Get to know your pension benefits
Stay informed, Stay in control: Get to know your pension benefits
Your D’Arcy Masius Benton & Bowles Pension & Death Benefit Scheme (The Scheme) pension has a valuable underpin guarantee which provides you with a safety net at retirement.
Understand how your pension and the underpin work together and learn about the options available to you in the sections below…
Before you get started, watch our bite-sized video, which should help you better understand how your pension works. It’ll only take two minutes!
Section 1: Understanding your Defined Contribution (DC) pension
A DC pension scheme is a retirement plan where contributions from both you and your employer are paid into an individual account set up for you. This account is invested with the aim that it should grow in value during your working life. The amount available at retirement depends on the total contributions made and the performance of the investments. It is difficult to accurately determine benefits in advance of retirement.
However, unlike traditional DC plans, your scheme includes a Defined Benefit (DB) underpin. This means that certain guaranteed defined benefits are provided, ensuring a base level of pension regardless of your DC account’s investment performance or the cost of converting your DC account into a pension at retirement.
Key features of your DC account
- Investment choices: You can choose how your account is invested, from a range of options.
- Individual account management: You manage your own pension account, and its value can increase or decrease based on investment performance.
- Defined Benefit underpin: Guarantees a minimum level of benefits, providing you with greater security and potentially higher retirement income than the DC account alone would offer.
Note: The DB underpin may restrict some of the flexibility seen in traditional DC plans. For more details, see Sections 2 and 3.
Section 2: Introducing your DB underpins
A DB underpin guarantees certain minimum benefits similar to those in DB schemes. This ensures you receive a base level of pension regardless of your DC account’s performance.
Types of DB underpin in the Scheme
- Guaranteed Minimum Pension (GMP): Applies to pensionable service before 6 April 1997, based on a proportion of your earnings subject to certain limits.
- Reference Scheme Test (RST) benefits: Applies to pensionable service from 6 April 1997, requiring schemes to satisfy a funding requirement targeted at a prescribed benefit level based on a proportion of your earnings between certain limits.
Section 3: How your DB underpins work with your DC pension
Calculation methods
Upon retirement or transfer, your benefits are calculated using both DC and DB methods. We compare the value of your DC account with the value of your DB underpin benefits to determine which is more valuable.
Test process
We perform a comparison to ensure your pension benefits meet or exceed the minimum provided by the DB underpin. This process ensures you receive the higher benefit value. Your pension at 65 (if you are a male) and 60 (if you are female) must be at least equal your GMP. The value of your retirement benefits must also cover the value of any RST benefits.
Section 4: Your options before retirement
During the deferment period, where you have not yet retired, you have several options to consider:
- Transfer your DC account out of the Scheme: You can request a transfer quotation from the Administrator to move your retirement fund to another suitable pension plan. If you transfer, the value of your GMP and RST benefits will be assessed, and if your DC account is lower than the value of these benefits, the transfer value will be uplifted to match your GMP and RST benefits.
- Investment choices: You can alter how your DC account is invested, choosing from a range of funds offered by the Trustee. You are allowed to change your investment choices once in any 12-month period free of charge.
- Annual benefit statements: You will receive an annual benefit statement detailing the current value of your DC account in the Scheme, though this does not include an assessment of the DB underpin.
- Updating your details: It is important to keep your contact information up to date with the Administrator to ensure you receive timely updates and benefit statements.
Note: You cannot make further contributions into the Scheme during the deferment period, and there are restrictions on withdrawing your total DC account in cash form.
Section 5: Your options at retirement
When you reach your Normal Retirement Date (NRD), typically at age 60, you have several options for accessing your individual account. The DB underpin affects these options by ensuring you receive a minimum pension, which influences the flexibility and amount of benefits you can take. Here’s how the underpin impacts each option:
Tax-Free lump sum: For a DC scheme with no DB underpin, you can typically take up to 25% of the total fund value of your individual account as a tax-free lump sum. However, the amount you can take from the Scheme may be limited because of your DB underpin. At retirement, subject to providing your GMP, you will be given an option to exchange part of your pension for a tax-free cash lump sum.
