Mirror Image Section - About United Utilities

United Utilities Pension SchemeMembers’ Guide for benefits up to 31 March 2010Mirror Image sectionPlease keep this booklet for reference

ContentsGlossary of termsSome of the words and phrases usedin this Guide have special meanings.These are highlighted and explainedat the back of this Guide.123456771112151618191920212425About this GuideYour choice in briefUUPS – Mirror Image section at a glanceJoiningContributionsWays to increase your benefitsTransfers from other schemesRetirement benefitsState benefits and your UUPS pensionBenefits payable on deathExpression of Wish formsLeaving UUPSPension increasesFamily questionsVariable pay optionInland Revenue limitsGeneral informationContacts – useful names and addressesGlossary of terms

About this GuideThis Guide tells you about the Mirror Image section of theUnited Utilities Pension Scheme (UUPS) and is intended as aneasy reference to all the provisions of this section of UUPS.Nothing in the Guide, however, can overridethe legal position which is set out in theTrust Deed and Rules, copies of which areheld by your employer and available foryour inspection.Some of the words and phrases used havespecial meanings that are set out in theGlossary of terms at the back of the Guide.Where these appear in the text they are shownin bold print.The Guide reflects UUPS Trust Deed andRules as at 8 June 1998 and subsequentamendments up to and including 30 May2002. It is applicable to employees whotransferred from the Water Mirror ImagePension Scheme on or after 1 April 1998.December 2002The Company and the Trustee are not allowedby the Financial Services and Markets Act,2000 to advise you whether a particularpension plan is appropriate for you, or whichchoice you should make.Keep this Guide in a safe place –you or your next of kin may need to use it.United Utilities Pension Scheme Members’ Guide 1

Your choice in briefGlossary of termsSome of the words and phrases usedin this Guide have special meanings.These are highlighted and explainedat the back of this Guide.You have a choice about whether to remain a member of UUPS and receive a range ofbenefits for you and your family or to make your own arrangements through a personalpension or rely on the Additional State Pension. Please consider the options verycarefully before you make your choice. You might also wish to consult an IndependentFinancial Adviser for further guidance.Your pension choiceMembership of UUPS is not compulsory.The alternatives to being a member are:• to take out a Personal Pension with aninsurance company or other financial body(NOTE: the Company will not make anycontributions towards a Personal Pension);and/or• to pay full National Insurance contributionsto the Additional State Pension.UUPS provides valuable benefits to youand your family. It is unlikely that the abovealternatives will be better and you should thinkcarefully before making a decision to opt outof UUPS.Why you should be interested in UUPSBecause it provides benefits for you and yourfamily when you retire, and in addition:• protection if you have to retire early dueto Incapacity,• protection for your family in the event ofyour death,• protection of the retirement benefits youhave earned if you leave,• the opportunity to receive your benefitsearly, and• a cash lump sum when you retire.2 United Utilities Pension Scheme Members’ Guide

UUPS – Mirror Image section at a glanceThe following list shows the main benefits and provisions of theMirror Image section of UUPS. You will find a fuller explanationlater in the sections of this Guide.EligibilityClosed to new entrants.Member’s contribution level6% of Pensionable Earnings(Non-Manual employees).5% of Pensionable Earnings(Manual employees).Retirement benefits• Pension – 1/80th of Final PensionableEarnings for each year of PensionableService, plus• Lump Sum – usually 3/80th of FinalPensionable Earnings for each year ofPensionable Service.Voluntary retirementFrom age 60:• Unreduced pension and lump sum(if 25 or more years Qualifying Service);• Reduced pension and lump sum subject toGMP requirements (if less than 25 yearsQualifying Service).Between ages 50 and 60:• Reduced pension and lump sum (subject toyour employer’s agreement).Redundancy retirementFrom age 50:• Unreduced pension and lump sum.Incapacity retirementPension and lump sum benefits based onactual Pensionable Service plus additionalservice (dependent on your length ofPensionable Service).Death in serviceSpouse’s pension: At the rate of yourFinal Pensionable Earnings for 3 monthsand then usually 50% of the pension payableto you had you retired due to Incapacityand Children’s pensions (if applicable) andLump sum: usually 4 times your FinalPensionable EarningsDeath after retirementSpouse’s pension: At the rate of your pensionfor 3 months and then usually 50% of yourretirement pension in payment and Children’spensions (if applicable) andLump sum: taking into account the pensionand lump sum payments you had alreadyreceived.Pension increasesIn line with the annual increase in theRetail Prices Index (RPI).United Utilities Pension Scheme Members’ Guide 3

