PENSIONNEWSFor members of the Dairy Crest Group Pension Fund November 2020

WELCOMEIt is a pleasure to present the latest issue of Pension News, the newsletter for members of the Dairy Crest Group Pension Fund. It includes an update from the Fund as well as news about pensions in general.

With the effects of the COVID-19 outbreak being felt across the UK and around the world, it is clear that this is not a normal year for anyone. Although we have found ourselves in extraordinary and challenging times, I am pleased to report that Fund business has continued as usual:

• If you’re a pensioner, you’ll know that your pension benefits have been and will continue to be paid as normal.

• If you’re a deferred member and are coming up to retirement, your requests will continue to be processed as normal, although it may take us a bit longer to respond.

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The Trustee, our advisers and the sponsor are meeting via video conference and we are able to monitor, govern and make decisions on the Fund. All our advisers and service providers have Business Continuity Plans that are in place and working well.

There has been a lot of media coverage about the impact of COVID-19 on the global financial markets but please be assured that your benefits remain unchanged. As you know, the Fund is a defined benefit pension scheme which means your benefits are not sensitive to movements in the financial markets but are defined by the Trust Deed and Rules.

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The funding level relies on a carefully managed and well-diversified asset portfolio which allows for such volatility in the financial markets. The Trustee continues to keep a close eye on the Fund’s investments to ensure they are as protected as possible.

In Trustee news, the terms of office for two of our member-nominated Trustee directors (MNTDs), David Lattimore and Andrew Tredrea, have been extended by one year to 30 September 2021. There will be a new MNTD nomination and selection process, so if you would like to take a more active role in running the Fund, look out for more details on this next year.

I hope you find this newsletter useful and informative and that you and your family stay safe.

Vicky Paramour The Law Debenture Pension Trust Corporation plc Chair of Trustee

FUND NOTICEBOARDSCAM ALERT!A major event like the coronavirus crisis can lead to new types of scams. We urge you to be particularly vigilant for scams of all kinds over the coming months. These could be about insurance policies, pension transfers or high-return investment opportunities, including investments in crypto-assets. Scammers are sophisticated, opportunistic and will try to get personal details or money from victims in many ways. They tend to target people who are feeling vulnerable, particularly in the current climate.

Pension scams can be hard to spot but their effects are devastating, with many people losing their entire life savings. While promising high returns and low risk, in reality, pension scams can leave you with nothing. You could also face a substantial tax bill from HM Revenue and Customs if you withdraw your savings before age 55.

For more information about these and other pension scams as well as how to avoid them, visit www.fca.org.uk/scamsmart

RETIRING LATE? DON’T MISS OUT!The Fund’s normal retirement age is 65 for most members, but you can take your pension at any time from age 55. However, if you are over age 65 and have not yet drawn your benefits from the Fund, please note that it might not be in your financial interest to delay.

If you were to die before taking your pension and you don’t have a spouse, dependant and/or child, the only benefit paid to your nominated beneficiaries would be a refund of your own contributions, which could be relatively small compared with the benefits that would have been paid had you taken your pension. If you would like to start drawing your benefits, please contact the Fund administrator, Premier Pensions.

REMEMBER TO UPDATE YOUR WISHESDon’t forget to complete an expression of wish form that reflects your current circumstances. This is especially important if you have recently got married or divorced, entered or left a civil partnership or had a child.

Depending on your circumstances, the Fund might pay benefits to your beneficiaries in the event of your death, and an up-to-date expression of wish helps the Trustee decide who should receive any benefits that are due. You can update your wishes at any time by contacting the Fund administrator.

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HAVE YOU GIVEN US YOUR EMAIL ADDRESS?In these current challenging times, email communications have never been more important. If you haven’t already done so, please give us your email address to make sure we can always get in touch about your pension.

