolution Procedure (IDRP) and a full copy is available from the Head of Pensions. The IDRP will be used to resolve any dispute if you have a serious problem that the Head of Pensions cannot resolve, or you are unhappy with the decision reached. To begin the IDRP you will need to put your complaint in writing to the Secretary to the Trustee at the following address:

A.A. Pensions Trustees Limited Fanum House (8th Floor) Basing View Basingstoke Hampshire RG21 4EA

You will then receive a written decision and an explanation, where possible within two months of your written complaint being received. If you are still dissatisfied, you have the right to appeal to the Trustee. At any time during the disputes procedure, you may refer the complaint to TPAS or the Pensions Ombudsman.

Getting further help


Office of the Information Commissioner (Data Protection)

Information about you and any dependants who may benefit from your membership of the Scheme is held on computer and within personal files. The Trustee needs to hold this information for the purposes of administering the Scheme and calculating and paying benefits. This may include ‘sensitive personal data’, such as information about your health or family circumstances. You will, therefore, be asked for express written consent to the processing of data about you, including sensitive personal data, as required by the Data Protection Act 1998. It may also be necessary for the Trustee to pass this information to the Company, Scheme actuary, auditors, legal advisers and other third parties for the purpose of administering the Scheme. The Trustee is registered under the Data Protection Act 1998.

The Data Protection Act gives you the right to check your personal details held by the Trustee and you may do this by contacting AA Pensions Administration. The Trustee reserves the right to charge for the provision of these details. In cases of dispute, you may refer any data issue to the Office of the Information Commissioner at the following address:

The Information Commissioner’s OfficeWycliffe HouseWater LaneWilmslowCheshireSK9 5AF

Telephone: 01625 545 745

Website: www.ico.gov.uk

Pension Tracing Service

The Pension Tracing Service holds details of all occupational pension funds. If you need help to trace pension benefits from previous employment, for example if you leave and lose touch with your employer, you can ask for free help by contacting:

Pension Tracing Service The Pension Service Tyneview Park Whitley Road Newcastle upon Tyne NE98 1BA

Telephone: 0845 6002 537

Website: www.direct.gov.uk

The Pensions Regulator (TPR)

TPR is responsible for regulating UK pension arrangements. It has the power to intervene in the running of a pension scheme where Trustees, employers or professional advisers have failed in their duties. TPR can be contacted at:

The Pensions RegulatorNapier HouseTrafalgar PlaceBrightonEast Sussex BN1 4DW

Telephone: 0845 600 7060

Website: www.thepensionsregulator.gov.uk


The Company is committed to the Scheme and has every intention of continuing it, but future conditions cannot be foreseen. The Scheme’s formal documents give the Principal Employer the right to amend or terminate the Scheme (without replacing it) at any time - in the case of amendment, by agreement between the Principal Employer and the Trustee. In the event of the Scheme being terminated, benefits for pensioners, members and other beneficiaries would be provided in accordance with the Rules. The funding of the Scheme aims to ensure that the assets are, in normal circumstances and assuming the Scheme continues as a contributory arrangement, sufficient so that benefits can be paid as and when they become due. If the assets prove insufficient, the Company would be responsible for making up the shortfall to the extent required by legislation. However, you should be aware that, if the Scheme is discontinued, even if the shortfall required by legislation is met, there will not necessarily be sufficient assets to provide your benefits in full.

The Pension Protection Fund

The Pension Protection Fund (PPF) compensates members of eligible pension schemes when their employer becomes insolvent (as defined by the Pensions Regulator), and their scheme does not have sufficient assets to pay benefits to members. The PPF provides between 90% and 100% compensation to members, depending on whether they are currently receiving a pension. Future pension increases are only provided on a limited basis. The benefit payable to a scheme member from the PPF is restricted to a maximum.

For more information on the PPF, visit its website at: www.pensionprotectionfund.org.uk

Trust status

The Management 2 is a section of the AA Pension Scheme (“the Scheme”). The Scheme is set up as a trust, the assets of which are kept entirely separate from the Company and may only be used to pay benefits to and in respect of members and the expenses of running the Scheme until the Scheme is wound up. All the benefits from the Scheme are provided out of the funds of the trust.

Your benefits are only payable as described in the Rules, and you may not use your benefits as security against any loan or assign them to anyone, i.e. a mortgage. If you attempt to do so, the Trustee may decide that you are no longer entitled to benefits from the Scheme.

