I'm in Plan 35

You can continue to pay AVCs into Plan 35 until any changes take place. If we closed Plan 35 then you could pay future AVCs into the new Plan.

No.

Yes, after the consultation, should the proposals go ahead, we would run a number of sessions for people either face-to-face or online to run through in detail their options under the new Plan.

No, it would only be a change in your contract in relation to the pension changes.

Yes.

We are consulting about changes to your Plan 35 benefits. Information about Plan 18 and AVC benefits will be covered in future communications.

More details are included in your pack.

Yes. Please email the pensions helpdesk and request a copy.

As outlined in your pension pack, the Trustee of the Fund 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. The agreement of the Trustee is not required to implement the proposed changes if they go ahead and are implemented in the manner proposed (by having individual members enter into contractual agreements with their employers). 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.

Yes.

This has not been decided yet but it would be within two years of the changes taking effect.

It is unlikely we would enter another consultation process but it would depend if and by how much the original proposals change.

As we've outlined in our communications, our current pension arrangements are both unfair and unsustainable and continuing without making substantial changes is simply not feasible. We have shared with you our clear objectives that we need to achieve in order to make our future pensions savings fair for all and sustainable. Our proposals represent the Company's best view of how we meet those objectives.

The purpose of the consultation period is for you and, where appropriate your Union representatives, to meaningfully engage in understanding the proposals, provide constructive feedback and suggest alternative options which could meet the objectives. It's important that as many of you as possible actively engage and share feedback, concerns and alternative suggestions, as it's your opportunity to assist us in shaping the way forward.

At the end of the consultation period we will consider all of the feedback and suggestions and adjust our proposals to incorporate alternative suggestions where feasible, before sharing a final proposal for members' consideration and agreement.

Through effective and constructive consultation, we would like to think that any final proposals will be acceptable to all members. In the event that some members do not feel that is the case, we would have to review at that time and take further advice on what options are available to allow us to proceed with the final proposals and provide fair and sustainable pension provision for all.

Provided you give notice to the Company that you wish to retire before Plan 35 closes on 31 July 2018, then your pension benefits would be calculated based on the early retirement factors applicable to active members of the Fund.

This has always been the case, as the early retirement factors for active members is written into the Fund rules whereas the factors for deferred members are reviewed every three years.

Any service switched from Plan 18 to Plan 35 is included in the calculations, even though the actual months granted are not displayed within the illustrations.

We are proposing higher contributions for Plan 35 in the new Plan, as the majority of employees in Plan 35 will see a reduction in their expected pension compared to what they could have expected if we were not making these changes. For Flexible Scheme members, the proposed level of future contributions will be higher than currently received. Any contribution levels in the new Plan could be subject to change in the future.

There are currently approximately 570 employees who are still in Plan 35 and nearly 2,000 employees in the Flexible Scheme. We also have 50 employees in Plan 18 and approximately 1,000 employees in NEST, which are the other two pension arrangements that we currently offer.

The changes proposed will have an adverse effect on the majority of current Plan 35 members, whereas the majority of employees in our other pension plans will see improvements in their expected pension benefits.

The deficit in Plan 35 when last formally assessed on 31 July 2016 was £81m. Most companies who still operate defined benefit schemes (such as Plan 35) will now have deficits. The size of deficit varies hugely across companies but also the size of the companies and resources to support the deficit will also vary. In Clarks case, we do not believe the current schemes we operate are sustainable for our business.

The level of contributions to continue to keep Plan 35 open has increased substantially over recent years and now average almost 50% of salary for each employee still in the scheme. We have estimated that if we keep Plan 35 open, this will add a further £100m to the current liabilities in the scheme. This is unsustainable for Clarks.

A number of changes in pensions legislation since 2003 have increased the level of funding requirements for companies who operate pension schemes such as Plan 35. In addition, the expectations on future investment returns and how long people will live have seen substantial increases in funding over the last 10 years. These could not have been predicted in 2003.

The company has not had a contribution holiday for more than 20 years. Many companies took pension contribution holidays at this time, as many schemes had surpluses, rather than deficits. Due to pensions legislation at that time, it was not possible to contribute anything further into the pension scheme.

If this was to happen in the future, an agreement on how the pension fund would be funded would have to be reached with any new owner.

As we have said in the information packs that you have received, we believe the current pension fund arrangements are unsustainable for the company, if they are kept open. The liabilities of Plan 35 have increased from £570 million in 2005 to £1.2 billion in 2016.

If we make the changes we are proposing, it will mean that the company would be in a better position to be able to ensure that the benefits (liabilities) that have already built up for all employees will be paid in full.

The new Clarks Flexible Savings Plan is a different pension scheme to the existing Plan 35 arrangement. You are free to choose the level of contribution rate you make to the new Plan (subject to minimum levels required by pensions legislation) and we will would expect that this choice would remain in the future, subject to the Government not requiring employees to save more.

