The EE Pension Scheme The EE Pension Scheme
CONTENTS
What is a pension? 4
How your pension works 5
Paying in
It may not cost as much as you think,
you receive tax relief on your payments.
6–7
Paying in more
How to pay Additional Voluntary
Contributions and what limits apply.
8–9
Life events
You may go on maternity, paternity or
adoption leave, divorce, dissolve a civil
partnership, be ill or die. You need to know
the benefits that may be payable.
10–11
Leaving
What happens to your savings if you
leave the Company or Scheme.
12–13
Retiring
When and what you need to know and do.
14–15
Transferring in other pensions 16
Reviewing your pension
Why and how to review your savings.
17
Contacts 18
WELCOME
Information on the EE Pension Scheme has
been divided into two parts. This is part one
of two and is an overview of the valuable
benefits the pension scheme provides.
Read this part first, then part two (page 19
),
which looks at choices for investing your
savings.
We’ve tried to make pensions easy for
everyone to understand, but there are some
technical terms that you may find unfamiliar.
A glossary can be found at the end of
part two.
Part 1. Outlined2 Part 1. Outlined3
The EE Pension Scheme The EE Pension Scheme
Joining
Membership of the Scheme is automatic if you’re aged 22
or over. You’ll be automatically enrolled into the Scheme
from the date you join the Company or the first of the
month following your 22nd birthday if later. (NB: If you
joined the Company before 1 June 2013 and were not
already an existing EE Pension scheme member on this
date you will have been auto-enrolled into the Scheme
from 1 June 2013 if you were 22 or over.) If you’re aged
under 22 you can join the Scheme voluntarily at any time
through the Your Rewards site. You’ll be enrolled into the
Scheme on the minimum contribution rates. After the first
month in the Scheme, you can change this through Your
Rewards.
On joining you’ll automatically be entered into the default
investment option ‘Do it for me’ – Drawdown. After joining
you can change investment options – page 28 outlines the
options available.
Leaving the Scheme
Once you’ve been entered into the Scheme, you’ll be sent
a welcome letter by the Scheme administrator confirming
your logins to the Scottish Widows online member website.
If you want to leave the pension Scheme, you can do
this through the Your Rewards site. Your opt out will be
effective from the 1st of the month following receipt of
your instruction. See page 12 for your leaving options.
Start date
Deductions are made from your pay in the month you join
the Scheme and monthly thereafter.
How your pension works
1. You and the Company make payments into your account
in the EE Pension Scheme.
2. The payments are invested into your chosen
investment funds.
3. Your account should grow in value.*
4. On retirement, you can choose how to take your benefit.
You’ll automatically be enrolled into the Scheme from
the date you join the Company if you’re aged 22 or over
and paid through the Company payroll.
HOW YOUR
PENSION WORKS
* The value of your account can go down as well as up.
Pensions help provide security in your
retirement and are well worth considering
as part of your financial plans.
However long you have until you retire you
should act now to save and plan for your
retirement – this will help ensure you have
a regular income for what will probably be
the longest holiday of your life!
There are lots of rules and regulations
around pensions but the basic principles
are easy. This booklet covers the basic
information you need about the EE Pension
Scheme. More information can be found
on the pensions site on the intranet.
WHAT IS
A PENSION?
Key points to consider:
Start saving early even if your
payments are relatively small. Your
savings will have longer to grow and
this can make a big difference.
Save as much as you can afford
by paying Additional Voluntary
Contributions which can increase
the amount of money you will receive
when you retire.
Careful investment of your savings
gives your pension account the best
opportunity to grow over the years
to retirement.
Part 1. Outlined4 Part 1. Outlined5
The EE Pension Scheme The EE Pension Scheme
When you join the EE Pension Scheme, money
is paid into your account in two ways: from
your pre-tax pay and from the Company. The
money paid in by the Company makes your
savings grow even faster.
PAYING IN
Pensionable salary
The amount of money that comes from your pay and from
the Company is based on a percentage of your pensionable
salary. Your pensionable salary is your basic pay. Shift
allowances, overtime and bonuses are not included. All
the contributions paid to the Scheme are credited to
your account set up for you by the EE Pension Scheme
administrator. The administrator generally invests the
money six days after receiving it from the Company. The
Company currently sends the money on or around the 1st
of the month following its deduction from your pay.
NICe payments
Once you’ve contributed to the Scheme for 30 days you
will, from the 1st of the month following this, be eligible
to be included in the NICe payment (National Insurance
Exempt) pension option which is a salary sacrifice
arrangement.
You’ll be put into this arrangement automatically and it
works by:
– you stop making your regular pension contributions into
your pension account;
– the Company will increase its contribution by the exact
amount you would normally have made;
– your contractual salary will be reduced by this amount.
This will increase your take home pay each month
because you will be paying less NICs;
– your salary before the NICe payments reduction will
become your reference salary. Your reference salary will
be used to calculate other salary related benefits such
as salary increases, bonuses, any overtime etc.
You can opt out of NICe payments at any point through
Your Rewards (which doesn’t impact your pension
scheme membership).
Further information on this can be found in the Salary
Sacrifice Guide on Your Rewards.
Money from your pay
This table sets out the level of member contributions
you can elect to pay and the additional contribution the
Company will make at that level of contribution. From
the 1st April 2019 when you first join the Scheme you’ll
be entered in on the minimum rates of 4% from your
pensionable and 6% from the company. After this, you can
choose how much you want to pay and the Company will
pay a corresponding amount as shown in the table below.
You can also pay AVCs but the Company will not match any
AVCs you make. You can make any of these changes via
the Your Rewards site.
Money from your pay Pay from the Company
4% 6%
5% 7%
6% 8%
7% 9%
Tax benefits
Where contributions are not paid by NICe and are
deducted from your pay, you receive full income tax relief
up to the Annual Allowance (see page 8 for more details).
Contributions paid by the Company via NICe result in a
reduction to your taxable salary and therefore reduce
the amount of your salary which is subject to income tax.
However, you can’t claim income tax relief based on these
contributions as they are made by the Company and not
by you.
Here is an example of how it works:
Jane is 30 years old and has pensionable pay of £15,000
per annum. Jane’s payment rate into the Scheme is 4% of
her pensionable pay.
