Your pension

Your pension

Your pension

Internal A guide to the Lloyds TSB Group Offshore Pension Scheme Pension Investment Plan your pension Sent to: ● Potential new Pension Investment Plan members (Jersey & Guernsey) Urgency: ● Immediate July 2005 making the right move

Your pension

If you qualify as a partial member and want to join... ● You NEED to complete an Application Form and a Retained Benefits Form ● Read this booklet ● Complete a Nomination Form ● Consider if you want to start making voluntary pension contributions WHAT DO I NEED TO DO? If you qualify as a full member and want to join... ● You DO NOT need to complete an Application Form - entry is automatic ● Read this booklet ● You NEED to complete a Nomination Form and a Retained Benefits Form ● Think about your investment choice and complete an Election Form, if necessary W h a t d o I n e e d t o d o ? shaping your future 1 Whatever you want out of life, you need to make plans to achieve it.

These plans will almost certainly involve your finances. Planning for retirement needs to begin as early as possible if you want to provide a good standard of living. You need to ensure that you have time to build up sufficient funds to buy the level of income you require. You also need to review your pension planning regularly.

To help you plan your future finances, Lloyds TSB Offshore Limited (referred to as the Company) offers staff the opportunity to join the Pension Investment Plan which forms part of the Lloyds TSB Group Offshore Pension Scheme. The Plan allows you: ● to decide how much you can afford to invest ● to choose a style of investment and ● at retirement, to select the benefits which suit your particular circumstances. It provides life cover and a pension if you have to stop working because of ill health. Essentially, the Plan works in a similar way to personal or stakeholder pension plans run by insurance companies.

The contributions build up in an account which is invested and used at retirement to buy your benefits. The important difference is that the Company contributes to the Pension Investment Plan but it does not contribute if you decide to make private arrangements.

This booklet provides basic details about the Plan. The full details are contained in the Rules, which are the legal basis of the Plan. Nothing stated in this booklet can override the Rules. Please study the following pages with care, so that you are familiar with the main features of the Plan. By understanding the benefits provided, you will be able to plan your long-term savings and insurance sensibly. If you have any queries on your pension, you should contact: Lloyds TSB Group Pensions Department, Lloyds TSB 3rd Floor, Bank House, Wine Street, Bristol BS1 2AN Internal mail code: TNT 22 Telephone: 0117 923 3406 (external); 7-801-3406 (internal)

special pension terms

A number of the words and phrases used in this booklet have special meanings. They are explained below and appear in bold type throughout this booklet. You might find it useful to fold out this page so you can refer to it while you are reading the booklet. The maximum amount of earnings that can count towards contributions and pension benefits. The earnings cap for the tax year 2005/06 is £105,600. It should increase annually in line with increases in the Retail Prices Index. Your average pensionable salary earned in the last 12 months.

A member of the Plan aged 25 or more and on an established contract. A member of the Plan aged under 25 or in a category of employment which allows only partial membership.

Your annual rate of basic salary. The length of time you are a full or partial member of the Plan until you retire or leave. Means a pension : (1) Starting at a normal pension age of 65, and (2) Payable at a yearly rate of 1/80th of your average Pensionable Salary in the last 3 years before leaving service for each complete year of Pensionable Service as a full member. The latest continuous period of employment with a participating employer. Earnings cap Final pensionable salary Full member Partial member Pensionable salary Pensionable Service Minimum Scheme Pension Service special pension terms

● Categories: There are two categories of membership ● Transferring in benefits: You may be able to transfer previous benefits into the Plan ● Joining later: If you don’t join when you are first eligible, you may not be able to join later ● Members: You decide how much you want to contribute, within certain limits ● Company: Contributions depend on your membership category, age and how much you contribute ● Investment choices: Investment fund chosen for you or you can choose yourself ● Range of investment funds: You can select from ten investment strategies if you decide to choose how your account is invested ● Normal retirement age: age 60 ● Pension at retirement: Depends on the size of your account, the type of pension you want and the cost of buying a pension ● Ill-health retirement: Full members may qualify for an ill-health pension ● Pension increases: Guaranteed pension increases ● Death in service: Benefits for your dependants including a lump sum ● Death in retirement: Benefits depend on the choices you make at retirement ● Temporary absence: Your membership will not generally be affected ● Rejoining if you leave: You may not be allowed to rejoin ● If you leave: Options depend on your pensionable service and age ● Basic State pension: Membership of the Plan does not affect your entitlement to receive this pension your benefits in brief 2 Membership Contributions Investing your account Benefits at retirement Family benefits Temporary absence and options on leaving The Plan and the State pension arrangements

