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Lotus Development Pension Investment Plan Investing for retirement Presentation

Lotus Development Pension Investment Plan Investing for retirement Presentation. Name Andrew Strathdee Richard Smith Rita Galbraith November 2011. Welcome to our 2011 Lotus Development Pension Investment Plan Members Day. Agenda for Today

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Lotus Development Pension Investment Plan Investing for retirement Presentation

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  1. Lotus Development Pension Investment Plan Investing for retirement Presentation Name Andrew Strathdee Richard Smith Rita Galbraith November 2011

  2. Welcome to our 2011 Lotus Development Pension Investment Plan Members Day • Agenda for Today • Introduction – Andrew Strathdee - Trustee and Secretary • Plan Update – where are we now? • Age Discrimination Legislation • State Retirement Age • The New Funds • Member Nominated Trustees • Thinking about retirement – Richard Smith - Plan Administrator • How much do I need to retire? • Expectations and Aspirations – Rita Galbraith – Fidelity • Contributions • Investments • Tools to help you • What to do now

  3. Plan Update Andrew Strathdee 3 00 Month 0000 in footer

  4. Age Discrimination • Following legislation in 2006, the Trustees have agreed: • To allow “late retirement” after the scheme normal retirement age of 60 • New Tier for contributions for members under age 35 • Under 35 Tier applies equally to members over 60 The Trustees are still awaiting formal agreement from the Company

  5. New Contribution Rates (over 60s/under 35s) Figures in brackets are current Lotus rates for members over age 50

  6. Options at 60 • Check contribution rates of the schemes • Are you on a Sales Plan? Pensionable Salary may be higher in Lotus Plan • If you leave Lotus Plan you cannot rejoin • IBM matching rates not contractual • TAKE ADVICE!

  7. State Retirement Ages Still some uncertainty. Latest Position: • For men born before 6 December 1953, the current State Pension age is 65. • For women, the current State Pension age is increasing from 60 to 65 from April 2010. This affects women born on or after 6 April 1950. Proposal to increase State Pension age to 66: • The government has published new proposals for increasing the State Pension age to 66. • Women’s State Pension age will increase more quickly to 65 between April 2016 and November 2018. • From December 2018 the State Pension age for both men and women will start to increase to reach 66 in 2020. • These proposals affect you if you are one of the following: • a woman born on or between 6 April 1953 and 5 April 1960 • a man born on or between 6 December 1953 and 5 April 1960 These proposed changes are not yet law and still require the approval of Parliament.

  8. State Retirement Ages People not affected by these proposed changes These proposals do not affect you, if you are one of the following: • a woman born on or before 5 April 1953 • a man born on or before 5 December 1953 • a man or woman born on or after 6 April 1960 The current law already provides for the State Pension age to increase to: • 67 between 2034 and 2036 • 68 between 2044 and 2046 However, the government is considering how the State Pension age should be changed in the future.  This may mean the timetable for increases to 67 and 68 will be revised. The government will bring forward proposals in due course. Any change to the timetable would require the approval of Parliament.

  9. The New Funds • Part of Trustee’s Role is to: • Monitor investment arrangements, performance and prospects and review choices available • Implement changes after appropriate professional advice • Review new opportunities and developments • Trustee’s concerns • Concerned about disappointing past performance and about the suitability of the Fidelity International Equity Fund as a long-term investment option for Plan members • Over the past few years, investment markets suffered as global economy went into recession. • Poor performance of many asset classes, in particular equities, has shown that investing Pension Account in one single asset class can increase risk

  10. The New Funds • Trustees took advice and decided to: • Replacing the Fidelity International Equity Fund with a new, actively managed, global equity fund • Design a new global equity fund (“Lotus Active Global Equity Fund”) that will invest in actively managed equity funds, split between overseas and UK equities. • Introducing a new type of actively managed fund: the Schroder Diversified Growth Fund • Spreading or “diversifying” Pension Account across different asset classes spreads investment risk • Different asset classes have different characteristics; giving different performance depending on the economic climate, leading to smoother investment return for investors over most time periods. • Rita will talk more about these funds Later

