FAQs

A pension is a tax-efficient way of saving money that you can use to live on when you’re no longer working. In a workplace pension, like the DC Section of the Cummins UK Pension Plan, both you and your employer pay into the Plan.

There are lots of different types of pension plans. Workplace pension plans are set up by employers to help their employees save for retirement. Both you and your employer pay into this type of pension. With workplace pensions, you can get defined contribution (DC) plans and defined benefit (DB) plans. The Cummins UK Pension Plan has a DC Section which is open to new employees and a DB Section, which is closed to new employees.

You can also join a personal pension, where you pay into the pension but your employer doesn’t.

All employees are contractually enrolled into the Plan and there are a lot of good reasons to be in your workplace pension. Firstly, your employer helps you save for retirement by paying money into your pension (on top of the money you pay in yourself). If you opt out of the workplace pension, you wouldn’t get this extra contribution.

Another reason to stay in the Plan is that the government also wants to help people save for the future, so you don’t pay tax on your pension contributions, which means it costs you less than you think. If you’re a basic rate taxpayer, every £1 you pay into your pension actually only costs you 80p. Paying your contributions using SMART reduces the cost of every £1 to 68p.

In addition to this ‘free money’, being in a workplace pension is easy. Your employer sets it all up for you, so you don’t have to think about setting up direct debits or any of the other hassles you might have in taking out a personal pension.

As a member of the Plan, you also get life cover of five times your basic annual salary. If you opt out but stay working for the Company, this life cover is reduced to one times your basic annual salary.

Your entitlement to a State pension depends on how many qualifying years of National Insurance (NI) contributions you’ve got. To receive any State pension at all, you must have a minimum of 10 qualifying years. To get the full State pension, you’ll need to have 35 qualifying years. If you have between 10 and 35 years of NI contributions, you’ll get a proportionate amount of State pension. To find out how much you’re entitled to, you can use the government website to check your State pension.

In 2012, it became compulsory for employers to automatically enrol eligible employees into a workplace pension and for both the employer and employee to make contributions towards it. Once enrolled, employees have the option to leave the pension plan (opt out).

If you opt out of the Plan, the Company will have to automatically re-enrol you every three years or when you reach a certain age or salary level.

While you’re a member, you build up a pot of money called your pension fund during your employment, made up of contributions from you and the Company. These contributions are invested with the aim of increasing your pension fund over time.

Contact the Plan administrator, Premier Pensions.

A board of Trustees is responsible for the administration of the Plan in accordance with legislation and the Plan Rules. Some of the Trustees are selected by Cummins and some are nominated by the Plan’s members.

Your annual benefit statement will summarise the contributions paid into your pension fund by you and by Cummins, how your investments have performed, your prospective pension at retirement (assuming you buy an annuity), and your death benefits.

You can also view your pension fund at any time using Manage my pension. There are useful modellers so you can see what difference paying more or changing your retirement date might make to your pension.

New employees are automatically enrolled into the DC Section, but it’s not a condition of your employment to be or remain a member of the Plan. To opt out, you need to log into your personal account using Manage my pension.

If you’ve got a complaint, please contact the Plan administrator, Premier Pensions in the first instance.

If your complaint can’t be settled by the Plan administrator, you can use the Internal Dispute Resolution (IDR) procedure, which the Trustee has put in place to resolve complaints or disputes. Premier Pensions will send you the forms needed to make an application along with a copy of the IDR procedure.

The minimum basic member contribution is 3% of your pay. Any saver contributions you choose to pay in on top between 1% and 4% of your salary will be matched by the Company.

Your contributions are also eligible for tax and National Insurance (NI) relief, so each £1 you save costs 68p (for a basic rate taxpayer).

The money paid in by you and the Company is added to your personal Pension Fund, which is kept separate from the Company’s assets. It is administered by the Trustee and invested.

SMART stands for ‘save money and reduce tax’. It’s a salary sacrifice arrangement, which reduces the cost of your pension contributions to you by making National Insurance (NI) savings.

No, you can pay via deduction from salary instead, but you’d then pay National Insurance on the value of your contributions.

You can’t participate in SMART if the salary sacrifice would result in reducing your salary to below the National Minimum Wage (or National Living Wage, if you’re over 25). It’s also not possible to sacrifice statutory pay, for example on maternity, paternity, adoption or sick leave.

Yes, you can pay up to 100% of your salary in any month if you wish but the Company will only match up to 4% of your saver contributions. You should also be aware that the Annual Allowance puts a limit on tax-free pension savings, which for most people is £40,000 but for some could be as low as £4,000.