JoiningMembership of the Mirror Image section of UUPS isavailable to all employees of the Company who werepreviously members of MIS.Glossary of termsSome of the words and phrases usedin this Guide have special meanings.These are highlighted and explainedat the back of this Guide.Who can join the Mirror Image sectionof UUPS?A member of MIS prior to 1 April 1998automatically became a member of the MirrorImage section of UUPS. At its discretion theCompany may offer membership of the MirrorImage section of UUPS to other employees.Contracting-out of the Additional StatePensionOn joining UUPS you will be contracted-outof S2P and, as a consequence pay lowerNational Insurance contributions. UUPS iscontracted-out of S2P on the referencescheme test basis under the Pensions Act1995. This means that UUPS has to providebenefits of at least a minimum level asspecified in the contracting-out regulations.Opt outYou can opt out of UUPS at any time bygiving 60 days’ notice in writing to the Trustee.Joining or rejoining UUPS at a later dateYou can only join or rejoin UUPS at a laterdate if the Company agrees and you will haveno automatic right to Mirror Image sectionbenefits. Admittance may be subject to theproduction of medical information, and specialconditions may be imposed.4 United Utilities Pension Scheme Members’ Guide

ContributionsAs a member you will be eligible for tax relief on contributionsand also pay reduced National Insurance contributions.Your employer also makes contributions to UUPS.How much you payYou pay either 6% of your PensionableEarnings as a Non-Manual Employee or5% as a Manual Employee. Under currenttax rules, full tax relief is allowed on yourcontributions.What your employer paysYour employer’s contribution rate can vary andis usually higher than your contribution rate.The Scheme Actuary values the assets andliabilities of UUPS at least every three yearsand advises on the level of employer’scontributions required to ensure that thebenefits can be paid in the future.Members on maternity leaveIf you take paid maternity leave then youwill continue to accrue benefits based ona notional Pensionable Earnings figureequivalent to the Pensionable Earningswhich you would have received had you nottaken maternity leave. Your contributions willbe calculated as 6%, or 5% if you are aManual Employee, of your actual PensionableEarnings (including statutory maternity pay).If you take any unpaid maternity leave you willhave the option of continuing contributionsduring this period (based on your PensionableEarnings immediately before the start ofmaternity leave). These contributions caneither be paid during maternity leave or whenyou return to work. Your unpaid maternityleave will then count as Pensionable Service.Otherwise, the unpaid maternity leave will notcount as Pensionable Service, but the twoperiods before and after your unpaid maternityleave will be treated as continuous.Other periods of absenceIf you are absent from work for any otherreason on reduced or no pay, you will beinformed individually by the Company asto how this affects your benefits andcontributions for the period of absence.United Utilities Pension Scheme Members’ Guide 5

Ways to increase your benefitsYou have the option to pay Additional Voluntary Contributions(AVCs) which can be used to increase your pension benefits.Contributions to recognised AVC arrangements receive tax relief.Glossary of termsSome of the words and phrases usedin this Guide have special meanings.These are highlighted and explainedat the back of this Guide.Additional Voluntary Contributions (AVCs)Using UUPS in-house arrangements mostmembers can pay AVCs, which also attracttax relief.Alternatively, you can pay ‘Free StandingAdditional Voluntary Contributions’ (FSAVCs)to some insurance companies and otherfinancial organisations. (NOTE: If you set upFSAVCs, neither your employer nor UUPSwill be involved but you will still be entitled totax relief.)Subject to the limits set by the InlandRevenue, AVCs and FSAVCs may be used to:• increase your own retirement pension, butnot your lump sum (unless your AVCscommenced prior to 8 April 1987),• increase your spouse’s and dependants’pensions.Additional Pensionable ServiceSubject to the limits set by the InlandRevenue, you may pay additionalcontributions on a regular basis, or as alump sum, to increase your period ofPensionable Service.For some members, the scope for furtherprovision may be restricted by the limits onbenefits imposed by the Inland Revenue.In addition, the total contributions madein any one tax year including your normalUUPS contributions must not exceed 15%of your earnings (see page 20 for furtherdetails on Inland Revenue limits).Elimination of reduction in lump sumbenefitsIf you are a married man whose PensionableService commenced before 1 April 1972,then your lump sum benefit on retirement oron death is reduced in respect of the periodof your Pensionable Service before that date.You may eliminate these reductions, subject tothe limits set by the Inland Revenue, by payingadditional contributions on a regular basis,or as a lump sum. If you think this mayaffect your benefits you should contact theScheme Administrator (see page 24) formore information.InformationFull details of in-house AVC arrangements areavailable from the Group Pensions department(see page 24).6 United Utilities Pension Scheme Members’ Guide