Jane’s pension account receives £125 per month, £75 from
the Company and £50 from Jane, but Jane’s take home pay
is only reduced by £40 not the full £50, for a basic rate
tax payer. This is because of the tax relief on Jane’s own
payments. The saving would be even greater for higher
rate tax payers.
Part 1. Outlined6 Part 1. Outlined7
The EE Pension Scheme The EE Pension Scheme
How do I make AVCs?
You can start, stop or change your AVCs through
Your Rewards.
Tax relief on AVCs
AVCs are deducted from your pay and qualify for income
tax relief in the same way as your regular pension
payments. Should you leave the Scheme before retirement,
your AVCs will be treated in the same way as your regular
savings in your account.
Paying into other pension arrangements
You can pay into as many pension schemes as you like
subject to the limits set in the Annual Allowance. However,
the Company will only make payments to the EE Pension
Scheme. If you wish to consider paying into other
pension arrangements, you should take independent
financial advice.
If you would like to pay more into your account,
you can make Additional Voluntary Contributions.
PAYING IN MORE
Additional Voluntary Contributions (AVCs)
If you wish to save more than is shown in the table on
page 7, you can make monthly or one off AVCs. AVCs are
flexible and can be started and stopped at any time to suit
your personal circumstances, through Your Rewards.
Increasing the amount you pay may be important if you are
considering early retirement or if you started paying into a
pension scheme later in your career and want to make up
lost ground. You may also just wish to increase the amount
of money in your account ready for when you retire.
Waiver arrangements
If you participate in one of the Company bonus schemes
(excluding commissions), as an alternative to receiving any
payment in the form of cash, the Company will allow you
to waive some or all of any bonus payment which may be
made so that it is paid directly into your pension account
as an employer contribution. By waiving your right to
receive a payment, the employer contribution made in lieu
to the EE Pension Scheme is free from tax and National
Insurance. This can be selected via the Your Rewards site.
Annual Allowance
You are allowed to make pension payments that attract tax
relief of up to 100% of your gross taxable pay in each tax
year. However, if the total value of the pension rights you
build up in any tax year is more than the Annual Allowance,
then the amount in excess of the Annual Allowance will be
subject to income tax.
The amount of pension rights you build up in a tax year
includes your own payments and the Company payments
to our Scheme and any other Defined Contribution
Scheme, plus any increase in the value of any final salary
pension you may have. It does however exclude any
investment returns earned on any Defined Contribution
pension arrangement (e.g. your EE pension account).
HM Revenue and Customs require an ‘input period’ to
be declared over which contributions for your Annual
Allowance are based. For the Scheme this will be in tax
years and will be shown on your annual benefit statement
each year.
You can make a maximum payment of 80% of total taxable
pay via the payroll to the Scheme in any tax year (subject
to this not exceeding the overall limits referred to above).
If you wish to pay in excess of 80% you should contact the
pensions team to discuss what special arrangements may
be made. Any payments made over and above your regular
payments will be treated as AVCs. If you exceed the set
Annual Allowance in any tax year the amount in excess
should be declared on your Self Assessment Tax Return
and will be subject to income tax. Please note it is your
responsibility to monitor your contributions against the
Annual Allowance.
Part 1. Outlined8 Part 1. Outlined9
The Annual Allowance varies between £4,000 and
£40,000 and is personal to you. You can find out
more about the Annual Allowance at the government’s website.
The EE Pension Scheme The EE Pension Scheme
Illness or injury
If you are absent from work because of illness or injury,
both you and the Company continue to pay into your
account as long as you are being paid.
Death in service
While you are an employee of the Company, one of your
Life Assurance
employment benefits (in addition to the pension) is life
assurance of four times your basic pay at the date of
death. This benefit is administered by the Trustees,
which enables the cash sum to be paid tax free and
without legal delays.
The Trustees will pay this benefit to your beneficiaries in
such shares as they decide. In doing so, they will consider
your wishes if known. You should keep your expression
of wish form up to date. You can do this through Your
Rewards.
Pension Account
If you die before retiring, the money in your account will
be paid by the Trustees as a cash sum to your beneficiaries
(as with the life assurance) in such shares as they decide,
subject to limits. In doing so, they will consider your
wishes if known. In certain instances, the money in your
account may be used to buy an annuity (a pension) for your
beneficiaries instead of payment in cash.
Maternity/Additional Paternity leave
If you are on company paid Maternity /Additional Paternity
leave, your own pension payments will be paid at your
normal % rate but based on your actual pay. Company
payments continue to be paid into your account at the
normal level, based on your pensionable pay before you
went on leave.
The Company will make up any shortfall in your own
pension payments to the normal level, again based on your
pensionable pay before you went on Maternity/Additional
Paternity leave.
If you do not receive company Maternity/Additional
Paternity pay, the Company will make up payments to the
normal level only for the period that you receive Statutory
Maternity/Paternity Allowance.
If you decide not to return to work, your benefits under the
Scheme will be dealt with as if you had left the Scheme
permanently on the date your Maternity/Additional
Paternity leave ended.
Ordinary Paternity leave
The payments made to your account will remain
unchanged during paternity leave. If you elect to take the
second week of Paternity leave your pension payments will
be based on Statutory Paternity Pay only, but the Company
will make payments and also make up any shortfall in your
own pension payments, based on your pensionable pay
before you went on Paternity leave.
Adoption leave
If you are on company paid adoption leave, your own
pension payments will be based on your actual pay.
Company payments continue to be paid into your account
at the normal level, based on your pensionable pay before
you went on adoption leave.
The Company will make up any shortfall in your own
pension payments to the normal level, again based on your
pensionable pay before you went on Adoption leave.
If you do not receive company adoption pay, the Company
will make up payments to the normal level only for the first
13 weeks of your Adoption leave.
If you decide not to return to work, your benefits under the
Scheme will be dealt with as if you had left the Scheme
permanently on the date your Adoption leave ended. Your
HR team will be able to advise which adoption scheme
applies to you.
Full details of the Company’s maternity, paternity and
adoption leave policies can be found on the HR site
on the intranet.
Pension sharing on divorce or
dissolution of a civil partnership
As part of a financial settlement on divorce, or following
the dissolution of a civil partnership, a court can split your
pension account between you and your former partner,
who will then need to transfer their account to another
pension provider.
