(1.5MB) and forms will be available from your HR Department - and available in pdf format from the pensions site on 'Momentum'.You will recall that the Trustee of the G.E.C. 1972 Plan (the Plan) announced last year that it would be introducing new AVC choices for contributing members of the Plan. I am pleased to enclose an AVC Investment Guide providing information about these new AVC choices.
Contributions to the new arrangements can be deducted from payrolls run after 6 April 2002.
Copies of the AVC Investment Guide(1.5MB) and forms will be available from your HR Department - and available in pdf format from the pensions site on 'Momentum'.
Additionally accumulated SBS credits can be transferred to one or both of the new providers. We will write to you separately regarding these additional options before mid-April 2002.
To recap on last year's announcements, the two main reasons for the new choices were:
Like many other UK pension plans whose pensioners are becoming an increasing proportion of the membership, the Plan has to adopt an investment policy aimed at providing a greater level of financial stability. For this reason, and because of the outlook for investment markets and low predicted rates of inflation, future investment returns in the Plan are expected to be lower than in the past. The Plan has been progressively increasing fixed-interest holdings and reducing those in equities, so that over 50% of the Plan's assets (and therefore SBS) are now in fixed-interest.
Changes in regulations, and the continuing requirement for prudent investment management, mean that the Trustee does not have the same investment freedom, but must focus much more on the security of returns for current and future pensioners.
After an extensive search, the Trustee, with the help of its professional advisers, have appointed two leading AVC Investment Management firms - Standard Life and Merrill Lynch Investment Managers.
Previously, if you wanted to make contributions to SBS you had only one investment choice. The alternative was to set up your own individual Free Standing Additional Voluntary Contribution (FSAVC) policy, as some members have chosen to do, paying fees and other costs as required.
The Trustee has negotiated favourable fees with the new AVC providers
From 6 April 2002, the SBS facility is being withdrawn to new contributors. For those with a SBS balance, contributions can continue to be made into SBS as well as the new choices.
You can retain part, or all, of your accumulated capital in SBS whilst contributing to the new AVC arrangements. You can also make future contributions partly to SBS and partly to the new choices.
You will also be able to transfer part, or all, of your existing SBS balance to one or more of the new AVC choices. However, once SBS balances have been transferred they cannot be transferred back into SBS in the future.
Before considering transferring SBS balances you need to compare the choices available. For example, SBS retirement credits do not go down, and there is a 2.5% guaranteed minimum credited interest level. Apart from the Cash Fund with Merrill Lynch and the Standard Life With-Profits Fund, if taken at age 65, the new AVC investment choices can go down as well as up.
Further information in respect of transferring existing SBS balances will be forwarded before mid-April 2002.
More information about SBS is contained in the Appendix to this leaflet. More information is available in the Plan booklet (April 1997 edition)(1.8MB).
Each member should consider carefully the information that has been made available and their own personal circumstances. In particular, a great deal will depend upon your anticipated retirement age and your approach to possible investment returns and degree of risk.
The AVC Investment Guide, the helplines and websites are being made available to provide members with information to make an informed decision. If, however, you are in any doubt as to the suitability of AVCs, or any alternative investment options, you should seek professional independent financial advice.
It is intended to hold presentations about the new AVC choices for employees on site, subject to demand. You should contact your HR Department if you are interested in attending a presentation.
If you wish to continue paying contributions into the SBS only, then no action is required.
If you wish to continue, reduce or stop paying contributions into SBS and start paying AVCs to Merrill Lynch and/or Standard Life you will need to:-
You should remember that your total rate of contribution to The GEC Plan, SBS and AVCs with Merrill Lynch and/or Standard Life can be no more than 15% of your gross salary in any one tax year.
Time constraints exist for amending AVC contributions and there are deadlines prior to each payroll, after which it will not be possible to amend contribution rates for that month. Your individual payroll department will have details of these cut-off dates.
The AVC contributions deducted from your salary will be forwarded to Pensions Office. Pensions Office will normally forward the contributions onto Merrill Lynch and/or Standard Life within 7 working days of receiving them. Your contributions will be credited to your AVC account on the working day after they are received by Merrill Lynch and/or Standard Life.
This facility will remain in place and the cover is reviewable on the anniversary date.
You may wish to continue DISC contributions, even though you are ceasing/reducing contributions to SBS for retirement benefits. In this case, it is important that you confirm your continuing contributions to DISC on the same SBS1 form, which you use to cease/amend your SBS retirement benefits.
Benefits arising from SBS depend on the accumulation of your retirement benefit contributions to that scheme, together with credited interest, and are payable
Alternatively, you may be able to increase your cash sum, or use it to provide an additional pension for your surviving spouse or specified dependant when you die, with increases (as also described in the Plan booklet).
The Trustee, having taken professional advice, feels there is a need to be prudent in the current year and future years. As a result, the Trustee has declared a credited interest rate at the start of this Plan year and will consider at the end of the year whether to top it up.
Should you die or retire during the current year (from 6 April 2001 to 5 April 2002) the credited interest rate to be applied will be 2.5% p.a. plus 3.0% per annum top-up, making 5.5% p.a. in total. (These are pro-rated for periods of less than one year).
In all other circumstances, the rate of 2.5% p.a. will apply for the year 2001/01. At the end of the year the Trustee will consider whether an additional top-up can be granted.
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Credited interest for those whose benefits become payable during the year (2001/02) |
Credited interest for those whose benefits do not become payable before 5 April 2002 |
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|---|---|---|
| 1. Guaranteed Rate | The guaranteed rate for 2001/02 is 2.5% p.a. This will be applied to your balance and new contributions from 6 April 2001 | The guaranteed rate for 2001/02 is 2.5% p.a. This will be applied to your balance and new contributions from 6 April 2001 |
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plus |
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| 2. Top-up Rate | The top-up rate for 2001/02 is 3.0% p.a.. | The Trustee will consider a top-up rate for 2001/02 at the end of the Plan Year |
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The total of 5.5% p.a. is earned evenly over the year |
At the end of the current plan year, and in future years we expect the total credited interest rate to be lower than in previous years.
Published by Stanhope Pension Trust Limited, the Trustee of The GEC Plan
and Selected Benefit Scheme
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