Yes. We will outline how this could happen after the consultation.
I'm in the Clarks Flexible Pension Scheme
Clarks has a number of pension schemes, including the Clarks Flexible Pension Scheme and the C & J Clark Pension Fund.
The Flexible Scheme combines the option to save towards a defined benefit (DB) pension (Pay Related Section) and a defined contribution (DC) pension (Investment Related Section), giving members the option to build up benefits in either or both.
The C & J Clark Pension Fund has been closed for a number of years to new employees to Clarks but we still have some employees building up DB pensions in this arrangement.
In a scheme providing a DB pension, the pension amount you would receive is defined under the rules of the scheme and the company has to pay whatever it costs to meet that pension over and above employee contributions. The costs of providing any form of DB pension have escalated hugely over recent years. For example, ongoing pension costs for DB members in the C & J Clark Pension Fund have more than doubled over the last ten years. As you are aware, the costs of building up a DB pension in the Pay Related Section of the Flexible Scheme have also almost doubled over the same period. This has been reflected in the higher contributions that members in the Pay Related Section of the Flexible Scheme have needed to pay to secure additional 'units' of DB pension.
As we mention in the consultation pack sent to you recently, there is more to our proposal for change than just costs. Here are some other reasons why we believe we need to change our pensions:
Rebalance our pension spend more equally between employees
At the moment, we spend the majority of our annual pension spend on a minority of our employees in DB pensions (particularly DB members in the C & J Clark Pension Fund). This means there are significant variations in overall benefit packages for two people doing the same job. We want to share our pension spend more equally across our workforce.
Provide value for members
In the Pay Related Section of the Flexible Scheme, members are paying considerably more now for the same benefit than they were ten years ago. This reflects the increased cost of providing a DB pension that has largely been borne by members in the Flexible Scheme.
Modernise our pension
The world of pensions has moved on in the last few years; there are new rules about how pension savers can take their defined contribution (DC) pension accounts. We think many of our employees would welcome access to these flexibilities (which are only currently available if you transfer your pension to another arrangement outside of Clarks). For example, many DC savers can now take their pension as cash (subject to tax), or keep it invested and take money from it as and when they need it – with the added bonus that they can pass their unused pension savings on to their loved ones as a lump sum on death, if they want. This is explained in more detail in the Q&As.
In brief, the company’s proposals are to:
- Close all our existing pension schemes to future accrual of benefits on 31 July 2018. This means you would become a deferred member of the Clarks Flexible Pension Scheme. Any benefits you have built up in the Pay Related Section or Investment Related Section of the Scheme up to the closure date would be protected.
- If you have built up benefits under the Pay Related Section of the Scheme, those benefits would be calculated by reference to your ‘Final Pensionable Pay’ on 31 July 2018. This means that any salary increases you may receive after 5 April 2018 would not be taken into account when calculating your benefits under the Pay Related Section, if the proposed changes go ahead.
- Launch a new defined contribution pension plan, with generous Company contributions and full flexibility at retirement, which would be open to all our employees. Under our proposals, on 1 August 2018, you would become a member of the new Clarks Flexible Savings Plan (referred to as the ‘New Plan’).
- Make available more flexible options to all our employees to build up savings and take benefits in a way that works best for them.
- Provide a death-in-service lump sum benefit of 8 x Basic Pay to all employees who join the proposed New Plan. This would be payable instead of the benefits that are payable on death in pensionable service under the existing Scheme. Further details about the death benefits payable under the existing Scheme and under the proposed New Plan are given in your booklet and the Q&A section.
If you have any questions or comments on our proposal, there are a number of ways you can get in touch:
Email: pensionshelpdesk@Clarks.com
Call us: 01458 842664
Or, you can use our online contact form, which will send your query through to the Pensions Team.
