YOUR PENSION – YOUR CHOICE

Guardian Media Group Pensions Department

Centurion House, 129 Deansgate, Manchester M3 3WR

Tel: 020 3353 2000

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YOUR PENSION - YOUR CHOICE

Are you now considering drawing your benefits from the Lifestyle Plan?

If so, you will need to think carefully about the important choices that are available to you.

This booklet is designed to guide you through those choices.

You should also refer to the Members' Guide and Investment Guide for additional information about the way the Lifestyle Plan works. There is a glossary at the end of this booklet clarifying some of the technical words.

You may also find our website useful

If there are any points about which you are unsure, please contact the Pensions Department.

CONTENTS /
PAGE
Getting Advice / 3
Are you happy with where your Lifestyle account is invested? / 4
About Our Illustrative Letters / 5
Retirement / 6

How Long Might Your Pension Be Paid For?

/ 7

Your Choices – Taking Your Benefits via Lifestyle Plan

  • Tax Free Lump Sum
  • Pension Increases
  • Spouse’s Pension on Death
  • 5-Year Guarantee / 10-Year Guarantee
  • Retiring early? Want a higher pension in early years?
  • Enhanced/Impaired Life Annuities
/ 8-16
Alternative Choices – Taking your benefits via an adviser
  • Investment Linked Annuities
  • Income Withdrawal (Income Drawdown)
  • Alternatively Secured Income
/ 17

Purchasing Your Pension

/ 18
Glossary / 19

Document updated April 2012

GETTING ADVICE

It will almost certainly be the case at this important time in your life that you will want to consider all aspects of your financial affairs - should you take the lump sum from the pension scheme and if so, how are you going to invest it etc?

If you have not already done so we would suggest that you consider these matters and seek the financial advice you think you may need e.g. independent financial advisors (IFAs), banks, building societies, insurance advisers, accountants, etc.

You can find out more information about financial advice and check whether a firm is authorised by contacting the Financial Services Authority consumer helpline on 0845 606 1234 or using their website

If you would like to find an IFA you can contact IFA Promotion on their consumer hotline (0800 085 3250) for a list of local IFAs or log on to their website at where there is a search facility.

Aim to speak to a range of people (e.g. friends, family and advisers) so that you can compare and contrast. You should ask each adviser to outline the charges which will be involved.

Please see page 18 for details of the arrangements for purchasing your pension. If you do this via the Lifestyle plan itis on a nil commission basis with the administration costs being met by the company.

This is also an ideal time for you to check your entitlements to State Pension or any other Social Security benefits with the Department for Work and Pensions (DWP). Their Pension Service website is

VERY IMPORTANT – Are you happy with where your Lifestyle Account is currently invested?

If you are intending to take your benefits in the near future you should give careful consideration to whether you need to a) change your Target Retirement Date (if you have not alreadydone so) or b) specify your own mix of investments.

If your Lifestyle account is invested as per the default investment arrangements then it is initially invested in the Long Term Fund which mainly consists of equity investments in the stock market together with a small element of bonds. The main objective of the Long Term Fund is to provide reasonable growth and protection against inflation in the longer term. However, we all know that stock market values can go up or down so as you approach the time when you wish to draw your benefits it is important that a gradual switching takes place from the Long Term Fund to the Short Term Fund. The Short Term Fund is generally invested in bonds. There is also a section of the Short Term Fund which is placed in cash deposits to provide for your tax free cash lump sum at retirement.

The capital value of bonds can also go up or down but these movements are closely related to changes in interest rates thus providing more stability to the actual amount of pension which can be purchased at retirement with your Lifestyle account. However, bonds cannot protectagainst changes in other factors which insurance companies use to determine annuity rates such as mortality trends.

You should also bear in mind that the Short Term Fund might not be appropriate if you do not intend purchasing an annuity (pension).

Switching from the Long Term Fund to the Short Term Fund normally takes place over a ten-year period up to your own Target Retirement Date. (Prior to 1st April 2003 the norm was for switching to take place over a five-year period). This is designed to achieve a gradual switch over, which helps to smooth out some of the ups and downs of the stock market values. It therefore means that you know the stability of your benefits is gradually building up as you approach your target retirement date.

You can override the automatic switches and specify your own mix between the funds or you can change your Target Retirement Date at any time to reflect your own circumstances and to keep the balance between 'growth' and 'stability' in line with your needs.

