Make your Nestlé pension
work for you.

Building up benefits

DB Core and DB CorePlus are closed to new members. DB Core and DB CorePlus are Career Average Revalued Earnings (CARE) arrangements – a kind of Defined benefit (DB) pension arrangement.

Here’s how they work:

You and Nestlé both make contributions into the Fund, but you do not have an individual account in the Fund. Nestlé pays the balance of the cost of the benefits you build up and takes the risk that the Fund’s investments might not perform well. Your pension builds up each year based on your Career Average Revalued Pensionable Earnings.

You contibute

6%

DB Core

Available to employees who joined Nestlé
before 1 July 2016

DB Core

1/80
(Accrual Rate)
X
Career Average Revalued Pensionable Earnings
X
Pensionable Service in
DB Core
=
Pension

Example

John chooses to build up pension in DB Core. He retires at age 65 with Career Average Revalued Pensionable Earnings of £22,187.50 and three years’ Pensionable Service in DB Core. His pension is calculated as follows:

1/80
X
£22,187.50
X
3
=
£832 a year

You contibute

9%

DB CorePlus

Available to employees who joined Nestlé
before 1 August 2010, who have not opted out

DB CorePlus

1/70
X
Career Average Revalued Pensionable Earnings
X
Pensionable Service in
DB CorePlus
=
Pension

Example

Jane chooses to build up pension in DB CorePlus from 1 August 2017. She retires on 31 July 2020 at age 65 with Career Average Revalued Pensionable Earnings of £28,000 and three years’ Pensionable Service in DB CorePlus. The part of her pension in DB CorePlus is calculated as follows:

1/70
X
£28,000
X
3
=
£1,200 a year

Career Average Revalued Pensionable Earnings

To calculate the Career Average Revalued Pensionable Earnings at retirement, each year’s Pensionable Earnings are increased, or revalued, in line with the Retail Prices Index (RPI) from the end of that year to your retirement date (up to a maximum of 2.5% a year) and added up to give your total revalued Pensionable Earnings. This is then divided by your number of years’ Pensionable Service in DB CorePlus or DB Core to give your Career Average Revalued Pensionable Earnings. In times of high inflation, Nestlé has the discretion to revalue your Pensionable Earnings above the 2.5% maximum.

Example

John retires at Normal Pension Age (NPA) on 31 July 2020 with three years’ Pensionable Service. In the three years before retirement, John’s Pensionable Earnings were £25,000 in year 1, £26,000 in year 2 and £27,000 in year 3. Let’s assume that when John retires, CPI has been 2.5% each year over his period of service.

Year 1 Pensionable Earnings revalued for 2 years = £25,000 + 2.5% + 2.5% = £26,265.63
Year 2 Pensionable Earnings revalued for 1 year = £26,000 + 2.5% = £26,650
Year 3 Pensionable Earnings (not revalued in the last year) = £27,000

So, John's Career Average Revalued Pensionable Earnings are calculated as follows:

£26,265.63
+
£26,650
+
£27,000

3 years

=

Career Average Revalued Pensionable Earnings of £26,638.54

John’s Career Average Revalued Pensionable Earnings are then used in the formula to calculate his pension as follows:

Accrual Rate
X
£26,638.54
X
Pensionable Service

Pensionable Earnings Cap

If you choose to build up DB benefits in DB Core or DB CorePlus (if this option is available to you), DB benefits are only available for Pensionable Earnings up to £45,000 each year. Once your Pensionable Earnings in any one scheme year (April to March) exceed £45,000, you will build up benefits in DC Core for the rest of that year.

The £45,000 Pensionable Earnings Cap will be increased each year in line with the rise in the Consumer Prices Index (CPI) up to a maximum of 2%.

For the period 1 August 2017 to 31 March 2018, the Pensionable Earnings Cap will be £30,000 (8 months = 8/12 x £45,000).

How the Pensionable Earnings Cap works

The example below shows how this will work in practice. John has Pensionable Earnings of £54,000 a year (£4,500 a month) and is a member of DB Core. The example is based on a full scheme year (April to March).

DB Core
DB CorePlus
Earnings below £45,000 will build up in DB Core or DB CorePlus
DC Core
Earnings between £45,000 & £54,000 will build up in DC Core

What will I receive?

At retirement you’ll receive a pension for the rest of your life from DB Core and/or DB CorePlus and, under current legislation, you’ll have the option to take up to 25% of the value of your benefits as a tax-free cash lump sum (subject to the Lifetime Allowance (LTA)).

If you build up benefits in more than one section, your pension will be calculated for each period of service in DB Core and DB CorePlus, and then added together.

Making Changes

If you are in DB Core or DB CorePlus and you joined the Fund before 1 August 2010, you will have the opportunity to change between DB Core and DB CorePlus in April each year.

