Husqvarna UK LimitedPension Scheme

September 2007Final Salary section

Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Some terms explained . . . . . . . . . . . . . . . . . . . . . . . . . 4/5

Membership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

When you retire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8/9

Help if you’re ill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Protection for your loved ones . . . . . . . . . . . 12/13

Choices if you leave . . . . . . . . . . . . . . . . . . . . . . . . . 14/15

You can reap more benefits . . . . . . . . . . . . . . . . . . . 16

State provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Some other matters . . . . . . . . . . . . . . . . . . . . . . . . . 18/19

If there’s a dispute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

How safe is your pension? . . . . . . . . . . . . . . . . . . . . 21

Your pension examples . . . . . . . . . . . . . . . . . . . . 22/24

…helping to2 | 3

This booklet only applies to members who joined the Scheme before 1 January 2004and who are therefore members of the closed Final Salary section.

If you joined the Scheme after 1 January 2004 you will be a member of the CAREsection. There is a separate booklet for this section, which is available from the GroupPensions Department or from your local Human Resources personnel.

Husqvarna UK LimitedPension SchemeFinal Salary section

clear away your pension worries…

Introduction

Limited Pension Scheme then some of the benefits described herewill not apply to you.There is aseparate booklet for CAREmembers which is available from the Group Pensions Department.

Special termsThroughout the booklet we refer tospecial terms that apply to somemembers.This includes members whohave transferred their benefits into theHusqvarna UK Limited PensionScheme from other schemes by a

This booklet summarises the rules of the Scheme.The Scheme isgoverned by the Trust Deed andRules. In the event of a conflictbetween the booklet and the TrustDeed and Rules, the Trust Deed and Rules will prevail.

The booklet describes the benefitspayable to members of the FinalSalary section of the Husqvarna UKLimited Pension Scheme. If you arean active member of the CAREsection of the Husqvarna UK

group transfer.These schemes includeFlymo and Hyett Adams.Thesemembers may be entitled to differentbenefits from the Scheme than we setout in this booklet. Please contact theGroup Pensions Department if yourequire further information.

Pensions can appear complicated. Ifyou have a specific query and cannotquickly find the answer in thisbooklet, please contact the GroupPensions Department directly on01582 588441.

Keeping4 | 5

Some terms explained

Although we have aimed to keep this booklet as free of jargon as possible,

there are several pension terms which have to be used when describing

your benefits. On this page we explain what each of them means. If you

have any queries, please contact the Group Pensions Department.

Annual Allowanceis the maximum tax-free increase inthe value of your pension benefitswhich is allowed in any one taxyear. (For the year from 6 April 2007this is £225,000.)

Contribution Pay means your actual gross earnings,excluding any non pensionableemoluments, on the date thecontribution is deducted, less theappropriate proportion of the LowerEarnings Limit on the same date.This takes into account whether youare paid monthly, weekly or at someother interval. If you joined theScheme on or after 1 June 1989your Contribution Pay cannotexceed the Earnings Cap.

Earnings CapFor members joining on or after 1 June 1989 the Earnings Cap was alimit set by the Government on thepay that can count for the purposesof calculating the maximumcontributions and benefits allowedby HMRC (Inland Revenue).Thishas been retained by Husqvarna UKLimited as a Scheme specificEarnings Cap following legislativechanges in 2006. For the year from 6 April 2007 it was £112,800 and itwill be increased each year in linewith the Retail Prices Index. Itapplies to both contributions andPensionable Pay.

Final Payis the highest annual average of yourPay over any three consecutive yearsout of the last ten years beforeleaving, retirement or death.

Final Pensionable Payis the highest annual average of yourPensionable Pay over any threeconsecutive years out of the last tenyears before leaving, retirement ordeath. Special terms apply to somemembers.

Guaranteed MinimumPension (GMP)is the minimum pension the Schemeis obliged to pay as a result of beingcontracted-out of the State EarningsRelated Pension Scheme (SERPS).GMPs ceased to be earned forPensionable Service after 5 April1997. Even if you joined after 5April 1997, you may have a GMP if you have transferred in previousscheme benefits.

Lifetime Allowanceis the limit set by the Government,which is measured against the valueof your benefits from all pensionarrangements you belong to. If yourtotal benefits exceed this limit theexcess will be subject to tax. (Forthe year from 6 April 2007 this is£1.6 million.)

Lower Earnings Limitis an amount set each year by theGovernment. It is approximately equalto the Basic State Pension for a singleperson.As at 6 April 2007, the LowerEarnings Limit is £4,524.

Normal Retirement Dateis age 65 for all members.You cancontinue to pay into the Schemeafter this date if you are stillemployed by Husqvarna.

Paymeans at any time, your P60earnings for PAYE purposes duringthe 12 months immediatelypreceding that time. Pay includesovertime, shift allowances,commission and some bonuses. Itdoes not include car or petrolallowances, or other fluctuatingemoluments unless otherwisedetermined by Husqvarna UKLimited.The full definition is set outin the Trust Deed and Rules.

Pensionable Pay means your Pay less the LowerEarnings Limit averaged over thesame period as Pay.The LowerEarnings Limit used to calculateyour Pensionable Pay is the one thatapplied two years before the periodin which Pensionable Pay iscalculated. Special terms apply to

things tidy

some members. If you joined theScheme on or after 1 June 1989your Pensionable Pay cannotexceed the Earnings Cap.

Pensionable Serviceis the length of time you havebeen a member of the Scheme.It is measured in complete yearsand days.

Retail Prices Index (RPI)is a measure of price inflation, orany replacement of that indexwhich the government might useto measure inflation in the future.

Scheme means the Husqvarna UKLimited Pension Scheme FinalSalary section.

