Saving for Retirement

What would you do if your mortgage was cleared, the children were off your hands, and you got two-thirds of your usual salary without even having to get out of bed? Odds on, you’d give up work and throw yourself into enjoyment.

For lucky people, that‘s what retiring is like. Having worked hard for thirty or forty years, they can look forward to an exciting retirement with maybe twenty or thirty years of fun. Wonderful, providing that is you can afford it… And here, unfortunately, a lot of us today hit a big snag because our pension arrangements just aren’t enough for a long comfortable retirement. It’s a very serious concern and the reason is simple.

With most company pension schemes, to generate a pension of more than, say, half of your final salary each year from age 60 onwards, both you and your employer need to contribute for several decades to allow your pension to grow. Anything less than this – changing employers, taking time off to raise a family, delaying saving for a pension until later in life or retiring early – could cause an alarming shortfall.

And while you may be counting on a basic State pension, and perhaps the State Second Pension and the Pension Credit too, sadly the real value of these is falling and they might hardly touch the problem.

Brighten your future!
An easy way to begin saving for retirement is to join the Kingfisher Pension Scheme. It offers you a tax efficient way to save for retirement - and the Company helps too by matching your core contributions to the Scheme (or if you joined the final salary section before 1 April 2004, by meeting the balance of the cost (over your own contributions) of paying your pension).

Simply by making payments while you’re working, you will be building up income to help protect your lifestyle after retirement and for the rest of your life.

Not only will you protect your lifestyle after retirement, but you will also help protect your dependants if you should die while working for the Company.

Increasing your pension savings
You can increase the benefits you receive at retirement by paying Additional Voluntary Contributions (usually known as AVCs). Like your ordinary contributions, AVCs are a tax-efficient way of providing extra benefits - if you are a standard rate taxpayer, for every £100 you pay, the overall cost to you is just £78, and the saving is even more if you pay higher rate tax. Of course, these tax concessions are limited by the Government and your total pension contributions in any tax year cannot exceed 15% of earnings.

If you are already paying AVCs or are considering your options, it is important to choose the right long-term investment fund for your particular circumstances.

This will depend on:
• Your age now
• How many years until you want to retire
• How much you can afford to pay
• Your attitude to the amount of risk you are prepared to take.



Money purchase (KPS-MP) AVC investment choices
Like your normal core contributions AVCs are credited to a retirement account. However, they won’t be matched by the Company. AVCs must be invested in the same way as your core contributions. More information about these options is provided in the investment options leaflet you were (or will be) given before joining the pension scheme. Additional copies are available on the pensions website at www.kgbd.co.uk.

Another option for increasing your Kingfisher pension
If you are a member of KPS-MP, then instead of paying AVCs, you can increase your Kingfisher pension by paying additional core contributions.

Normally, additional core contributions won’t be matched by Company contributions, but once you have been in continuous membership of a Kingfisher pension scheme for 5 years (earlier in some circumstances) matching amounts will be credited to your retirement account of up to 2% of your basic salary, depending on how much extra you are paying.
Additional core contributions are invested in the same way as your core contributions and AVCs.

So what’s the difference?
As we have said, AVCs won’t be matched by extra payments on behalf of the Company, whilst additional core contributions may be matched up to a certain level. AVCs are very flexible, being payable either monthly or as a one-off annual payment and can be altered at any time (although your payroll department will generally require one month’s notice of any change).

Additional core contributions on the other hand must be made by regular monthly payments and the amount you pay can only be altered once a year. At retirement, AVCs must (under current law) be used to provide additional pension and cannot be taken as tax free cash whereas, if you have paid additional core contributions, your choice of retirement benefits from them will be exactly the same as for your main benefits.

Final salary (KPS-FS) AVC investment choices

Choice 1:
A With-Profits Fund, currently invested with the Prudential Assurance Company, which aims to provide steady growth with a guarantee that if the monies are left in the Fund until retirement, they will only increase in value.

To find out more about the With-Profits Fund and saving for retirement with AVCs, please turn to the feature article specially prepared for us by Prudential on page 8 of our PDF.

Choice 2:
Unit-linked funds, where the value of the funds are directly linked to stock and bond markets. Unit-linked funds are currently invested with two AVC providers, Merrill Lynch Investment Managers and the Legal and General Assurance Company, who offer a range of investment funds.

Details of these AVC arrangements can be found in the explanatory booklet The KPS AVC Guide available online at our website www.kgbd.co.uk or from your personnel department. Details of the value of members’ AVC funds are included in personal benefit statements.