The trust is administered by a trustee company called A.A. Pensions Trustees Limited (‘the Trustee’). The Trustee’s role is to ensure that the Scheme is managed according to the Rules, and that its assets are invested prudently in line with the Statement of Investment Principles. Its board is made up of employer-appointed and member-nominated directors, whose names appear in the Scheme’s annual report, which the Trustee publishes each year, and which reports on progress over the preceding twelve months. Copies are available from AA Pensions Administration. The Rules are the governing documentation of the Scheme and in the event of any ambiguity or inconsistency between the Rules and this guide or any announcement; it is the Rules that will apply. This booklet is a guide and does not confer any entitlement to benefits.

The legal background


2. Earmark part of your accumulated retirement income and other benefits when payable. In this case, a proportion of your pension benefits (on retirement) or lump sum (on retirement or death) is made the subject of an attachment order and earmarked for payment to your ex-spouse when you retire or die.

3. Share your pension benefits and other benefits. This method sets out to achieve a ‘clean break’ of retirement benefit rights whether they are still being built, are deferred or are in payment. Your benefits in the Scheme are valued when a sharing order is made and your full entitlement is divided between you and your ex-spouse as set out in the order. The ex-spouse’s entitlement is then transferred into his or her occupational pension scheme or a personal or stakeholder pension, or another suitable type of insurance contract of the ex-spouse’s choice. Where the ex-spouse makes no transfer election, the Trustee will transfer the entitlement to an external arrangement of its choice.

If you need more details on divorce, you can request our information pack from AA Pensions Team. Also, please do not forget to complete a new Expression of Wish form which you can download from our website www.AApensions.com

HM Revenue & Customs registration

The Scheme is registered with HM Revenue & Customs (HMRC) under the Finance Act 2004. As a section of the Scheme, the Management 2 Section can only therefore provide certain benefits. Registration with HMRC also means that most contributions paid are eligible for tax relief and investment income earned by the Scheme is largely free of tax. Your pension will, however, be subject to income tax when it is paid. HMRC also imposes a Lifetime Allowance on the total amount of pension savings you can have before you suffer additional tax charges (see page 13).

Statement of investment principles

The Trustee must prepare a statement concerning decisions about investment of the Scheme’s funds, as required by law, and review it from time to time. The Trustee must seek independent advice from a suitably qualified investment adviser and consult with the principal employer in arriving at this statement. Copies are available from the AA Pensions Team.

Pensions and divorce

If you are a member of the Scheme and divorce, the accumulated retirement income and other benefits you have built up may be dealt with in one of three ways. A divorce court may:

1. Offset them against other assets in a financial settlement. The total value of your pension benefits and other benefits is taken into account alongside all the assets such as your house, car and other property. Your benefits are not therefore divided, but are offset against other assets.


Technical terms explainedCertain words and phrases with technical meanings are used in this booklet - these are explained below and appear in bold print throughout the text.

‘Active’ Status - The status of a Contributing member. You cease to be of ‘Active’ status when you opt out of, or otherwise leave the Scheme.

Additional Voluntary Contributions (AVCs) - Contributions you elect to pay which are over and above your minimum contributions.

Basic salary - Basic annual rate of pay excluding commission, overtime and other varying payments.

CARE - The Career Average Revalued Earnings section of the Scheme currently open to new entrants. Benefits under the CARE section of the Scheme are based on each year’s pensionable pay which may be revalued to help protect your benefits against inflation.

Child - A legitimate, legitimated or adopted child who is (unless born after your death) living with you or financially dependent upon you to a substantial extent (as to which the Trustee’s decision is final) and who is under age 18 or, if the Trustee decides to treat them as a child, is over age 18 but under age 23 and receiving full time education or vocational training.

Company - The Automobile Association Limited and its subsidiary and associated companies which participate in the Scheme. Where applicable, this refers to the Company that employs you.

Contributing member - An employee of the Company who is contributing to the Scheme.

Earnings - Basic remuneration plus fluctuating emoluments to the extent the Principal Employer has notified you that they are to be included.

Information, help and adviceThe websites listed below provide information on pensions, financial planning and State benefits.

www.gov.uk/browse/working– The Department of Work and Pensions provides information and advice on pensions, savings and State benefits. You can also request a State Pension Forecast here.

www.hmrc.gov.uk – This site contains information about issues including tax, National Insurance and tax credits.

www.unbiased.co.uk – The official site for personal independent financial advice. You can find general advice and contact details for an adviser in your area.


Dependant - A person who was financially dependent on you to a substantial extent immediately prior to your death and to whom the Trustee decides to pay a pension from the Scheme. In determining whether a person was so dependent the Trustee’s decision is final.