LIFE EVENTS
Part 1. Outlined10 Part 1. Outlined11
The EE Pension Scheme The EE Pension Scheme
Deferred members
Your account remains with the EE Pension Scheme until
retirement unless you transfer your savings to a new
pension provider when your account is then closed.
Once your account is closed, neither you nor the Company
can make further payments to your account unless you
rejoin the Scheme at a later date. Your account will be
affected by investment returns for as long as it’s invested.
You will continue to receive annual benefit statements.
The normal retirement age is 65.
You can change your investment options at any time. If
you selected the ‘Do it for me’ option, your savings will be
switched in the period before retirement in the same way
as if you had not become a deferred member.
Transferring your account
As a deferred member you may transfer your account to:
– a new employer’s scheme if the Trustees of that scheme
agree; or
– a personal pension plan that you have taken out with a
building society, insurance company or other financial
organisation; or
– an individual insurance policy known as a buy out
policy; or
– a stakeholder pension; or
– an overseas pension arrangement providing that certain
criteria are met. Please refer to the HM Revenue and
Customs website for further information.
Please contact Scottish Widows if you’d like a transfer
value. If you wish to go ahead with the transfer, this will
be based on the value of your account at the date of the
transfer. If you transfer your account you are not entitled
to any further benefits from the EE Pension Scheme.
Leaving the Scheme
You may leave the Scheme at any time by opting out online
through the Your Rewards site, this will be processed on
the first of the month following your request. A decision to
leave the Scheme is an important one and should not be
made without careful consideration of your circumstances
and those of your family. If you leave the Scheme, you
can rejoin at any time through Your Rewards. If you don’t
rejoin voluntarily you’ll be automatically re-enrolled into the
Scheme after 3 years or such earlier period as the Company
may reasonably determine.
Leaving the Company or opting out of
the Scheme
Leaving the Scheme with less than thirty days
pensionable service
You will automatically be given a refund of the value
of your pension payments* less tax. The Company’s
payments will not be included. Your account is closed
and you are not entitled to any further benefits from
the Scheme.
Leaving the Scheme with more than thirty days
pensionable service
You keep the money invested in your account made up of
money from your payments (if you paid any), the Company
payments and any investment returns. It cannot be
removed for personal use before you reach retirement age.
You become a deferred member.
You can transfer the value of your fund to another
approved pension arrangement.
Full details will be included in the leaving letter send to you
by the Scheme administrator.
The length of time you were a member of the
Scheme determines what pension options you
have when you leave.
LEAVING
* Any investment return on your payments will be paid gross and you will be responsible for declaring this to HM Revenue and Customs for income tax purposes.
Part 1. Outlined12 Part 1. Outlined13
The EE Pension Scheme The EE Pension Scheme
Secure Income – Annuity
The money in your account can be used to buy an annuity
from an insurance company. The annuity will provide you
with a pension payable for life. The pension will normally be
paid monthly in advance and be taxed as earned income.
You can choose an annuity which matches your personal
circumstances. Examples you could choose:
– an annuity which does not increase at all and payable for
your lifetime only;
– an annuity which increases in line with the Retail Price
Index and a 50% spouse’s pension payable on your death.
The EE Pension Scheme administrator can arrange to
provide you with a range of annuity quotes from insurance
companies based on your annuity choices. A charge is
made for the quotes obtained. Details will be given at the
time of retirement and the charge is deducted from your
account before an annuity is bought. As an alternative
you could have an ‘open market option’ which allows
you to find and secure your own annuity through an
insurance company.
Flexible Income – Drawdown
The money in your account can be transferred to a
Drawdown product with an insurance company. You can
then take your pension savings in cash instalments at
specified intervals, e.g monthly or annually, whilst leaving
the remainder invested. Each instalment is taxed as
earned income.
A charge may be made by the insurer for the set up of a
Drawdown policy.
Some insurers may impose a restriction on minimum fund
value to be able to take up the Drawdown option.
Cash Lump Sum
You could take your whole pension pot as a one off cash
lump sum directly from the Scheme. The first 25% would be
tax free, the remainder would be taxed as earned income.
Tax free cash sum
Whichever retirement option you take, you may take part
of your account as a tax free cash sum. The maximum tax
free cash sum from the Scheme will be 25% of the total
value of your account, including AVCs, at retirement. Any
amount up to 25% can be taken.
For example:
If the total value of your account at retirement is
£30,000, your maximum tax free cash sum would be
25% x £30,000 = £7,500.
You can choose to take your benefit in one of the
following ways at retirement.
Retirement age
The Scheme’s normal retirement age is 65.
Early retirement
– fewer payments will have been made into your account;
– the payments you and the Company will have made will
earn investment returns for a shorter period;
– the younger you are when you retire the more expensive
it is likely to be to buy a pension.
Late retirement
It is possible to delay taking your benefit until after your
normal retirement age.
Flexible Retirement
You can, once you reach age 55, draw some or all of your
pension. If you’re still employed by the Company you can
continue as an active member as long as you have funds
remaining in your pension account, then both you and
the Company would continue to pay contributions. There
may be restrictions on how much you can take from your
pension account at each retirement event depending
on how you would plan to take your benefit now and in
the future.
Lifetime Allowance
The Lifetime Allowance places a maximum value on all
pension rights you have built up, ie. it takes into account
the total value of your EE savings and any pension
benefits you accrue (or have accrued) from other UK
pension arrangements.
The value of any pension rights you have in excess of the
Lifetime Allowance when you retire will be subject to a tax
charge. It is an individual’s responsibility to check whether
the Lifetime Allowance will affect them and whether
to seek independent financial advice about its effect.
You should check the total of the pension benefits you
have accrued from the EE Pension Scheme and all other
employers and through personal pension arrangements.
Details of the current lifetime allowance can be found at
the government’s website.
When thinking about your retirement
There are many questions to ask yourself, including:
How much money will I need?
What expenses will I have after retiring?
Will my mortgage be paid off and will I have credit cards or
loans to repay?
What sources of income will I have and what will the
Government provide?
What investments, assets or savings will I have and how
long can I expect to be retired?
What type of tax will I have to pay on my savings
and income?