Pension income: You will receive a regular pension income from the Scheme. The DB underpin ensures that your pension income meets the minimum level. If your retirement fund is worth more than the value of the DB underpin, the default position is that the excess is used to increase your pension.
Dependants’ benefits: The underpin guarantees a minimum pension for your spouse or civil partner. You can use any excess funds to increase your spouse or legal partner’s pension, or provide a pension for an alternate named dependant, providing better security for your dependants.
Pension increases: The DB underpin typically results in increases in payment. You can use the excess to increase your pension over time, helping to protect against inflation.
Annuity purchase: An annuity is an insurance contract, where you exchange your contributions for a guaranteed income for life (a pension) from an insurance company. The default option in the Scheme is for your DC account to be converted to a pension payable from the Scheme. Alternatively, you can buy an annuity but the income generated by the annuity must meet the underpin requirements for the base level of benefits you are entitled to consisting of GMP and RST benefits.
Transfer to another arrangement: If you prefer more flexibility, you can transfer your retirement fund to another pension arrangement; the DB underpin will cease to apply on transfer. Your retirement options will be determined under the arrangement you transfer to, this could allow you to draw an income at a time and rate that suits you, take up to 25% of your pension savings as a tax-free lump-sum (TFLS), or fully commute the funds.
Your transfer value will be the greater of your DC account and the value of the DB underpin.
The option to transfer is no longer available after you have chosen to receive a pension from the Scheme at retirement.
Note: The payment of the GMP must normally be in pension form and cannot be commuted for a cash lump sum, unless all benefits under the Scheme fall below the limits set by tax law.
Section 6: Making informed decisions
When planning your retirement, it’s important to consider several key decisions that will impact your financial future. While you cannot choose between DB and DC benefits directly, there are significant decisions you’ll need to make, such as staying in the Scheme or transferring out, determining how to invest your pension, and deciding how to take your benefits at retirement. Here are the main areas where seeking independent financial advice is crucial:
- Staying in the Scheme vs. Transferring Out: One of the biggest decisions is whether to remain in the Scheme, benefiting from the security of the DB underpin, or transfer your funds to another arrangement for greater flexibility. If you choose to transfer, the DB underpin will no longer apply, and your retirement options will be governed by the new arrangement.
- Investment Choices (for DC Members): If you have excess funds in your DC account, deciding how to invest them is essential. Market performance, your risk appetite, and your long-term financial goals will influence how you grow your DC savings.
- Retirement Options: When it’s time to take your benefits, you will need to decide on the best option for you. The Scheme may offer various ways to take your pension, or if you’ve transferred out, the arrangement you transfer to could allow for flexible income drawdown, taking up to 25% of your funds as a tax-free lump sum, or fully commuting your pension pot.
Seeking advice
Given the complexities involved, it’s highly recommended to seek independent financial advice. A financial adviser can help you understand your options, weigh the pros and cons, and make the best decision tailored to your personal circumstances.
You can find out how financial advice works, the types of advisers you can speak to and when it’s appropriate to use a financial adviser at moneyhelper.org.uk/en/getting-help-and-advice/financial-advisers
Section 7: FAQs – additional information about your pension benefits
Your deferred benefits
What makes up my DC deferred benefits?
The contributions made by you and your employer, along with investment returns, accumulate to provide your retirement benefits. Remember, the value of these investments can fluctuate.
What are DB safeguarded rights?
DB safeguarded rights are benefits calculated based on a guarantee or promise that they include Guaranteed Minimum Pension (GMP) and Relevant State Earnings-Related Pension Scheme (SERPS) benefits.
- GMP (Guaranteed Minimum Pension): Accrued before 6 April, 1997, and revalued until GMP age (60 for women, 65 for men).
- RST (Reference Scheme Test) Benefits: Accrued from 6 April, 1997, revalued until age 65 and adjusted actuarially for early payment.
What information is provided in the Annual Benefit Statement?
Your Annual Benefit Statement provides the current DC value of your retirement savings but does not include the value of your GMP and RST benefits.
Investing and managing your DC account
Can I change my investment choices?
Yes, you can change your investment choices without charge.
