elements - UK Pensions : BASF SE - BASF

Winter 2011
elements
The newsletter for members of the BASF UK
Group Pension Scheme (defined benefit section)

Welcome
Welcome to the Winter edition of
Elements, the newsletter for the BASF
UK Group Pension Scheme. The aim is
to bring you information about what’s
happening in your pension scheme and
in the wider world of pensions.
We include a summary of the latest
Report & Accounts for the year ended
31 December 2010, which showed an
increase in the DB fund value of around
£21.5 million, including £5.4 million that
came from the Sorex Plan.
However, a fuller picture of the Scheme’s
finances is given on pages 4 and 5, with
the results of the latest full actuarial
valuation as at 31 December 2009 and an
update of the position at 31 December
2010. In the first seven months of 2011 the
deficit fluctuated quite wildly due to the
volatile market conditions, increasing to
£54 million by the end of August 2011.
Changes to the Scheme
Following the end of the consultation process on 13 May 2011 and after considering all
the feedback received, the Company has set out its plans for the closure of the DB
section for future service benefits and the revised DC section, which will come into effect
on 1 April 2012. All affected members have received a booklet giving an overview of the
changes. A copy is also available on the pension website. Please note that pensioners
and deferred members are NOT affected in any way by these changes.
A series of workshops for current employees will be taking place in the six months from
October 2011 to March 2012, covering the revised DC section and the benefits it
provides. It is important that you attend these workshops to fully understand how the
changes will affect you. The first wave of workshops have now been completed
with Workshop 2 starting in January 2012.
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The name of our Scheme administrators
has changed from AEGON Trustee
Solutions back to HS Admin. You can read
more about this on page 7 and their
contact details are also on the back cover
if you have any questions about your
own benefits.
There’s quite a lot happening in terms of
Government action on pensions, so we’ve
included a summary of the latest
developments on pages 8 to 10.
I hope you find Elements informative and
interesting. If you have any questions about
the contents, please get in touch with the
Pension Department – contact details are
on the back cover.
Pam Taylor
UK & Ireland Group Pension Manager

Financial highlights
You can see the latest full Report & Accounts on the pension website
(http://ukpensions.basf.co.uk). Or contact the Scheme administrators, HS Admin,
if you would like to be sent a copy.
The figures below show the position as at 31 December 2010 and include the assets
transferred from the Sorex Plan. The BASF UK Group Pension Scheme includes a
defined benefit section and a defined contribution section.
Money in, money out
DeFIneD BeneFIT (DB)
At the end of the year (31 December
2010), the DB section of the Scheme
was worth almost £400 million,
an increase of around £21.5 million
over the year (including £5.4 million
from the Sorex Plan).
During the year, BASF paid in almost
£1 million and members paid in
£0.3 million (including AVCs).
During the year, the Scheme paid out
£19.2 million (on things like pensions,
lump sums and transfers out).
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DeFIneD COnTRIBUTIOn (DC)
At the end of the year (31 December
2010), the DC section of the Scheme
was worth over £147 million, an
increase of more than £9 million
over the year.
During the year, BASF paid in
£2.9 million and members paid in
nearly £1.3 million (including AVCs)
During the year, the Scheme paid out
£8.7 million (on things like annuities,
lump sums and transfers out).

Summary of
Actuarial valuation
The most recent funding valuation of the Scheme showed that, on 31 December 2009,
the ongoing funding position (ie, the funding position of the Scheme on the basis
that it continues) was as follows:
Assets £378.5m
Amount needed to provide benefits £396.0m
Shortfall of assets £17.5m*
Funding level 96%
* Please note that the Sorex Limited Pension Plan was merged into the Scheme after the
valuation date, so no allowance has been included in these figures. However, an allowance
of £1.5m has been included for Sorex in determining the deficit contributions required.
Contribution payments have therefore been agreed to meet a deficit of £19m.
To meet the deficit at 31 December 2009, the Company and the Trustee agreed that the
Company will make additional lump sum contributions each year from 2011 intended to fully
remove the deficit by the end of 2016. These contributions will be:
• £2.3m by 31 December 2011
• £5.8m by 31 December 2012
• £4.0m by 31 December each year from 2012 to 2016.
These payments add up to more than the £19 million deficit because they take account of
the interest applying to the deficit over the six year period - much like the way interest
applies when you are paying off a mortgage.
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Funding update
as at 31 December 2010
A funding update was carried out at
31 December 2010, which showed that
the funding level at that date had remained
broadly unchanged at 96%, with a shortfall
of £16.6m. The slight improvement in the
funding position since 31 December 2009
is due mainly to investment returns being
higher than expected over the year. This
offset an increase in the amount needed to
provide benefits due to changes in
investment market conditions and a small
deficit brought into the Scheme as a result
of the merger of the Sorex Limited Pension
Plan with the Scheme.
Since the Summary Funding Statement
was issued in June, based on the position
as at 31 December 2010, the deficit had
increased to almost £54 million as at the
end of August 2011 under conditions of
continuing volatility. The funding level
continues to be monitored on a regular
basis by the Company and the Trustees.
You can request a copy of the full valuation
report by contacting HS Admin (see
page 12).
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Investment performance
All the Scheme’s assets are invested
through Legal & General, including the
assets that have come from the recent
scheme mergers.
The investment return from the assets
invested in equities (shares) was 12.4% in
the year to 31 December 2010, while the
bond portfolio returned 7.9% over the
same period.
The latest figures available show that from
31 December 2010 to 31 August 2011, the
equities assets returned 8.3% and the
bond portfolio returned 5.2%.
Scheme merger completed
The integration of the Sorex Limited Pension Plan was completed on 30 June 2010,
when £5.4 million was transferred into the BASF Pension Scheme. The Sorex Plan is
in the process of being wound up, as the Sorex members have now become deferred
members of the Scheme and their benefits will be paid from the BASF Scheme. This
change does not affect members’ benefits in the BASF Pension Scheme in any way.