This is not a definitive list of questions. It may be that you
need to take independent financial advice. Pension Wise
is a Government service that will provide free and
impartial advice.
When you retire, there are a number of things
to think about.
RETIRING
Part 1. Outlined14 Part 1. Outlined15
You can choose to retire early from age 55.
Note: The government is currently consulting on raising
the minimum retirement age from April 2028 to age 57.
If you are suffering from serious ill health you may be able
to retire before age 55, but to do so you would need the
agreement of the Trustees of the Scheme. If you retire
early (for whatever reason), your pension benefits will
be smaller than the benefits you could receive if you
continued working until you reached your normal
retirement age because:
The EE Pension Scheme The EE Pension Scheme
Your pension is a long term investment. You should
review your savings regularly to ensure they are
achieving your investment aims.
REVIEWING
YOUR PENSION
What to review
You need to be prepared to change your investment choices as
your personal circumstances, your proximity to retirement and
your attitude towards investment risk change. You will receive a
summary of the annual Trustees’ Report, including information
on investment performance which may help you to review your
investment choice.
If you have chosen the ‘Leave me to it’ option you may also
want to review your fund choices if there are changes in
market or economic conditions that may affect returns on
your investment funds. In addition as you near retirement you
should reassess your attitude to investment risk as you may
want to consider protecting your savings while still achieving
some growth.
Have I saved enough for retirement?
Ask yourself the following questions:
– What is my target retirement income?
– How would I like to take my pension savings in retirement,
i.e annuity, Drawdown or Cash?
– Do I need to pay more?
Regular statements
Reviewing your pension account is essential to ensure that it
is on track to provide the level of income you are expecting in
retirement. You will receive an annual benefit statement from
the Trustees detailing:
– what your account is worth;
– what payments were made during the year;
– what pension (annuity) you might get at retirement.
While the account value will be accurate as at the date of
the statement, it is impossible to predict exactly what your
pension may be worth when you retire – so please remember
that pension estimates you are given have to make certain
assumptions (detailed on your statement) and should only
be used as a guide.
You should also check your State Pension entitlement.
You can do this by contacting the Department for Work
and Pensions.
More information online
You can access all EE Pension Scheme information online, via
the pensions site on the Intranet , or on Your Rewards.
Your pension account online
TRANSFERRING IN
OTHER PENSIONS
If you have a pension with a previous employer, you may be
able to transfer the value of your benefits to the Scheme,
with the agreement of the Trustees. The transfer value
would then be added to your account.
Part 1. Outlined16 Part 1. Outlined17
The Trustee recommends that you seek guidance or advice
before transferring. You may be required to prove that you
have received advice if you are planning to transfer benefits
from a Defined Benefit scheme. Neither the Company nor the
Trustees are able to provide any advice as to whether you
should join the Scheme or whether you should transfer
benefits to or from the Scheme.
The
The EE Pension Scheme administrator provides online access to
your EE Pension Scheme account. You can view your current
balance, payments made to your account and your investment
choices. Please refer to the Contacts section for details of
how to access your online facilities.
The EE Pension Scheme
If you have questions about the
EE Pension Scheme.
CONTACTS
Phone the EE Pension Scheme
administrator helpline at Scottish Widows
0800 389 9160
Email the EE Pension Scheme
administrator at Scottish Widows
Or write to the EE Pension Scheme
administrator at the Scottish Widows
Support Centre
EE Service Team
PO Box 1611
The Grange
Cheltenham
Gloucestershire
GL50 9RX
Your Rewards
www.your-rewards.co.uk
Scottish Widows Member Site
‘www.scottishwidows.co.uk/save/ee
More information
Now continue reading part two, your guide to investing
in the EE Pension Scheme.
Part 1. Outlined18
The EE Pension Scheme The EE Pension Scheme
THE EE
PENSION
SCHEME
EXPLAINED
Part 2
WELCOME
Information about the EE Pension Scheme
has been divided into two parts. This is part
two of two. You should read part one first
which outlines the benefits of joining the
pension scheme.
Part two covers the basics of investing your
savings and explains the options and range
of investment funds available to you.
You decide how to invest the money in your
pension account. When making investment
decisions, you should choose the level of risk
that best suits your financial needs and that
you are comfortable with.
Part 2. Explained20
The EE Pension Scheme
CONTENTS
The basics of investing
Building and protecting your saving.
22
Your attitude to investment risk
You should consider your personal
circumstances when assessing your
attitude to investment risk.
23
Investing in equities, property,
bonds and cash
The rewards and risks of each.
24–25
Active and passive management 26
Investment funds
Details of the funds offered by
the EE Pension Scheme.
27
Your investment options
You need to choose an option.
28
Annual management changes and
Changing your investment choices
29–30
Legal information / Useful information 31–32
Glossary 33–34
Part 2. Explained21
The EE Pension Scheme The EE Pension Scheme
Some people opt for a safer investment that carries less
risk, preferring to know they are less likely to suffer a fall
in the value of their account. The downside is that their
account could have less potential for gaining higher long
term rewards and may not keep up with inflation.
Others are willing to live with the risk of losses in the short
term (which may span several years) in order to increase
the potential of getting higher long term returns.
When making investment decisions, you should choose
the level of risk that best suits your financial needs and
that you are comfortable with. You need to consider which
investment funds you should choose, as not all investment
funds are suitable for you at all times.
Your personal circumstances play a very large part in
determining your attitude to risk.
For example:
When considering savings for your retirement:
– If you are young and have many years until retirement,
you might be prepared to take larger risks with your
pension savings in order to try to achieve higher long
term returns.
– If you are about to retire, you might not be prepared to
risk any sudden fluctuation in the value of your account
as you may not have enough time to build your savings
up again, if its value falls.
At different times in your life, you have different attitudes to
investment risk. ‘Risk’ in this booklet simply means the investment
can fall (as well as rise) in value and can significantly affect your
savings. This helps you determine how to invest your money.
YOUR ATTITUDE TO
INVESTMENT RISK
Your timescale to retirement and your attitude to
investment risk are the two most important factors
when determining how to invest your money.
THE BASICS OF INVESTING
Building your savings.
Equities are more likely to be a good investment if you
are starting out in your career and have a relatively long
time before retirement. This is because their long term
growth tends to be linked to growth in the economy, and
you will have time to recover from short term declines in
value. Bonds and property may also be worth considering,
depending on your attitude to investment risk.
