Final Salary Section - Sainsbury's pensions website

Sainsbury’s Pension Scheme
Final Salary Section
How does the Scheme work?
Contributions
How much pension will I get?
Lump sum option
Early & Late retirement
Death benefits
Changing section & Leaving Sainsbury’ s
Other information & Glossary
A step by step guide to your pension

How does the Scheme work?
Your Sainsbury’s pension is a valuable
benefit. It provides a pension linked to your
final earnings, serious ill-health protection
and benefits for your Dependants in the
event of your death.
The Scheme is set up under Trust and run by a Trustee
company which is a separate legal entity from Sainsbury’s.
The Trustee company has a legal duty to safeguard your
interests. Some of its directors are chosen by Sainsbury’s
and some are selected by Scheme members. You can find
details of the Trustee board on www.jspensions.com.
How does the Scheme work?
A number of changes have taken place so please take the
time to read this guide.
An explanation of special terms can be found at the back
of this guide and appear as bold in the text.
Please Note:
This guide is a summary of the Scheme’s
Trust Deed & Rules. It is intended only as a
guide for Active members. Your benefits will
always be calculated using the Trust Deed &
Rules and general pensions law. If there is
any difference between this guide and the
Trust Deed & Rules, the Trust Deed & Rules
will prevail.
You should consider taking independent financial
advice before making any decision which could affect
your pension.
2

Membership
Membership of the Sainsbury’s Pension Scheme, Final
Salary section, is now closed. This means that no one
else can become a member and, if you choose to opt out
of membership, you cannot rejoin.
See page 16 for more information on changing sections.
It is not possible to transfer in pension benefits to the
Scheme.
Contributions
3

Contributions
Your contribution rate is 10% of your Pensionable earnings.
The true cost to you is less than this amount because you get tax
relief on your contributions at the highest rate you pay. You also pay
lower National Insurance contributions as the Scheme is Contracted
out of the State Second Pension.
The balance of the cost of providing your benefits is met by
Sainsbury’s.
Contributions
SMART
SMART is a Salary sacrifice arrangement where Sainsbury’s pays
your contributions for you. If you are in SMART, Sainsbury’s pays an
amount equal to your normal pension contribution and reduces your
salary by the same amount. SMART is designed so that you and
Sainsbury’s pay less National Insurance. Your take-home pay
increases by the amount you save. You must earn above the pay
protection limit (this varies every year) to benefit from SMART. See
www.jspensions.com for a copy of the SMART guide relevant to this
Scheme. SMART does not reduce the amount of salary used for
calculating Pensionable earnings.
Capping of contributions and benefits
Members who joined the Scheme after 1 June 1989 are subject to a
cap on their Pensionable earnings used for calculating benefits and
contributions. This will be increased each year broadly in line with the
increase in price inflation.
A ‘Lifetime Allowance’ also operates on tax-approved pension saving.
For tax years 2010/11 to 2011/12 the maximum Capital value of your
total pension (from all schemes) is £1.8m. This will reduce to £1.5m
from April 2012. This amount will be changed from time to time.
4

Normal pension age
You can take your pension at any age
between 55 and 75.
Benefits will be reduced for early payment if
taken before age 65, which is your Normal
pension age.
For women, any Pensionable service up to
26 September 1992 has a protected
retirement age of 60. For men this protection
runs from 17 May 1990 to 26 September 1992.
Your Normal pension age for the payment of
these benefits is still 65, but we take this
protected service into account when
calculating your final pension benefit.
How much pension will I get?
5