  11. Member Nominated Trustees • We will need to elect new Member Nominated Trustees (MNTs) next year • There are three MNTs for the Fund and six Company appointed. • The responsibilities of all Trustees are identical • To ensure contributions are received from the Company and invested in line with members’ wishes; • To keep records of members benefits and Pension Accounts; • To keep beneficiaries informed; • To appoint the Plan’s advisers; • To review the performance of the Plan’s investment managers and to appoint new managers if necessary; • To act in the interests of the beneficiaries and ensure that benefits are paid in accordance with the Plan Rules.

  12. Member Nominated Trustees • You can be a Member Nominated Trustee if: • You are an active member of the Lotus Plan; • You understand the need for confidentiality; • You have an interest in pensions; • You are prepared to commit to the role for approximately 5 years. • You can attend approximately four meetings per year and undertake training as required, including attending appropriate training courses and seminars, as well as taking the time to familiarise yourself with the Plan’s various documents • Have the support of your manager • But NOT: • undischarged bankrupts; • anyone either disqualified from being a director or convicted of an offence involving dishonesty or deception • Not of sound mind!

  13. Member Nominated Trustees • The Trustees will announce the nomination process early next year • Will require Nominees to produce a personal statement supporting their nomination, will check to ensure they are eligible and get them to sign a declaration of eligibility • Publish a list of nominees to the members • Arrange selection panel of Trustees to identify the successful .nominee(s) • Announce the results • New MNTs will be formally appointed by Deed • MNTs who cease to be a member of the Plan for any reason, or to be an employee of IBM (UK) Limited will automatically be ineligible for continued Trusteeship

  14. Thinking about Retirement Richard Smith 14 00 Month 0000 in footer

  15. Thinking about retirement • Income in Retirement - what do I need and get? • Outliving your money – How long will I need it for • Inflation – the ever present threat • Investment Risks on my retirement income • Health Risks – Paying for care as I get older • Today we will look at the first three

  16. The three pillars of Retirement Income State Pension Company Pension Savings

  17. Income in Retirement • What do I need? • Comparing gross Lotus pension with gross IBM Salary can be misleading • You don’t pay National Insurance • You don’t pay Pension Contributions • Tax may reduce • Other deductions will cease • Many work related expenses are no longer payable (e.g. Professional memberships , work clothing etc) • Some expenses will increase • Home heating • Leisure and outings • Home entertainment equipment • What do I spend it on? • Varies by stage of retirement - On top of living expenses, • Early in retirement - travel and recreation • Later in retirement - health, care and heating

  18. Longevity – will I run out of money? Actuarial Tables

  19. Buy yourself some extra time… You could gain this… If you do this… Get married Man: 7 years. Woman: 2 years. Stop smoking 6 years Moderate cardiovascular exercise Keep a pet 1 year 2 to 4 years Chat to friends 3 to 4 years 3 years Five-a-day fruit and vegetables Do brain exercises 5 years Sleep 8 hours a night 6 years Have sex every day 8 years Source: The Daily Telegraph, 17.09.07 (article re Laindon Model); Life Trust presentation for ILAG.

  20. Inflation Risk • At retirement, you will be able to choose between a fixed rate pension and one that increases in value • Whichever option you choose, it is likely that the real value will reduce over the course of your retirement

  21. Fixed v Escalating Pension • Assume a fund of £250,000 for a male member retiring at 65 • Flat pension = £15,400 • Pension increasing at 3% = £10,600 These figures are based on current annuity rates and are subject to fluctuation. They assume a 50% spouse’s pension on death.