So you can move to a section with a higher contribution rate, with the aim of increasing your retirement benefits, or you can move to a section with a lower contribution rate if you cannot afford your current contribution rate.

You can also move into DC Core, but if you choose to do this, you would not be able to move back into one of the DB Sections at a later date.

You have a quarterly opportunity to move from one of the DB sections into DC Core.

For a reminder of how much each section costs, see What do I pay? You only have the option to move from DB Core to DB CorePlus if you have continued to be a member of the Fund since before 1 August 2010. If you’re in DB Core, DB CorePlus or DC Core, you cannot move to DC Start. The only way you can join DC Start is to opt out of the Fund and then re-join (however, you would lose the option to move to either of the DB sections in future).

Tax allowances

Building up a pension is generally a very tax efficient form of saving. Various tax reliefs are provided up-front (on contributions and on the roll-up of investment returns) and the payment of income tax is currently deferred until the point at which benefits are finally taken as pension income.

The law does not restrict the number of pension arrangements you can be a member of at any one time. For example, if you wish, you can contribute to a personal pension at the same time as building up benefits in the Fund. You may generally obtain tax relief on pension contributions (to all schemes) up to the greater of 100% of your earnings or £3,600 a year if you are a non-taxpayer.

However, her Majesty’s Revenue and Customs (HMRC) place two important restrictions on the reliefs provided:

If your benefits exceed either of these allowances, they will be subject to a tax charge. It is your responsibility to inform HMRC that you have exceeded the allowance and to pay any charge arising.

For more information, see DC Benefits - Tax allowances.

Transfers in

If you have benefits in a previous pension scheme, you may be able to transfer them into the Fund. If you are in DB Core, DB CorePlus or DC Core, any pension transferred into the Fund will go into DC Core and you will be able to choose how it is invested. For further information about DC Core, see DC Benefits. If you are in DC Start, any pension transferred in will go into DC Start and must be invested in the Lifetime Pathway. Transferring pension benefits can be very complex. You should think carefully and consider taking financial advice before making a transfer into or out of the Fund. If you would like to transfer benefits into the Fund, please contact Nestlé Pensions.

Working part time

If you work part time, the calculation of your benefits in DB Core and DB CorePlus will be calculated in the same way as if you were a full-time employee.

Example

John retires on 31 July 2020 after being a member of DB Core for three years. In his last year before retirement, John worked 15 hours a week so his salary reduced to £13,000. So, in the three years before retirement, John’s Pensionable Earnings were £25,000 in year 1, £26,000 in year 2 and £13,000 in year 3.

His Career Average Revalued Pensionable Earnings are calculated as follows:

£26,265.63 + £26,650 + £13,000
3 years

=

Career Average Revalued
Pensionable Earnings of £21,971.88

John’s Career Average Revalued Pensionable Earnings are then used in the formula to calculate his pension as follows:

Accrual Rate
X
£21,971.88
X
Pensionable Service

What if I'm absent?

Maternity leave

During any period of maternity leave you’ll continue to pay contributions based on the Pensionable Earnings you actually receive. You’ll still be covered for the full range of benefits, including the usual life cover that will be based on your Pay in the 12 months before maternity leave begins. If you make contributions through salary sacrifice, see salary sacrifice and statutory maternity pay.

You will build up Pensionable Service during the whole of the maternity leave period providing you return to work at the end of your maternity leave. If you do not return to work, your benefits will be calculated as if you had left the Fund at the time you stopped contributing.

Long-term sickness and disability scheme

If illness or injury prevents you from working for a prolonged period, you may be entitled to receive a benefit from a long-term sickness scheme operated by Nestlé. The scheme is not part of the Fund. Details are available in the HR policy section of the Nest or on request from HR. Whilst you are receiving benefits from the scheme, your membership of the Fund will normally remain unchanged. This means that you will continue to pay contributions based on the pay you receive and to build up pension. You will be covered for the usual life cover in DB Core or DB CorePlus of three times Pensionable Earnings while you are absent from work. If you are too ill to return to work, the Fund also offers ill-health retirement options.

Other temporary absences

Most absences from work are for a relatively short period and your membership of the Fund would, under normal circumstances, be unaffected. However, if you are away from work for a longer period but continue to be employed by Nestlé you’ll be advised at the time what effect, if any, your absence has on your Fund membership. Please contact Nestlé Pensions for more information at the time. You’ll continue to pay contributions to the Fund on any Pensionable Earnings you receive during your period of absence and, unless you are absent because of sickness, the period of absence will only count as Pensionable Service in DB Core and DB CorePlus if contributions are paid.

Divorce

If you get divorced, the court can allocate a proportion of your Fund benefits to your ex-spouse. If you are making financial arrangements in connection with a marital separation or divorce, you should get advice about your pension rights. A lawyer may ask for an up-to-date calculation of the transfer value of your benefits. If you are going through a divorce and require information about your pension, you should contact Nestlé Pensions.