Cash would probably be a poor choice for someone in their
early years, because of the relatively low returns that cash
funds have achieved over long periods.
Protecting your savings.
There is no single point when the plan to build your
retirement savings becomes a plan to protect them. Your
individual needs and circumstances will be very different
from someone else’s.
As a guide, however, five to ten years from your planned
retirement is a good time to think about stabilising your
investments. The aim is to continue to grow your funds
but at least partially protect them from the risk of a fall
in value. At this time, you may have saved the majority
of what you need to live comfortably in retirement. If so,
it might be sensible to consider transferring your money
into investments that are less volatile than equities. This is
because there can be short term falls in equity prices that
will reduce the value of your savings, perhaps at the very
time when you need to buy your pension. Therefore,
a greater proportion of bonds and cash may be desirable
at this stage.
Part 2. ExplainedPart 2. Explained22 23
The EE Pension Scheme The EE Pension Scheme
What is a Diversified Growth Fund?
A Diversified Growth Fund invests in a wide range of
traditional and alternative investments, including, but not
limited to, UK and overseas equities, property, hedge funds,
high yield and Emerging Markets bonds, private equity
and commodities.
How risky are Diversified Growth Funds?
Diversified Growth Funds aim to produce similar returns to
that expected from equities over the long term. Just like
equities though, the price of the investments held within
a Diversified Growth Fund, and, therefore their returns can
fluctuate in the short term. However, because there are
a wide range of different types of investment held within
a Diversified Growth Fund (the prices of which are not
expected to all move together over a period of time) the
expectation is that some of the volatility that can occur
with equities in the short term will be reduced in a
Diversified Growth Fund.
Bonds
Rather than investing directly in particular bonds, the Scheme
offers members the opportunity to invest in bond funds.
What are bonds?
Like equities, bonds are issued by companies and
governments to raise money. But whereas equities don’t
guarantee what dividend they’ll pay, bonds tend to pay a fixed
income each year, and typically repay a set amount on a set
date. That’s why they’re often called fixed-interest or fixed-
income securities. As a result, their price tends to be more
stable (although prices can still fall).
For example:
If prevailing interest rates rise to, say 5%, the value of a bond
that pays interest at a rate of 4% will fall because investors
can obtain better returns elsewhere. If interest rates drop to
3% however, the value of a 7% bond will increase.
How risky are bonds?
Different kinds of bonds involve different levels of risk. For
example bonds issued by the UK Government (known as
Gilts) are likely to be less risky than bonds issued by a small
company, simply because companies can go out of business
but governments rarely do.
Although the value of bonds does fluctuate, and there are
instances of bond issuers defaulting on their obligations, the
promise of regular interest payments and repayment on a
specified date in the future makes them relatively predictable
and easy to value. This typically reduces the amount of risk
compared to the risk of investing in equities.
Annuity providers invest in bonds to meet their annuity
obligations. Adopting this same approach will therefore
provide some protection against changes in annuity prices as
you get near to your retirement date.
Cash funds
What are cash funds? Investment managers offer cash funds
that try to get the best rates of interest from a number of
different banks.
How risky are cash funds?
Many people believe that bank or building society deposits
are the safest place for savings. Most of us expect to receive
a competitive rate of interest without any risk of a fall in
the capital value of our savings. Cash deposits are good for
saving money over short periods of time, with little risk of loss
in value. However, investing in cash is not necessarily the
best strategy for longer term savings. This is because returns
on cash deposits have been relatively low compared with
inflation, and so savings are unlikely to grow at a rate that
would provide enough money for retirement.
Whilst cash may not lose its capital value, you should
remember that the cost of buying an annuity may increase and
the return on cash deposits may be less than the increased
annuity cost. A proportion of your savings invested in cash is
likely to be a good investment if you are close to retirement
and want to take part of your savings as a tax free cash sum.
Equities (shares)
Rather than investing directly in particular companies, the
Scheme offers members the opportunity to invest in equity
funds. Equity funds are run by investment managers; in
these funds, money from a large number of investors is
pooled together and invested collectively in a number of
different equities.
What are equities?
Equities provide a share of ownership in a company. They
are also known as shares or stocks. The return from equities
comes both from dividends (a share in the profits made by
a company) and an increase in value of the share price of a
company (the share price can also decrease).
How risky are equities?
The price of shares and, therefore, their returns tends to
fluctuate in the short term. These fluctuations, known as
volatility, can occur for a number of reasons, including:
– changes in general or industry economic conditions;
– changes in factors that are specific to the
company concerned;
– attitudes of investors to the market, the company or the
sector of the economy in which the company operates.
All these factors can have a direct bearing on a company’s
prospects and therefore, on the value of its shares.
Property funds
Rather than investing directly in property, the Scheme offers
members the opportunity to invest in a property fund.
What is a property fund?
A property fund invests in a range of commercial properties
such as offices, warehouses and retail units. The fund is
a collective investment, which means the money from a
number of investors is pooled together for the fund manager
to invest. The manager then allocates units to the fund’s
investors. The fund manager varies the ‘mix’ between types
of property and geographic areas, depending on where they
believe rents and values are most likely to increase.
Performance of the property market is similar to equities in
some ways. Commercial property investment depends in part
on how well the companies renting them are faring, which in
turn depends on the health of the economy.
How risky are property funds?
Property funds are seen as a medium risk investment.
Traditionally, the major drawback is that it can be
difficult to buy and sell property quickly (unlike equities).
However, buying and selling units in a collective investment,
rather than buying and selling individual properties, reduces
this risk.
Diversified Growth funds
A Diversified Growth Fund is run by an investment manager.
Instead of investing directly in specific investments, money
from a large number of investors is pooled together and
invested collectively in a number of different investments.
The risks and performance of each investment.
INVESTING IN EQUITIES,
PROPERTY, BONDS AND CASH
Part 2. ExplainedPart 2. Explained24 25
The EE Pension Scheme The EE Pension Scheme
These are the funds available to EE Pension
Scheme members.
INVESTMENT FUNDS
These charges are deducted by either reducing the number
of units you hold or through the unit price of the fund. All the
funds deal daily and are single priced: they do not have
a different bid (buy) and offer (sale) price See pages 29–30
for more information including information on changing
between funds.