How much pension will I get?
Your pension can be calculated in one of two ways, and the method which
gives the greater amount of pension is used.
The first method is using an accrual rate:
Pensionable service 1
Accrual rate 2 x Final pensionable earnings 3
1. Complete years’ and months’ membership of the Final Salary section.
2. Your Accrual rate is 60ths. This is the rate at which your pension
builds up.
3. Final pensionable earnings are:
> Your best annual Pensionable earnings (excluding overtime) in any one
of the five full financial years immediately before the end of your
Pensionable service; plus the annual average of overtime over the
three years before the end of your Pensionable service.
How much pension will I get?
For example:
Jo has 20 years’ service in the Final Salary section and retires at 65
(Normal pension age) on Final pensionable earnings of £12,000.
The pension at retirement from the Final Salary section would be:
20 x £12,000 = £4,000 per year
60
6

The alternative method is an amount which relates to your member
contributions. How much you get depends on when you joined the
Scheme and is different for different periods of service. The rates
and the periods of service to which they relate are as follows:
For service completed:
£1.00 of pension for
every member
contribution of:
On or before 27 March 2004 £2.55
28 March 2004 to 9 September 2006 £4.20
On and after 10 September 2006 £6.00
How much pension will I get?
Buying back pension – pre-1978 joiners
If you joined the Scheme before 1978, when you retire, you can buy
back up to 18 months of Pensionable service to take account of
the waiting period to join the Scheme that existed at that time.
How pensions are paid
Your pension will be paid four-weekly in advance into an account in
your name.
What if I get divorced?
If you divorce your Spouse or dissolve a Civil partnership, the
court may order part of your pension benefit to be transferred to
your former Spouse. If this is the case, you can continue to be a
member but your benefits will be reduced.
7

What if I work part time?
If you have a period of part-time service, your Pensionable service will
be a proportion of your full-time equivalent service. On leaving
Pensionable service or retirement, full-time equivalent earnings will be
used to calculate your pension rather than actual earnings. For example:
A member works full time for five years and has a salary of £10,000 per
year. Their pension is:
5 x £10,000 = £833 per year
60
Another member works part time (half hours) for five years and has a
full-time equivalent salary of £10,000 per year, but only earns £5,000
per year due to working part time. Their pension is:
How much pension will I get?
2.5 x £10,000 = £417 per year
60
0.5/0 x £10,000 = £83 per year
(Pensionable earnings are worked out using the full-time equivalent,
hence £10,000).
8

Lump sum option
You can normally exchange part of your pension
for a cash lump sum, which is currently tax free.
The amount of pension which can be taken as a
lump sum is limited by law. For most members the
maximum amount is 25% of the Capital value of
the pension.
Before taking any lump sum payment, you may ask
the Trustee to reduce your pension in order to
provide a pension for one or more of your
Dependants in the event of your death. For
example, you may wish to take a smaller pension
with a larger pension being due to your Spouse on
your death. You must request this option at least
four weeks before your pension is due to start. The
Sainsbury’s Pension Team can provide further
details.
Lump sum option
9

Early retirement
You may request payment of your pension at any time after age
55. This early pension will be reduced for each year it is paid
before your Normal pension age of 65.
If you are thinking of retiring early and would like provisional
figures to consider, please contact the Sainsbury’s Pension Team
Subject to Sainsbury’s consent and you giving six months’ notice, if
you have completed 40 years’ Pensionable service (across all
sections of the Scheme) you may be able to take your pension with
no reduction for early payment.
Early & Late retirement
For example:
John retires at age 60 after 10 years’ Pensionable service
with Final pensionable earnings of £12,000.
At the time he retires the reduction at age 60 is 27%, so he
receives 73%* of these benefits.
His pension is worked out as follows:
10 x £12,000 x 73% = £1,460 per year
60 (the Accrual rate)
*This rate is for illustration only and may be different at the
time you retire.
10