Your benefits in brief PAGE 1 Membership 4 Who can join; how to join; transferring in benefits from a previous pension arrangement and joining at a later date 2 Contributions 6 Members’ and Company contributions and tax relief 3 Investing your account 8 Your investment choices and some guidance about making your choice 4 Benefits at retirement 18 Your pension at retirement; benefits if you have to retire because of ill health; your options at retirement and pension increases 5 Family benefits 22 Benefits if you die in service or in retirement 6 Temporary absence and options on leaving 24 How temporary absence affects your membership; your options if you leave the Company or the Plan before retirement 7 Other pension arrangements 28 The State pension arrangements and other ways to build up a pension 8 Help and information 30 Other sources of information and who to contact with any queries or problems 3 contents 1 2 6 7 8 4 5 3 contents

membership 4 1 Section There are two categories of membership: Full members You qualify as a full member if you are: ● a full time or reduced hours employee of the Offshore Company after 1 May 1999. ● aged 25 or over but under age 60 ● an established member of staff. Partial members You qualify as a partial member if you: ● are aged under age 25 ● have completed one year’s continuous service with the Company ● are an established member of staff If you qualify as a full member You will automatically join the Plan from your first day of employment or, if later, the 1st day of the month after you qualify as a full member.

You do not need to complete an Application Form but should complete the Retained Benefits Form (C) at the back of this booklet. If you decide that you do not wish to join the Plan, you should complete an Opt Out Form, available from Group Pensions Department.

If you qualify as a partial member You will need to complete the Application Form (B) and Retained Benefits Form (C) at the back of this booklet. You will become a full member from the 1st of the month following your 25th birthday, unless you complete and return an Opt Out Form, available from Group Pensions Department. Who can join the Plan? How do I join? ● There are two categories of membership - depending on your age and employment status ● Entry is automatic for full members who are established staff. Partial members should complete and return an Application Form. All applicants should complete a Retained Benefits Form ● When you join, an account is set up in your name ● You may be able to transfer benefits into the Plan from another pension arrangement I N B R I E F

Evidence of health The Trustee may ask for evidence of your good health and may restrict the benefits payable under the Plan unless you provide satisfactory evidence. An account is set up for you in the Plan, when you join. Your account will be invested in the Lloyds TSB Dynamic Tracker Pension fund (see page 13 for details) unless you choose otherwise. You will need to complete the Nomination Form (D) at the back of this booklet to tell the Trustee who you would like to receive any benefits payable on your death and, if you want an investment option other than the Lloyds TSB Dynamic Tracker Pension fund, you will also need to complete the Election Form (A) at the back of this booklet.

See section 3 for information on investments and page 23 for details about your Nomination Form.

If you are a full member, the Trustee may accept a transfer of your benefits from another occupational or personal pension scheme. If you are interested in transferring in benefits, you should ask Group Pensions Department for the appropriate form. Your transferred in benefits will be credited to your account. A transfer of benefits may not be possible in every case. Yes, membership of the Plan is voluntary. But you should think carefully before turning down the opportunity to join. You still need to make provision for your retirement and if you rely just on State benefits, you may be very disappointed.

The State schemes were never intended to be an alternative to good company pension arrangements. If you do not join the Plan as a full member when you are first eligible, you may be able to join at a later date. You will, though, miss out on the opportunity of building up a larger retirement account and you will be required to provide evidence of good health before joining. Life cover will still be provided under the Plan at the reduced rate of twice your pensionable salary.

What happens when I join? Can I transfer benefits into the Plan? Can I choose not to join? 5 membership 1 2 6 7 8 4 5 3

● Full members pay 2% of pensionable salary inclusive of any territorial allowance you receive ● You can pay voluntary contributions (AVCs) to build up better benefits ● You get tax relief on your contributions and AVCs ● Company contributions depend on your age and how much you contribute ● You may be able to contribute to a personal pension as well as to the Plan to build up extra benefits I N B R I E F 6 Full members Your normal contribution to the Plan is 2% of your pensionable salary inclusive of any territorial allowance you receive.

You can pay more, in which case you should state the required percentage on Election Form (A) or Application Form (B) as appropriate, and return the form to Group Pensions Department. Any extra contributions you make are known as additional voluntary contributions (AVCs). The maximum contribution to the Plan allowed by the tax authorities is 15% of your gross taxable earnings (subject to an earnings cap and an overall limit to the benefits you may receive from the Plan). This includes your normal Plan contribution.