Here’s a timeline of what to expect during the consultation.
| Start date of consultation | 15 January 2018 |
| Employee sessions at Distribution Centres and HQ | 16-19, 23-29 January 2018 |
| Closing date of consultation | 15 March 2018 |
| Update on outcome of consultation posted to all employees’ home addresses | April 2018 |
| Anticipated closure of Clarks’ existing pensions arrangements | 31 July 2018 |
| Anticipated launch date for proposed Clarks Flexible Savings Plan | 1 August 2018 |
The employee sessions have now finished.
Useful documents & video
Your questions answered
We know that the proposed changes might raise a number of questions, so we will try to answer as many of these as possible in a set of questions and answers on this website.
The questions and answers will be updated regularly in response to questions raised by employees during the consultation. If you can’t find the answer to the question you are looking for, you can submit a question through this online contact form.
New questions
We did not feel that these were necessary for members of the Flexible Scheme and believe the four examples provided in the pack provide enough of a guide to members on how the changes will have an impact on their pension expectations.
The majority of members in the Flexible Scheme are only participating in the Investment Related Section. You will see from the proposals and the examples in the pack that these members will see an improved overall pension position through our proposals due to the additional options at retirement and the introduction of the new savings alternatives and in many cases, higher company matching contributions compared to the current arrangements.
Due to the future unknown cost of buying units in the Pay Related Section, which has changed every year since the Scheme was introduced, we felt that any illustration would not provide any valid indication on what benefits to expect from this section. Although any illustrations are subject to the assumptions used, we believe for this section any illustration that was provided indicating it was personal to the member would be misleading.
Yes.
Yes.
Yes.
In the main, employees in Plan 35 would receive a lower pension in the future, if the changes go ahead compared to their current expectations. This is not the case for the majority of Flexible Scheme members.
No. The proposals are different for employees who are in Plan 35.
The differences are outlined in your consultation pack or on the website.
This has been a major review of our pension benefits and we would not expect to carry out a similar review or make further changes in the short term. However, we would always want to ensure any of our benefits remain relevant and competitive compared to other companies and we also cannot predict what will happen with future pension legislation.
This is an individual consultation with each employee.
The consultation period must be at least 60 days. We do not anticipate increasing it, as we feel there is time to consult thoroughly within the current timescales.
There is an overall HMRC cap on contributions to a pension scheme. This is £40,000 per annum for most people. Therefore, for most employees, they would be able to contribute as much as they wish to the new Plan but the company matching contribution is capped at 10% of pay.
The elements of pay that are currently used to calculate your death in service lump sum would continue under the new Plan.
Under our current proposals, if you wish to see an IFA, this would be at your expense.
This will be an option and we will provide more details on how this will happen, if we proceed with these changes.
You can continue to pay AVCs to the current pension schemes until they are closed. If they are replaced by the new Plan, you can then pay AVCs to the new Plan.
The rate of investment return will depend on the type of investments you choose to make. We have provided different examples to show how returns can vary.
We have not finalised the new provider or the other savings options that will be provided in the new Clarks Flexible Savings Plan. However, we anticipate that there will be a cash ISA, as well as an alternative ISA where you can invest in shares and other investment funds.
Yes.
This 60-day consultation only relates to the pension changes.
The purpose of the consultation is to get feedback on the current proposals and for employees to suggest options to the company on how the current proposals could be modified/improved.
We do not anticipate this go-live date changing, having planned adequate time for a thorough consultation period.
We are in a period of consultation regarding the proposed changes. During this consultation, we want to provide you with the opportunity to understand the business drivers behind this review and also recognise the inequality that currently exists between employees on different pension arrangements. We welcome your thoughts on these proposals and will listen to all of the feedback from our employees and the Unions throughout this consultation period before taking stock and determining whether the proposals should go ahead as they are, or whether we need to consider other options. In the event that employees do not agree with any final proposals after the consultation period, we would have to review at that time and take further advice on what options are available to allow us to proceed with these critical changes for our business.