Early retirement on ill-health grounds
You can apply for early payment of your pension on serious ill-health grounds.
Active members must apply for the consent of both Sainsbury’s and the
Trustee board whilst in service or within six months of leaving. After six
months of leaving you will be able to apply as a Deferred member, see
page 17 ‘What if I leave Sainsbury’s?’.
As well as requiring consent, you must meet the Scheme’s ill-health conditions.
You must be too ill to work for any employer ever again. Medical evidence will
be required to support your application and ongoing eligibility. Your pension
may be reduced or suspended if your health improves to the extent that in the
Trustee’s opinion you are able to work again.
Early & Late retirement
If you are granted an ill-health pension it will be based on:
> your Pensionable service to date; plus
> half your potential service to age 65 (subject to a maximum of 40 years); and
> your Final pensionable earnings at the date of leaving Pensionable service.
There will be no reduction for early payment.
If you are terminally ill you may be able to take all of your pension benefit
as a lump sum.
Late retirement
If you are in Pensionable service after age 65, you can:
> Carry on building your Personal Retirement account up to age 75; or
> Stop paying into the pension scheme at any time and use your Personal
Retirement account to buy pension when you finally retire; or
> Stop paying into the pension scheme and take your pension while you carry on
working .
11

12
Death benefits

Death benefits
Death in service
The following benefits are payable if you die whilst an Active
member:
Lump sum
A lump sum is payable equal to the sum of:
> four times your Final pensionable earnings;
> your contributions (if no Spouse’s/Dependant's pension is
payable); and
> the value of your Additional Voluntary Contributions (AVCs).
The Trustee has discretion over who it pays the lump sum to. Your
wishes will be considered if notified using a nomination of
beneficiary form. This form is available from www.jspensions.com,
your annual pension statement or the Sainsbury’s Pension Team.
Spouse's pension
A pension will be payable to your Spouse. The amount of pension
will be equal to half of your pension calculated on Pensionable
service to the date of your death plus half potential service to age
65. It will also be based on Final pensionable earnings at the date
of death.
Children's allowances
Children’s allowances are payable for up to two dependent children
under 16 or between ages 16 and 21 if they are in full-time
education. A child’s pension may be paid for longer if they have a
disability.
The amount payable depends on whether a pension is payable to
your Spouse or Dependant.
If a pension is payable to a Spouse or Dependant, each eligible
child will receive a pension equal to the greater of £780 per year
or 10% of the Spouse’s/Dependant’s pension.
If no Spouse’s or Dependant's pension is payable (or stops being
paid), each eligible child will receive a pension equal to the greater
of £780 per year or 50% of the Spouse’s/Dependant's pension.
If you have more than two eligible children the total amount of
benefit can be shared amongst all your children or the Trustee
may pay an additional benefit to the other children.
Eligible children are natural, adopted and dependent step children.
Death benefits
If there is no Spouse a pension may instead be payable at the
Trustee’s discretion to one or more of your Dependants.
13

Death in retirement
The following benefits are payable if you die after your pension has become payable:
Lump sum
If you die within five years of retirement, a lump sum payment of the balance of the pension for
the five-year period is paid. In certain cases the current tax regime may restrict this payment. If
this is the case the Trustee will aim to pay an alternative benefit of equal value e.g. an increased
Spouse’s pension.
Death benefits
The Trustee has discretion over who it pays the lump sum to. Your wishes will be considered if
notified using a nomination of beneficiary form. This form is available from www.jspensions.com,
your annual pension statement or the Sainsbury’s Pension Team.
Spouse's pension
A pension to your Spouse (providing you were married or in a registered Civil partnership before
retirement or Normal pension age if earlier) of 50% of your pension.
If you were not married or in a registered Civil partnership before retirement or Normal pension
age if earlier then, if you die within six months of getting married or entering into your Civil
partnership a Guaranteed Minimum Pension is payable. If you die after six months of getting
married or entering into a Civil partnership the pension payable to your Spouse will be 50% of
your pension. Under these circumstances, if your Spouse is under age 60 when you die the
pension will stop being paid if they re-marry.
The pension payable to your Spouse is based on your pension after any lump sum has been taken.
If there is no Spouse, a pension may be payable instead at the Trustee’s discretion to one or more
of your Dependants.
Children's allowances
Children’s allowances will be payable in the same manner as allowances payable on
death in service.
14