Over the last five years, the Fund has returned c11% per annum. The company does not get any of this return, as the pension fund assets are held separately from the company.

Pension costs can be split into two categories. Firstly, cost of providing future benefits (or accrual), i.e., the contributions that need to be paid into the pension scheme to build up a future year of pension. These costs have more than doubled over the last 12 years and now stand at almost 60% of salary on average (with almost 50% being paid by the Company).

In addition, every three years, the Company has to agree with the Pension Trustees how it will 'pay off' any pension deficit in the Fund. A deficit arises where the total expected liabilities of the pension fund are greater than the value of the assets. Liabilities are calculated as the total of all the pensions that are expected to be paid from the pension fund over the future lifetime of all of its members. These could be active members, deferred members or pensioners and also any possible dependants of these members who may also get pensions in the future. The actuary estimates what this total liability figure will be, based on a number of assumptions about the future and, if the value of the assets that are currently held is less than that figure, then there is a deficit.

The total liabilities of the CJCPF are almost £1.2bn measured at the last valuation in 2016. The assets of the Fund were lower than this by £81m which is the deficit that the company, under pensions law, must agree with the Trustees to pay off. The company paid £16m in March 2017 and will have to pay a further £10m a year from next year to 2025. To give some more context on this, the liabilities of the Fund have doubled since the 2005 valuation when they were £577m. This has been due to more benefits accruing to members, lower expectations in recent years of future investment returns and increasing life expectancy, which means pensions will be paid for longer.

Under pensions law, the company is required to make sure that the Fund remains able to meet its liabilities by paying in the necessary contributions. Fortunately, in recent years, the assets in the Fund have performed well, which has kept the deficit under control but there is no guarantee this will continue in the future, which presents a major risk to the company, as it will be required to meet the costs of any future rise in deficit. That said, the company has paid £109m towards the deficit since 2012 and the deficit that was £110m then had only reduced to £81m in 2016.

By stopping future accrual in the Fund, it will help to contain the increase in future liabilities, which in turn should mean the company is more able to ensure that the necessary funding is available to make sure that all the benefits accrued to end of July 2018 are covered. If we don't close the Fund, it is estimated that more than £100m will be added to the liabilities over the next 10 years.

This is why the total cost of keeping the pension fund open is no longer viable for the company.

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.

We have made the appropriate trade unions aware of our proposals.

Call us on 01458 842664 or email pensionshelpdesk@Clarks.com and we will arrange to have another copy sent your home address.

The Trustee of the Fund 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. The agreement of the Trustee is not required to implement the proposed changes if they go ahead and are implemented in the manner proposed (by having individual members enter into contractual agreements with their employers).

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.

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.

Following the consultation, if the proposals were to go ahead, we would propose to implement the changes by asking for your agreement to them (which would include you agreeing to opt out of Plan 35). If you provided your agreement to opt out, this would mean that you would become a deferred member of the Fund.

You should note that there are two ways commonly used to implement these types of changes: 1) the way we are proposing above, or 2) by the employer and the trustee agreeing a change to the rules that govern how a scheme is run and what benefits are paid under it.

In this case, however, the Rules of the Fund contain a restriction which means that it might not be possible for them to be changed so as to close the Fund and put in place the other elements of the proposals. This is why you would be asked to provide your agreement to the changes if they go ahead. We will provide further details on this during the consultation process.

A valuation was undertaken as at 31 July 2016 for the Fund, which includes Plan 35. This has resulted in significant increases in both deficit contributions and ongoing contributions to pay for future build-up of pensions:

• In respect of the benefits already built up, Clarks paid £16m last year and will pay more than £10m a year between 2019 and 2025. Clarks is committed to paying these amounts.
• Ongoing company contributions required to fund the cost of benefits still being built up have increased from 38% to 48% of Pensionable Pay and it is possible that these costs could increase further in the future. Clarks considers it is unable to absorb this increase in cost into the business and therefore believes that change is needed.

Yes, as part of our comprehensive review, the company 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 existing pension arrangements to future accrual, not just Plan 35. We have around 600 employees in Plan 35, 2,900 employees in other pension arrangements and our remaining employees are not saving for a pension.

The proposals do not affect deferred or pensioner members of the Fund, who would continue to receive the benefits they have built up under the Fund.

Yes.

If the proposals go ahead and you join the Clarks Flexible Savings Plan, you would be able to choose to pay a contribution as a percentage of your pay. Contributions would be based on your actual part-time salary rather than full-time equivalent earnings.

*Under these proposals, transitional arrangements could see the total contribution paid into your pension account increased by 5% of your Basic Pay in 2018 and 2019, if you elect to receive an additional pension payment, rather than a cash payment.