Trusteesmeans the Board of Directors ofHusqvarna Pension Scheme TrusteeLimited (see page 18 for moredetails of the Trustees).

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Look

to the future

Membership

The cost to HusqvarnaThe contributions members makewould not be sufficient on theirown to meet all the costs of runningthe Scheme and providing all thebenefits. Husqvarna meets thebalance of the cost of providing the benefits.

Husqvarna UK Limited and theTrustees consult with the SchemeActuary and reach agreement onhow much Husqvarna contributes to the Scheme.

The contribution from Husqvarnaforms a valuable part of your payand benefits package.

Where the money goesYour contributions and those madeby Husqvarna are paid into a fundwhich is looked after by theScheme's Trustees. It is keptcompletely separate from thefinances of Husqvarna.The moneyin the fund is invested and used topay members' benefits as and whenthey become payable.

The cost to youAs a member of the Scheme youmake contributions to help pay forthe benefits provided.Yourcontribution is either 5% or 8% ofyour Contribution Pay, dependingon the level of benefits you haveopted to receive when you retire (seepage 8). However, it actually costsyou less than this because you get taxrelief on your contributions and youpay lower National Insurancecontributions as a Scheme member,see pages 22 and 23.You can workout what you actually pay using theexamples on pages 22 and 23.

Your contributions are deductedfrom your pay automatically. Checkyour payslip to see this.

You can pay extra contributions ifyou wish, known as ‘AdditionalVoluntary Contributions’ (AVCs).You will get tax relief on your AVCs.Under current Her Majesty'sRevenue & Customs (HMRC –formerly the Inland Revenue) rules,when you retire, part of your AVCscan be taken as a tax-free lump sum.You can read more about AVCs on page 16.

With effect from 1 January 2004, the Final Salary

section was closed to new entrants.

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Reaching retirementThe Scheme’s Normal RetirementDate is your 65th birthday for menand women.You may be able toleave at an earlier age and receiveyour pension if you wish. Currentlythe earliest age at which you canretire and receive your pension is 50,but from April 2010 it will be 55.Early retirement is subject to theagreement of Husqvarna UKLimited and the Trustees and to yourpension meeting certain minimumstatutory requirements.

Your pensionThe amount of pension you receivedepends on your salary close toretirement, the length of time you havebeen a member of the Scheme and therate of contribution that you pay.

If, from 1 January 2005, you optedto pay 8% of Contribution Pay, thecalculation is one sixtieth of yourFinal Pensionable Pay for every year of Pensionable Service.

If, from 1 January 2005, you optedto pay 5% of Contribution Pay, thecalculation is one sixtieth of yourFinal Pensionable Pay for every yearof Pensionable Service up to 31 December 2004 and oneeightieth of your Final PensionablePay for every year of PensionableService thereafter.

Pensionable Service is calculated inyears and days, so all your PensionableService is included right up to theday you retire.

An example of how this is calculatedis shown on page 23.

If you were a Scheme member on 1 December 1998, your pension inrespect of service to 6 April 1998 will

When you retire

be uplifted by 4%.This uplift does notapply to any transferred-in benefits orto added years purchased with AVCs.

Receiving your pensionYour pension will be paid eithermonthly or quarterly direct to yourbank or building society account. Itwill be taxed under the PAYEsystem and is paid for life.

Taking your pension earlyIf you retire early, your pension willbe lower than it would be at age 65because it will be based on your FinalPensionable Pay and PensionableService at the date you retire. It willalso be reduced to make allowancefor the fact that it is being paid earlierand so will be paid for longer.

For all members joining the Schemeafter 1 April 1988, and who haveservice after 1 November 1996, thereduction is 3% a year for each yearand completed month to age 65.Thisapplies unless you have completedmore than 12.5 years’ PensionableService, in which case the reductionis 3% a year for each year andcompleted month to age 60.

For an active member who joinedthe Scheme on or before 1 April1988, and who was still a member at 1 November 1996, the reduction is3% a year for each year andcompleted month to age 60 unlessyou have completed 12.5 years’Pensionable Service, when it is 3% ayear for each year and completedmonth to age 55.

Different reductions may apply tomembers who have bulk-transferredbenefits in from other schemes.Theymay also apply if you left activeservice before the date of this

booklet. Please contact the GroupPensions Department for further information.

If you would like an idea of whatyour pension will be if you are ableto retire early, the Group PensionsDepartment will be happy toprovide an estimate.

It is not possible to take yourretirement benefits while you remainin employment with the Company.

Taking your pension lateIf, with Husqvarna UK Limited’sagreement, you continue workingafter you have reached age 65, youmay with the agreement of theTrustees take your pension late. Ifyou do so, you will remain coveredfor death in service benefits underthe Scheme and you will have tochoose whether to cease yourcontributions or to continue payingand delay your retirement.

If you choose to cease contributing atage 65, your pension accrued to thisdate will be calculated and thenincreased by a late retirement factor to reflect the delay in payment.

If you continue contributing after age 65, you will continue to build uppension on the basis of either 1/60thor 1/80th for each year ofPensionable Service (depending onyour contribution rate) so that theactual date of retirement is treated asyour Normal Retirement Date.

Tax-free lump sumsAt retirement, you can take up tofour times your pension as a tax-freecash sum.Your pension at retirementwill include your pension from theScheme and any AVCs you have.

The only restriction on this is if the value of all your pensionarrangements adds up to more thanthe Lifetime Allowance (see below).

It is important to remember thattaking a tax-free cash sum will reducethe amount of pension payable, andthe larger the cash sum taken, thelower your annual pension will be.