Investment Fund Name Current Manager*
Cash and Money Market 1 Fund Mercer/BlackRock
Defensive 1 Fund Mercer
Diversified Growth 1 Fund Mercer
Diversified Retirement 1 Fund Mercer
Emerging Markets Equity 1 Fund Mercer/Irish Life
Ethical 1 Fund BMO
European ex-UK Equity 1 Fund BlackRock
Fixed Interest Gilt 1 Fund Mercer/BlackRock
Global Equity (60:40) 1 Fund BlackRock
Growth 1 Fund Mercer
High Growth 1 Fund Mercer
Index Linked Gilt 1 Fund Mercer/BlackRock
Japanese Equity 1 Fund BlackRock
Moderate Growth 1 Fund Mercer
Overseas Equity 1 Fund Mercer/BlackRock
Asia Pacific (ex-Japan) Equity 1 Fund BlackRock
Property 1 Fund Legal & General
Pre-Retirement 1 Fund Mercer/Legal & General
Retirement Fund – various options** Mercer/BlackRock
Shariah 1 Fund HSBC
Target Retirement (Date) Fund – various options** Mercer
UK Corporate Bond 1 Fund Mercer/BlackRock
UK Equity 1 Fund Mercer/BlackRock
US Equity 1 Fund BlackRock
* The Trustee, in conjunction with its investment adviser Mercer, reserves the right to change the managers of these funds and where appropriate
the underlying asset allocation in line with their latest views, market opportunities and market trends.
** Please see page 28 of this booklet for information on the pre-retirement phase of the ‘Do it for me’ strategy and the options you have.
Active investment management.
Selecting stocks (equities).
Active fund managers dedicate substantial resources
to researching economies and companies, to identify
investment opportunities across all markets.
Measuring performance.
They seek to give investors better returns, over the longer
term, than those of a specific benchmark. This benchmark
may be either an index, reflecting the performance of a
particular stock (equity) market (for example the London
Stock Exchange’s 100 largest companies), or the average
return of similar funds.
The attraction of active management is the potential
for achieving investment returns that exceed the fund’s
benchmark and if this is achieved consistently over time, they
can significantly increase the value of your account. However,
an active fund manager will generally take more risks than
a passive fund manager (in the expectation of obtaining a
higher return).
Passive investment management.
Selecting stocks (equities).
Passively managed funds replicate their chosen benchmarks.
The manager does not research stocks (equities). Passive
management is often known as index tracking, as the
benchmark followed is typically an index.
Measuring performance.
This should mirror the performance of the particular
benchmark, for example the FTSE All Share Index, because
the stocks in the funds and the buying/selling activities mirror
the chosen benchmark.
The attractions of passively managed funds are that the
charges tend to be lower than those for actively managed funds
and investment returns broadly reflect those of the market.
Investment managers either manage their funds
actively or passively.
ACTIVE AND PASSIVE
MANAGEMENT
Part 2. ExplainedPart 2. Explained26 27
If you choose to invest in the ‘Do it for me’ option your
savings will be invested in the Growth Fund up until 8
years tfrom retirement before entering Target Drawdown,
with both funds highlighted in aqua, in accordance. This is
explained fully on page 28. Each fund has an annual
management charge, details of which can be found on the
fund factsheets available on the library pages of the
Scottish Widows website.
The EE Pension Scheme The EE Pension Scheme
Annual Management Charges
.
Changing investment options
You can switch between investment options at any time,
for example from ‘Do it for me’ to ‘Leave me to it’.
You should regularly review your investment choices
including the funds you have chosen if you are in the ‘Leave
me to it’ option.
The Scheme is flexible. Should your investment goals change,
you can alter how the money in your account is invested.
ANNUAL MANAGEMENT
CHARGES AND CHANGING
YOUR INVESTMENT CHOICES
There are two investment options: ‘Do it for
me’ or ‘Leave me to it’.
You can choose different options for your regular
contributions, including any AVCs.
If you do not indicate an investment choice, your regular
payments and Additional Voluntary Contributions will
automatically be invested in the ‘Do it for me’ – Drawdown
option. You should consider whether this suits your
personal circumstances. The ‘Do it for me’ – Drawdown
option is determined by the Trustees and is not tailored to
any particular member’s circumstances. Your investment
decisions should be based on your investment goals,
your age and your view of risk. You may change between
investment options at any time (see pages 29–30).
1. ‘Do it for me’ option
Who would this suit?
Those members who don’t feel comfortable or don’t have
time to make their own investment decisions and want to
follow an investment strategy designed by the Trustee and
their investment advisers, Mercer.
How does it work?
This strategy is split into two phases: the Growth Phase
and the Pre-retirement Phase.
The Growth Phase
During this phase, savings are invested in the Growth Fund
which is made up of a range of asset types (Diversified
Growth, UK Equity and Overseas Equity) which aim to
deliver long-term growth but may move up and down in
value in the short-term.
The Diversified Growth Fund element combines alternative
investments such as property and commodities with more
traditional investments such as specialist equities, bonds
and cash. It’s this diversification from traditional equities
that aims to reduce the volatility of the Growth
Fund’s returns.
Whilst the Growth Fund is designed to reflect current best
ideas, the asset allocation will gradually evolve as ideas and
markets change, to give peace of mind that what is fit
for purpose today will remain so in the future.
In order to maximise growth for members during this
phase, the Annual Charge of the Growth Fund has also
been minimised by using a passive investment approach
for all assets. The elements that are actively managed,
are the asset allocations between the three components
in the Growth Fund and the asset allocation within the
Diversified Growth Fund.
The Pre-retirement Phase
You can draw your pension at any time from age 55 and
this phase will start from 1 January immediately before
you reach eight years from your intended retirement
date. At this point, your savings would automatically be
switched from the funds in the Growth Phase above, to a
Target Retirement Fund. The Target Retirement Funds are
made up of a range of assets and are designed specifically
for people intending to retire in the same year as you.
When you retire you can choose to take your benefit as
an annuity, Drawdown or Cash. You can choose a Target
Retirement Fund, that will invest in assets best matching
your intended retirement option.