Who’s in the Scheme?
The total membership of the Scheme was 7,029 on 16 September 2011.
The figures for the membership categories at that date were:
Active members – DB 87
Active members – DC 560
Deferred members – DB 1,735
Deferred members – DC 2,115
DB pensioners 2,532
Don’t forget to attend the forthcoming Pension Workshops!
See page 2 for more details.
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Trustee update
Geoff Dobson, who joined as a Company Appointed Trustee Director in August
2009, resigned from the Board in November 2010. We would like to thank Geoff for
all his hard work and valuable contributions to the work of the Trustee and wish him
well in the future.
The current Trustee Directors are:
Company Appointed
Nick Fitzpatrick - BESTrustees
Ruth Constable (Cheadle)
Dennis Holmes (Alfreton)
Ray Scott (DC pensioner)
Shirley Wilson (Cheadle)
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Member nominated
Ken Norrie (DB pensioner)
Patricia Spreull (DC pensioner)
Trevor Stanley (DB pensioner)
Administration update
Following the sale of AEGON Trustee Solutions to Goddard Perry in October 2010,
HS Admin have reverted to their previous company name and, following a full review
of service, will continue as the administrators for the Scheme. Their contact details can
be found on page 12.
Online access to your AVC details
We are pleased to announce the launch of a new website – ‘openweb’ – to give you
instant access to details of any AVC benefits you may have with Legal & General. It
replaces the ‘Mybenefit’ system. If you have not received your log in details, please
contact HS Admin using the details on page 12.

Your roundup of the
latest pensions news...
Revaluation of deferred
pensions
If you are a former BASF employee with a
deferred pension, the initial amount of that
pension is increased (or ‘revalued’) each
year between your date of leaving the
Scheme and your retirement, to take
account of impact of inflation.
Under the Rules of the Scheme, revaluation
of deferred pensions is determined in
accordance with Regulations made under
statute laid down by Parliament. Up to
now, Regulations have set out the increase
each year in line with that year’s rise in the
Retail Prices Index (RPI) measure of
inflation (subject to a maximum of 5% for
pension earned up to 5 April 2009, and
2.5% for pension earned after that date).
With effect from April 2011, however,
the Government decided that the
Regulations will instead set increases
based on the Consumer Prices Index
(CPI) measure of inflation (again subject
to the 5%/2.5% maximum).
Both RPI and CPI measure inflation by
recording how the price of a particular
‘basket of goods’ increases over a year.
However, the two ‘baskets’ contain slightly
different items. The main difference is that
CPI does not currently include housing
related costs such as mortgages. They also
use different methods of calculation. The
result is that, historically, CPI has generally
been lower than RPI, though there have been
occasional years when it has been higher.
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The Government has introduced this
change because it believes that CPI is the
most appropriate measure of inflation to
use for pensions. The effect upon you,
however, is that the annual revaluation of
your deferred pension could be lower than
if RPI remained as the measure.
Default Retirement Age
This was the age at which employers could
require their employees to retire, regardless
of their circumstances, and was set at age
65. However, the Government has
implemented the removal of this default
retirement age from 1 October 2011.
The move is one of a number of measures
the Government is taking to encourage
people to work for longer against the
backdrop of a population living longer,
healthier lives. In some cases the
Government has said that employers will still
be able to operate a compulsory retirement
age if they can ‘objectively justify’ it.
This change will not have any impact on
our Scheme, as the Scheme’s own Normal
Retirement Age is quite separate from the
default retirement age and allows various
pension calculations to be done and
explained. If you are an active member and
you remain employed after the Scheme’s
Normal Retirement Age, you can choose to
keep contributing to the Scheme to earn
more benefit.