15
Changing section & Leaving Sainsbury’ s

Can I change section?
Yes, you can move into the Career Average or Cash Balance section of the Scheme
at any time. These sections have a lower member contribution rate.
The Career Average section calculates your pension in a different way from the
Final Salary section but most of the associated benefits are broadly similar.
The Cash Balance section is different and you should read the Cash Balance guide
carefully before making a decision. You should also consider taking independent
financial advice.
Once you have opted out of the Final Salary section you cannot move back into
it at any time.
If you do change section then your Final Salary benefits will be on the basis of your
Pensionable service up to the time that you change and your Final pensionable
earnings at that time but increased in line with the Retail Prices Index (inflation)
whilst you are an Active member.
Members who were promoted to grade C6/6S or above on or before 24 February
2006 will automatically be transferred to the Executive section on completion of five
years’ active membership of a Sainsbury’s Pension Scheme at that grade. Members
who were promoted after this date will remain in this Scheme and benefits will not
transfer to the Executive Scheme.
If you wish to leave the Scheme but are not leaving Sainsbury’s you can do so at any
time by completing an opt-out form available from www.jspensions.com or the
Sainsbury’s Pensions Team, providing a minimum of four weeks’ notice. You cannot
rejoin the Scheme at a later date. You may instead join the J Sainsbury
Stakeholder Plan.
You should take independent financial advice before making any decision which
could affect your pension.
Changing section & Leaving Sainsbury’ s
16

What if I leave Sainsbury’s?
The following benefits are payable:
Deferred pension
This will be payable from age 65 but based on the pension you had built up at the date of leaving Pensionable service plus any
increases. Your pension in excess of the Guaranteed Minimum Pension element will be increased each year until your pension comes
into payment as follows:
> Pension accrued to 5 April 2009: increased by the Retail Prices Index (inflation) up to a maximum of 5% per year.
> Pension accrued from 6 April 2009: increased by the Retail Prices Index (inflation) up to a maximum of 2.5% per year.
Early payment
You can apply to the Trustee for early payment of your pension if you are over the age of 55. Your pension will be reduced for early
payment before age 65.
Ill-health
If you suffer serious ill-health you can apply to the Trustee and Sainsbury’s for agreement to pay an early pension on ill-health grounds.
If you joined the Scheme before 28 March 2004 your pension will not be reduced for early payment for benefits earned up to that date,
but benefits earned on or after that date will be reduced for early payment.
If you joined the Scheme on or after 28 March 2004 your pension will be reduced for early payment. If you recover this payment may
be reduced or withdrawn. You may be required to provide medical evidence of your ongoing eligibility.
If you are terminally ill you may be able to take all of your pension benefit as a lump sum.
Transfer your pension
You can transfer the value of your benefits out of the Scheme to your new employer’s scheme, a personal pension or stakeholder plan
or an appropriate buy-out contract (if HM Revenue & Customs approved). Independent financial advice should be taken before
deciding on this course of action.
Changing section & Leaving Sainsbury’ s
17

Late payment
You may ask the Trustee to agree to postpone payment of your pension until no
later than age 75. You must notify the Trustee of this request at least three months
before your Normal pension age. Your pension will be increased for late payment.
Lump sum option
You may give up part of your pension in exchange for a cash lump sum, currently
tax free.
Death benefits
If you die after leaving Pensionable service with an entitlement to a deferred
pension, the following benefits are payable:
> A pension to your Spouse of 50% of your deferred pension. If there is no Spouse,
a pension may be payable instead at the Trustee’s discretion to one or more of
your Dependants.
> Where no Spouse's or Dependant's pension is paid a lump sum is payable at the
Trustee’s discretion equal to your own contributions with interest added, currently
at 3% per year from the date of leaving. This rate could change.
> The value of your Additional Voluntary Contributions (if applicable).
Changing section & Leaving Sainsbury’ s
18

