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Your Guide to AVC section. BOC Retirement Savings Plan (RS Plan). AVC section.
Your Guide to AVC section.
BOC Retirement Savings Plan (RS Plan).AVC section.
Terms used in this bookletThe following technical terms are used frequently in this booklet.The terms are shown in bold the first time they are used in each section.
Annuity
A regular income (or pension) that you buy (normally from an insurance company) with yourAVC fund.
Annual Allowance (AA)
The maximum increase in pension savings that can be built up by you in any one tax year withoutincurring a tax charge. The Annual Allowance is £245,000 for the tax year 2009/10 and rises to£255,000 in the tax year 2010/11, when it will be frozen for five years.
Company
The BOC Group Limited.
Earnings
Normally your gross pay for the year including any amount deducted for Statutory Sick Pay. For anyperiod of part-time employment this figure will be the full-time equivalent.
Lifetime Allowance (LTA)
The maximum value of pension benefits (except State Pension) that can generally be built up byyou during your lifetime without incurring a tax charge. The Lifetime Allowance is £1.75m for thetax year 2009/10 and rises to £1.8m in the tax year 2010/11, when it will be frozen for five years.
Recognised Dependant
Your spouse or registered civil partner (if normally resident with you) at the date of your death; orwhere this does not apply, an adult who is financially inter-dependent with you for basic livingneeds and who is normally resident with you for at least two years up to your death.
Retirement Age
Age 65 unless a different age is specified in your employment contract.
Scheme
The BOC Pension Scheme.
Scheme Notional Cap
Restricts Earnings (for pension purposes) and hence contributions and benefits for members whojoined the BOC Pension Scheme after 31 May 1989. The Cap is £123,600 for the tax years 2009/10and 2010/11 and will be increased each year in line with the Retail Prices Index, rounded up to thenearest £600.
Trustee
Looks after the assets of RS Plan on your behalf and manages RS Plan in accordance with the TrustDeed and Rules. RS Plan is run by a trustee company, BOC RSP Trustees Limited.
As an active member of the BOC Pension Scheme, you have the opportunity to makeAdditional Voluntary Contributions (AVCs) through AVC section.
3Your Guide to AVC section
Introduction to AVC section
What are AVCs?
AVCs are extra contributions that are made on top ofScheme contributions in order to build up additionalbenefits for retirement. There are many reasons why youmay want extra benefits. For example, you may:
• have joined the Scheme later in life and have little inthe way of earlier pension provision
• have some service in Level 1 of the Scheme
• want to retire early
• want to provide additional benefits for your family onyour death after retirement.
AVC section provides one facility for you to make extraprovision for retirement. You can also make your ownarrangements (e.g. stakeholder and personal pensions).
Inside this booklet
Page
Terms used in this booklet 2
Introduction to AVC section 3
Contributions and joining 4 – 5
Investment 6
Benefits on leaving and death 7
Benefits on retirement 8 – 9
General information 10 – 11
1. Decide how much you want to save
• Decide how much you want, or canafford, to save.
• Decide whether contributions areregular or one-off payments.
3. Options at retirement
• Tax-free cash.
• Extra pension from the Scheme.
• An Annuity (pension) froman external provider.
2. Choose how to invest your AVC fund
• Choose from the investmentoptions available.
• Review your investmentchoices regularly.
How AVC section works
Through payroll. Your salary isreduced by the value of your AVCs,which are then made by theCompany on your behalf.
Unlimited – subject to you stillreceiving at least the nationalminimum wage.
Yes. The Company pays an extra5% of any AVCs into your AVC fund,e.g. for a £100 AVC, £105 is paid intoyour AVC fund.
At any 1 April or following asignificant change in lifestyle, beforeyour Retirement Age.
About contributions
AVCs are made through Salary Exchange unless you opt out. The table below shows the differences between makingcontributions in Salary Exchange or out of Salary Exchange.
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Contributions and joining
Opted out of Salary ExchangeIn Salary Exchange
How are AVCs made?
What is the maximum AVC?
Does the Company contribute?
When can I start, change orstop AVCs?
How often can AVCs be made?
Can I transfer in?
How can I start, change orstop AVCs?
Through payroll by deductions fromyour salary or by cheque. For chequepayments you would need to claimtax relief from your local tax office.
15% of your taxable earnings (up tothe Scheme Notional Cap), less yourScheme contributions.
