FAQs - Cummins UK Pension Plan
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FAQs

There’s lots to know about pensions, and the chances are your question will be answered here. If not, please get in touch.


ABOUT PENSIONS IN GENERAL
What is a pension?

A pension is a tax-efficient way of saving money that you can use to live on when you retire. In a workplace pension like the Plan, both you and your employer pay contributions.

What are the different types of pension?

There are several different kinds of pension. 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 entrants, and a DB Section, which is closed to new entrants. 

You can also have a personal pension, which you pay into, but your employer doesn’t.

Why should I be in the Plan?

When you join Cummins, you’ll be 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 Plan, you won’t get this extra contribution. 

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

Will I get a State pension?

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

What is automatic enrolment?

Employers are legally required to 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.

ABOUT THE CUMMINS UK PENSION PLAN
How does the Plan work?

While you’re a member working for Cummins, you build up a pot of money called your pension fund, made up of contributions from you and the Company. These contributions are invested to help them grow over time.

Who should I contact if I’ve got a question about my pension?

Contact Isio, the Plan administrator.

Who runs the Cummins UK Pension Plan?

The Plan is looked after by a trustee company called Cummins UK Pension Plan Trustee Limited. There is a board of directors who are responsible for making sure the Plan is run in line with pensions legislation and the Plan rules. Some of the directors are selected by Cummins and some have been nominated by the Plan’s members.

How do I know how much my pension fund is worth?

Every year, we send you a benefit statement that summarises the contributions you and Cummins have paid in and how your investments have performed. It includes an illustration of how much pension you could get when you retire, if you decide to buy an annuity. 

You can also see your pension fund balance at any time by logging in via Manage my pension, as well as use the modellers to work out how paying more or changing your retirement date could make a difference to your pension.

Can I transfer my other pensions into the Plan?

Yes, you can transfer other pensions into the Plan on a defined contribution basis. To find out how to do this, contact the administrator of the scheme you want to transfer from.

Can I opt out of the Plan?

When you join Cummins, you’re automatically enrolled in the Plan, but it’s not a condition of your employment and you can opt out at any time. To opt out, you need to log in to your personal account via Manage my pension.

How do I re-join the Plan if I’ve opted out?

You can opt back into the Plan at any time. Simply log in to your personal account via Manage my pension. If you’ve forgotten your login details, please contact Isio, the Plan administrator.

How can I make a complaint?

We work hard to make sure that you don’t have any reason to complain about the Plan, but if you do have a complaint, please contact Isio in the first instance. 

If Isio can’t resolve your issue, the Trustee has a formal process that you can use called the Internal Dispute Resolution Procedure (IDRP). Isio will send you the information you need for this.

CONTRIBUTIONS
How much does it cost?

The minimum basic contribution for members is 3% of your pay, and Cummins pays 5%. On top of this, you can choose to pay saver contributions of between 1% and 4% of your pay – any saver contributions you pay are matched by Cummins. Your contributions benefit from tax and National Insurance relief, which brings the cost of saving £1 down to 70p (for a basic-rate taxpayer).

What happens to my contributions?

The money that you and Cummins pay into the Plan is added to your personal pension fund where it is invested to help it grow. This is your own account which is kept separate from the Company’s assets. It is administered by the Plan Trustee.

What is SMART?

SMART stands for ‘save money and reduce tax’. It’s a salary sacrifice method of paying your pension contributions that reduces the cost to you by making National Insurance savings.

Do I have to pay contributions using SMART?

No, you can pay via deduction from your 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 Living Wage (or National Minimum Wage, if you’re under 23). 

It’s also not possible to sacrifice statutory pay, for example if you’re on parental, adoption or sick leave.

Can I pay in more than 7% (3% basic contributions plus maximum 4% saver contributions)?

Yes, you can pay as much as you like into your pension as long as your take-home pay doesn’t go below the national minimum or living wage, but the Company will only contribute basic contributions of 5% and match up to 4% of your saver contributions.

However, please note that the pension contributions you can get tax relief on are limited by an annual allowance, which for most people is £60,000 but for some is as low as £10,000.

What is the annual allowance?

The government limits how much tax-free money can be saved into a pension each year. It is currently £60,000. You can save more than this into your pension in a year, if you wish, but any contributions above this amount won’t get tax relief. 

If you earn more than £200,000 in a year and have an adjusted income over £260,000, your annual allowance might be reduced and could be as low as £10,000. 

If you’ve already accessed some pension savings flexibly but are continuing to save into a pension, your annual allowance will be reduced to £10,000.