State Pension age rising
You may already know that the State
Pension age for women is gradually
increasing to age 65, as this change has
already begun to take effect. However,
many people are not aware that the
change has now been accelerated
between April 2016 and November 2018,
which will further affect State Pension age
for a number of women.
Additionally, the increase in State Pension
age for both men and women (to 66 years)
will now take place between December 2018
and October 2020. The Government is
currently considering a timetable which could
increase State Pension age to 67 by 2034
and to 68 by 2044.
A State Pension age calculator is
available online on the Directgov website
at www.direct.gov.uk/en/Pensionsand
retirementplanning/StatePension/
DG_4017919. This will be updated as the
changes are finalised in law.
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Changes to
pension tax allowances
From April 2011, the Annual Allowance on
pension savings has dropped from £255,000
to £50,000. The Annual Allowance is the
maximum amount of pension savings on
which an individual can receive tax relief in
any one year.
This applies to benefit accrual for the DB
section of the Scheme, any contributions
paid under the DC section of the Scheme
and any additional voluntary contributions.
The 12 month period against which an
individual’s Annual Allowance is measured is
called the Pension Input Period or PIP.
For our Scheme, the end date of the PIP is
31 March each year and has been so
since 2007.
The Lifetime Allowance (the tax-free limit on
the total value of your pension savings from
all sources) is set to drop in April 2012,
from its current £1.8 million rate to a
reduced level of £1.5 million.
Very few people will be affected by these
changes, but if you think that the new levels
may impact on you, you are recommended
to take independent financial advice. Visit
www.unbiased.co.uk to find an independent
financial adviser in your local area.

Pensions Green Paper
In April, the Government published a Green
Paper outlining proposals to implement a
flat rate State pension to replace the
current two-tier system. Two different
approaches are being considered.
The first proposal is to accelerate the pace
of existing reforms to the State second
pension (S2P), so that it becomes a flat
rate pension by 2020 rather than by the
2030s. At the end of the transition, subject
to an individual having 30 qualifying years,
this would provide a combined State
pension of around £140 per week in
today’s terms, made up of the basic State
pension and S2P.
The second proposal is more radical and
would combine the basic State pension and
S2P into one single tier State pension.
Subject to an individual having 30 qualifying
years, this would again provide a pension of
around £140 per week, with the level set
above the basic level of support provided by
the Pension Credit.
Consultation on the Government’s
proposals closed on 24 June 2011 and a
White Paper will be issued later this year if
the Government decides to proceed with
any reforms.
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New flexible
retirement options
On 6 April 2011, the Government
introduced new flexible retirement options
for individuals retiring from that date. These
include new flexible drawdown rules once
an individual’s guaranteed income meets
the Minimum Income Requirement (MIR) of
£20,000 a year. The MIR includes
pensions, annuities and state pensions.
If an individual has a pension income of at
least the MIR, then the excess funds can
be drawn immediately, or as required by
the individual, as cash. A proportion will be
tax free and the rest will be subject to
income tax.
The Trustee and the Company are
considering the impact of these changes
and further information will be issued in due
course. In the meantime, any members
who are approaching retirement and who
may be interested in the new flexible
retirement options, should seek
independent financial advice and also
contact the BASF Pension Department
(details on page 12).

Useful contacts
You may find the following websites and contact details useful…
www.direct.gov.uk
This website brings together a wide range
of public service information and services
online. You can access the Pension Tracing
Service on this site, which enables members
who lose contact with pension schemes of
previous employers to trace their benefits.
www.thepensionsregulator.gov.uk
The Pensions Regulator is the regulatory
body set up to encourage high standards
and good practice in the running of
work-based pension schemes in the UK.
It provides a wide range of guidance and
training modules to help Trustees better
manage their pension schemes.
Phone number: 0870 606 3636.
www.pensionsadvisoryservice.org.uk
The Pensions Advisory Service (TPAS) is
an independent voluntary organisation
set up to give free help and advice on
occupational or personal pension issues.
The website also has a range of tools
and guides.
Phone number: 0845 601 2923.
www.pensions-ombudsman.org.uk
If TPAS is unable to help, you can contact
the Pensions Ombudsman, who can
investigate and determine any complaint
or dispute of fact or law.
Phone number: 020 7834 9144.
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www.unbiased.co.uk
This is the official site for Independent
Financial Advisers (IFAs), where you can
find details of IFAs in your area.
Alternatively you can call 020 7833 3131.
www.fsa.gov.uk
The site of the Financial Services Authority,
whose functions include the regulation of
investment companies.
Phone number: 0845 606 1234.
www.moneyadviceservice.org.uk
The Money Advice Service was launched
in April 2011 to give free, unbiased money
advice. Its objective is to enhance the
understanding and knowledge of members
of the public about financial matters. The site
includes a section on pensions and has
some useful publications and links to access.
Phone number: 0300 500 5000.
http://ukpensions.basf.co.uk
The BASF UK pensions website - your first
port of call for any information about
the Scheme.
If you want information
about your benefits please
see the next page.

Your contacts
If you have any questions about
your pension, please contact the
Scheme administrators:
HS Admin
Post: HS Administrative Services,
3300 Daresbury Park, Daresbury,
Warrington WA4 4HS
Tel: 01928 707930 / 707932
Email: basf.team@hsadmin.co.uk
BASF Pension Department
Post: BASF plc, PO Box 4,
Earl Road, Cheadle Hulme,
Cheshire SK8 6QG
Email: alison.wilkins@basf.com
Web: http://ukpensions.basf.co.uk
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