You may wish to obtain advice from a qualified financial adviser concerning the investment of your Lifestyle Account to ensure that the approach you follow is the most appropriate for your circumstances. The Trustees of the Plan and the members of the Pensions Department are unable to give advice to members regarding their investment choices (see “Getting Advice” on page 3).

Full details of all investment choices are contained in the Investment Guide, which is available on request from the Pensions Department. Details are also available via our website –

ABOUT OUR ILLUSTRATIVE LETTERS

Members of the Lifestyle Plan receive annual illustrations of benefits. Onrequest, we canalso provide illustrative figures in “retirement choices” lettersincluding details of different types of pension to suit members' individual requirements.

The letters contain quite a lot of information and have therefore been designed to be as simple as possible. These notes explain the letters in more detail.

The value of your Lifestyle account in letters is the value at the date shown and is subject to fluctuation thereafter. (Any Equitable Life AVC figures are usually approximate and are subject to confirmation.)

You can choose to have a pension(annuity)that will remain level over your lifetime, or you can have a pension with guaranteed annual increases. See the rest of this guide for a more detailed description of your choices including: lump sum option on retirement, pension increases, spouse's pension payable on death, lump sum payable on death and the early retirement“step-down” option.

The pensions illustrated in letters are based on assumed annuity rates which are subject to fluctuation up to the time of actual purchase of the annuity. The annuity rates we have used are based on market rates. Our standard calculations assume wives are 3 years younger than their husbands. Variations from this assumption will mean that the pension which can be secured may be higher or lower than shown.

Please note that once you have chosen the type of pension you want and you have completed the Benefit Choices section of the “Taking Your Benefits” Application Pack, then individual annuity quotations are obtained by the Trustees, on your behalf, from a panel of competitive insurance companies, using an estimated retirement fund and the best one is put forward. For this purpose, quotations are obtained on a nil commission basis and all administration costs are met by the company. Alternatively, if you wish, in conjunction with your financial adviser, you can specify which insurance company is to provide your pension. However, you wouldneed to meet the advice and administration costs yourself.Page 18 gives further details re purchasing your pension.

Any tax-free lump sum at retirement illustrated in letters is based on the rules of the Lifestyle Plan. For the majority of members this will be 25% of your fund value.

Where benefits are shown at a future date they are expressed “in today’s values” so that you can relate them to your current income and outgoings. This is in line with the basis for the figures in your annual personal illustration of benefits. These figures are of course purely illustrative. Where benefits are shown at a future date it has also been assumed that Lifestyle contributions, AVC’s and EC’s will be continued at current rates to the projected date, where applicable.

RETIREMENT

On your retirement you will be given a range of benefit options that your Lifestyle Account can be used for. These are discussed in detail later in this booklet.

Lifetime Allowance

From 6 April 2006 the Inland Revenue (HMRC) introduced a new limit on tax-efficient pension savings called the Lifetime Allowance. The Lifetime Allowance is compared to the value of all your pension benefits, including benefits from previous employers and personal pensions, and any excess value over the Lifetime Allowance at your retirement date is subject to a recovery charge of 25%, in addition to income tax being payable. The level of the Lifetime Allowance is £1.5 million for the tax year 2012/13. Therefore, once you decide on your retirement date we will ask for full details of all your pension benefits in order to check your benefits against this allowance.

Frequency of Pension

Your pension will normally be payable monthly in arrears for your lifetime, however, if the purchase price is below £5,000 then your pension will usually bepayable annually in advance.

Commutation of Small Pensions

On retirement after age 60, there are two ways in which small benefit rights may be commuted and paid as a one-off lump sum.

  • The Trustees may offer a one-off lump sum instead of a pension if the pension is small enough to be deemed “trivial”. Trivial means total pensions of around £800 pa, which is equivalent to total pension funds of less than £18,000. You should notify the Pensions Department if you think this applies to you – remember the limit is across all your pension arrangements.
  • Alternatively, the Trustees may offer a one-off lump sum instead of a pension to members with fund values (or fund values after deduction of protected tax-free cash) of less than £2,000 providing certain conditions can be met. To determine your eligibility for this option, pensions from other pension arrangements can be ignored.

Early Retirement

If you joined the Lifestyle Plan on or before 5 April 2006, and your Lifestyle account included some Non Protected Rights funds at 6th April 2006, the earliest you can take your benefits is age 50 provided:

  • You take all your benefits under the Lifestyle plan at the same time, and
  • You do not stay in employment within GMG Group

If you joined the Lifestyle Plan after 5 April 2006 the earliest you can take your benefits is age 55.