The Lifetime Allowance Since 6 April 2006 the Governmentrequires that the value of yourbenefits from all pensionarrangements you belong to(including those not with Husqvarna)is measured against a new LifetimeAllowance (LTA). If the value of yourtotal pension benefits exceeds theLTA the excess will be subject to tax.

The LTA was initially set at £1.5mfor 2006/07 and increases each yearto reach £1.8m by 2010, afterwhich it will be reviewed.Anexample of the way it is calculated is shown in the panel on the right.

Pension increases beforeState Pension AgeYour total pension will increaseduring payment in line with theannual rise in the Retail PricesIndex (RPI), subject to a maximumof 5% a year.

Pension accrued before 6 April 2001will receive a minimum increase of3% a year.

Pension accrued after 5 April 2005 is subject to a maximum increase of 2.5% a year.

Pension increases afterState Pension AgeYour Guaranteed Minimum Pension(GMP) which accrued between 6 April 1988 and 5 April 1997 willreceive increases from the Scheme of3% a year or the rise in RPI, if less.

Your pension in excess of the GMP

making

will increase by the rise in the RPI,subject to a maximum of 5% a yearand, on pension accrued before 6 April 2001, a minimum of 3% ayear. Pension accrued after 5 April2005 is subject to a maximumincrease of 2.5% a year.

Discretionary increases may beawarded at the discretion ofHusqvarna UK Limited (on theadvice of the Scheme Actuary).

Example of LTA calculation A member retiring on 6 May 2007 has pensions from two company definedbenefit pension schemes and also a pension from a Personal Pension Plan:

Company final salary pensions – at retirement

Pension A: £5,000 paPension B: £2,000 paTotal £7,000 pa

Personal Pension Plan

Fund value on retirement: £40,000

To check if the LTA has been exceeded:

1. Multiply the pensions from the company defined benefit schemes by 20£7,000 x 20 = £140,000

2. Add the above total to the value of the Personal Pension Plan£140,000 + £40,000 = £180,000

Since £180,000 does not exceed the LTA of £1.6m, there is no LTA taxpayable by the member. Pension income is, however, subject to income tax.

As the LTA has been set at a high level (your pension would need to beover £80,000 a year multiplied by 20, ie £1.6 million), very few people arelikely to be affected by it. If your total benefits do add up to more than theLTA, you will have to take this excess as a lump sum when you retire, whichwould then be taxed at the rate of 55% at the time of payment. It is yourresponsibility to let the Group Pensions Department know of all yourpension arrangements to help with the LTA calculation when you retire.

right choicethe

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Stopping workIf, while a contributing member ofthe Scheme, you become seriouslyill and have to stop working at anyage, you may be eligible to receivean incapacity pension from theScheme.To be able to apply for anincapacity pension, you must havebeen a member of the Scheme for at least five years.

Payment of an incapacity pension is subject to the agreement ofHusqvarna UK Limited and theTrustees.The Trustees will wantmedical evidence regarding your illness.

Your incapacity pensionThere are two levels of incapacitypension: total incapacity and partial incapacity.

Total incapacityThis is where, in the opinion of theTrustees, your illness is likely to bepermanent and such that you willnot be able to follow any gainfulemployment in the future. If this isthe case and you are a contributingmember your pension will becalculated in a similar way to yournormal retirement pension (see page 8).

It will be based on your potentialPensionable Service and the greaterof your Pensionable Pay and yourFinal Pensionable Pay. In otherwords, it will be based on theamount of service you could havebuilt up if you had been able tocarry on working until NormalRetirement Date.

Help if you’re ill

Partial incapacityThis is where, in the opinion of the Trustees, you are not totallyincapacitated but your illness isbeyond that which is normallyassociated with advancing age orsimply due to a decline in energy orability and as a result of which youare prevented through illness fromfollowing your normal employmentwith Husqvarna. In thesecircumstances, you would receiveyour pension based on completedPensionable Service. However, itwould not be reduced on account of being paid early.

If you recoverIn either case, if your health improves,your incapacity pension will bereviewed by the Trustees and paymentmay be stopped or reduced.

Increases to yourincapacity pension once it is in paymentYour incapacity pension will beincreased in the same way as normalretirement pensions (see page 9).

Deferred pensionersIf you are a deferred pensioner andbecome seriously ill and have to stopworking, you may be eligible for anincapacity pension at the discretion of the Trustees (see page 15).

HMRC requirementsPlease note that HMRC (formerlyInland Revenue) impose certainadditional conditions on pensions paidearly on incapacity grounds.TheTrustees will apply these conditionswhen considering your eligibility foran incapacity pension.

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Death in service

If, as an active member of theScheme, you die while still workingfor Husqvarna, valuable benefits willbe payable to your dependants.

A tax-free cash sum of all thecontributions you made to theScheme plus three times your Paywill be paid at the Trustees’discretion (see ‘Payment of benefits’on page 13). If there is no pensionpayable, the cash sum is increased tofour times your Pay.

If you were married or in a civilpartnership at the time of death,your spouse or civil partner willreceive a pension. If you were notmarried or in a civil partnership, butliving with someone who wasfinancially dependent on you, adependant’s pension may be payableat the Trustees' discretion.Thespouse's or dependant's pension willbe half of your retirement pensionbased on the greater of yourPensionable Pay and your FinalPensionable Pay on the date you die,and your potential PensionableService to age 65.

Children’s pensions are also payable.Like the spouse’s, civil partner's ordependant’s pension, the amount theyreceive is a proportion of the pensionyou would have received if you hadcontinued working to age 65. See‘Payment of benefits’ on page 13.

If you have chosen not to join theScheme and you die in service, thena lump sum equal to one times yourPay at date of death is payable at theTrustees’ discretion. No pension willbe payable to your spouse, civilpartner or children.