Can I make additional contributions to the Scheme?
No, further contributions cannot be made to the Scheme.
Reaching Normal Retirement Date (NRD)
What choices do I have at my Normal Retirement Date (NRD)?
You will have various options for taking your retirement benefits, including the default options if no choice is made. See Section 5 above for more details.
When does the retirement process begin?
The retirement process begins several months before your NRD, when you will be contacted to start making decisions about your benefits.
Death before NRD
What happens if I die before reaching NRD?
A pension will be payable to your spouse or legal partner to satisfy the DB Underpin requirements. Any remainder of your DC account will be distributed to your beneficiaries. Ensure you have an up-to-date Expression of Wish form on file.
Keeping your information up to date
What should I do if my address changes?
Notify the Administrator of any address changes to ensure you receive timely information about your benefits and options.
Retirement benefits
What is the minimum pension?
The minimum pension consists of GMP and RST benefits. See Section 2 above for more details.
What happens if my benefits are small?
If your benefits are small, they may be commuted to a cash lump sum under certain conditions.
Cash lump sum at retirement
Can I take a lump sum at retirement?
At retirement, you will be given an option to commute your non GMP pension for a cash lump sum. We will send you more information about this as you approach retirement.
Transfer value
How is the transfer value assessed?
An assessment ensures your transfer value (based on the money in your DC account) covers your GMP and RST benefits according to the DB underpin. If the transfer value is insufficient, it will be uplifted to meet the minimum required value.
Buying an annuity
Can I buy an annuity?
Yes, you have the option to secure an annuity (which pays a guaranteed income for life, a bit like a pension) from an insurance provider, ensuring it meets or exceeds the minimum Scheme pension levels.
What is pension drawdown, and is it available within the Scheme?
Pension drawdown is a way of accessing your pension savings where you can withdraw a flexible income from your individual account while the rest remains invested. Drawdown is not available within the Scheme. If you wish to use drawdown, you can transfer your benefits out of the Scheme to another arrangement that offers this option.
Get to know your pension benefits
Stay informed, Stay in control: Get to know your pension benefits
Your D’Arcy Masius Benton & Bowles Pension & Death Benefit Scheme (The Scheme) pension has a valuable underpin guarantee which provides you with a safety net at retirement.
Understand how your pension and the underpin work together and learn about the options available to you in the sections below…
Before you get started, watch our bite-sized video, which should help you better understand how your pension works. It’ll only take two minutes!
Section 1: Understanding your Defined Contribution (DC) pension
A DC pension scheme is a retirement plan where contributions from both you and your employer are paid into an individual account set up for you. This account is invested with the aim that it should grow in value during your working life. The amount available at retirement depends on the total contributions made and the performance of the investments. It is difficult to accurately determine benefits in advance of retirement
However, unlike traditional DC plans, your scheme includes a Defined Benefit (DB) underpin. This means that certain guaranteed defined benefits are provided, ensuring a base level of pension regardless of your DC account’s investment performance or the cost of converting your DC account into a pension at retirement.
Key features of your DC account
- Investment choices: You can choose how your account is invested, from a range of options.
- Individual account management: You manage your own pension account, and its value can increase or decrease based on investment performance.
- Defined Benefit underpin: Guarantees a minimum level of benefits, providing you with greater security and potentially higher retirement income than the DC account alone would offer.
Note: The DB underpin may restrict some of the flexibility seen in traditional DC plans. For more details, see Sections 2 and 3.
Section 2: Introducing your DB underpins
A DB scheme provides benefits that are calculated on a formula prescribed in their rules and are typically calculated as a percentage of pensionable earnings for each year of service in the scheme, subject to certain variables (such as inflation on earnings and the cost of living). These retirement benefits are easier to estimate in advance.
A DB underpin guarantees certain minimum benefits similar to those in DB schemes. This ensures you receive a base level of pension regardless of your DC account’s performance.
Types of DB underpin in the Scheme
- Guaranteed Minimum Pension (GMP): Applies to pensionable service before April 6 1997, based on a proportion of your earnings subject to certain limits.