What is the lifetime allowance?

This was a limit that the government imposed on the total pension savings you could build up over your lifetime before having to pay a tax charge. From April 2023, the tax charge is 0% and from April 2024, the lifetime allowance is no longer in place. If you previously had a lifetime allowance protection, this may protect the tax-free lump sum amount that you can take at retirement.

Can I change my contribution rate?

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

INVESTMENTS
How are my contributions invested?

The contributions from you and Cummins are invested in the Plan’s lifestyle investment option or you can choose your own investments from the self-select fund range. 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.

What are my investment choices?

You can choose the Plan’s lifestyle investment strategy if you prefer not to be involved in day-to-day investment decisions. This is the option that most members currently use. 

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

Can I use the lifestyle option as well as a self-select fund?

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

Can I change my investment choices?

Yes, you can make changes to the way your pension fund is invested at any time, by logging in to your account via Manage my pension.

Isn’t investment risky?

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 self-select fund range) 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 that 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 lifestyle strategy overseen by the Trustee, which is designed to be suitable for the needs of most members.

What’s lifestyling?

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

What’s my target retirement age?

This is the age that you choose to take your Plan savings. It can be any age from 55, although the government is raising this minimum pension age to 57 in April 2028. 

It’s 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 you intend to retire at your State pension age.

Where can I get investment advice?

There’s more information about investing in our investment guide. Neither Cummins nor the Trustee can give you financial advice. If you need further information, MoneyHelper is the government’s free guidance service about money and pensions. You can find an independent financial adviser in your local area at VouchedFor or Unbiased.

RETIREMENT
When can I retire?

You can take your retirement savings from the Plan at any time after the age of 55. Please note, in April 2028, the government is raising the earliest age you can take your savings to 57.

What are my retirement options?

You can take up to 25% (capped at £268,275*) of your pension fund as a tax-free cash lump sum. You can then use the rest to provide a taxable retirement income in the way that’s right for you. You can transfer to a flexible income drawdown arrangement, buy an annuity or take a one-off cash lump sum. 

*If you previously had a lifetime allowance protection, your maximum tax-free lump sum may be protected above this limit.

What’s income drawdown?

Sometimes also called ‘flexible drawdown’, it allows you to keep your money invested and then withdraw money as and when you need to.

What’s an annuity?

This is an insurance product that pays you a guaranteed income for the rest of your life. There are several options for how the annuity would work, which influence how much it costs. For example, you could have a flat-rate annuity or one that increases each year with inflation.

How much can I take as a tax-free lump sum?

You can take up to 25% of your pension fund as a tax-free cash lump sum, capped at £268,275. Your lump sum might be higher than this if you’ve previously applied (before March 2023) to HMRC for ‘pension protection’.

How much will my pension be?

This is a defined contribution pension plan, so you won’t know exactly how much retirement income you’ll get from your pension fund until you retire. It depends on how much has been paid in as contributions and how your investments have performed. It also depends on how you decide to take your Plan savings when you retire. 

Your annual benefit statement gives an estimate of your prospective pension fund at retirement and an illustration if you buy an annuity.

LEAVING
What if I leave Cummins?

If you leave Cummins, no further contributions can be paid into your pension fund, and you will become a ‘deferred’ member of the Plan. You can leave your savings in the Plan until you transfer them to a new pension arrangement or access them at retirement.

What if I want to leave the Plan (opt out)?

If you work for Cummins but don’t want to be a member of the Plan, you can opt out. No further contributions are paid into your pension fund, and you will become a ‘deferred’ member of the Plan. Your life assurance cover will reduce from five times your annual salary to one year’s salary. 

You can opt out by logging in to your account via Manage my pension. You can’t get a refund of your contributions unless you opt out within 30 days of joining the Plan. If you’re opting out after 30 days of joining, you can leave any savings you have in the Plan until you transfer them to a new pension arrangement or access them after age 55. 

After you’ve opted out of the Plan, you can re-join as an active member via Manage my pension.

Can I transfer my pension?

Yes, the money in your pension fund belongs to you. You can transfer it to a new employer’s pension scheme or another registered pension arrangement. For more details about how to do this, please get in touch.

DEATH BENEFITS
What happens to my pension fund if I die before I retire?

The value of your pension fund is paid to your beneficiaries as a lump sum.

What death-in-service benefits are provided?

As an active member of the Plan, if you die in service, a lump sum equal to five times your annual salary would be paid to your beneficiaries.