Retirement benefits (continued)Glossary of termsSome of the words and phrases usedin this Guide have special meanings.These are highlighted and explainedat the back of this Guide.Early retirement in normal healthOn early retirement and with at least two years’ Qualifying Service, your benefits canbe paid as follows:Age at retirementBetween 60 and 65Between 50 and 60Age 50 or overBenefits payableMore than 25 years’ Qualifying Service:unreduced pension and lump sum.Less than 25 years’ Qualifying Service:reduced pension may be payable(subject to GMP requirements) plus a reduced lump sum.With employer’s consent:reduced pension and lump sum payable subjectto GMP requirements.On redundancy or re-organisation and with at least2 years Qualifying Service:unreduced pension and lump sum.Retirement after Normal Retirement Date(NRD)If, at the request of your employer, youcontinue to work after NRD you will be ableto count your period of service after this dateas Pensionable Service and will continue topay contributions, subject to the overall limitof 45 years’ Pensionable Service.Retirement because of IncapacityIf whilst an active member of UUPS youbecome unfit for work and your employercan find no suitable alternative employment,you may be able to retire with an immediatepension providing you have at least two years’Qualifying Service and satisfy the Incapacityrequirements.The percentages by which pensions and lump sums are reduced for retirement in thecircumstances described above depend on your age at retirement and may be subjectto review from time to time.8 United Utilities Pension Scheme Members’ Guide

If granted, the Incapacity retirement benefits will be calculated using the same formulaas at NRD using your Final Pensionable Earnings at your actual date of retirement.The pension will be payable without reduction for early payment. The PensionableService which counts on Incapacity is calculated as follows:Actual Pensionable ServicePensionable Service tocount on IncapacityThe period of Pensionable Service to counton Incapacity cannot exceed the PensionableService which you could have completed atNRD and is subject to an overall maximumof 40 years.Less than 10 yearsBetween 10 and 13 1 / 3 yearsMore than 13 1 / 3 years2 times actual Pensionable Service20 yearsActual Pensionable Service plus 6 2 / 3 years(or future service to NRD, if lower)In the above calculations, actual Pensionable Service excludes any PensionableService secured by additional contributions you may have made (see page 6).The number of years of Pensionable Service to count on Incapacity is then increasedby the prospective period of years being purchased by additional contributions.United Utilities Pension Scheme Members’ Guide 9

Things to remember when considering retirementGlossary of termsSome of the words and phrases usedin this Guide have special meanings.These are highlighted and explainedat the back of this Guide.There are a number of factors you shouldalso take into consideration when you areapproaching retirement or thinking aboutretiring early.• Once in payment, your pension will bepayable for life.• The total pension benefits payable when youretire will be subject to Inland Revenue limits.• Benefits paid on voluntary retirementbetween age 60 and 65 may be reducedand between age 50 and 60 will be reduced.• You may give up part of your own pensionto provide a pension for any dependant oran additional pension for your spouse.An option to give up part of your pensioncannot be reversed after pension paymentscommence even if your beneficiary diesbefore you. Contact the SchemeAdministrator for further details (see page 24).• Special rules cover those cases whereemployment continues after NormalRetirement Date. Where appropriate, pleasediscuss with the Scheme Administrator.• All pensions, including your own and anydependant’s, are paid monthly in arrearsand taxed as earned income on a ‘Pay AsYou Earn’ basis.10 United Utilities Pension Scheme Members’ Guide

State benefits and your UUPS pensionThe current State pension arrangements are in two parts:the Basic State Pension which almost everyone receivesat State Pension Age and the Additional State Pension.UUPS is contracted-out of the AdditionalState Pension which means you will notearn full Additional State Pension benefitswhilst you are an active member of UUPS.How the State pension is made upThe current State pension arrangements are intwo parts:Basic State PensionThis is payable to almost everyone. The amountis set by the Government each year but if thereis a gap in your National Insurance contributionrecord you may not receive the full amount(contact the Department for Work and Pensionsif you wish to check, see page 24). Womenwho have always paid the married woman’sreduced rate National Insurance contributionswill not receive this pension. Your Basic StatePension is not affected by your UUPS pension.Additional State PensionAs UUPS meets certain statutory requirementsand provides benefits in place of S2P it iscontracted-out. This means that manymembers will not receive any SERPS pension(for service prior to 6 April 2002) or the S2Pbenefit (for service after 5 April 2002), althoughmembers with earnings below £24,600 a year(at 2002/03 levels) will receive part of the S2P.Whilst you are paying contributions into UUPS,lower National Insurance contributions arededucted from your pay. However, if you havepaid the higher National Insurance rate for aperiod (for instance, whilst in another job) youmay receive the Additional State Pensionfor that period (contact the Departmentfor Work and Pensions for more details,see page 24).United Utilities Pension Scheme Members’ Guide 11