Rules - The formal rules of the Scheme which define all your benefit entitlements under the Scheme, and also comprise the Scheme’s trust deed. A copy is available from AA Pensions Administration, but a small charge may be made to cover any reproduction costs. The Rules will be used to determine benefits and override any other communication or benefit illustration, including this booklet.

Scheme - The AA Pension Scheme (Management 2 Section).

Spouse - Your husband, wife or Civil Partner (as defined by the Civil Partnership Act) who, at the time of your death, was normally living with you.

State Pension Age - State Pension Age (SPA) in the UK will vary based upon gender and date of birth. Under the current rules for men born before 6th December 1953 it’s 65 and for women born on or before 5 April 1950 it’s 60.

Transfer-in - A payment from an external pension arrangement (occupational, personal or stakeholder) to the Scheme to secure additional benefits.

Trustee - A trustee company - A.A. Pensions Trustees Limited. The Trustee’s role is to ensure that the Scheme is managed according to the Rules, and that its assets are invested prudently in line with the Scheme’s statement of investment principles. Its board is made up of principal employer-appointed and member-nominated directors, whose names appear in the Scheme’s annual report, which the Trustee publishes each year, and which reports on progress over the last year.

Notional Earnings Cap - This is a limit on the amount of a member's earnings on which pension contributions and benefits are based (£149,400 in the 2015/16 tax year).

Final pensionable earnings - The higher of:

n your pensionable earnings over the 12 months ending on the date of retirement; and

n the highest pensionable earnings in the previous 5 tax years ending on the date of retirement.

Guaranteed minimum (GMP) - The minimum amount of pension that the Scheme must pay to satisfy the requirements for pension contracting-out of the State Pension arrangements, in respect of Scheme benefits built up before 6 April 1997.

Minimum pension age - The minimum age that you can take your pension (unless due to ill-health). Under prevailing legislation this is age 55.

Normal retirement date - The last day of the month in which you reach age 65.

Pensionable earnings - Full-timers: Earnings less a deduction equal to the Lower Earnings Limit in force during the period over which earnings are assessed. The Lower Earnings Limit is an amount published each year by the Government (£5,824 for 2015/16) and is very close to the annual basic State Pension for a single person.

Part-timers: Earnings less a deduction of a proportion of the Lower Earnings Limit, depending on the hours you are contracted to work. For example, if you are contracted to work half the usual standard hours of 36¼ hours per week, the deduction would be half the Lower Earnings Limit. The Principal employer determines standard full time hours for this purpose.

Pensionable employment or service - Complete years and months of Scheme membership, plus any years and months credited to you from another registered pension arrangement for which a transfer payment was received by the Scheme and for which added years were granted.

Principal employer - AA Developments Limited.

© A

A P

ensi

ons

Trus

tees

Lim

ited

2015

|

Man

agem

ent

2 EB

| D

esig

ned

and

prod

uced

by

Con

cert

Con

sulti

ng 0

2 D

ecem

ber

2015

V1

Telephone: 0345 850 6406 | Email: [email protected] | Web: www.AApensions.com

Contact detailsThis booklet has been produced by AA Pensions Trustees Limited. If you have any queries relating to the Management 2 Section or to your benefits you should contact the AA Pensions team in the first place. Their contact details are:

The AA Pensions teamAon HewittPO Box 196HuddersfieldHD8 1EG

Telephone: 0345 850 6406 (Helpline number)


When you call the Helpline the following questions will always be asked:

n Full Name;

n Full Address;

n Date of Birth.

…plus one of the following additional questions:

n Pension reference number;

n Date joined scheme (year/month);

n Date joined company (year/month);

n Amount of last contributions (to the nearest pound);

n Amount of last payment (to the nearest pound – pensioners only);

n Date pension commenced (year/month – pensioners only).

If you have any queries relating to your payslip please contact:

AA Payroll ProcessingFanum HouseBasing ViewBasingstokeHampshireRG21 4EA

Telephone: 0800 587 7877 [option 2]


You can also contact the AA Pensions Department:

AA Pensions DepartmentFanum HouseBasing ViewBasingstokeHampshireRG21 4EA

Telephone: 0800 587 7877 [option 3]


We are here to help you so please do what you can to be prepared before calling. If you cannot pass the data security questions then we will not be able to divulge any information.

www.AApensions.com

explanatory booklet - aa pension s · 6 the aa pension scheme management 2 section the trustee, on...

Documents