NB: As a default your savings will be switched into the
Target Retirement Fund targeting Drawdown unless you
tell us differently.
2. ‘Leave me to it’ option
Who would this suit?
Those members who are confident about making
investment decisions and want access to a wide choice of
funds across different asset classes.
How does it work?
The investment decisions are left to you right up until your
retirement date. You can choose from any combination of
the funds shown in the table on page 27.
Your money, your choice.
YOUR INVESTMENT
OPTIONS
Part 1. Outlined29Part 2. Explained28
The Annual Management Charge represents the fees
charged by the investment manager to manage the fund
and also the administration services provided by Scottish
Widows. The Annual Management Charge represents the
majority of the Total Expense Ratio (the total cost to
members of being invested in a fund). The Total Expense
Ratio, which is the amount that you pay as a member either
through the unit price or through a periodic adjustment
to your unit holding, consists of the annual management
charge plus additional expenses such as legal and
custodian fees. These additional expenses can vary over
time. The Total Expense Ratio, which will also vary as a
result of the variable additional expenses, is shown on the
fund factsheets available on the library pages of the
Scottish Widows website. The factsheets are updated on a
quarterly basis to take account of the variable nature of
the additional expenses and more accurately reflect total
costs that will be incurred by members of being invested
in a fund. Fund factsheets are available on the Scottish
Widows website from 6 weeks following the end of each
quarter year. Please note the Total Expense Ratio does not
include the transaction costs of buying or selling units in a
fund.
The Annual Management Charges shown for the Target
Retirement Funds are based on the mix of component
investments at the start of each year. The underlying
investments for these funds gradually change as retire-
ment approaches, reflecting the longer term aims of
reducing risk and preparing the pension account for
buying an annuity (pension). The Annual Management
Charges will change as the investments gradually change.
The fund factsheets, which show the Total Expense Ratio
of investing in these funds ( annual management charge
and additional expenses), are updated on a quarterly basis
to reflect any change in composition of the funds and any
change in annual management charge.
The EE Pension Scheme The EE Pension Scheme
LEGAL
INFORMATION
The EE Pension Scheme is set up under trust, which means
that its funds are entirely separate from the Company’s
business. Corporate trustees, EE Pension Trustees Limited
manage the trust and have a legal obligation to look after
members’ interests.
The allocation of a pension account to you is for
administration purposes only. The assets of the Scheme
are held in the trust in common and you do not have an
entitlement to receive any specific assets held by the
Trustees. Benefits are paid to all members from the common
trust fund.
The Company has the power to discontinue the Scheme or
reduce payments. In this event, your accrued rights would be
protected and benefits paid according to the Rules.
The Trustees also have power to alter the Scheme (but
not the rights you have already built up). This booklet is a
summary of the legal documents that govern the Scheme
but if there is any difference between the two, the Rules
will be taken as correct. If you wish to see a copy of the
legal documents, you can request these by emailing
The Scheme’s annual report and accounts are available on
the pensions site of the intranet or you can request a copy
from the pensions team. The Scheme is a ‘registered pension
scheme’ for the purposes of Part 4 of the Finance Act 2004.
This approval brings very favourable tax treatment, but there
are also benefit limits that must be met.
The Data Protection Action 2018 – GDPR
All the information you provide will be held securely by the
Trustees or the EE Pension Scheme administrator who
act on the Trustees’ behalf to arrange and administer your
entitlements from the Scheme.
Any information requested is necessary and without it you
will not be able to join the Scheme. The information may also
be passed to the following parties:
– Insurance companies and annuity brokers to arrange
particular entitlements;
– Legal advisers who may need to assist in any disputes;
– Other advisers to the Trustees, your employer and any
future potential employers;
– Government or regulatory organisations (if the Trustees are
obliged to do so); and
– Pensions team.
Changing between funds
During the course of each calendar year, you may make
as many switches as you wish, free of any administrative
charges. You will, however, incur transaction costs when
switching between funds reflecting the costs of buying and
selling the underlying assets. These costs are in addition to
the annual management charges and additional expenses
which apply to all of the funds in which members can invest.
All funds, with the exception of the Mercer Diversified Growth
Fund, the Shariah Fund and the Cash and Money Market
Fund, are structured on a “single swinging” pricing basis
which means that on any one day only one price is quoted
to all members, regardless of whether they are buying or
selling. This one quoted price can swing between the selling
(bid) and the purchase (offer) price, with the difference
between the two primarily representing the transaction costs
of buying or selling the underlying securities. The first (the bid
price) is always lower than the second (the offer price), and
the difference between them is the bid/offer spread.
Bid/offer spreads for the majority of equity funds are
generally between approximately 0.2% and 1.0% of the
transaction value, with the spread on emerging markets
equities being closer to 3%. Bond funds tend to have spreads
between approximately 0% and 1.2%. The L&G Property Fund
has the largest spread, approximately 5.5%, due to the higher
dealing costs associated with buying and selling properties.
Due to the way in which the single swinging priced funds
operate, it is not possible to predict in advance whether the
bid or offer price will be used for any given trade.
For the Mercer Diversified Growth Fund, the Shariah Fund
and the Cash and Money Market Fund a single price is
calculated each day and investors buy and sell units at the
same price. In order to protect the value of the units for
existing investors of the fund a dilution levy may be applied
to transacting investors to cover the costs of dealing. The
dilution levy is paid directly to the fund to cover the costs and
taxes associated with dealing.
It is not guaranteed that a dilution levy will be applied to
all transactions as this is at the discretion of the manager
and often depends on the size of net investments or
disinvestments across all investors on any one day. If applied,
the levy on the Diversified Growth Fund is estimated to be
0.1%. At the time of writing no dilution levy had been applied
by the managers of the Shariah Fund and the Cash and Money
Market Fund.
Changing investment choices online.
You can change your investment choices via the Scheme
administrator member website, which provides online
access to your account.
Part 2. Explained31Part 1. Outlined30
The EE Pension Scheme The EE Pension Scheme
Account
The money (if any) deducted from your pay and the
money from the Company are held in an account for
you. Administration of this account is handled by the
EE Pension Scheme administrator; the funds are invested
according to your instructions.