If the proposals were to go ahead, you would build up money in your individual pension account. At retirement, you would have the following options with your DC pension account:

1. Take it as cash, either as one lump sum or a number of withdrawals.
   Under current tax rules, you can take 25% of your pension savings as tax-free cash. It used to be the case that you had to use the rest to buy an annuity (a pension – see below) but the pension flexibilities introduced in 2015 mean you can now take it all as cash, if you want – with everything over 25% being taxed as income at your highest marginal tax rate.
2. Use it to buy an annuity (a pension)
   You could use some or all of your pension savings to buy an annuity from an insurance company. In exchange for a lump sum payment, the insurance company would provide you with an income for life. You can tailor the annuity to meet your needs. For example, your annuity doesn’t have to provide for a spouse’s pension (which is an option that costs more). This may suit you better if you’re not married or if your spouse has their own pension which provides sufficient income for them.
3. Keep the money invested and ‘drawdown’
   ‘Drawdown’ is a pension word that means you keep your pension savings invested and take an income from your account, as and when you need it. This means your money could carry on growing during retirement – but there is also a risk that your retirement income could fall or even run out, especially if stock markets fall.
4. A combination of the above

The table below illustrates how your monthly take-home pay may change if you joined the Clarks Flexible Savings Plan and paid contributions of between 6% and 10% of your Basic Pay, compared to the current contributions for most employees in Plan 35 of 10% of Pensionable Pay.

The figures shown are examples only. The figures assume that you pay your contributions through Smart Pensions (salary sacrifice) in both Plan 35 and the Clarks Flexible Savings Plan, and that your gross earnings are equal to your Basic Pay.

Please note that your Pensionable Pay is lower than your Basic Pay as it includes a deduction in respect of the State Pension Offset. For example, if your Basic Pay is £20,000 (and your gross earnings are also equal to this amount), then your Pensionable Pay would be £13,640 (based on the current Basic State Pension of £6,360 or a pro-rated amount if you work part time).

This means that, if you pay the same percentage of your Basic Pay into the Clarks Flexible Savings Plan as you currently pay into Plan 35 from your Pensionable Pay, you would be paying more into your pension and your take-home pay would therefore be likely to reduce. However, you would also get the benefit of Clarks paying contributions based on your Basic Pay rather than your Pensionable Pay.

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 Clarks Flexible Savings Plan. We expect to make details available to you in the coming weeks.

No but we expect that the Clarks Flexible Savings Plan will 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, if you meet certain criteria, we have to automatically enrol you into a pension scheme. Even if you choose not to join the Clarks Flexible Savings Plan, you may be automatically enrolled into it at a later date.

Subject to the outcome of this consultation, Plan 35 would close to future accrual of benefits on 31 July 2018. After this date, your benefits from Plan 35 would no longer be linked to any future changes in your pay from Clarks. Your Final Pensionable Pay at 31 July 2018 would be used to calculate your benefits. In practice, this means that any salary changes after 5 April 2018 would not affect your benefits.

The Current Basic Pay/Contribution Salary shown is your basic salary on or before 5 April 2017. This may include contractual elements such as shift allowance, but will not include any prospective payments such as additional hours or overtime.

The definition of Pensionable Pay is your Gross Pensionable Pay which you would have earned had you been full time, less an amount equal to the Basic State Pension.

Included within the calculation of your Pensionable Pay are most pay elements that are deemed to be earnings. This includes such elements as Basic Pay, additional hours, overtime and shift allowance, but will exclude elements such as car allowance, travel allowance and bonus payments.

The Pensionable Pay figure shown in your personal illustration is that applicable for the tax year ending 5 April 2017.

The Basic State Pension is currently £6,360 a year, but the actual deduction will depend on the applicable tax year relevant to your Pensionable Pay.

The information provided in your consultation pack describes how your Plan 35 benefits would be affected if the proposed changes go ahead. Further information will be provided to you separately about how your Plan 18 benefits would be affected by the changes.

AVCs paid into Plan 35 before 31 July 2018 would continue to be available to provide benefits on retirement. Note: you can choose to transfer your AVCs into the Clarks Flexible Savings Plan if you wish. It would not be possible for you to pay any further AVCs into Plan 35 after 31 July 2018. However, you could pay AVCs into the Clarks Flexible Savings Plan if you wished (although the company would not pay any additional contributions over and above the agreed contribution rates).

If you joined the Fund before 6 April 1988 on either non-staff or permanent staff conditions of employment and joined Plan 35 with effect from 6 April 1992, you are currently entitled to an additional pension if you retire from active service before your 65th birthday. This additional pension is normally paid as a temporary pension or ‘bridging pension’ until a date determined by the Trustee but can instead be taken as a smaller pension element, payable for life. This additional pension is only available while the Fund remains open and would cease to be available if the proposed closure goes ahead.