No.
At any time before yourRetirement Age.
By completing a Joining/Change of AVCs form (available to download from thewebsite at www.bocpensions.co.uk or from BOC Pension Services on request).
AVCs can be regular contributions (i.e. weekly/monthly) or one-off payments.
You may be able to transfer the value of a Free Standing AVC arrangement intoAVC section.
Opted out of Salary ExchangeIn salary Exchange
Tax and National Insurance
The table below shows the effect on tax and National Insurance (NI) of making contributions in Salary Exchange and out ofSalary Exchange.
How much will it cost?
The table below shows how the actual cost to you is less than the amount invested in your AVC fund.
5Your Guide to AVC section
Important note
If you are a Level 1 member, you should seriously consider transferring toLevel 2 before joining AVC section. Please contact BOC Pension Servicesfor further information.
What is the effect onNI contributions?
Do I get tax relief?
You pay less NI because your salaryis reduced.
Yes. You receive tax relief becauseyour salary is reduced.
NI contributions are not affectedby AVCs.
Yes. You receive tax relief becauseyour AVCs are deducted from yoursalary before tax.
Opted out of Salary ExchangeIn Salary Exchange
£50
£100
£200
20% 40% Amounttaxpayer taxpayer paid in*
£34.50 £29.50 £52.50
£69.00 £59.00 £105.00
£138.00 £118.00 £210.00
20% 40% Amounttaxpayer taxpayer paid in
£40.00 £30.00 £50.00
£80.00 £60.00 £100.00
£160.00 £120.00 £200.00
Opted out of Salary ExchangeIn Salary ExchangeContribution
How do you join?
To join AVC section, just complete and return a Joining/Change of AVCs form.You can download a form from the website at www.bocpensions.co.ukor request one from BOC Pension Services.
Actual cost to a: Actual cost to a:
* Includes the extra 5% contribution from the Company.
Investing your savings
How you choose to invest your AVC fund throughout your working life will directly affect the value of your AVC fund atretirement and therefore the benefits payable. So taking the time to understand your investment choices is important.
The Trustee provides (and keeps under review) a range of investment choices for AVC section members to choose from. Thechoices available are considered to be suitable to meet the short and long-term objectives of the majority of members.
On joining AVC section, you will be asked to indicate your initial investment choice on the Joining/Change of AVCs form.Your AVC fund will then be invested by the Trustee in accordance with your selection.
You can select your own investment strategy by choosing from a number of investment options. Or, if you would rather notmake your own investment decisions, you can choose LifePath where AVCs are invested on your behalf according to a setpattern based on your planned retirement age. You can invest AVCs in any combination of the available funds. You canchange your investment choice at any time before retirement.
Your investment options
LifePath
With LifePath, the decision about which funds to invest inand when to switch between them is all done for you by theinvestment manager appointed by the Trustee. The Trusteehas a responsibility to ensure that the investment manager’sstrategy is appropriate for the majority of members.
The other investment options
With the other investment options, you essentially createyour own investment strategy. You are therefore responsiblefor ensuring that the chosen strategy is appropriate to yourparticular circumstances at any time.
Reviewing your investment choice
You can alter your investment choice at any time before retirement. In fact, you are encouraged to review your investmentchoice regularly to ensure that it remains appropriate for you. The Trustee helps you to do this by sending you apersonalised benefit statement every six months.
You can change the way your future and/or past contributions are invested by completing a Change of AVC Investmentform. You can download a form from the website at www.bocpensions.co.uk or request one from BOC Pension Services.
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InvestmentYou choose how your AVC fund is invested and you can change your investmentchoice at any time.
Information regarding the different investment optionsis outlined on the AVC section of the website at
www.bocpensions.co.uk
You should read the AVC section of the websitecarefully before making a decision.
7Your Guide to AVC section
What if you leave the Company?
If you leave the Company or opt out of the main Scheme, payments to your AVC fund will stop. Your AVC fund will remaininvested until you transfer your benefits to another registered provider, take your Scheme pension or die. You cannot have arefund of AVCs.
If you leave your AVC fund invested, you can change the way it is invested at any time by completing a Change of AVCInvestment form. You can download a form from the website at www.bocpensions.co.uk or request one fromBOC Pension Services.
If you choose to transfer your Scheme benefits to a new pension arrangement, your AVC fund must also be transferred.You can transfer your Scheme benefits at any time before your Retirement Age.