Increases to pensions in payment
Part of your pension due from being Contracted out of
the State Second Pension (the Guaranteed Minimum
Pension) is increased by an amount set by law. You will
be notified about this on retirement.
The rest is increased every year by the increase in the
Retail Prices Index and is capped as follows:
> Benefits earned up to 5 April 1997 – 3%.
> Benefits earned from 6 April 1997 to 5 April 2006 – 5%.
> Benefits earned from 6 April 2006 onwards – 2.5%.
The Trustee and Sainsbury’s have discretion to award
additional increases.
Maternity leave
You will continue to build up Pensionable service and
benefit from life cover for up to 12 months. You will
continue to make contributions from any contractual and
statutory pay you receive. This means that you continue
to build up full pension whilst on leave.
Other information & Glossary
Approved career break
You continue to benefit from life cover for up to 12
months. This period will not count as Pensionable
service. However, if you return to work at the end of this
break, we will link your pre and post break Pensionable
service and allow you to continue being an Active
member. If you do not return to work you will become a
Deferred member.
19

Temporary absence continued
Time away from work for other reasons
Your benefits may be affected if you are absent from work for 12 months or more. If you are likely to be absent
from work for a prolonged period, you can contact the Sainsbury’s Pension Team for more information about
your contributions and benefits during this time.
Saving more for your retirement
Additional Voluntary Contributions (AVCs)
The AVC option has now closed and you can no longer pay AVCs to the Scheme. Money invested within AVC
accounts before 10 September 2006 can be used to purchase additional pension at retirement. Pension can be
purchased either within the Scheme (with Trustee agreement) or from an external insurer. There are two rates
available: one that will buy a pension that does not increase over time (a level pension), or another that
increases broadly in line with price inflation capped at 2.5% per year (an increasing pension). You may transfer
the value of your AVC account to another approved pension scheme. Independent financial advice should be
taken before deciding on this course of action.
Other information & Glossary
You can take up to 25% of the value of your AVC fund as a cash sum, currently tax free. If you opened your
existing AVC account before 8 April 1987 you may be able to take more than 25% of your AVC fund as a cash
sum. The Sainsbury’s Pension Team will provide you with more information about this option at retirement.
Pension top up
If you want to build up additional retirement benefits, one way you could do this is to make additional
contributions through Legal & General, our Stakeholder Pension provider. This means at retirement, you will
buy pension at external market rates and your pension will be paid by the provider you choose and not the
Scheme. You can contact the Legal & General help line on 0845 302 0323 for an application pack to join the
J Sainsbury Stakeholder Pension Plan for Defined Benefit Members. Please be aware that there are other ways
to save towards your retirement. An independent financial adviser will be able to outline other ways of
saving appropriate to your personal circumstances and it is recommended that you take independent
financial advice before making any decision which could affect your pension.
20