CHANGES TO TAX ALLOWANCESThe Annual Allowance (AA) is the maximum amount of tax relief you can get in a year when saving into a pension. The standard AA is currently set at £40,000. However, for high earners, a change was introduced in April 2020 to the earnings threshold. If your total income is over £240,000, your AA will be reduced by a tapered amount of £1 for every £2 of income over the threshold and could be as low as £4,000. This may apply to you if you are also a member of another pension scheme and are actively contributing.

The Lifetime Allowance (LTA) is the maximum amount of pension savings you can have at retirement from all pension schemes without incurring an additional tax charge. It currently increases annually in line with inflation as measured by the Consumer Prices Index and is set at £1,073,100 for the 2020/21 tax year.

HOW MUCH WILL YOU NEED IN RETIREMENT?The Pensions and Lifetime Savings Association (PLSA) has launched ‘Retirement Living Standards’ to help people picture their future retirement and understand what they need to save to achieve that.

The PLSA’s research shows that only 23% of people understand how much they need to save. As part of their research, they asked consumers for their views on how much they would need to live on in retirement. This suggested that a single person will need £10,000 each year as a minimum income, £20,000 for a moderate standard of living and £30,000 to be comfortable. For couples, the equivalent numbers are £15,000, £30,000 and £45,000 each year.

The PLSA’s website lets you explore the different categories in more detail to picture what life in retirement could look like. Go to www.retirementlivingstandards.org.uk

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MONEY & MEMBERSHIPThe information on these pages has been taken from the Fund’s audited Report & Accounts for the 12 months to 31 March 2020. The table shows a summary of the money paid into and out of the Fund during the year.

FINANCIAL HIGHLIGHTS

Value of the Fund at 1 April 2019 £1,240.8 million

Money in less money out (£39.8 million)

Net returns on investments £65.2 million

Value of the Fund at 31 March 2020 £1,266.2 million

Year ending 31 March 2020 £m

Year ending 31 March 2019 £mMONEY IN

Company contributions 5.7 15.1

Other income 0.1 -

TOTAL 5.8 15.1

MONEY OUT

Benefits paid to members (36.2) (35.9)

Payments to leavers (8.2) (15.6)

Administrative expenses (1.2) (1.1)

TOTAL (45.6) (52.6)

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FINANCIAL HIGHLIGHTS

As at 31 March 2020, you were one of 13,282 members in the Fund.

WHO’S IN THE FUND?

DEFERRED MEMBERS

PENSIONERS TOTAL

5,205 8,077 13,282

+ =

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OUR INVESTMENTSOn 31 March 2020, the Fund’s assets were split between the following investments (rounded):

Bonds 13.8%

Property 7.2%

Liability hedging 45.8%

Multi-asset credit 4.3%

Annuity policy 23.5%

Cash & other 5.4%

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TOTAL 100%

The Trustee is responsible for investing the Fund’s assets but delegates the day-to-day management of investments to its appointed investment managers. These are:

• Aviva Investors Jersey Unit Trusts Management Ltd

• DRC Capital LLP

• Insight Investment Management Ltd

• Legal and General Assurance Society

• Pacific Investment Management Company

• Wellington Management Company LLP

• Nephila Capital Ltd

WHERE ARE THE ASSETS INVESTED?

FUND PERFORMANCEDuring the year to 31 March 2020, the total Fund performance was 4.2% compared with a target benchmark of 5.0%. The chart shows the performance over the one-year, three-year and five-year periods to 31 March 2020.

0

2

4

6

8

4.24.4

6.0

5.04.4

5.9

1 year % 3 years % p.a. 5 years % p.a.

Fund performanceBenchmark

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SUMMARY FUNDING STATEMENTAs a member, you have built up valuable benefits for your future. Knowing how the Fund is doing financially is therefore important. The most recent valuation of the Fund was carried out at 31 March 2019 and an update looked at the position as at 31 March 2020. The results are shown in the table.