Benefits payable on deathWhether you die after you retire or whilst still working for theCompany, UUPS provides a range of benefits for your spouse,children and dependants.Glossary of termsSome of the words and phrases usedin this Guide have special meanings.These are highlighted and explainedat the back of this Guide.These include pensions and, in somecircumstances, cash lump sums. Detailsof the benefits payable are shown in thefollowing sections.Death in serviceHow your family is protectedThere will be a lump sum payment andpensions for your spouse and dependentchildren.How the lump sum is calculatedThe lump sum will be 4 x Final PensionableEarnings. This will be reduced, however, if youare a married man, and your PensionableService commenced before 1 April 1972,(unless you have paid additional contributions(see page 6) to eliminate this reduction).Who receives the lump sum?The Trustee decides who should receivethe lump sum but it takes into account yourwishes, as indicated on your Expression ofWish form, and your personal circumstancesat the time of your death. More informationis given on page 15.Under current tax rules, the lump sumpayment will normally be free of tax.How spouse’s and children’s pensionsare calculated• First 3 months after your deathSpouse’s pension equal to your FinalPensionable Earnings. If you have nospouse, then a sum equal in total to thespouse’s pension would be payable toyour child or children.• After first 3 monthsSpouse’s pension:1/2 x member’s Incapacity pension(reduced by excluding Pensionable Servicecompleted before 6 April 1988 if youare female)Child’s pension in addition to a spouse’spension:1/4 x member’s Incapacity pensionChild’s pension when no spouse’s pensionis payable:1/3 x member’s Incapacity pensionIf there are two or more dependent children,the total pension payable will be calculatedas if there were only two dependent childrenand shared amongst each of your dependentchildren in proportions decided by the Trustee.12 United Utilities Pension Scheme Members’ Guide

If you are a married woman, then themember’s Incapacity pension is reducedby excluding any Pensionable Servicecompleted before 17 May 1990, whencalculating the child’s pension.Who is paid spouse’s and children’spensions?A legal widow or widower is entitled to apension payable for life. Dependent childrenwill also be entitled to a pension until age 18.If they are still in full-time education, vocationaltraining or are financially dependent on youbecause of physical or mental disability, theirpensions will continue to be paid to age 21 oreven beyond that age if the Trustee agrees.Where there is no spouse, the Trustee may,at its discretion, pay a pension to anotherdependant.Death after retirementHow your family is protectedA spouse’s pension is automatically payable,plus pensions for any dependent children.There will also be a lump sum payment if youhad been receiving your pension for less thanfive years.How much your spouse and childrenreceive• First 3 months after your deathSpouse’s pension:equal to your pension.If you have no spouse, then a sum equal intotal to the spouse’s pension would bepayable to your child or children.• After 3 monthsSpouse’s pension:1/2 x member’s pension (reduced byexcluding Pensionable Service completedbefore 6 April 1988 if you are female).Child’s pension:Calculated in the same way as for death inservice but will be based on your pension.If you get married after the date of yourretirement then the spouse’s pensiondescribed above will be calculated taking intoaccount only Pensionable Service after5 April 1978 (if you are male) or 5 April 1988(if you are female), and excluding anyenhancement to Pensionable Serviceawarded on retirement because of Incapacity.United Utilities Pension Scheme Members’ Guide 13

Benefits payable on death(continued)Glossary of termsSome of the words and phrases usedin this Guide have special meanings.These are highlighted and explainedat the back of this Guide.Who is paid spouse’s and children’spensions?The same conditions apply as for death inservice (see page 13).When a lump sum is payable and howmuch it will be• If you had less than 10 years’ PensionableService at retirement and die within fiveyears of retirement, the balance of the firstfive years’ pension instalments will bepayable as a lump sum.(i) your Final Pensionable Earnings, and(ii) 3/80 x Pensionable Service xFinal Pensionable Earningsless (in each case) all lump sum and pensionpayments made to you since retirement, andless a further deduction if you were a marriedman and had Pensionable Service before1 April 1972.The Trustee will decide who will receive themoney in the same way as lump sums fordeath in service (see page 12).• If you had 10 or more years’ PensionableService at retirement, the lump sumpayable will equal the greater of:14 United Utilities Pension Scheme Members’ Guide

Expression of Wish formsIt is very important that you complete an Expression of Wishform to let the Trustee know to whom you would prefer anylump sum benefit to be paid, in the event of your death.The Expression of Wish form allows youto indicate to whom you would like anylump sum benefit to be paid, in the eventof your death.It is your responsibility to complete and returnan Expression of Wish form and keep it up todate. When completed, your Expression ofWish form should be returned to the GroupPensions department for safekeeping. This willensure the security of the information providedand guarantee that it is immediately availableto the Trustee.If you wish to change the information in thefuture, blank Expression of Wish forms areavailable from the Group Pensions department(see page 24).United Utilities Pension Scheme Members’ Guide 15