Protection for yourloved ones

Death after retirementIf you die after you have retired,pensions are paid to your dependants.

If you were married or in a civilpartnership at the time of death,your spouse or civil partner willreceive a pension. If you were notmarried or in a civil partnership, butliving with someone who wasfinancially dependent on you, adependant's pension may be payableat the Trustees' discretion.Thespouse's or dependant's pension willbe half of your total pensionignoring any reduction for takingcash at retirement.

Children’s pensions are also payable.Like the spouse's, civil partner's ordependant's pension, the amount theyreceive is a proportion of your totalpension, ignoring any reduction fortaking cash. See ‘Payment of benefits’on page 13.

Bereavement grant – morethan five yearsIf you die more than five years afteryou have retired, a tax-freebereavement grant of £1,650 ispayable, provided you had completedat least five years’ PensionableService at retirement.

However, for those retiring after 6 April 2006 and who die aged 75and over, the Government willrequire this benefit to be taxed.

Pension guarantee – lessthan five yearsYour pension is guaranteed for fiveyears, so if you die within five yearsof your retirement, a cash sum equalto the balance of five years’ pension

will be paid or, if higher, thebereavement grant described above.

If you are receiving an incapacitypension and you die within fiveyears of retirement and beforeNormal Retirement Date, a higherlump sum may be payable. Contactthe Group Pensions Department for further information.

Civil PartnershipsThe Civil Partnership Act cameinto force on 5 December 2005.Civil partnership is a new legalrelationship which can be formedby two people of the same sex.

The legal requirement is that forPensionable Service from 5 December 2005, death benefitspayable to spouses are paid toregistered civil partners.TheHusqvarna Scheme goes furtherthan this and treats ALLPensionable Service in this way.

In the same way, if a registeredcivil partnership comes to an end,the ex-civil partner is treated inthe same way for pension sharingas an ex-spouse would be forpension sharing on divorce.

Payment of benefitsCash sumWhen you join the Scheme you areasked to complete an Expression ofWish Form on which you state whoyou would like to receive any cashsum payable on your death.This formis kept on record, and the Trusteeswould refer to it if a cash sum becamepayable.To ensure that the cash sumwill not be liable for Inheritance Tax,the Trustees will not be legally boundto make the payment to the person(s)you have nominated. However, theywill take your wishes into accountwhen deciding how to allocate thecash sum.

For this reason, it is very importantthat you update your Expression ofWish Form if there are any changesin your personal circumstances.Further forms are available from theGroup Pensions Department or yourHuman Resources Department.

Spouse’s or dependant’spensionYour spouse’s, civil partner's ordependant’s pension will be paid forlife regardless of whether he or sheremarries. If your spouse, civilpartner or dependant is more thanten years younger than you, thepension may be reduced.

At the discretion of the Trustees, thespouse’s or civil partner's pensionmay be payable to someone whoyou are living with and who

is financially dependent on you,provided that there is no legalspouse or civil partner.

If you marry or enter into a civilpartnership in retirement and diewithin six months of doing so, aspouse’s or civil partner's pensionwill not be payable unless theTrustees and Husqvarna UK Limited decide otherwise.

Children’s pensionsIf, at the date you die, you have any children who are financiallydependent on you and are under the age of 16 (or 23 if they are infull-time education), they will alsobe paid a pension.

The amount they receive is aproportion of your pension (or ifyou die in service your FormulaPension, but including your potential Pensionable Service to age 65 without reduction).The proportions are:

20% for one child30% for two children40% for three children50% for four or more children

Each child’s pension ceases when the child reaches age 16, or 23 ifthey are in full-time education. Ifthere is no other pension payable,the children’s pensions are doubled.

For death in deferment, see page 15.

…your dependants

looked afterwill be

Choices if you leave

Leaving before retirementIf you leave Husqvarna you willautomatically leave the Scheme,unless you immediately take upemployment with another employerin the Scheme.You may also be ableto leave your pension in the Scheme.

If you wish to leave the Scheme butremain working for Husqvarna, youmust give the Group PensionsDepartment one month’s writtennotice of your wishes.You shouldbear in mind that if you leave the

Scheme and later want to rejoin, youwill only be allowed to do so at thediscretion of the Trustees andHusqvarna UK Limited, and on suchterms as they decide.

If you have completed less than threemonths' Pensionable Service, you willreceive a refund of the contributionsyou have made to the Scheme.Tax(currently at the rate of 20%) will bededucted from your refund, alongwith the cost of buying you backinto the State Second Pension.

If you have completed more thanthree months' but less than two years’Pensionable Service, you will beentitled to transfer your benefits toanother pension arrangement as analternative to having a refund of yourcontributions as described above.

If you have completed more thantwo years’ Pensionable Service, youwill be entitled to your pension atdate of leaving.This is called yourdeferred pension.You can eitherleave your deferred pension in the

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Scheme until retirement or you cantransfer the value of your benefits toyour new employer’s pension schemeor to an individual pension policy.

Deferred pensionIf you decide to leave your pensionin the Scheme, it will becomepayable once you reach age 65.

However, if Husqvarna UK Limitedand the Trustees agree, you can takeyour pension from age 50 (age 55from April 2010), provided that theremaining pension is greater thanany Guaranteed Minimum Pension(GMP).Your pension will be reducedto make allowance for the fact that itis being paid earlier. Special termsapply to some members.

During the period up to StatePension Age, any GMP will beincreased to meet contracting-outrequirements. In the period betweenleaving and retirement, your pensionin excess of any GMP will beincreased each year in line with therise in the Retail Prices Index up to amaximum of 5.0%. For pensionaccrued to 5 April 2001, a minimumincrease of 3% a year applies to theexcess over GMP.