The government places a limit on the tax-free amount of money that can be saved into a pension each year. This is currently £40,000 a year. You can save more than this into your pension in a year, if you wish, but any contributions above this amount would not receive tax relief.

Your Annual Allowance may be reduced if you earn more than £200,000 a year. It would also be reduced if you have flexibly accessed any other pension plans. If you think you may be affected by the Annual Allowance, you can find out more using the modeller.

This is a limit that the government places on the total value of tax-efficient pension savings you can build up over the course of your working life from ALL sources including the Plan (but excluding the State pension). It’s currently set at £1,073,100 and increases annually with inflation. If you think you’re affected by the Lifetime Allowance, you can find out more using the modeller.

Yes, you can change your contribution rate at any time by logging into your personal account at Manage my pension. If you request your changes before the 15th of the month, these will be implemented in your next pay. (Please note that timings are different in December when the payroll is run earlier.)

You can take the money that has built up in your pension fund at any time from the age of 55. The government is planning to raise this minimum retirement age to 57 by 2028.

You can take up to 25% of your pension fund as a tax-free cash lump sum. You can then use the rest in the way that suits you best. You can choose to purchase an annuity (a guaranteed income), set up a drawdown account (you'll need to transfer out of the Plan), or take it as taxable cash.

An annuity is a pension for life that you can buy from an insurance company. There are several options for how the annuity may work, which influence how much it would cost. For example, you could have a flat-rate annuity or one that increases each year with inflation.

Drawdown allows you to transfer your retirement savings out of the Plan to a new provider at retirement, keep the money invested and then draw an income from it.

The contributions from you and from Cummins are invested in the default flexicycle investment option or in your chosen self-select funds. The value of your pension fund can therefore go down or up at any point in time depending on the performance of the financial markets.

You can choose the flexicycle investment strategy if you prefer not to be involved in day-to-day investment decisions. Currently this is the option that the majority of members use.

Alternatively, if you don’t think the flexicycle strategy is appropriate for your circumstances and you’d like to manage your pension fund more actively, you can choose to invest in one or more of 12 self-select funds that have been made available by the Trustee.

No, you can’t invest in both at the same time. If you choose flexicycle, 100% of your pension fund must be invested in this way.

Yes, you can make changes to the way your pension fund is invested at any time. Go to Manage my pension and log into your personal account.

Yes, investment involves taking risk in the expectation that this will be rewarded over the long-term period that applies to a pension.

You can take different levels of risk (using the different self-select funds) and using a low-risk fund would make it less likely that your pension fund would go down in value. However, it also reduces the chances of investment markets helping your pension fund to grow and it’s important to remember the impact inflation can have on the real long-term value of your savings.

If you don’t feel confident with investment, you have the option of using the flexicycle strategy overseen by the Trustee which is designed to be suitable for the needs of most members.

Flexicycle is an investment approach that uses an automatic process of switching your pension fund from higher-risk funds into lower-risk funds gradually as you progress towards your target retirement age.

This is the age at which you plan to take your Plan benefits. It can be any age after 55. It’s really important to tell us your target retirement age so that the gradual de-risking of your pension fund matches when you want to retire. If you don’t choose a target retirement age, we’ll assume that you plan to retire at State pension age.

There’s more information about the types of investment you can choose in our investment guide. Neither Cummins nor the Trustee can give you advice. If you need further information and guidance, the Money and Pensions Service is the government’s free information website, or you can find an independent financial adviser local to you at www.vouchedfor.co.uk or www.unbiased.co.uk

The DC Section is a defined contribution pension plan which means that you won’t know exactly how much your pension will be until you retire. It depends on the amount of money that’s paid into your pension fund as contributions along with how your investments have performed.

Your annual benefit statement will give you an estimate of your prospective pension at retirement or you can use the online modellers at Manage my pension.

The earliest you can take your benefits from the DC Section is 55. The government is planning to raise this minimum retirement age to 57 by 2028.

If you leave the Plan before age 55, no further contributions will be payable into your pension fund and your benefits will be ‘deferred’.

Yes, you can take the value of your pension fund with you to a new employer’s plan or another registered pension arrangement, provided you haven’t started to receive your benefits.

If you die in service as a member of the DC Section, a lump sum equal to five times your annual salary would be payable to your beneficiaries.

The value of your pension fund at the date of your death is paid to your beneficiaries as a lump sum.