Transcript Project Control Board – Responsibilities

SIEMENS UK PENSION PLANS
Member Briefings
July/ August 2007
Page 1
July./ August 2007
Siemens plc
Agenda
1. Today’s purpose
2. The need for change and the aims of the review
3. Outcome of the review
4. The consultation process
5. Where to get more information
6. Your questions
Page 2
July./ August 2007
Siemens plc
The UK pensions crisis
Page 3
July./ August 2007
Siemens plc
Future service costs
Page 4
July./ August 2007
Siemens plc
Liabilities and assets
Deficit
= £539m
Page 5
July./ August 2007
Siemens plc
Financial Position of UK DB Plans - Actual IAS Accounting Figures
September 2006
Assets
Siemens Benefits Scheme
1,751,400
2,192,500
441,100
80%
29,059
39,410
10,351
74%
9,243
12,390
3,147
75%
Siemens Magnet Technology Pension Scheme
36,692
58,168
21,476
63%
Electrium Pension Scheme
71,400
78,700
7,300
91%
113,022
146,129
33,107
77%
45,450
68,071
22,621
67%
2,056,266
2,595,368
539,102
79%
Siemens Building Technologies Limited
Retirement Benefits Scheme (Landis & Staefa)
Siemens Fire Safety and Security (PFP)
Pension Scheme (Preussag)
VA Tech (UK) Pension Scheme
VAI Industries (UK) Limited Pension Scheme
TOTAL
Page 6
July./ August 2007
Liabilities
Deficit
Funding
Ratio %
Pensions Scheme £(000)
Siemens plc
Additional contributions and deficit repair
Page 7
July./ August 2007
Siemens plc
Action taken to date
• Defined benefit schemes closed to new entrants
• Increased employee contributions/reduced future accrual rates
• Reduced cap on increases to pensions in payment
• Termination of future pension accruals for some acquired companies
Page 8
July./ August 2007
Siemens plc
The aims of the review
• Increase the security of the benefits that members have earned to date, by Siemens
making cash payments to reduce the pension schemes’ deficits
• Help to secure employment by making the company more competitive through the
reduction of future pension costs
• Continue to provide significant ongoing financial help to employees to build up their
pension savings
Page 9
July./ August 2007
Siemens plc
Pension review: members affected
Page 10
July./ August 2007
Siemens plc
Outcome of the review: the Company’s proposals
• Siemens will pay off all relevant pension schemes’ deficits before the end of
2007. The deficits will be calculated using the method that applies to the figures
shown in company accounts. In addition, the company will put forward a plan to
pay off future deficits as they arise
• No change will be made to the accrued pension entitlement that relates to
members’ pensionable earnings before 31 December 2007. This pension will
continue to benefit from an element of linkage to your future earnings.
• From 1 January 2008, members will not build additional final salary pension but
will be offered a “defined contribution” pension for the future, instead
• From 1 January 2008, instead of membership of a defined benefit scheme,
members will be able to join the Investor Plan section of the Siemens Benefits
Scheme, on specially improved terms
Page 11
July./ August 2007
Siemens plc
Reminder of how pension benefits build up now
Final Salary example - member of Siemens Benefit Scheme:
 30 years pensionable service
 Retires at 65
 Final pensionable salary of £30,000.
 1/60 pension build up
Pension calculation
30/60 x £30,000 = £15,000 per annum
Page 12
July./ August 2007
Siemens plc
Reminder of how pension benefits build up now
Defined Benefit:
Employee pays contribution
Sponsoring employer meets balance of the cost
Page 13
July./ August 2007
Siemens plc
How pension builds up under defined contribution
Page 14
July./ August 2007
Siemens plc
Defined Benefit and Defined Contribution - Normal Retirement Age
Defined Benefit
Defined Contribution

Tax free cash decision
(Maximum 25% of value of
benefits)

Tax free cash decision
(Maximum 25% of the
value of the fund)

Pension basis cannot be
changed i.e five year
guarantee, spouse’s
pension and increase
basis.

Pension secured by
annuity

Basis can be decided at
retirement to suit
circumstances at the
time.
Page 15
July./ August 2007
Siemens plc
Defined Benefit and Defined Contribution – Early Retirement
Defined Benefit
Defined Contribution

Pension reduced

Fewer contributions paid

Fewer years of service

Shorter investment term

Lower pensionable salary?