If you die with a deferredpensionIf you defer your benefits and diebefore you reach retirement, arefund of your contributions ispayable as a cash sum. If no spouse’s,civil partner's, children’s or otherdependant’s pension is payable,interest of 4% a year will be addedbetween the date you leave and thedate you die.

If you were married or in a civilpartnership at the date of your

death, your spouse or civil partnerwill receive a pension. If you werenot married or in a civil partnership,but were living with someone whowas financially dependent on you, adependant's pension may be payableat the Trustees' discretion.Thepension will be one half of yourdeferred pension at the date ofdeath. Children’s pensions may alsobe payable.

If you become seriously illwith a deferred pensionIf you choose to defer your benefitsand then become seriously ill andhave to stop working, you may beentitled to an incapacity pension atthe discretion of Husqvarna UKLimited and the Trustees.

This will be based on yourcompleted Pensionable Service inthe Scheme and will be reduced forearly payment. Special terms applyto some members. Please contact theGroup Pensions Department forfurther information.

Transferring your benefitsIf you choose to transfer the value ofthe benefits you have built up in theScheme, a transfer value will becalculated and quoted to the pensionarrangement you wish to transfer itto.The transfer value will beguaranteed for three months fromthe date it is calculated.Transfervalues are calculated in accordancewith legal requirements.

You do not have to transfer yourbenefits out of the Scheme straightafter you leave.You may decide totransfer them at a later date. If so, anew transfer value will be calculated.It is recommended that you take

independent financial advice before taking a transfer to another arrangement.

Keeping in touchIf you leave Husqvarna and chooseto defer payment of your benefitsuntil retirement, you should makesure that you keep the GroupPensions Department informed ofany change of address.They need toknow where to contact you whenthe time comes to pay your pension.

Information about the Scheme(including the address at which theTrustees may be contacted) has beengiven to the Pension TracingService, which is managed by theDepartment for Work and Pensions.This acts as a central tracing agencyto help individuals keep track oftheir deferred benefit entitlementswith previous employers’ schemes.

Pension Tracing Service

The Pension ServiceTyneview ParkWhitley RoadNewcastle upon TyneNE98 1BA

Phone: 0845 6002 537www.thepensionservice.gov.uk

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Additional VoluntaryContributions (AVCs)As a member of the Scheme youpay contributions of either 5% or8% of Contribution Pay and areentitled to a wide range of benefits.However, you can choose to makeextra contributions known asAdditional Voluntary Contributions(AVCs).AVCs can be used toincrease your benefits and areparticularly useful if you have a shortperiod of service or you areplanning to retire early and wish tomake up a shortfall in your pension.

How they workThe Trustees have previously madetwo types of AVC arrangementavailable.

In the added years option memberspay a percentage of their ContributionPay to purchase extra PensionableService.This option was closed to newentrants as from December 2006.

You can reap more benefits

In the money purchase option yourAVCs are paid to an AVC provider,currently Zurich.You will be kept intouch with how they build up overthe years.

Your chosen level of AVCs arededucted from your pay along withyour normal contributions before taxso you benefit from tax relief.Youcannot pay more than 15% of yourgross earnings (including yournormal contributions of 5% or 8%)into the Scheme in any tax year.

You can, however, pay more moneyinto other pension arrangements (seepanel below).

What they provideYou may be able to take some or allof your AVCs as a tax-free lumpsum (see page 9 for more details).Alternatively they could be used topurchase extra pension. It is worthremembering that AVCs are a long-term investment for retirement.

If you die before retirementIf you die before you reachretirement and you have not boughtadded years with your AVCs, yourtotal AVC fund will be refunded freeof tax. It will be paid to a dependantin the same way as other cash sums(see page 13).

If your AVCs are used to buy addedyears of Pensionable Service, yourspouse or civil partner will receive apension of half the resulting pension.

If you leaveIf you leave the Scheme before youreach retirement, your AVCs must be treated in the same way as yourother Scheme benefits. (See pages14-15 for more details.)

Finding out moreThis page gives a brief overview of AVCs. More details are availablefrom the Group PensionsDepartment.

Freedom to pay into morethan one pension schemeSince April 2006, you have theopportunity of paying into otherpension arrangements such as aPersonal Pension Plan at the sametime as contributing to the Scheme,as long as the total paid into allschemes does not exceed yourannual earnings (or the AnnualAllowance – see below).You can payup to 15% of your earnings into theHusqvarna Scheme.

The Annual AllowanceThe Annual Allowance (AA) is themaximum tax-free increase in thevalue of your pension benefits which

is allowed in any one tax year.Effectively, since April 2006, you are allowed to contribute up to100% of your earnings to pensionarrangements as long as this iswithin the AA.

The AA was set at £215,000 for2006/07 and will increase each yearto reach £255,000 by 2010/11, whenit will be reviewed.This will affectonly a very small number of people,but if your pension benefits doincrease by more than the AA, youwill be liable to an additional tax bill.

Her Majesty's Revenue & Customs(HMRC - formerly the InlandRevenue) will monitor the increase

in your pension benefits throughyour annual tax return. For thispurpose, you will find the increasein your Scheme benefits on yourannual Benefit Statement.

Scheme specific Earnings CapThe Scheme has a cap onPensionable Pay.This was £112,800in the 2007/08 tax year and it willbe increased in line with the RetailPrices Index each year. Consequentlythe maximum contribution you canmake to the Husqvarna Scheme eachyear will be 15% of this EarningsCap (or your Pensionable Pay if less)if you joined after 1 June 1989.