- Reference Scheme Test (RST) benefits: Applies to pensionable service from April 6 1997, requiring schemes to satisfy a funding requirement targeted at a prescribed benefit level based on a proportion of your earnings between certain limits.
Section 3: How your DB underpins work with your DC pension
Calculation methods
Upon retirement or transfer, your benefits are calculated using both DC and DB methods. We compare the value of your DC account with the value of your DB underpin benefits to determine which is more valuable.
Test process
We perform a comparison to ensure your pension benefits meet or exceed the minimum provided by the DB underpin. This process ensures you receive the higher benefit value. Your pension at 65 (if you are a male) and 60 (if you are female) must be at least equal your GMP. The value of your retirement benefits must also cover the value of any RST benefits.
Section 4: Your options before retirement
During the deferment period, where you have not yet retired, you have several options to consider:
- Transfer your DC account out of the Scheme: You can request a transfer quotation from the Administrator to move your retirement fund to another suitable pension plan. If you transfer, the value of your GMP and RST benefits will be assessed, and if your DC account is lower than the value of these benefits, the transfer value will be uplifted to match your GMP and RST benefits.
- Investment choices: You can alter how your DC account is invested, choosing from a range of funds offered by the Trustee. You are allowed to change your investment choices once in any 12-month period free of charge.
- Annual benefit statements: You will receive an annual benefit statement detailing the current value of your DC account in the Scheme, though this does not include an assessment of the DB underpin.
- Updating your details: It is important to keep your contact information up to date with the Administrator to ensure you receive timely updates and benefit statements.
Note: You cannot make further contributions into the Scheme during the deferment period, and there are restrictions on withdrawing your total DC account in cash form.
Section 5: Your options at retirement
When you reach your Normal Retirement Date (NRD), typically at age 60, you have several options for accessing your individual account. The DB underpin affects these options by ensuring you receive a minimum pension, which influences the flexibility and amount of benefits you can take. Here’s how the underpin impacts each option:
Tax-Free lump sum: For a DC scheme with no DB underpin, you can typically take up to 25% of the total fund value of your individual account as a tax-free lump sum. However, the amount you can take from the Scheme may be limited because of your DB underpin. At retirement, subject to providing your GMP, you will be given an option to exchange part of your pension for a tax-free cash lump sum.
Pension income: You will receive a regular pension income from the Scheme. The DB underpin ensures that your pension income meets the minimum level. If your retirement fund is worth more than the value of the DB underpin, the default position is that the excess is used to increase your pension.
Dependants’ benefits: The underpin guarantees a minimum pension for your spouse or civil partner. You can use any excess funds to increase your spouse or legal partner’s pension, or provide a pension for an alternate named dependant, providing better security for your dependants.
Pension increases: The DB underpin typically results in increases in payment. You can use the excess to increase your pension over time, helping to protect against inflation.
Annuity purchase: An annuity is an insurance contract, where you exchange your contributions for a guaranteed income for life (a pension) from an insurance company. The default option in the Scheme is for your DC account to be converted to a pension payable from the Scheme. Alternatively, you can buy an annuity but the income generated by the annuity must meet the underpin requirements.
Transfer to another arrangement: If you prefer more flexibility, you can transfer your retirement fund to another pension arrangement; the DB underpin will cease to apply on transfer. Your retirement options will be determined under the arrangement you transfer to, this could allow you to draw an income at a time and rate that suits you, take up to 25% of your pension savings as a tax-free lump sum (TFLS), or fully commute the funds.
Your transfer value will be the greater of your DC account and the value of the DB underpin.
The option to transfer is no longer available after you have chosen to receive a pension from the Scheme at retirement.
Note: The payment of the GMP must normally be in pension form and cannot be commuted for a cash lump sum, unless all benefits under the Scheme fall below the limits set by tax law.
Section 6: Making informed decisions
When planning your retirement, it’s important to consider several key decisions that will impact your financial future. While you cannot choose between DB and DC benefits directly, there are significant decisions you’ll need to make, such as staying in the Scheme or transferring out, determining how to invest your pension, and deciding how to take your benefits at retirement. Here are the main areas where seeking independent financial advice is crucial:
- Staying in the Scheme vs. Transferring Out: One of the biggest decisions is whether to remain in the Scheme, benefiting from the security of the DB underpin, or transfer your funds to another arrangement for greater flexibility. If you choose to transfer, the DB underpin will no longer apply, and your retirement options will be governed by the new arrangement.