Lower annuity rate

Early retirement factors
applied
Page 16
July./ August 2007
Siemens plc
Enhanced Matching
• The Company will match employee contributions up to 10% on a 2 for 1 basis
in year 1
• Enhanced matching will reduce to 1.5 for 1 by year 11 in increments of 0.05%
• Enhanced matching will continue at 1.5 for 1 for a further 5 years
• Enhanced matching payments will be made on a monthly basis together with normal
matching
• Contributions are made through My choice flexible benefits system
Page 17
July./ August 2007
Siemens plc
Enhanced Matching
Page 18
July./ August 2007
Siemens plc
Matching (assuming maximum employee contribution)
Page 19
Year
Calendar
Year
Employee contribution
(%)
Employer match
(%)
Total combined maximum
contribution (%)
1
2008
10
20
30
2
2009
10
19.5
29.5
3
2010
10
19
29
4
2011
10
18.5
28.5
5
2012
10
18
28
6
2013
10
17.5
27.5
7
2014
10
17
27
8
2015
10
16.5
26.5
9
2016
10
16
26
10
2017
10
15.5
25.5
11
2018
10
15
25
12
2019
10
15
25
13
2020
10
15
25
14
2021
10
15
25
15
2022
10
15
25
16+
2023+
10
10
20
July./ August 2007
Siemens plc
Matching (assuming minimum employee contribution)
Page 20
Year
Calendar
Year
Employee contribution
(%)
Employer match
(%)
Total combined minimum
contribution (%)
1
2008
3
6
9
2
2009
3
5.85
8.85
3
2010
3
5.70
8.70
4
2011
3
5.55
8.55
5
2012
3
5.40
8.40
6
2013
3
5.25
8.25
7
2014
3
5.10
8.10
8
2015
3
4.95
7.95
9
2016
3
4.80
7.80
10
2017
3
4.65
7.65
11
2018
3
4.5
7.5
12
2019
3
4.5
7.5
13
2020
3
4.5
7.5
14
2021
3
4.5
7.5
15
2022
3
4.5
7.5
16+
2023+
3
3
6
July./ August 2007
Siemens plc
The State Pension
State Second Pension (S2P):
 Earnings Related tier of the State Pension
 Broadly based on earnings that are subject to National Insurance
 Contracting out:
 Siemens Benefit Scheme contracted out
 Investor Plan contracted in
Page 21
July./ August 2007
Siemens plc
The State Pension
Employee 9.4%
HMRC
Employer 9.3%
National Insurance
Page 22
July./ August 2007
Basic State pension
Siemens plc
The State Pension
Employee 11.00%
HMRC
Employer 12.80%
National Insurance
NI Rebate
Basic State Pension
State Second Pension
Personal Pension Arrangement
Page 23
July./ August 2007
Siemens plc
Example of affect on take home pay – salary £29,700
Your tax bill reduces
because your taxable
Thishas
is broadly
salary
gone 9.4%
downof your
earnings between £433 and
£2,903 a month + 1% on
earnings above this
AFTER
BEFORE
As your contributions are
As a result of My choice your
based on a higher
salary is already reduced to
pensionable salary, this
take account of your
Overall your take
figure is now less (due to
contributions paid through
home pay is now the
lesssalary conversion
salary conversion
process)
Page 24
July./ August 2007
This has increased as it is
now 11% of your earnings
between £433 and £2,903
a month and 1% on
earnings above this
Siemens plc
Enhanced Revaluation Basis
• Pensions earned to date are not “frozen”: a substantial element of salary linkage is
proposed
• Salary* linkage of benefits earned to 31 December 2007, subject to a maximum of Retail
Prices Index + 2% in any year for 15 years
• Benefits will never be less than those of a member who left on 31 December 2007 and
received the revaluation required by law
* Based on “Final Pensionable Salary” in the Defined Benefit scheme
Page 25
July./ August 2007
Siemens plc
Overview of pension revaluation
Page 26
July./ August 2007
Siemens plc
Overview of pension revaluation
Page 27
July./ August 2007
Siemens plc
Year to year capped salary linkage
Pension at 31/12/07: 10 x £24,000 x 1/60ths= £4,000
Page 28
July./ August 2007
Siemens plc
Year to year capped salary linkage
Pension at 31/12/07: 10 x £24,000 x 1/60ths= £4,000
Increases for employee
Page 29