State provision

What the State providesThe State Scheme is in two parts,the Basic State Pension and a second,earnings-related pension. Both arepaid from State Pension Age, whichis currently age 65 for men and forwomen born after 6 April 1955.Women born between 6 April 1950and 5 April 1955 have a StatePension Age of between 60 and 65.For women born before 6 April1950, State Pension Age is 60.

Basic State PensionThis is based on your history ofNational Insurance contributions. Ifyour National Insurance contributionsrecord is sufficient, you will receivethe full Basic State Pension inaddition to your pension from theScheme. If you do not have a fullNational Insurance history, a reducedBasic State Pension may be paid.

State Second PensionUntil April 2002, the second tier ofState pension was the State EarningsRelated Pension Scheme or SERPS.From April 2002, SERPS wasreplaced by the State SecondPension or S2P, although you keepany benefits you built up in SERPS.

S2P is based on earnings, likeSERPS. But since the Governmentaims to provide increased benefitsfor those on lower than averageearnings, it is calculated differently.

Contracting-outThe Scheme is contracted-out ofthe second tier of State pension.This meant that under SERPS theScheme was legally obliged toprovide members with a pensionequivalent to, or better than, theState scheme.

For contracted-out members,therefore, benefits from the Schemereplace the benefits they wouldotherwise have received fromSERPS.This also means both youand Husqvarna pay lower NationalInsurance contributions

Following the introduction of S2P,those Scheme members who werecontracted-out of SERPS are insteadcontracted-out of S2P.

don’t let thegrass grow

18 | 19

Some other matters

Running the SchemeThe Scheme is run by HusqvarnaPension Scheme Trustee Limited.Currently there are seven TrusteeDirectors, four of whom areappointed by Husqvarna UK Limitedand three by the members.

Together they are responsible forensuring that the Scheme is runsmoothly and always in accordancewith the Trust Deed and Rules, thelegal basis of the Scheme.TheTrustees employ various professionaladvisers to assist them with the day-to-day running of the Scheme.Theseinclude investment managers,solicitors, auditors and actuaries.

Registered with HMRCThe Scheme is registered withHMRC (formerly the InlandRevenue).This currently means that:

• you receive full income tax relief on your contributions to the Scheme, including any AVCs

• the Scheme has some tax reliefon its investment income andcapital gains

• the cash sums payable onretirement or death are usuallyfree of tax

In return for these valuable taxconcessions, HMRC imposes amaximum on the amounts ofbenefits and contributions that cantake advantage of these taxconcessions through the Lifetime

Allowance and the AnnualAllowance (see pages 9 and 16).

Changes or closureHusqvarna UK Limited may, withthe consent of the Trustees, changeat any point the type of futurebenefits provided under the Scheme.Husqvarna UK Limited also reservesthe right to discontinue the Schemeat any time.You will be informed ofany changes as they take place.

If the Scheme were to bediscontinued, your benefits would besecured out of the Scheme’s assets inaccordance with the Trust Deed andRules. Husqvarna UK Limitedwould be required to make goodany financial deficiency in theScheme on its closure, in accordancewith legal requirements. (See 'Howsafe is your pension?' on page 21.)

Statement of FundingPrinciplesThe Trustees, on advice from theScheme Actuary, have prepared aStatement of Funding Principlessetting out the assumptions made inthe actuarial valuations and theirpolicy for meeting the statutoryfunding objective (SFO).The SFO isthe requirement that the Scheme'must have sufficient and appropriateassets to cover its technical provisions',that is, there must be sufficient assetsto cover all the Scheme's liabilitiesboth now and in the future.

Statement of InvestmentPrinciplesThe Trustees have prepared astatement of the principles

allbasescovering

governing their decisions about theScheme’s investments.This covers:

• the Trustees’ policy forcomplying with the Statementof Investment Principles

• the types of investments theyhold and the balance betweenthem

• their investment objectives,including any constraints theymight impose in conjunctionwith their investment advisers

A copy of this statement will bemade available on request to anymember who wishes to see one.

Appointment of AdvisersThe Pensions Act states that theTrustees of occupational schemesmust appoint formal advisers tocertain roles.The Scheme’s Trusteeshave appointed Jane Curtis of HewittBacon & Woodrow as the SchemeActuary, Hewitt as investmentadviser, Horwath Clark WhitehillLLP as Auditors and Sacker &Partners LLP as legal advisers.

Secretary to the TrusteesThe Pensions Act requires that theTrustees formally appoint aSecretary.They have appointedRussell Williams to this post.

Benefits as securityYou must not promise your benefitsto anyone else or use them assecurity for a loan.This is strictlyforbidden under the Rules of theScheme and any attempt to do somay result in a loss of benefit.

Divorce and your pensionIf you divorce, your pensionentitlement can form a substantialpart of your assets. For divorceproceedings that started on or after 1 December 2000, the law now

allows courts to order the sharing ofpension rights between divorcingpartners.This applies equally to thebreak-up of a civil partnership.

If you are getting divorced or endinga civil partnership, and needinformation about your pensionrights for the purposes of yoursettlement, you should contact theGroup Pensions Department.

Temporary absenceIf you are temporarily absent fromwork, because of illness or injury forexample, your membership of theScheme may be continued at thediscretion of the Trustees, with theconsent of Husqvarna UK Limited. Ifyour membership is continued, youwill continue to pay contributions andaccrue benefits in the normal way.

Maternity and other family leaveYour period of paid maternity,paternity, parental or adoption leavewill be treated as PensionableService and contributions will bededucted as normal.Any period ofunpaid maternity, paternity, parentalor adoption leave will not counttowards your Pensionable Serviceunless Husqvarna UK Limitedagrees and you pay the contributionsafter your return to work, orlegislation requires it to be counted.

If you decide not to return to work,you will be treated as having left theScheme at the point at which youceased to pay contributions.