Questions about the consultation
The Trustee of the Flexible Scheme is aware of the changes Clarks is proposing. However, the proposals being made are company proposals and the Trustee has not been involved in formulating them. As noted in the question above (‘Can Clarks legally propose changes to my pension arrangements?'), Clarks can, if it wishes, implement the proposed changes without requiring the agreement of the Trustee. Clarks will continue to liaise with the Trustee about the proposals during the consultation process and, should the proposals go ahead, until any final changes are documented and brought into effect.
We have made the appropriate trade unions aware of our proposals.
The law says we must consult on the proposed changes for a minimum period of 60 days. Our consultation runs from 15 January to 15 March 2018.
Yes, under pension law, Clarks can propose changes relating to the way in which future pension benefits are built up. The law requires that we actively engage in consultation with affected employees, which is what we’re doing now.
If the proposals go ahead following the consultation, as permitted under the Rules of the Flexible Scheme, Clarks would close the Flexible Scheme to future accrual of benefits by making a change to those Rules. (The Rules are the document that governs how the Flexible Scheme is run and the benefits that are payable under it.)
Clarks could make this change to the Rules without requiring the agreement of the Trustee of the Flexible Scheme. You would then be enrolled into a new pension arrangement, the Clarks Flexible Savings Plan (assuming you were eligible to be automatically enrolled). This new pension arrangement is referred to in our consultation documents as the ‘New Plan’. We will provide further details on this during the consultation process.
Yes, as part of our comprehensive review, Clarks considered a number of potential options to change our pensions. We believe that the proposals we have outlined to you best meet our objectives.
The proposal affects all Clarks current and future employees in the UK because we are proposing to close all our pension arrangements to future accrual, not just the Clarks Flexible Pension Scheme, and to set up a new arrangement.
The proposals do not affect deferred or pensioner members of the Flexible Scheme, who will continue to receive the benefits they have built up under the Flexible Scheme.
We know that the proposed changes might raise a number of questions, so we will try to answer as many of these as possible in a set of questions and answers on this website. The questions and answers will be updated regularly in response to questions raised by employees during the consultation. If you can’t find the answer to the question you are looking for, you can submit a question through this online form, via email to pensionshelpdesk@Clarks.com or call us on 01458 842664.
Some of you will also be able to attend one of the sessions we are holding at our Distribution Centres or HQ, where you can put questions directly to members of the Pensions Team and our advisers. Find out more about the sessions at DCs and HQ.
Call us on 01458 842664 or email pensionshelpdesk@Clarks.com and we will arrange to have another copy sent your home address.
Questions about the New Plan
Yes, if you have Investment Related Section benefits, you can use your pension account to secure benefits in accordance with the Flexible Scheme Rules. This would require the consent of the Trustee and, if you are retiring within five years of leaving employment, the consent of Clarks. If you have a Pay Related Section pension and wished to retire before your 65th birthday, your pension would be reduced for early payment in the same way that it is now. The Trustee and Clarks would both need to consent to you taking your benefits early. Currently, the earliest age that you can retire is age 55 unless you are retiring early due to ill health. Note that the government may change this age in the future.
You would be able to access your pension account in the New Plan from age 55.
Should the proposals go ahead and you join the New Plan, you would be able to choose to pay a contribution as a percentage of your pay in the same way that you do now. Contributions would be based on your actual part-time salary rather than full-time equivalent earnings.
If you decided to continue paying the same level of contributions to the New Plan as you currently pay to the Scheme, your monthly take-home pay would be unaffected. As a reminder, the table below shows the real cost to you (after allowing for tax relief), if you paid between 2% and 7% of your Basic Pay into the New Plan; this is the same as it would be if the same level of contributions were to be paid to the Flexible Scheme. This table does not show the effect of paying through Smart Pensions, which would further reduce the cost to you.