Yes, there are three main benefits that would be paid to your dependants if you die while an employee of Clarks and a member of Plan 35 or the Clarks Flexible Savings Plan.

Lump sum: If you are contributing to the new Clarks Flexible Savings Plan and die, your dependants would receive a lump sum equal to 8 x your Basic Pay. This is more than would currently be paid under Plan 35, where a lump sum of 4 x Final Earnings is payable. A further lump sum equal to the value of the contributions you have paid into Plan 35 would also be paid, whether the proposals go ahead or not.

Dependant’s pension: A dependant’s pension would be paid from Plan 35. If the proposals go ahead, your spouse or spousal equivalent would be due a pension equal to 50% of the Plan 35 pension you have built up to the date of closure at 31 July 2018. This is different from the pension that would currently be paid, which is equal to 25% of Final Earnings, regardless of the service you have in the Fund. Generally, we expect the dependant’s pension paid from Plan 35 to be lower if the proposals go ahead. Children’s pensions are also paid to any children who are financially dependent on you at the time of your death.

Pension account: In addition, the value of your pension account in the Clarks Flexible Savings Plan would be paid to your dependants.

Note: some individual members have special benefits which are not covered in the above description.

If you are made redundant while you are an active member of the Fund and you joined the Fund before 1 January 1996, you are entitled to an unreduced pension from the Fund from age 55. If you joined the Fund after 31 December 1995, any pension paid to you early on grounds of redundancy would still be reduced but the reductions that currently apply are more favourable than those that apply to deferred members who take their pension early.

However, if the proposed changes to the Fund go ahead, the Plan 35 pension payable from the Fund to a member who is made redundant would be reduced in the same way as any other pension paid early to a deferred member and the favourable terms described above would no longer apply.

No, under the Rules of the Fund, if you retire from active service because of ill-health and the Trustee of the Fund believes that you satisfy the eligibility criteria for an incapacity pension paid from the Fund, you are currently entitled to an immediate, unreduced pension from the Fund that is calculated assuming that you remained in pensionable service until your 65th birthday. The consent of the company is also required.

If the proposed changes go ahead, you would still be entitled to draw your Plan 35 pension early with the consent of the Trustee but the pension you would receive would only take into account the pensionable service you had completed as a Plan 35 member of the Fund up to 31 July 2018 and would be calculated by reference to your ‘Final Pensionable Pay’ at that date (this would mean that any salary increases awarded to you after 5 April 2018 would not be taken into account). An adjustment would also be made to your pension to take account of increases in inflation between 31 July 2018 and the date of your retirement.

It would still be possible for you to retire from Plan 35 on or after your 55th birthday if the proposed changes were to go ahead but only if you had also left service of the company. The terms on which your pension would be paid to you would be different. In particular, the reduction that would be applied to your benefits would be likely to be greater than if you had retired as an active Plan 35 member because the reduction factors that apply for deferred members who draw their benefits early are less generous than those that apply for members who retire early from active service. You would also need the consent of the Trustee (rather than the consent of the company) to take your benefits early.

For members who joined after 6 April 1992, under the current Rules of the Fund, it is possible for active members who are aged 62 and over to draw their pension without reduction, provided the company agrees. If the proposed changes go ahead, a reduction would be applied to all pensions paid before age 65.

For members who joined on or before 6 April 1992 (or those who are former members of the K Shoes Contributory Pension Scheme), it is possible for active members who are aged 60 and over to draw their pension without reduction. If the proposed changes go ahead, they will still be able to draw their pension from age 60 without reduction. However, different factors may apply for retiring before age 60.

For some members, these changes could make a substantial difference to the value of their pension if they chose to retire early. Further details of the impact of the changes for members taking early retirement will be available in the presentations and videos.

No – in fact, it is likely that the security of your pension benefits accumulated to the date of closure may 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 key difference in risk relates to investments, as this risk is effectively taken by Clarks in Plan 35 and by you in the new Clarks Flexible Savings Plan. Under Plan 35, if investments do not perform then Clarks will be required to increase its contributions (provided it is in a position to be able to do this), in order to ensure you receive the benefits promised. Under the new Clarks Flexible Savings Plan, if investments do not perform then in order to maintain your pension expectations, you may have to make higher contributions or a lower pension income may be available. The cost of purchasing an annuity will also vary.

The impact of these proposals for all individuals would vary. Therefore, as part of the consultation and communication process, we have prepared personal illustrations as part of your consultation pack. These show your estimated pension, based on a number of assumptions about what might happen in the future, if the proposals go ahead, and also what your pension would be if Plan 35 stays open to future accrual of benefits.

No, the current policy will remain in place and you would need to leave service in order to take your Plan 35 benefits.

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