Part timersIf you work part time your pensionwill be adjusted to reflect this. Forexample, if you change from fulltime to part time work, your pensionwill reduce pro rata with thereduction in your earnings. If thisapplies to you, please contact theGroup Pensions Department formore information.

Further informationCommunication is given a highpriority within the Husqvarna UKLimited Pension Scheme.TheTrustees want to ensure thatmembers understand their benefitsand are kept fully informed aboutthe progress of the Scheme. For thisreason, you will receive an annualbenefit statement while you are anactive member which shows howyour benefits are building up. Inaddition members receive an annualreview which covers highlights ofthe Scheme’s financial year, anannual summary funding statementand other information of interest tomembers.There is also a range ofinformation which is available onrequest.This includes:

• Trust Deed and Rules

• Actuarial Valuation Report

• Full Annual Report andAccounts

• Statement of InvestmentPrinciples

• Statement of Funding Principles

• Recovery Plan (if applicable)

• Schedule of Contributions

• Disputes procedure

If you would like to see any of theseitems, or if, at any time, you have aquery about the Scheme or yourbenefits, please contact:

Husqvarna UK LimitedPension SchemeAddington WayLutonBeds LU4 9QQ

Phone: 01582 588441 / 588446Fax: 01582 588702Internal: 7013441 / 7013446

20 | 21

If there’s a dispute

The Pensions OmbudsmanThe Pensions Ombudsman, appointedunder section 145 (2) of the 1993Act, may investigate and determineany complaint or dispute of fact orlaw in relation to an occupationalpension scheme made or referred inaccordance with that Act.

The Pensions Ombudsman11 Belgrave SquareLondonSW1V 1RB

Phone: 0207 834 9144www.pensions-ombudsman.org.uk

Pensions RegulatorOn 6 April 2005 the PensionsRegulator was established as thenew regulator of work-basedpensions in the UK, having widerand more flexible powers under thePensions Act 2004. It is able tointervene in the running of pensionschemes where trustees, employersor professional advisers have failed intheir duties.

The Pensions Regulator Napier HouseTrafalgar PlaceBrightonBN1 4DW

Phone: 0870 606 3636www.thepensionsregulator.gov.uk

Data Protection Act 1998The Trustees and Husqvarna UKLimited need to hold personal dataabout you in order to run the Schemeefficiently and in your best interests.Todo this, from time to time they mayneed to pass your data to the Scheme’sactuary, auditor, administrator or otherprofessional advisers.

The Trustees and Husqvarna UKLimited are regarded as ‘DataControllers’ under the Data ProtectionAct 1998.This means they will onlyuse your data to run the Scheme andnot for any other purpose. If you wantto see the details the Trustees holdabout you, please contact the GroupPensions Department at the address onthe previous page.

DisputesAny problems connected with yourScheme membership can normallybe resolved quickly and easily by theGroup Pensions Department. Inthose rare circumstances where theGroup Pensions Department cannotresolve your problem, you can usethe formal procedure which theScheme has in place for resolvingdisputes.You can ask for a copy ofthe full formal disputes procedurefrom the Group Pensions Managerat the address on the previous page.

If, after following the procedure, youare unhappy with the outcome, thefollowing external organisations areavailable to investigate complaints.

TPAS (The PensionsAdvisory Service) TPAS is available at any time toassist members and beneficiaries ofthe Scheme in connection with:

• any pensions query they may have

• any difficulty which they havefailed to resolve with theTrustees or administrators of the Scheme

The Pensions Advisory Service11 Belgrave SquareLondonSW1V 1RB

Phone: 0845 601 2923www.pensionsadvisoryservice.org.uk

in adon’t get

How safe is your pension?

Guaranteed benefits?Members may have been concernedabout press coverage a while back,highlighting the plight of somegroups of workers who lost theirdefined benefit pensions because of employer insolvency.

Defined benefit pensions such as theHusqvarna UK Limited PensionScheme are often referred to as'guaranteed' benefits. However, anyguarantee is dependent on thefinancial strength of the employerwho pays the balance of cost forproviding the promised benefits.

The Government has recentlyintroduced new legislation to furtherprotect members’ benefits, althoughthe protection is subject to limitation.The new legislation includes:

Debt on Employer Regulations

Where an employer wishes towithdraw from an ongoing pensionscheme, or the scheme is beingwound up, the employer must ensure that the scheme is fullyfunded in order that the Trusteeshave sufficient assets to cover thepension liabilities.

Pension Protection Fund

The Pension Protection Fund (PPF)was set up by the Government andis paid for by a levy on all definedbenefit pension schemes such as theHusqvarna Scheme.

The PPF's aim is to help membersof defined benefit schemes if theirscheme's sponsoring employerbecomes insolvent and their schemeis under-funded, meaning there isnot enough money to pay thebenefits promised. In such cases thePPF will pay compensation tomembers.The PPF aims to provide:

• 100% level of compensationfor people who have reacheda scheme’s normal retire-ment age, and for youngermembers who are in receiptof an ill health or incapacitypension

• 90% of the benefits for other members, subject to a cap on the annual pensionthat can be paid.The amount of the cap willdepend on a member’s agewhen he/she starts to receivea pension, but it is likely tobe £25,000 each year formembers who start to receive a pension at age 65

• for pension earned before 6 April 1997, a level pensionin payment (ie no increases)

• for pension earned after 5 April 1997, increases inpayment in line with RPI up to a maximum of 2.5% a year

The PPF reserves the right todecrease these benefits if the fundingis not available.