Leaving UUPSIf you leave UUPS, for instance as a result of leaving theCompany, you will still qualify for benefits from UUPS.Glossary of termsSome of the words and phrases usedin this Guide have special meanings.These are highlighted and explainedat the back of this Guide.The benefits available to you dependon your length of service at the timeyou leave.What happens to your pension rights ifyou leave UUPS?The choices available depend on the lengthof your Qualifying Service:Under two years• repayment of your contributions plusinterest less deductions to make up yourNational Insurance contributions in theAdditional State Pension and tax (currentlyat the rate of 20%).Two or more years (or if you have transferredother pension rights to UUPS)• preserved benefits for all your PensionableService (known as deferred benefits), or• transfer of your deferred benefits to anotherapproved pension scheme, personalpension plan or a buy-out annuity policyfrom an insurance company, or• immediate retirement benefits if you areaged over 50 (see pages 7 and 8), or• Incapacity pension benefits if you satisfythe Incapacity requirements (see page 9).What are deferred benefits?A deferred benefit consists of a retirementpension and lump sum calculated in thesame way as benefits at NRD but based onPensionable Service and Final PensionableEarnings at your date of leaving. The deferredbenefits are increased between your date ofleaving and your date of retirement.When are deferred benefits payable?A deferred benefit is payable without reductionin the following circumstances:• at age 65• from age 60 onwards, provided youwould have completed 25 years’Qualifying Service (had you continuedas a member of the Mirror Image sectionof UUPS)• if you are suffering from Incapacity• from age 50 onwards if your employerconsents on compassionate grounds.In other circumstances, your deferred benefitsmay be payable at any time after age 60, butwill normally be reduced to take account ofearly payment.What happens to your deferred benefitsif you die before retirement?Pensions will be provided for your spouse andany dependent children in the same way aspensions payable three months after death inservice (see page 12) although the pensionswill be based on Pensionable Service to dateof leaving, increased up to your date of death,and will commence immediately on your death.16United Utilities Pension Scheme Members’ Guide

Also, on death before retirement, a lump sumequal to 3/80 x Final Pensionable Earnings xPensionable Service to date of leaving(reduced if you had any Pensionable Servicebefore 1 April 1972) will be paid in the sameway as for death in service (see page 12).After you have left the Company, it isimportant that you keep the Trustee informedof all changes in your marital status andhome address.Transfer of your deferred benefitsIf you are entitled to deferred benefits, youmay request the Trustee to transfer a sumof money to an approved company pensionscheme, a personal pension plan or a buy-outpolicy. You may wish to seek advice on thisoption from an Independent Financial Adviser.If you wish to investigate this option, you will beprovided with a statement of the ‘guaranteedcash equivalent’, quoting the transfer valueavailable and giving instructions on how to goabout exercising this option.Requests for ‘guaranteed cash equivalents’can be made after ceasing employment withthe Company or opting out of UUPS. If youwish to proceed with the transfer you mustreply within three months of the date thequotation is provided.Members in active service are entitled, once ayear, to request an estimate of their cashequivalent. This would be calculated assumingPensionable Service were to cease at the datethe calculation is carried out.If you are interested in transferring your UUPSbenefits or obtaining a transfer value quotationyou should contact the Scheme Administrator(see page 24).The transfer value is calculated in accordancewith instructions provided by the SchemeActuary and is the current cash value ofyour deferred benefits. The transfer value iscalculated by discounting the expected futurebenefit payments at an assumed rate ofinvestment return, as advised by the SchemeActuary. The Trustee has the discretion to paya greater amount with the Company’s consent.The calculation takes into account the rate atwhich the deferred benefits will increase bothbefore and after the benefit becomes payable.It also takes account of the probability of eachbenefit payment being made, based on your,and your dependants’, expected lifespan.The transfer value will allow for pensions toincrease annually in line with the Retail PricesIndex (RPI).United Utilities Pension Scheme Members’ Guide 17

Pension increasesPensions which are in payment and deferred benefits areincreased annually to take account of changes in the cost of living.Pensioners are notified of the increase made by the Trustee.Glossary of termsSome of the words and phrases usedin this Guide have special meanings.These are highlighted and explainedat the back of this Guide.How your benefits will increasePensions in payment will be increased on1 April each year in line with the RPI.Prior to State Pension Age, the whole of yourUUPS pension will increase as describedabove. After State Pension Age, UUPSincreases will apply only to the pension inexcess of the GMP element.After State Pension Age your GMP for serviceto April 1988 will not be increased underUUPS as, in most circumstances, it is inflationproofed by the State. The balance of yourGMP is increased by UUPS at 3% per annum(or the increase in the RPI if less) and anyadditional inflation proofing is normallyprovided by the State.That part of any deferred pension in excess ofyour GMP and the lump sum will be increasedin the same way as pensions in payment.The GMP part of your deferred pension willbe increased each year at a rate fixed by theState and advised to you when you leave.Pensions for spouses and dependent childrenwill be increased in a similar way.The Company also has discretion to direct theTrustee to increase pensions in payment anddeferred pensions to a higher level than thatset out above, subject to Inland Revenue limits(see page 20), provided that the Trustee issatisfied that the Company can fund theproposed increase.How to find out the value of theannual awardDetails of pension increases are given eachyear in the report that is issued to membersand pensioners (see page 21). In addition,pensioners are advised individually of anyincrease in their pensions.18 United Utilities Pension Scheme Members’ Guide