Active/passive management
This refers to how an investment fund manager operates
a particular fund. If a fund is actively managed, the fund
manager devotes resources to identifying investment
opportunities. If the fund is passively managed, the fund
manager tracks a particular benchmark, usually an index
that reflects the performance of a specific stock exchange.
Annual Allowance
The Annual Allowance is a contribution limit which sets a
maximum level on the build up all of pension rights in any
tax year.
Annuity
When you retire, some or all of the money in your account
is used to buy an annuity from an insurance company.
The annuity provides you with a pension, in other words a
monthly income for the rest of your life.
AVCs (Additional Voluntary Contributions)
A method of paying more into your account. You can
arrange for AVCs (as monthly or one off payments) to be
deducted from your pay, subject to limits.
Benchmark
A performance target that an actively managed fund seeks
to exceed and a passively managed fund seeks to track.
A benchmark may be either an index or the average return
of similar funds.
Bonds
Loans to a government or Company, also known as fixed-
interest securities.
Cash
When you retire, all of the money in your account can be
taken as a one off Cash lump sum. 25% would be tax free
and the remainder would be taxable at your marginal rate.
Deferred member
A member who has left the Scheme with more than
30 days’ pensionable service and chosen to leave
their savings in the EE Pension Scheme.
Drawdown
When you retire, some or all of the money in your account
can be transferred to a Drawdown product with an
insurance company. You can then take your pension
savings in cash instalments at specified intervals, e.g.
monthly or annually, whilst leaving the remainder invested.
Diversified Growth Fund
A fund that invests in a wide range of traditional and
alternative ‘growth’ assets, including equities, property,
hedge funds, high yield bonds, private equity and
commodities.
Equities (shares or stock)
Shares of a company, which provide investors with a share
in the ownership of the company.
Equity funds
Funds that are run by investment managers; in these
funds, money from a large number of investors is pooled
together and invested collectively in a number of different
equities.
FTSE
An abbreviation of Financial Times Stock Exchange. The
Financial Times publishes various indices of assets quoted
on the London Stock Exchange.
Gilts
Gilts are bonds issued by the UK Government.
Index
A measure of performance of a market. An index
‘price’ represents movements in the prices of the shares
underlying the index.
Input period
The period used to assess the Annual Allowance. This is
based on tax years.
Investment fund managers
Companies that choose investments and manage funds
for investors.
GLOSSARY
In case of disputes
If you have queries or difficulties relating to this or other
schemes of which you have been a member, there are a
number of resources that you can call upon. The following
process has been set up to help members of occupational
pension schemes to get answers to queries, assistance
with complaints and information on pension benefits. They
are listed in the order in which you should seek assistance
(although the Pensions Ombudsman can be contacted at
any stage).
1. Internal Dispute Resolution Procedure
If you are unhappy with any aspect of the Scheme, there
is an internal procedure for resolving disputes with the
Trustees. It cannot be used for disputes with the Company.
For details, you should write to:
EE Pension Scheme
Floor 14
One Braham
1 Braham Street
London
E1 8EE
You will receive a form to complete explaining your
complaint. In normal circumstances you will receive a full
response within four months. If you are dissatisfied with
the first response, you are able to refer the matter directly
to the Scheme Trustees.
2. Money Helper
Money Helper provide free and impartial guidance to you
and your beneficiaries on any queries you have or difficulty
that has not been resolved with the Scheme Trustee
or administrator.
For more information please visit the Money Helper
website.
3. Pensions Ombudsman
For more information please visit the Pensions Ombudsman
website.
4. The Pensions Regulator
The Pensions Regulator is able to intervene in the running
of schemes where Trustees, employers or professional
advisers have failed in their duties. The EE Pension Scheme
is registered with the Pensions Regulator.
For more information please visit the Regulators website.
5. Pensions tracing service
The Pensions Tracing Service has access to a database of
over 200,000 occupational and personal pension schemes
and can be used, free of charge, to search for a scheme.
They may be able to provide you with an up-to-date
contact address for a pension scheme. To try and trace a
previous pension benefit you can contact:
Pensions Tracing Service
The Pension Service
Tyneview Park
Whitley Road
Newcastle Upon Tyne NE98 1BA
USEFUL
INFORMATION
Part 2. ExplainedPart 2. Explained32 33
The Ombudsman has the power to investigate any
complaints and settle disputes between Trustees and
managers or employees and members. The Ombudsman
will usually only get involved if your complaint is not
resolved by the Trustee through the Scheme's Internal
Dispute Resolution Procedure. Complaints must normally
be referred to the Ombudsman within three years of the
act or omission occurring. The Ombudsman cannot
investigate a dispute once formal legal proceedings have
been started.
The EE Pension Scheme
Investment risk
This is a measure of the chance or possibility of making
a loss. The level and type of investment risk is likely to
change with age and proximity to retirement depending
on the type of investment chosen.
Lifetime Allowance
It places a maximum value on all pension rights you
have built up, taking into account the total value of
your EE savings and any pension benefits you accrue
(or have accrued) from other UK pension arrangements.
NICe payments
A way of paying contributions to the EE Pension Scheme
which works by eliminating the National Insurance
Contributions (NICs) that both you and the Company
would otherwise have to pay on the amounts paid into
the pension scheme.
Normal retirement age
65 years.
Pensionable salary
Basic pay. Shift allowances, overtime and bonuses are
not included.
Rules
The legal document that sets up and governs the Trust,
through which the Scheme is run.
Scheme
The EE Pension Scheme.
Scheme year
The Scheme year ends 5 April.
Scottish Widows
The external company that administers the EE
Pension Scheme.
SIP (Statement of Investment Principles)
A legally required statement of the investment objectives
of a pension scheme, including details of investment
choices, performance objectives and the Trustees’ attitude
to risk.
Taxable earnings
Any pay that is subject to income tax (e.g. basic salary,
shift allowances, bonuses) and including earnings shown
on your P11D (such as healthcare and company cars).
Trustees
The Company is legally required to appoint Trustees to
manage the EE Pension Scheme. The Trustees are the
Everything Everywhere Pension Trustees Ltd who manage
the Scheme for the benefit of members.
Part 2. Explained34
The EE Pension Scheme
Thirteen 3976 2019
Produced by
BT Pensions Team
Floor 14
One Braham
1 Braham Street
London
E1 8EE
©
EE Limited 2019