Other information
National Insurance rebate
As a member of the Scheme, you will be Contracted out of the
State Second Pension on a reference scheme basis. There is a
minimum pension you will receive instead of the State Second
Pension for the time you are an Active member of the Scheme,
called the Guaranteed Minimum Pension. Because the Scheme is
Contracted out of the State Second Pension, you pay reduced rate
National Insurance contributions whilst an Active member.
The Pensions Regulator
The Pensions Regulator is responsible for ensuring pension
schemes are run properly. It may intervene in the running of this
Scheme if the Trustee, Sainsbury’s or professional advisers have
failed in their duties. Its address is: Napier House, Trafalgar Place,
Brighton, BN1 4DW. It also has a website containing further
information about its role and responsibilities
www.thepensionsregulator.gov.uk.
Data protection
The Trustee is registered under the Data Protection Act 1998 and
uses personal information about you for the purposes of
administering the Scheme and paying benefits. This may include
passing information about you to third parties to operate the
Scheme, or for the purpose of preventing fraud. A statement
detailing the Scheme’s policy on the use of personal data can be
found at www.jspensions.com.
Assignment
Your pension is personal to you and is not assignable i.e. it cannot
be transferred to anyone else and you may not for example, use
your benefit as security for a loan.
Scheme Documents
Your can request a copy of the Scheme’s Trust Deed & Rules and/or
the latest report and accounts from the Sainsbury’s Pension Team.
You can contact them by email at pensions@sainsburys.co.uk or
write to them at 33 Holborn, London, EC1N 2HT.
Member Queries
If you have a question about your benefit entitlement, or about the
Scheme generally, you should contact the Sainsbury’s Pension
Team at the address on the back page.
Support if you have a complaint
Your pension is important but occasionally things can go wrong.
We will always deal with your complaint fairly and as quickly as
possible.
If you have a query or complaint you should first write to the
address on the back of this guide. If this matter cannot be resolved
informally then you should ask for a dispute form.
The Pensions Advisory Service (TPAS) and the Pensions
Ombudsman exist to help you resolve disputes at any time during
this process. They are unlikely to take up your complaint until you
have received the Trustee’s decision. TPAS can also help you with
general pensions queries. You can contact them at 11 Belgrave Rd,
London, SW1V 1RB. The Pensions Advisory Service website is:
www.pensionsadvisoryservice.org.uk.
Debts owed to Sainsbury’s or the Scheme
If you owe any money to Sainsbury’s or the Scheme because
you have acted criminally, negligently or fraudulently, your
benefits can be reduced to recover that debt.
If your benefits are to be reduced for this reason, you will be
told about it before it happens. If you dispute the amount of
the debt, your benefits will not be reduced until the dispute
has been resolved
Other information & Glossary
21

Glossary of terms
The following special terms are used in this guide.
Accrual rate This is the rate at which your pension builds up.
You will get a certain amount for each year of Pensionable
service.
Active member Someone who is building up pension from
their present job with Sainsbury’s.
Capital value This is the overall value of your benefits from all
pension schemes (including those of former employers).
Civil partnership Legal recognition of relationships between
couples that are gay or lesbian, which entitles them to receive
similar treatment and benefits as married couples.
Contracted out A Scheme where members are not in the
State Second Pension.
Deferred member A member who has left the Scheme but will
get benefits when they retire.
Dependant Your Spouse, child or another person who is
financially dependent or interdependent on you.
Final pensionable earnings The Pensionable earnings used
to work out your final pension. See page 6 for details.
Guaranteed Minimum Pension This is the minimum pension
from contracting out of the State Second Pension arising from
service to April 1997.
Normal pension age Also known as normal retirement date.
This is age 65.
Pensionable earnings These are the earnings used to work
out your pension benefits and contributions. They are your
gross basic earnings and include overtime and shift premia
but exclude bonuses and any other allowances or one-off
payments.
Pensionable service This is the period which is taken into
account when working out your pension benefits.
Salary sacrifice This is an agreement between you and
Sainsbury’s. You agree to give up an amount of salary and
Sainsbury’s pays the same amount as a contribution to the
Scheme.
Spouse Someone to whom you are legally married or have
entered into a Civil partnership with.
Transfer value This is the amount the Scheme will pay if you
leave the Scheme and transfer the value of your benefits to
another Scheme. It will be a cash equivalent amount of your
benefit that you are entitled to under Chapter IV of the
Pension Schemes Act 1993 or such other amount as the
Trustee and Sainsbury’s may determine after taking advice
from the Scheme’s actuary, subject to any limits set out in the
Scheme rules.
Other information & Glossary
22

This guide is only a summary of the Scheme's Trust Deed & Rules. If there is any
difference between this guide and the Trust Deed & Rules, the Trust Deed & Rules
will prevail. The benefits of the Scheme may be changed in the future.
For further information contact:
Sainsbury’s Pension Team
Towers Watson
PO Box 545
Redhill
Surrey
RH1 1YH
Telephone: 0800 916 8087
Email: sainsburyspensions@towerswatson.com
October 2010
Designed and produced by Anthony Hodges Consulting Limited