THE LATEST POSITION

Valuation 31 March 2019

Update 31 March 2020

Assets (excluding AVCs) £1,239.4 million £1,265.0 million

Amount needed to pay benefits (liabilities) £1,231.9 million £1,322.8 million

Surplus/(shortfall) £7.5 million (£57.8 million)

Funding level 101% 96%

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The financial position of the Fund has deteriorated since March 2019. Both the assets and liabilities have increased over the year, but the assets have increased by less than the liabilities. Key factors influencing this are:

• the liabilities have increased as a result of the reduction in interest rates

• the Fund’s liability hedging assets, which are designed to broadly mirror changes in the liabilities, have performed as expected and increased in value

• the Fund’s growth assets have fallen in value due to challenging financial conditions

• Dairy Crest paid contributions of approximately £5.7 million in the year.

Since 31 March 2020, the financial position of the Fund has improved due to improved investment returns, and the shortfall is estimated to be around £40 million at September 2020.

Please keep in mind the long-term nature of the Fund to meet payments to members over many years into the future. The financial position is a ‘snap-shot’ which will change from year to year. The next full valuation will be as at 31 March 2022.

IMPORTANCE OF DAIRY CREST LIMITED’S (DAIRY CREST) SUPPORTThe funding target agreed for the Fund meets the requirements of the Pensions Act 2004 and is called the ‘technical provisions’. It relies on Dairy Crest and its financial support to:

• make extra contributions if there is a funding shortfall• put in more money if the investment returns are lower

than expected.

As the Fund was fully funded at the valuation date, no contributions are required from Dairy Crest at this time. However, Dairy Crest has paid over £5.7 million in contributions to the Fund in 2019/20.

WHAT IF THE FUND WERE TO WIND UP?The following is for information only. We don’t intend to wind up the Fund, but we do check the impact on the Fund should Dairy Crest no longer be able to support it.

Under the hypothetical scenario that the Fund wound up on 31 March 2019, the shortfall is estimated to have been £286 million. The Fund can only be wound up in limited circumstances and this figure would only be likely to crystalise if Dairy Crest became insolvent. Under the legal guarantee, Saputo Inc. would then be required to pay any shortfall not met by Dairy Crest.

The shortfall on winding up, which is different from the ongoing surplus/shortfall shown in the table previously, assumes that all members’ pensions would be provided by an insurance company. Insurers take a very cautious view of the future and they need to make a profit. The ongoing position assumes that Dairy Crest will continue in business and carry on supporting the Fund. Over time, the Trustee’s long-term aim is to reach a funding position where all benefits can be secured in full with a regulated UK insurer.

IS MY PENSION PROTECTED?If the Fund were to wind up today, Dairy Crest would have to pay enough into the Fund to buy out all members’ benefits with an insurance company. If Dairy Crest could not afford to cover this, Saputo Inc. would then be required to pay any shortfall not met by Dairy Crest. The Pension Protection Fund (PPF) was also established by the government to help protect members’ pensions when a company becomes insolvent (although it doesn’t guarantee full benefits). You can find out more about the PPF at www.ppf.co.uk

OTHER INFORMATION WE NEED TO TELL YOUAs required by law, we can confirm that there have not been any payments to Dairy Crest out of the Fund since the last summary funding statement was issued. We can also confirm that the Fund has not been modified by the Pensions Regulator and no directions or schedule of contributions have been imposed on it by the Regulator.

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GET IN TOUCHIf you have any questions about the Fund or your benefits, please contact the appropriate Fund administrator:

For deferred members and pensioners (if Premier pays your pension)

Premier Pensions, PO Box 108, Blyth NE24 9DY

Email: dairycrest@premiercompanies.co.uk

Call: 0800 122 3560

For pensioners (if Legal & General pay your pension)

Legal & General, Customer Payment Services, PO Box 809, Cardiff CF24 0YL

Email: CPSc@landg.com (general enquiries) Bereavements@landg.com (bereavements)

Call: 0345 7660 813

PLEASE LET US KNOW! Don’t forget to let us know if you move home or any of your personal details change. Having your email address will help us keep in touch with you, even if you move house.

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