Final Pensionable
Salary
Retail Prices
Index
Retail Prices
Index + 2%
Pension
Start of year 1
£24,000
N/A
N/A
£4,000
% changes by end year 1
5%
4%
6%
£4,200
July./ August 2007
Siemens plc
Year to year capped salary linkage
Pension at 31/12/07: 10 x £24,000 x 1/60ths= £4,000
Increases for employee
Page 30
Final Pensionable
Salary
Retail Prices
Index
Retail Prices
Index + 2%
Pension
Start of year 1
£24,000
N/A
N/A
£4,000
% changes by end year 1
5%
4%
6%
£4,200
% changes by end year 2
4%
1%
3%
£4,326
July./ August 2007
Siemens plc
Year to year capped salary linkage
Pension at 31/12/07: 10 x £24,000 x 1/60ths= £4,000
Increases for employee
Page 31
Final Pensionable
Salary
Retail Prices
Index
Retail Prices
Index + 2%
Pension
Start of year 1
£24,000
N/A
N/A
£4,000
% changes by end year 1
5%
4%
6%
£4,200
% changes by end year 2
4%
1%
3%
£4,326
% changes by end year 3
4%
2%
4%
£4,500
July./ August 2007
Siemens plc
Minimum level of increase
Page 32
July./ August 2007
Siemens plc
Death Benefits from 01/01/2008
Investor Plan
Greater of: 3 x death benefit salary plus value of member account
and
6 x death benefit salary
Plus
Deferred Pension
Dependant’s pension from pension built up until 31/12/2007 (if applicable)
For details of what applies in your scheme you can contact the Helpdesk:
Internal tel: x720 5555 (option 6)
External tel: 0845 6039972
Email: [email protected]
Page 33
July./ August 2007
Siemens plc
Deficit Payments
• The 2007 “balance sheet” deficit will be paid off by 31 December 2007
• Any “balance sheet” deficits arising in future years will generally be paid off by the
Company before the next year’s valuation (subject, in some cases to a cap to
cover extreme market developments)
Page 34
July./ August 2007
Siemens plc
Deficit Payments
• The Company’s cash payments are expected to be several hundred £million
• The actual amounts will depend on the “balance sheet” deficits calculated at 30
September 2007
• These payments give added security to the pension earned by members to
31 December 2007
Page 35
July./ August 2007
Siemens plc
Illustrative ‘before and after’ comparisons
Page 36
July./ August 2007
Siemens plc
Siemens Benefits Scheme
Illustrative “before and after” comparisons; A member who keeps
their take home pay the same.
Page 37
July./ August 2007
Siemens plc
Siemens Benefits Scheme
Illustrative “before and after” comparisons; A member who keeps
their take home pay the same.
Page 38
July./ August 2007
Siemens plc
Siemens Benefits Scheme
Illustrative “before and after” comparisons; A member aiming to get
the maximum company contribution
Page 39
July./ August 2007
Siemens plc
Siemens Benefits Scheme
Illustrative “before and after” comparisons; A member aiming to get
the maximum company contribution
Page 40
July./ August 2007
Siemens plc
Consultation process
• The company wishes to consult for longer than the legal requirement of 60 days
• Consultation involves an exchange of views and the establishment of a dialogue
• Consultation means working in a spirit of co-operation and taking into account the
interests of both groups
• Ultimately, the company will have to make a decision based on the input and
information it receives during the consultation
Page 41
July./ August 2007
Siemens plc
Where do you get more information?
 Speak to one of your local employee consultative forum representatives
 Read Defined Benefit Pensions Review Proposals updates
 Pension Review Helpdesk [internal tel 720 5555 (option 6); external tel:0845
6039972; email [email protected]]
 Log on to the intranet at: http://intranet.css.siemens.co.uk/pensions
 How do you make your views known? Complete feedback form enclosed with
update
Page 42
July./ August 2007
Siemens plc