Boots pension changes: frequently asked questions

Date: 10 June 2010

Here are some of the most popular questions that Usdaw members at Boots and Alliance Healthcare have been asking us

Should I join the new Boots pension?

Usdaw recommends to our members that they do join the new Boots pension.

If you don’t join then you don’t qualify for the contribution that Boots make towards your pension savings.  This is the same as turning down extra pay albeit extra pay put to one side for when you retire.

Also, if you don’t join then your dependants (spouse, partner, children) won’t be eligible to receive the 4 times salary lump sum payable if you die whilst employed by Boots.

How much should I contribute to the new Boots pension?

Ultimately it is for you to decide how much to contribute depending on how much you can afford.  Obviously, the more you contribute the larger your pension and lump sum will be when you retire.  There are certain factors you should be aware of depending which pension scheme you were in before.

Former members of the Boots Pension Scheme (the final salary scheme) should be aware that on switching to the new pension you will no longer be contracted out of the Additional State Pension scheme.  This means you will be paying an extra 1.6% National Insurance.  If you carry on contributing at the rate of 8% to the new pension scheme you might end up with less net pay (after deductions) than usual.

The same also applies to anybody who was contributing to the UniChem Benefit Plan and to those people who were contributing to the UniChem Contribution Plan who voluntarily opted to contract out of the Additional State Pension.

If you are unsure how much to contribute, we suggest you choose what you think you might be able to afford between 3% and 6% and see what the effect is on your first few pay checks after the switch to the new plan.  Remember that you can increase or decrease how much you contribute at a later date.

Anybody who was contributing to either of the Boots Stakeholder plans or who were contributing to the UniChem Contribution Plan and didn’t voluntarily opt to contract out of the Additional State Pension will see no change in the amount of NI they pay and can carry on contributing at the same rate as before.

How should I choose to invest my contributions to the new Boots pension?

Again, it is up to you to decide.

Are you confident enough to be able to select which funds from the available list you want to invest your money in?  Will you be able to keep a close eye on how those investments perform so that if any of them don’t perform as well as they should be doing, you can act by switching the money elsewhere?

If the answer is yes then you should read the information you’ve been provided about all the various funds available, make your choice and select which one(s) you want.

If you’re not confident enough to do the above and would rather leave it to the experts to invest your money for you then you might consider opting for what is called the Default Lifestyle fund.  In this fund your money is initially invested mostly in stocks and shares in the UK and overseas then, as you get closer to retirement age, is automatically switched into less volatile investments instead (such as cash deposits and government bonds).  You won’t have to do anything.  It’s fair to say that in most pension schemes like this the majority of people opt for the Default Lifestyle approach.

What should be my target retirement age?

This is the date you intend to retire or start receiving your retirement benefits.  You should be realistic about what age you choose.  For a start it’s not possible to receive your retirement benefits earlier than 55.  Whatever age you put down isn’t binding on you – you won’t be dismissed at that age for selecting it on your form.  It’s only to give the pension provider an indication of when you want to start receiving your benefits so they can contact you nearer that time.  You can always change your target retirement age at a later date.  If you select the Default Lifestyle fund described in (3) above then you should definitely make sure you keep your target retirement age updated if you change your plans especially if you decide you want to receive your benefits earlier than first planned.

Who should I nominate to be my beneficiary if I die whilst working for Boots?

This can be anybody you like depending on your circumstances.  It doesn’t all have to be left to one person.  The money can be split between numerous people as long as all the different shares add up to 100%.

If your circumstances change you can fill in a new nomination form which overrules the one you’ve already filled in.  Make sure you update your nomination form if your circumstances change.

What is SMART Pensions and should I be doing it?

Click here to access or guide to SMART Pensions including details of who should and should not participate in it.

Should I transfer my old Boots pension into the new pension scheme?

If you were contributing to either the Boots Pension Scheme (the final salary scheme) or the UniChem Benefit Plan, we would caution you against transferring the pension benefits you have built up into the new plan (or indeed to any other pension).  You have a guaranteed amount of pension built up in these schemes but when you transfer you lose all guarantees of how much you will receive when you retire.

There is less risk involved for members of the Boots Stakeholder plans or UniChem Contribution Plan but we would still advise you to take independent, professional financial advice before you start transferring money between pension schemes.

You can find financial advisers in your local area at http://www.unbiased.co.uk/.

Can I carry on paying Additional Voluntary Contributions (AVCs)?

AVCs should automatically stop being deducted from your pay at the same time as the Boots Pension Scheme and UniChem Benefit Plan both close.  In the new plan there is no need to pay AVCs since you have the option of increasing (or decreasing) how much you want to contribute towards your pension.

Any other questions?

Usdaw members can contact the Union’s pensions team on 0161 249 2440 or email pensions@usdaw.org.uk.