What if you die?
If you die before your AVC fund is used to provide retirement benefits, a lump sum death benefit (based upon the valueof your AVC fund) is payable, subject to HM Revenue and Customs (HMRC) rules. Your dependant(s) could use some/allof this lump sum to buy an Annuity. The Scheme Trustee decides who will receive the lump sum, taking account of anywishes detailed on an Expression of Wish form. You can download a form from the website at www.bocpensions.co.uk orrequest one from BOC Pension Services.
If you die in retirement, the choices you make on retirement will determine any death benefits paid. For more information,you should refer to pages 8 and 9.
Benefits on leaving and death
Benefits on retirement
When can you take your benefits?
Your AVC benefits must be taken at the same time as your Scheme benefits. You can retire at any time after age 55(or age 50 if you retire before 6 April 2010) subject to the approval of the Scheme Trustee. It may be possible to take yourbenefits earlier if you satisfy the ill-health requirements.
Benefits on retirement
On retirement, you have a number of options regarding your AVC fund.
1. Tax-free cash
You have the option to take up to 25% of the combined value of your Scheme benefits and AVCs (subject to theLifetime Allowance) as a tax-free cash sum. Unless you request otherwise, the cash will automatically be taken fromyour AVC fund first (normally of benefit to you because of the calculation involved).
2. Extra pension from the Scheme
If you do not want to take tax-free cash or your AVC fund exceeds the maximum tax-free cash allowed, your AVCfund may be used to provide additional pension from the Scheme. This extra pension will be increased each yearand be subject to income tax in the same way as your Scheme pension.
You can choose whether this pension should be paid:
• for the rest of your life only; or
• for the rest of your life then continuing at one-half of your pension to your Recognised Dependant afteryour death.
On death in retirement, regardless of which option you choose, the total pension payable (including pension fromAVCs) will be no less than five times your initial yearly pension. If you and your Recognised Dependant (if any) diebefore that amount has been paid, a lump sum will be paid to bring the total benefits up to the guaranteed amount.The Scheme Trustee decides who will receive the lump sum, taking account of any wishes you express on anExpression of Wish form.
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You choose when to take your benefits, whether to take a tax-free cash sum and thetype of Annuity to buy.
3. An Annuity (pension) from an external provider
As an alternative to having your AVC pension paid by the Scheme, you can use your AVC fund (after any tax-free cashtaken) to buy an Annuity from a provider of your choice (usually an insurance company). The Annuity will provideyou with a regular retirement income payable for a fixed period or the rest of your life.
Different types of Annuity are available and your personal circumstances should influence the type of Annuity youchoose. The most common options are:
• Pension increases – inclusion of annual increases to your pension, either fixed or in line with the Retail PricesIndex (RPI) up to a set maximum;
• A pension for your dependant on your death – inclusion of a dependant’s pension (e.g. one-half or two-thirdsof your own pension)
• Pensions guarantee – inclusion of a guaranteed minimum payout if you die shortly after the pension starts(e.g. within five years of the first payment).
You should note that the more extra benefits you choose, the lower your annual pension will be.
BOC Pension Services can explain the procedure involved but cannot advise on which provider to use.You may therefore wish to consult an independent financial adviser.
How much will you get?
The amount of pension you receive will depend, amongstother things, on:
• how much money is paid into your AVC fundthrough contributions;
• how much your AVC fund grows throughinvestment returns;
• whether you take tax-free cash at retirement;
• the cost of buying either:
• extra pension from the Scheme; or
• an Annuity when you retire.
Because of these factors, it is impossible to predict thebenefits you will receive at retirement. However, the pensioncalculator on the website at www.bocpensions.co.uk willgive you an idea of how much extra pension you mightreceive from the Scheme using your AVC fund.
What will you need to do?
Before retirement, you will receive a Personal Benefit Illustration from BOC Pension Services and you will need to completea Retirement Benefit Claim Form confirming what you would like to do with your AVC fund. You can download a form fromthe website at www.bocpensions.co.uk or request one from BOC Pension Services.
9Your Guide to AVC section
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RS Plan Trustee
AVC section is one of two sections of RS Plan. The otheris RS section.
The RS Plan Trustee is responsible for looking after theassets of RS Plan on your behalf and managing RS Plan inaccordance with the Trust Deed and Rules. There are fourTrustee Directors appointed by the Company and twoelected by the members of RS Plan.