If you are age 30 or over the Company will match the first 2% of AVCs you pay. Partial members You can pay voluntary contributions to the Plan, based on your pensionable salary and subject to the tax authorities maximum of 15% of gross taxable earnings (subject to an earnings cap) and an overall limit to the benefits you may receive from the Plan. The Company does not contribute to your account but does pay the cost of your life cover. To pay voluntary contribution, you should state the required percentage on Application Form (B) and return the form to Group Pensions Department. Your normal contributions and any AVCs are taken from your pay before tax is calculated.

This means you receive full tax relief automatically on your contributions and AVCs.

What do I pay? Do I get tax relief? 2 Section contributions

The Company’s contributions are decided by the Company after considering the advice of the Scheme’s actuary to meet the full liabilities of the Scheme. As a full member, the Trustee ensures that your account is credited with the contribution rates shown in the table below. These amounts may be credited from the general assets of the Scheme. Your AVCs are flexible; you can increase or decrease them at any time. Suitable forms can be obtained from Group Pensions Department. Yes, subject to local terms and conditions.

If you wish to take advantage of this, you should seek independent financial advice. Please note that such an arrangement may not qualify for tax relief. How much does the Company pay? 7 1 2 6 7 8 4 5 3 Can I change the amount I pay in AVCs? Can I contribute to a personal pension whilst I am a member of the Plan?

contributions Normal contributions Additional Voluntary Contributions Your age Age 25-29 Age 30-44 Age 45-60 Your contribution 2% 2% 2% Company’s contribution 6.5% 8.5% 10.5% Total contribution to your account 8.5% 10.5% 12.5% If you choose to contribute an extra... 1% 2% to 13% 1% 2% to 13% 1% 2% to 13% The Company will contribute an extra - 1% 2% 1% 2% The total contribution to your account 9.5% 10.5% to 12.5% 14.5% to 14.5% 16.5% to 21.5% 25.5% 27.5%

investing your account 8 3 Section Your contributions will be invested in the Lloyds TSB Group Offshore Pension Scheme, with notional units being allocated as if the investment had been made within the Lloyds TSB Group Pension Investment Plan on the mainland.

The Company will ensure that the notional asset values will be covered by assets actually held offshore. The Trustee and Company agree on the number of investment options. The Trustee and the company have selected a range of investment funds from which you can choose.

If you make no investment choice your account will automatically be invested in the Lloyds TSB Dynamic Tracker Pension fund (see page 13 for details). We cannot give any assurance that this fund is appropriate to your personal circumstances. If you wish, you can choose a different investment strategy by completing the Election Form (A) at the back of this booklet if you are an established member aged 25 or over. If you are a fixed term member of staff or established member under age 25, you should tick the relevant investment fund on the appropriate Application Form. What happens to my contributions? How is my account invested?

● The Trustee uses the contributions to notionally buy units in a range of investment funds ● Your account is invested automatically in the Lloyds TSB Dynamic Tracker Pension fund - unless you choose a different investment fund ● If you want to select the investment style for yourself, you can choose from ten investment funds ● You can change how your account is invested free of charge, once a year - you will be charged for any additional changes ● All funds are run using a lifestyle approach ● You will receive a statement each year showing how your account is building up.

I N B R I E F

It is entirely up to you to decide which investment fund you want to select. Neither the Company or the Trustee can advise which fund is right for you. While this information includes a general description of the funds available, nothing in it should be construed as financial advice to you. In making your decision, you will probably want to think about the level of investment risk you find acceptable. All the investment funds are operated on a lifestyle basis ie as you approach retirement, your account is gradually switched to investments which offer greater security. When deciding which investment fund to choose, you will probably want to think about: ● Management style you wish to adopt Do you want a passive or active management style or a combination? Passive: Designed to match returns in the chosen index or indices.

Active: Aims to produce returns which are better than the passive funds but also has a greater risk of under- performing. Combined: The equity assets are managed on an active basis while the remaining assets are managed on an index tracking basis. ● Level of investment risk you are willing to take Investment risk can best be described as the degree of probability that an investment will lead to a gain or a loss. The general principle applying to risk is the greater the risk, the greater the possible gains but, conversely, the greater the possible losses.

If retirement is more than, say, 10 years away, you may wish to consider an investment fund which carries a higher level of investment risk but which, in return, can offer greater potential for investment gains.

If you are within 10 years of retirement, you might want to think about a fund which carries less investment risk. What is meant by ‘investment risk’? Investment risk is the risk of a fall in the value of your investment. It is what people refer to when they say, ‘the value of shares can go down as well as up’. The general principle is that the higher the investment risk, the greater the possible gains or possible losses.

9 investing your account 1 2 6 7 8 4 5 3 IN PLAIN ENGLISH What investment fund should I choose?

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