  22. Level or increasing? • Annual pension available from £100,000 pot • Retirement Age 65 • Annuity rates: October 2008 Cumulative pension payments cross over after 23 years Actual pension payments cross over after 11 years

  23. Inflation Risk • With inflation at 3%, an annual fixed pension of £15,425 will reduce in real terms to £8540 in 20 years. • You may have other sources of income, eg State Benefits, that are fully protected against inflation.

  24. Your personal inflation rate • Official figures – whether RPI or CPI – are a “broad brush” – everyone has their own individual rate according to their own life style and circumstances Average Personal Inflation Rates, by age, September 2011

  25. Spending Patterns of retired people

  26. Spending by Age

  27. Inflation over 25 years

  28. Inflation since 1997

  29. Expectations Aspirations Rita Galbraith 29 00 Month 0000 in footer

  30. Basic State Pension • Paid from state pension age – currently age 65 for men and between 60 and 65 for women • Set to increase over the coming years to 68 for those born after the 5th March 1959. • The full amount of Basic State Pension from 6 April 2011 is £5,311.80 a year for a single person • State Second Pension also available. Top up to Basic State Pension State Benefit • DWP State Pension Forecasting Team on 0845 3000 168 www.thepensionservice.gov.uk

  31. Lotus plan At retirement Company contributions Your contribution Tax free cash Contributions invested Pension income

  32. £7,076 £6,478 £6,028 Highest Rate Lowest Rate Average Rate Annuities vary with time Annual Pension Bought With £100,000 Source: Canada Life based on £100,000 male joint life at 65 / 60 March 2011 Rates: February 2002 To June 2010

  33. £8,303 £6,478 £5,535 Annuities vary with age Age 55 Age 65 Age 75 Average Annuity Rates Source: Canada Life based on £100,000 male joint life Rates: February 2002 To June 2010

  34. Contributions 34 00 Month 0000 in footer

  35. How much should I save? • www.fidelitypensions.co.uk 35 00 Month 0000 in footer

  36. Investments

  37. Investment choices ‘Hands on’ approach 10 Funds New funds Schroder Diversified Growth Fund Lotus Global Equity Tailored Portfolio ‘Hands off’ approach Ready-made investment option Self-select Lifestyle strategy The value of investments may go down as well as up and an investor may not get back the amount invested. Fund charges and expenses may change in the future.

  38. Capital Falls Investment Growth Missed opportunity Price inflation 0 Time to retirement Risks Pension conversion

  39. Lifestyle option • Automatic investment process • 60 – default target retirement age or select own retirement age The lifestyle strategy is an investment strategy driven by your retirement date. If selected it is important that you keep Fidelity informed of any changes to this date. Equities – Fidelity BlackRock Global Equity 50/50 Fund Bonds Fidelity Lotus Bond Fund Cash - Fidelity Cash Pensions Fund

  40. Lifestyle option

  41. Tools to help you

  42. PlanViewer

  43. Help and support • Pensions Service Centre 08457 234 235 • www.fidelitypensions.co.uk

  44. Pensions Service Centre08457 234 235 • Account balance • Personalised illustrations • Fund performance information • Switching & redirecting investments • Investment options • Open UK business days • 8am to 6pm

  45. What you should do now

  46. How do you make a difference? • Review your contribution level • Review your fund choice • Engage with your plan & take financial advice, if required

  47. Important Information No statements or representations made in this document are legally binding on Fidelity or the recipient. Fidelity only gives information about its own products and services and does not provide investment advice based on individual circumstances. If you would like advice, please contact a Financial Adviser. Past performance is not a reliable indicator of future results. FIL Limited, and its subsidiaries are commonly referred to as Fidelity International. Fidelity, Fidelity International and the Pyramid Logo are trademarks of FIL Limited. Issued and approved by FIL Life Insurance Limited (FSA registered number 186526). Authorised and regulated by the Financial Services Authority. Registered in England and Wales No. 3406905. Registered Office at: Oakhill House, 130 Tonbridge Road, Hildenborough, Kent, England TN11 9DZ. October 2011 MDC05429

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