Family questionsChanges in your marital circumstances can affect thebenefits payable to your spouse, partner or dependants.Variable payoptionIf you divorceIf you divorce, your former spouse maybecome entitled to part of your pension(or its equivalent value) as part of your divorcesettlement. Contact the Scheme Administratorfor further details (see page 24).Unmarried partner and dependant’sentitlementsAn unmarried partner or a dependanthas no automatic right to a pension.However, the Trustee may, at its discretion,pay a pension to an unmarried partneror dependant. In addition, and with theagreement of the Trustee, you may giveup part of your pension to provide apension for an unmarried partner ordependant when you retire.The Trustee may at its discretion paychildren’s pensions to children resultingfrom a common-law relationship who areeligible and dependent on you at the dateof death.Your employer may offer you the opportunityto build up pension benefits on earningswhich would otherwise be non-pensionable.UUPS provides benefits on your PensionableEarnings only. Your employer, at its owndiscretion and subject to the Company’sconsent, may provide members with the optionto pay contributions on some or all elements ofpay which would otherwise be non-pensionable.Your employer would decide which elements ofpay, if any, would qualify for the variable payoption.You will be able to contribute between 1% and5% of qualifying non-pensionable pay if you areoffered this option. Your employer will match yourcontributions.These contributions will be invested with theAVC provider, although they will not be classifiedas AVCs.United Utilities Pension Scheme Members’ Guide 19

Inland Revenue limitsThe Inland Revenue imposes limits on contributions to,and benefits payable from, UUPS.Glossary of termsSome of the words and phrases usedin this Guide have special meanings.These are highlighted and explainedat the back of this Guide.The Inland Revenue lays down strictlimits on the amount of benefits that canbe provided for members of an exemptapproved pension scheme like UUPS.These limits must be taken into accountwhen determining all benefits andcontributions and may override thenormal UUPS provisions in somecircumstances.The calculation of the maximum benefitswhich can be provided is complicated andvaries according to an employee’s length ofservice on leaving and any pension benefitsfrom previous employments.If your continuous membership of UUPS orone of its predecessor schemes commencedon or after 1 June 1989 you are subject to theoperation of the “Earnings Cap”. This means:1 The Pensionable Earnings used tocalculate your life cover (death in servicebenefit) provided by the pension schemecannot be higher than the Earnings Cap.2 Your pension from the scheme (calculatedon your Final Pensionable Earnings whenyou leave) cannot be higher than 2/3rds ofthe Earnings Cap if you have 20 or moreyears’ Pensionable Service. If you haveless than 20 years’ Pensionable Servicewhen you leave, your pension cannot behigher than 1/30th of the Earnings Capfor each year of Pensionable Service.For the 2002/2003 tax year the Earnings Capis fixed at £97,200. This limit is reviewedeach April by the Government and may beincreased at this time. The maximum increasewhich will be applied in any one year will bedetermined by the level of price inflation.If you require more detailed information onInland Revenue limits and how they affectyour benefits, please contact the SchemeAdministrator (see page 24).20 United Utilities Pension Scheme Members’ Guide

General informationThis section includes information on the legal basis of UUPStogether with details of who to contact if you have a query.Who to contact if you need furtherinformation, help or adviceAll initial enquiries or requests for furtherinformation about UUPS should be madeto the Scheme Administrator or the GroupPensions department (see page 24). Allenquiries are dealt with in strict confidence.Legal backgroundUUPS is fully tax exempt approved by theInland Revenue under Chapter 1, Part XIV ofthe Income and Corporation Taxes Act 1988.This means UUPS and you, as a member,qualify for some tax relief.Constitution of UUPSThe Trustee of UUPS is United UtilitiesPensions Trustee Limited. The Board ofDirectors of the Trustee Company includesrepresentatives from the Company, UUPSmembership and an independent Director.The Trustee is bound by its legal duty toprotect your interests as a UUPS member.The benefits and operation of UUPS, togetherwith the Trustee’s duties and powers, are laiddown in a legal document known as theTrust Deed and Rules which is availablefrom your employer to view on request.Annual ReportThe Trustee publishes a full Annual Reportthat is available on request from the GroupPensions department. An abbreviated versionof the Report is automatically issued tomembers.Provision of benefits, changes andterminationYour own contributions to UUPS together withthe Company’s contributions are invested in aTrust Fund which is held completely separatefrom the assets of the Company and youremployer. All UUPS benefits are paid fromthe Trust Fund. The Fund is subject to anindependent annual audit.The Company pays the balance of thecost of the benefits, as well as the cost ofadministering UUPS. The pension benefits arefunded which means the long-term cost isassessed periodically by the Scheme Actuarywho then advises the Company on the rateof its contributions.The Trustee and the Company can agreeto change or amend any part of UUPS.The Company fully intends to continuethe operation of UUPS but in extremecircumstances it reserves the right to reduce,suspend or terminate contributions. In thisunlikely event, your benefits would beestablished in accordance with UUPS TrustDeed and Rules covering such circumstances.United Utilities Pension Scheme Members’ Guide 21