| Cost to you of monthly pension contribution if your annual Basic Pay is... | |||||
| Contribution rate (% of Basic Pay) | £12,000 | £18,000 | £26,000 | £36,000 | £50,000 |
| 2% | £16 | £24 | £34.66 | £48 | £50 |
| 3% | £24 | £36 | £52.00 | £72 | £75 |
| 4% | £32 | £48 | £69.34 | £96 | £100 |
| 5% | £40 | £60 | £86.66 | £120 | £125 |
| 6% | £48 | £72 | £104.00 | £144 | £150 |
| 7% | £56 | £84 | £121.34 | £168 | £175 |
| If you paid (% of Basic Pay) |
Clarks would pay (% of Basic Pay) |
Total paid into your pension account (% of Basic Pay) |
||
| 2% | 5% | 7% | ||
| 3% | 6% | 9% | ||
| 4% | 7% | 11% | Choice over 2% | If the total paid into your pension account was at least 9%, you would be able to choose to pay the balance into an alternative workplace savings product. |
| 5% | 8% | 13% | Choice over 4% | |
| 6% | 9% | 15% | Choice over 6% | |
| 7% | 10% | 17% | Choice over 8% | |
The final details on the alternative savings products are still to be agreed but we expect ISAs to be one of the options available.
Should the proposals go ahead, Clarks would appoint a trusted and well-known UK pension provider to run the New Plan. We expect to be able to make details available to you in the coming weeks.
Yes, you would contribute via Smart Pensions in the same way that you do now.
No, but we expect that the New Plan would be our only pension arrangement, so you would be missing out on valuable company contributions, if you choose not to join. Note that under current legislation, we have to automatically enrol our employees into a pension scheme. Even if you chose not to join the New Plan, it is possible you might be automatically enrolled into it, either immediately after the closure of the Flexible Scheme or at a later date, although you would be permitted to opt out if you did not wish to remain a member.
Subject to the outcome of this consultation, the Flexible Scheme would close to future service on 31 July 2018.
Questions about my Flexible Scheme benefits
The way in which your pension under the Pay Related Section is calculated is outlined on page 8 of the booklet in your pack. If the changes go ahead, your ‘Final Pensionable Pay’ would be fixed as at 31 July 2018, as this is the date on which your ‘Pensionable Service’ would end. In practice, this means that any salary increases you might receive after 5 April 2018 would not be taken into account when calculating your pension under the Pay Related Section of the Flexible Scheme. However, increases would be applied to your pension to take account of inflation between 1 August 2018 and the date you retire.
No, the current policy will remain in place, meaning you will need to leave service in order to take your benefits from the Flexible Scheme.
The impact of these proposals for all individuals would vary. Therefore, as part of the consultation and communication process, we have prepared some generic examples to show what impact the change might have on a typical employee who has benefits in the Flexible Scheme (either in the Investment Related Section or the Pay Related Section). These examples are enclosed in your pack and you can also view them on this website: examples.
No – in fact, it is likely that the security of any benefits accumulated in the Pay Related Section of the Flexible Scheme to the date of closure would be increased if the proposed changes take effect, as it would be more sustainable for Clarks to provide the necessary funding for these benefits. The proposed changes would not affect the value of the benefits you have built up in your pension account in the Investment Related Section of the Flexible Scheme.
Other questions
The Pensions Regulator (TPR) is the UK regulator of work-based pension schemes. It works with trustees, employers, pension specialists and business advisers, giving guidance on what is expected of them. If you have any concerns about this consultation process that you are unable to resolve by speaking to the Clarks Pensions Department first, you can contact TPR:
Napier House
Trafalgar Place
Brighton BN1 4DW
Telephone: 0845 600 0707
Email: customersupport@tpr.gov.uk
Got a question or feedback?
The consultation will run from 15 January 2018 to 15 March 2018 and allows you to give us your comments and ask questions on the proposal.
You can provide your feedback via the contact form below. This will send your question or comment direct to a member of the Pensions Team. Please do not include personal financial information in the form, as the link is not secure.
Other ways to submit your questions or comments
Email us: pensionshelpdesk@Clarks.com
Call us: 01458 842664
You can also write to us at:
Clarks Pensions Department, 40 High Street, Street, Somerset BA16 0EQ, Internal Box 123.