The Trust Deed and Rules governs how RS Plan is run. TheTrustee delegates the day-to-day administration to BOCPension Services. The Trustee prepares audited accountsannually which outline the management and financialdevelopment of RS Plan.
The Company reserves the right to discontinue RS Plan atany time. Similarly the Company may make changes to RSPlan, with the consent of the Trustee and followingconsultation with the membership, at any time.
Tax
RS Plan is registered with HMRC. Under current legislation,this gives you and the Company certain tax advantages.
The pension you receive will be subject to income tax underthe Pay As You Earn system. Lump sum cash benefits onretirement – up to 25% of the value of your overall benefitswithin the Lifetime Allowance (LTA) – are currently taxfree.
Any contributions paid, or benefits received, above theLifetime or Annual Allowance will incur a tax chargepayable by you. Most members are unlikely to exceed theallowances. However, if you think you might be affected(perhaps because you have built up significant benefits inother arrangements) you should contact BOC Pension Services.
Statements made in this booklet in relation to the taxtreatment of contributions and benefits are based on theTrustee’s understanding of HMRC law and practice at thedate of publication. Benefits will be subject to tax inaccordance with the actual law and practice applicable atthe time of payment.
Pensions and divorce
If you get divorced, both you and your spouse’s orregistered civil partner’s pension benefits must be takeninto account when your joint assets are calculated.
If the Trustee receives a pension sharing order from theCourt, your ex-spouse or ex-registered civil partner willbecome entitled to a share of your AVC fund – called apension credit. The Trustee will require your ex-spouse orex-registered civil partner to transfer this pension credit outof AVC section (unless he or she is also an AVC sectionmember) at the time the order is received.
A separate process applies if the Trustee receives a Courtorder requiring pension earmarking. Further informationabout pensions and divorce can be obtained fromBOC Pension Services.
Internal Dispute Resolution Procedure
Any complaint should initially be referred to the UK PensionsManager at BOC Pension Services (see contact detailsopposite) who will review the complaint and send you awritten response.
For complaints which cannot be resolved informally with theUK Pensions Manager, the Trustee operates an Internal DisputeResolution Procedure (IDRP). This is a two-stage process:
Stage 1: In the first instance, you should refer your complaintto the Chairman of the Trustee who will review the case andpersonally respond to you in writing.
Stage 2: If you are unhappy with the Chairman’s decision, youwill have six months in which to request in writing that yourcomplaint is considered at a Trustee meeting. The decision willbe communicated to you in writing.
If, after these steps have been taken, you are still dissatisfied,you may refer your complaint to The Pensions Advisory Servicein the first instance and then the Pensions Ombudsman.
Full details of the formal IDRP are available on the websiteat www.bocpensions.co.uk or can be obtained fromBOC Pension Services.
General information
11Your Guide to AVC section
Data Protection Act
It is necessary for the Trustee (and any third party itappoints) to hold and process personal data about you.
This data and its use has been registered under theData Protection Act 1998 which gives you certain rightsto ensure that the information is accurate and that propersecurity is maintained.
As a member of AVC section you consent to your personalinformation being held and processed by the Trustee andany third party it appoints for the effective running ofAVC section.
You are entitled to request a copy of the information heldabout you and have any inaccuracies corrected.
If your circumstances change, please contact BOC PensionServices to ensure the information held by the Trusteeremains accurate.
Further information
If, after reading this booklet, you have any queries aboutAVC section, you can contact:
BOC Pension ServicesThe Priestley Centre10 Priestley RoadThe Surrey Research ParkGuildfordSurreyGU2 7XY
Helpline: 0800 096 3214 (BOC TEL 750 4745)Fax: 01483 244 739Email: [email protected]: www.bocpensions.co.uk
Full details of AVC section are detailed in the Trust Deedand Rules, which is the legal document that governsRS Plan. If there is any discrepancy between this bookletand the Trust Deed and Rules, the Trust Deed and Ruleswill take precedence.
Contact detailsBOC Pension ServicesThe Priestley Centre10 Priestley RoadThe Surrey Research ParkGuildfordSurrey GU2 7XY
Helpline: 0800 096 3214 (BOC TEL 750 4745)Fax: 01483 244 739Email: [email protected]: www.bocpensions.co.uk
Issue 1 – February 2010