General information (continued)Glossary of termsSome of the words and phrases usedin this Guide have special meanings.These are highlighted and explainedat the back of this Guide.Personal informationUnder the Data Protection Act 1998, theTrustee and the Company are ‘datacontrollers’ in relation to data personal to youand which identifies you such as your name,address and National Insurance number (your‘personal data’). Some of your personal datamay be sensitive (such as details of yourhealth and personal relationships). The Trusteeand the Company have a legitimate interest inprocessing your sensitive and non-sensitivepersonal data – and that of other membersand beneficiaries of UUPS – for purposesassociated with UUPS. In doing so, they mayalso use carefully selected advisers and thirdparties who may be necessary for theadministration of UUPS.As a member of UUPS, you consent to theTrustee processing your personal data for anypurposes associated with UUPS. You should22 United Utilities Pension Scheme Members’ Guidenote that this may involve transferring personaldata about you and others to, among others,your employer, the Company (or any businessassociated with it) or third parties who assistthe Trustee.You should keep the Trustee up to date withyour personal details, including your maritalstatus and address, otherwise delays mayoccur in paying benefits to you or yourdependants.AssignmentYou may not assign, charge or use yourbenefits as the security for a loan. This meansthat you cannot promise to pay your benefitsover to someone else as security if you takeout a loan.What to do if you are unhappy with adecision about your pension rightsIf you are dissatisfied with anything to dowith UUPS, you should, in the first instance,write to the Scheme Administrator who willattempt to resolve your query. If you remaindissatisfied, you may then write to the GroupPensions Manager (see page 24), who willprovide you with details of UUPS InternalDispute Resolution Procedure. This is a twostageprocess which involves various timelimits and information requirements. Under thefirst stage, the Group Pensions Manager willdeal with your complaint. If you are notsatisfied with his decision, you may appealto the Trustee under the second stage.Other pension bodiesA number of other pension bodies havebeen established to assist in the running ofoccupational pension schemes. Further detailsare given on page 23 and their addressesincluded on page 24.

The Pensions Advisory Service (OPAS)OPAS offers a free and confidential serviceto provide help and advice at any time forpension scheme members and beneficiariesin connection with any pensions query theymay have or difficulties they have failed toresolve with the trustee of a scheme. OPASis available at any time to assist you and willconsider your complaint and appoint an adviserto deal with it, even if your complaint is beingdealt with using the Internal Dispute ResolutionProcedure described on page 22.Pensions OmbudsmanIf your query still cannot be resolved you maycontact the Pensions Ombudsman. He hasthe power to investigate and decide anycomplaints or disputes of fact or law in relationto any occupational pension scheme.Occupational Pensions RegulatoryAuthority (OPRA)OPRA monitors the running of occupationalpension schemes and is able to intervenewhere trustees, employers or professionaladvisers have failed in their duties. It has widepowers to conduct investigations and canimpose penalties on those who fail to complywith the relevant legislation.Pension Schemes RegistryThe Registry was established to helpindividuals trace benefits in respect of previousemployments if they have lost contact withthe employer involved. Information aboutUUPS including current and previousemployers associated with UUPS hasbeen sent to the Registrar.United Utilities Pension Scheme Members’ Guide 23

ContactsThe following contact names are mentionedthroughout the booklet.Group Pensions departmentUnited Utilities PLCDawson HouseLiverpool RoadGreat SankeyWarrington WA5 3LWTel: 01925 237034Group Pensions Manager &Secretary to the TrusteeUnited Utilities PLCDawson HouseLiverpool RoadGreat SankeyWarrington WA5 3LWTel: 01925 237063Scheme AdministratorCapita Hartshead LimitedHartshead House257 Ecclesall RoadSheffield S11 8NXTel: 01142 737331OPASThe Pensions Advisory Service11 Belgrave RoadLondon SW1V 1RBTel: 0845 601 2923 (Local Rate)OmbudsmanThe Pensions Ombudsman11 Belgrave RoadLondon SW1V 1RBTel: 0207 834 9144OPRAThe Occupational Pensions RegulatoryAuthorityInvicta HouseTrafalgar PlaceBrighton BN1 4DWTel: 01273 627600Registrar of Pension SchemesOPRAPO Box 1NNNewcastle-upon-TyneNE99 1NNTel: 0191 225 6393DWPDepartment for Work and PensionsDWP LongbentonNewcastle-upon-TyneNE98 1YX24 United Utilities Pension Scheme Members’ Guide