- Investment Choices (for DC Members): If you have excess funds in your DC account, deciding how to invest them is essential. Market performance, your risk appetite, and your long-term financial goals will influence how you grow your DC savings.
- Retirement options: When it’s time to take your benefits, you will need to decide on the best option for you. The Scheme may offer various ways to take your pension, or if you’ve transferred out, the arrangement you transfer to could allow for flexible income drawdown, taking up to 25% of your funds as a tax-free lump sum, or fully commuting your pension pot.
Seeking advice
Given the complexities involved, it’s highly recommended to seek independent financial advice. A financial adviser can help you understand your options, weigh the pros and cons, and make the best decision tailored to your personal circumstances.
You can find out how financial advice works, the types of advisers you can speak to and when it’s appropriate to use a financial adviser at moneyhelper.org.uk/en/getting-help-and-advice/financial-advisers
Section 7: FAQs – additional information about your pension benefits
Your deferred benefits
What makes up my DC deferred benefits?
The contributions made by you and your employer, along with investment returns, accumulate to provide your retirement benefits. Remember, the value of these investments can fluctuate.
What are DB safeguarded rights?
DB safeguarded rights are benefits calculated based on a guarantee or promise that they include Guaranteed Minimum Pension (GMP) and Relevant State Earnings-Related Pension Scheme (SERPS) benefits.
- GMP (Guaranteed Minimum Pension): Accrued before April 6, 1997, and revalued until GMP age (60 for women, 65 for men).
- RST (Reference Scheme Test) Benefits: Accrued from April 6, 1997, revalued until age 65 and adjusted actuarially for early payment.
What information is provided in the Annual Benefit Statement?
Your Annual Benefit Statement provides the current DC value of your retirement savings but does not include the value of your GMP and RST benefits.
Investing and managing your DC account
Can I change my investment choices?
Yes, you can change your investment choices once a year without charge.
Can I make additional contributions to the Scheme?
No, further contributions cannot be made to the Scheme.
Reaching Normal Retirement Date (NRD)
What choices do I have at my Normal Retirement Date (NRD)?
You will have various options for taking your retirement benefits, including the default options if no choice is made. See Section 5 above for more details.
When does the retirement process begin?
The retirement process begins several months before your NRD, when you will be contacted to start making decisions about your benefits.
Death before NRD
What happens if I die before reaching NRD?
A pension will be payable to your spouse or legal partner to satisfy the DB Underpin requirements. Any remainder of your DC account will be distributed to your beneficiaries. Ensure you have an up-to-date Expression of Wish form on file.
Keeping your information up to date
What should I do if my address changes?
Notify the Administrator of any address changes to ensure you receive timely information about your benefits and options.
Retirement benefits
What is the minimum pension?
The minimum pension consists of GMP and RST benefits. See Section 2 above for more details.
What happens if my benefits are small?
If your benefits are small, they may be commuted to a cash lump sum under certain conditions.
Cash lump sum at retirement
Can I take a lump sum at retirement?
At retirement, you will be given an option to commute your non GMP pension for a cash lump sum. We will send you more information about this as you approach retirement.
Transfer value
How is the transfer value assessed?
An assessment ensures your transfer value (based on the money in your DC account) covers your GMP and RST benefits according to the DB underpin. If the transfer value is insufficient, it will be uplifted to meet the minimum required value.
Buying an annuity
Can I buy an annuity?
Yes, you have the option to secure an annuity (which pays a guaranteed income for life, a bit like a pension) from an insurance provider, ensuring it meets or exceeds the minimum Scheme pension levels.
What is pension drawdown, and is it available within the Scheme?
Pension drawdown is a way of accessing your pension savings where you can withdraw a flexible income from your individual account while the rest remains invested. Drawdown is not available within the Scheme. If you wish to use drawdown, you can transfer your benefits out of the Scheme to another arrangement that offers this option.