Flexible Retirement - Taking Your Benefits Whilst Continuing In Employment

There is an increased desire to ease the transition from working life to retirement. The Lifestyle Plan allows members to take their benefits whilst continuing to work. If, however, you want to change your working hours, for example go part time, then this would need to be agreed by your Manager and your HR Department. To avoid overcomplicating the Plan, under this option you must take all your benefits at the same time. You will be able to rejoin the Lifestyle Plan once and build up a second pension. You will also be covered for a reduced level of death benefits.

You can take flexible retirement if you are over age 55.

If you are interested in this option you should contact the Pensions Department.

HOW LONG MIGHT YOUR PENSION BE PAID FOR?

The choices set out in this booklet will very much depend on your own personal circumstances.

Remember, you will need to think about the level of income you need to live on, the level of inflation while you are alive, what will happen to your dependants when you die.

It often comes as a surprise that in many cases your pension may be needed to provide an income in retirement which could well exceed the period over which you have saved - always remembering that the pension will often need to continue to be paid to your spouse after your death. The following table shows how long a pension may be needed if it is payable to you and your spouse.

YOUR AGE
55
60
65 / AVERAGE PERIOD FOR WHICH PENSION COULD BE REQUIRED
33 YEARS
28 YEARS
24 YEARS

This table is based on actuarial tables and is intended purely to give a broad indication of the average period for which a pension might continue.

YOUR CHOICES – Taking your benefits via the Lifestyle Plan

TAX FREE LUMP SUM

On retirement you may elect to take a tax-free lump sum of any amount up to the maximum under HMRC rules. Obviously the more you take as a lump sum the smaller your pension will be. (Pensions are taxable as income). Deciding how much lump sum, if any, you require and what you might do with it is a vitally important decision. As mentioned earlier you will almost certainly want to seek financial advice before making a final decision.

Since 6 April 2006 you are entitled to take 25% of your fund as tax-free cash, subject to a limit of 25% of the Lifetime Allowance at your date of retirement. However, if the previous HMRC rules would have produced a better cash sum for you, you will continue to have this for the part of your Lifestyle account related to contributions paid before 6 April 2006.

If you are taking a higher pension with no tax-free lump sum you should also seek advice. It might be possible to improve the tax position by taking the tax-free lump sum and purchasing the additional pension with this part of your benefits separately.

PENSION

INCREASES

The pensions quoted in illustrations and “retirement choices” letters show alternative types of annual increases. In illustrations we include LPI increases only. In “retirement choices” letters we usually illustrate three options – Level (no increases), 3% pa and LPI. LPI means 'limited price indexation' i.e. increases in line with inflation up to a maximum of 5% pa and a minimum of 0%.

You can choose between a pension that is level or with guaranteed increases. The level pension starts off higher but obviously would never increase. The increasing pensions will eventually catch up with and then exceed the level pension. In other words the choice is about 'more now and less later' or 'less now and more later'. For a person who lives to the expected 'average age' it is reasonable to take a broad view that all of these options provide the same value for money in terms of what will be paid out.

Another option to consider is a pension with guaranteed RPI increases i.e. 'an inflation proofed' pension without the upper limit of 5%. Such a pension would provide high increases if inflation were to reach high levels. The cost of pensions with RPI increases varies from time to time according to the outlook for inflation. The starting level for such a pension might sometimes be a lot lower than the pensions described above but sometimes when inflation is very low the starting amount can be quite similar. A pension which has guaranteed RPI increases usually has detailed provisions dealing with the way in which increases will be calculated in certain circumstances e.g. if the Government changes the structure of the Index or if the pension continues for a very long time. You should note that it is possible for a pension of this type to go down if inflation is negative.

SPOUSE'S PENSIONON DEATH

The pensions we quote in “retirement choices” letters include an optional 50% spouse’s pension to be paid in the event of your death. Whether you are married or single you can choose to have a spouse’s or dependant’s pension.

If you are not legally married but have Financial Dependants you may provide for a continuing pension to be paid to one or more dependants in the event of your death. Please note that if you subsequently separate, then the dependant’s pension would remain payable to your named dependant as it is not possible to change the terms of your pension once it has been purchased with an insurance company.

For married members, we have found that the majority choose a spouse's pension of 50% although it is possible to have lower or higher amounts with a corresponding effect on your own starting pension.