Glossary of termsSome of the words and phrases used have special meaningswhich are set out below. Where they appear in the Guide,they are shown in bold print.Additional State PensionThe State pension, based partly on earnings, thatis provided in addition to the Basic State Pension.Prior to 6 April 2002 this was known as the StateEarnings Related Pension Scheme (SERPS).From 6 April 2002 SERPS was replaced by theState Second Pension (S2P).Additional Voluntary Contributions (AVCs)Contributions you can choose to pay in addition tothe usual scheme rate to provide additional benefits.CompanyUnited Utilities PLC or associated companies.Final Pensionable EarningsThis is the greater of your Pensionable Earnings inthe twelve months ending on the last day of yourPensionable Service, or your Pensionable Earningsin one of the two preceding years.If your employer has issued you with a certificatestating that your Pensionable Earnings havebeen reduced as a result of a material change inyour circumstances outside your control, thenFinal Pensionable Earnings can, as an alternative,be either Pensionable Earnings in any 12 monthperiod in the last 5 years of Pensionable Service,or the annual average of Pensionable Earnings inany 3 consecutive years in the last 13 years ofPensionable Service.Each year’s Pensionable Earnings will be increase inline with the rise in the Retail Prices Index (RPI) fromthe end of the relevant pay period to the date youleave the Scheme.Guaranteed Minimum Pension (GMP)This is the minimum pension which UUPS has toprovide as a condition of being contracted-out of theState Earnings Related Pension Scheme (SERPS)for service before 6 April 1997 only. It is broadlyequal to the Additional State Pension you wouldhave earned if you had not been contracted-out ofSERPS for this period.IncapacityPhysical or mental ill-health which the Trustee, havingconsidered such medical and other evidence as itdetermines to be appropriate, agrees is permanentand prevents you from carrying out the normal dutiesof your employment.Manual EmployeeYou are a Manual Employee if your job is notwholly or mainly administrative, professional,technical or clerical.United Utilities Pension Scheme Members’ Guide 25

Glossary of terms (continued)MISThe Water Mirror Image Pension Scheme, benefitsfrom which were transferred to the Mirror Imagesection of UUPS on 1 April 1998.Non-Manual EmployeeYou are a Non-Manual Employee if your job iswholly or mainly administrative, professional, technicalor clerical.Normal Retirement Date (NRD)The earlier of:(a) the date you complete 40 years’ PensionableService, excluding any additional service securedby the payment of AVCs, if you are 60 or over,(b) the day before your 65th birthday.Pensionable EarningsIf you are a full-time employee, your annual rate ofsalary or wages for your contractual hours ofemployment, including shift allowance, bonus,contractual overtime and any specified fluctuatingpayments notified to you by your employer. It doesnot include overtime you choose to work, travellingor subsistence allowances, pay instead of holidaysor notice, or the value of benefits in kind unlessotherwise advised to you by your employer. If you area part-time employee, benefits are calculated usingyour full-time equivalent pay and service based onthe proportional hours you actually work.Pensionable Service (used to calculate benefits)Your period of actual contributory membership ofUUPS up to the date you retire or leave UUPS(calculated in years and days) including any creditedservice resulting from your membership of MIS andany other pension scheme of the Company fromwhich you have transferred benefits, together with anyadditional service secured by the payment of AVCs.Any additional service that may have been grantedas a result of a transfer from another employer’spension scheme or personal pension is not includedin the definition of Pensionable Service but will beused to provide additional benefits as notified to you.26 United Utilities Pension Scheme Members’ Guide

Qualifying Service (used to decide whether ornot benefits can be awarded)This equals:• Pensionable Service (excluding any additionalservice secured by the payment of AVCs) plus• The period of membership of another pensionscheme from which a transfer has been paid toUUPS, plus• Leave of absence not covered by contributionsto UUPS.Retail Prices Index (RPI)The Index of Retail Prices (All Items) as publishedby the Government.TrusteeThe Trustee of UUPS is United Utilities PensionsTrustee Limited, a separate legal entity.UUPSThe United Utilities Pension Scheme.Water Mirror Image Pension Scheme (MIS)The Water Mirror Image Pension Scheme,benefits from which were transferred to theMirror Image section of UUPS on 1 April 1998.Scheme ActuaryA professionally qualified independent personappointed by the Trustee to value the fund, and toprovide advice on other financial aspects of UUPS.State Earnings Related Pension Scheme(SERPS)/State Second Pension (S2P)The additional pension arrangements provided bythe Government.United Utilities Pension Scheme Members’ Guide 27

Notes

United Utilities PLCDawson House, Great SankeyWarrington WA5 3LWUnited Utilities PLCRegistered in England & Wales No. 2366616Registered office: Dawson House, Great SankeyWarrington WA5 3LW