The Pensions Regulator

The regulatory regime for pensionshas been strengthened. If anemployer acts (or fails to act) in away that the Regulator believes is toavoid a pension debt, the Regulatorcan issue a Contribution Notice tothe employer.This legislation isdesigned to prevent employersrestructuring companies in order toavoid pension obligations.tangle

22 | 23

Your pension examples

The difference in your take-home payChoose the correct example below for your contribution rate (5% or 8%) and by following the method shown,you can work out the real cost to you of being a member of the Husqvarna UK Limited Pension Scheme FinalSalary section.

Contribution rate of 5%After taking account of tax relief and National Insurance savings, the net cost (the difference you'll see in your take-home pay) is more like 2% than 5% of your Pay. In the example below the employee earns £22,800 a year and thenet cost is only 1.9% or £434.76 a year (£36.23 a month).

Try your own figures using the following examples

Pay in the month of March 2007 £1,900 (22,800 / 12)Lower Earnings Limit for March 2007 £364 (4,368 / 12)Contribution Pay in March 2007 £1,900 – £364 = £1,536

To calculate contribution in March 2007

Multiply Contribution Pay by 5% £1,536 x 5% = £76.80

To calculate Tax Relief (assuming tax at 22p in the pound)

Multiply contribution by 22% £76.80 x 22% = £16.90

To calculate savings in NI Contributions *

(£1,900 - £420.33 = £1,479.67)*Multiply £1,479.67 x 1.6% = £23.67

To calculate the net cost

Subtract tax relief and saving in NI contributionsfrom monthly contribution £76.80 – £16.90 – £23.67 = £36.23

* Saving is 1.6% on monthly earnings between £420.33 (threshold figure) and £2,795.00 (the upper earnings limit)for tax year 2006-07.

Contribution rate of 8%After taking account of tax relief and National Insurance savings, the net cost (the difference you'll see in your take-home pay) is more like 4% than 8% of your Pay. In the example below the employee earns £22,800 a year and thenet cost is only 3.8% or £866.16 a year (£72.18 a month).

Try your own figures using the following examples

Pay in the month of March 2007 £1,900 (22,800 / 12)Lower Earnings Limit for March 2007 £364 (4,368 / 12)Contribution Pay in March 2007 £1,900 – £364 = £1,536

To calculate contribution in March 2007

Multiply Contribution Pay by 8% £1,536 x 8% = £122.88

To calculate Tax Relief (assuming tax at 22p in the pound)

Multiply contribution by 22% £122.88 x 22% = £27.03

To calculate savings in NI Contributions *

(£1,900 - £420.33 = £1,479.67)*Multiply £1,479.67 x 1.6% = £23.67

To calculate the net cost

Subtract tax relief and saving in NI contributionsfrom monthly contribution £122.88 – £27.03 – £23.67 = £72.18

* Saving is 1.6% on monthly earnings between £420.33 (threshold figure) and £2,795.00 (the upper earnings limit)for tax year 2006-07.

Normal retirement example A woman retires on her 65th birthday on 6 October 2007, having completed 30 years, 183 days of PensionableService in the Husqvarna UK Limited Pension Scheme. She has paid contributions at the rate of 8% since 1 January2005. Her leaving date is exactly half way through a Scheme year, which runs from 6 April to 5 April. Her earningshave increased each year. Her pension calculation is as follows:

Year Pay LEL deductions** Pensionable Pay

2004/05 £18,000 £3,744 £14,2562005/06 £19,000 £3,900 £15,1002006/07 £20,000 £4,004 £15,9962007/08 £10,500 £2,054 £8,446

* Pay from 6 April 2007 to 6 October 2007 ** The LEL deduction has a two-year time lag. See page 4.

Final Pensionable Pay will be: £14,256 + £15,100 + £15,996 + £8,446 = £46,670 = £15,556

Pension will be: 30.5 x £15,556 = £7,907 a year

A 4% bonus applies to Pensionable Service accrued to 5 April 1998 for members in service at 1 December1998, excluding transferred-in service and added years service from AVCs.Bonus will be: 21 x £15,556 x 4% = £217

Total pension including bonus will be: £7,907 + £217 = £8,124 a year

2 3

60

60

*

24 | 25

Calculation of cash at retirementThe maximum tax-free cash available is equal to four times the pension at retirement.

To obtain a tax-free lump sum you have to give up part of your pension.The amount of lump sum you get for each £1 of pension given up is known as the commutation rate.This varies by age, so for example,currently at age 55 it is 18.3, at age 60 it is 16.4 and at age 65 it is 14.4.These rates are reviewed from time to time.

Assuming a pension at retirement at age 60 of £5,000 a year, the lump sum would be £20,000.The amount of pension given up to obtain the £20,000 would be:

Therefore the remaining pension payable would be: £5,000 - £1,220 = £3,780 a year

£20,00016.4

= £1,220 a year

Early retirement exampleHere we assume that the woman in the normal retirement example is 53.5 years old rather than 65, that herearnings and service are the same and that she is not subject to any special early retirement terms. Her pensionbefore reduction for early retirement is £8,124 a year.The standard early retirement terms for members active at the date of this booklet are as follows:

Date Joined Scheme Pensionable Service Amount of reduction

Before or on 1 April 1988: More than 12.5 years 3% for each year before age 55

After 1 April 1988 More than 12.5 years 3% for each year before age 60

Less than 12.5 years 3% for each year before age 65

She has completed more than 12.5 years Pensionable Service and joined the Scheme before 1 April 1988.She is not subject to any special early retirement terms.Therefore the early retirement reduction which appliesis 3% a year to age 55.

As she is 53.5 years old, the reduction is: 3% x 1.5 = 4.5%

Therefore her early retirement pension is: £8,124 x 95.5% = £7,758

Husqvarna UK Limited Pension SchemeAddington Way, Luton

Beds LU4 9QQ

www.husqvarna.com