A

Guidefor Members

MMC UK Pension Fund

Mercer

Page

Section 1 How the Fund works 1

Section 2 The Fund in brief 3

Section 3 Money Purchase section 4

Investment 4

Retirement benefits 5

Early and late retirement 6

AVC benefits - deferred payment 6

Death in service 7

Death after retirement 7

Pension increases 7

Leaving 8

Section 4 Defined Benefit section 9

Retirement benefits 9

Early and late retirement 10

Death in service 11

Death after retirement 11

Pension increases 12

AVC benefits - deferred payment 12

Leaving 12

Section 5 Further information 14

Contents

1

The Company believes that the provision of apension fund is an important part of your pay andbenefits package and offers a flexible pensionarrangement designed to help you plan for thefuture with confidence, whatever your age orpersonal circumstances.

The purpose of the Fund is to:

l give you a secure income when you retire

l provide financial protection for you and yourdependants should you die before retirement.

The Fund uses two methods of providing benefitsaccording to your age on joining the Fund.

The Money Purchase section of the Fund providesbenefits for eligible employees who are under age 30when joining the Fund and the Defined Benefitsection provides benefits for eligible employees whoare over age 30 on joining.

On reaching age 30 members will be able to chooseeither to stay in the Money Purchase section of theFund or switch to the Defined Benefit section fromthe following 1 April.

Details of the Money Purchase section of the Fundcan be found in Section 3. Please refer to Section 4for more information on the Defined Benefit sectionof the Fund.

Who can joinContributory membership is open to employeesunder age 65 who fall into one of the categoriesbelow:

l Permanent employees

l Temporary employees who are in receipt of thebenefit allowance

If you are a permanent employee, you will beautomatically entered into the Fund unless youindicate to the contrary (see ‘‘Opting out of the Fund’’on page 14). If you are employed on a temporarycontract, you will be advised by the Companywhether you are eligible to join the Fund and willneed to complete an application form to join.

DefinitionsCertain terms have special meanings which are givenin a table of definitions on the fold out flap at theback of this guide. Where a defined word is used inthe main text it appears in italics.

Contributions to the FundYour contributionsThe Fund is designed to provide for your financialsecurity, both now and in the future. Your share ofthe cost is currently 5% of your Pensionable Salaryfor members of the Defined Benefit section of theFund or 3% of your Pensionable Salary for membersof the Money Purchase section. However, the actualcost to you will normally be much less because youreceive full tax relief on your contributions at themaximum rate to which you are liable. So if you paytax at 22%, each £1 you contribute only costs you78 pence. The PAYE system automatically adjustsfor tax without any action on your part.

Contributions normally cease at NormalRetirement Age.

In addition, because the Fund is contracted out ofall or part of the State Second Pension (S2P) youpay reduced National Insurance contributions(see page 17).

Company contributionsThe Company is responsible for meeting the balanceof the cost of the benefits from the Fund - both theDefined Benefit section and, separately, the amountsto be paid or credited to the Individual Accounts (inaddition to your own contributions) to providebenefits under the Money Purchase section.

Contributions are paid directly to the Fund by the19th of the month following the month of collection.

All the assets of the Fund are held in Trust, separatefrom the Company assets, under the responsibility ofthe Trustee.

The Company sets the level of its contribution tothe Defined Benefit section having regard to theadvice of the Scheme Actuary who reviews the costat regular intervals.

How the Fund works

Section 1

2

Additional voluntary contributionsIf you wish to boost your retirement benefits, youmay choose to do so by paying additional voluntarycontributions (AVCs). You can make AVCs in twoways if you are a member of the Defined Benefitsection:

l You can increase your Benefit Accrual Rate bychoosing to pay higher contributions to theFund under ‘‘Options’’. For further informationplease see the ‘‘Flexible Defined Benefit AVCArrangement’’ leaflet which accompaniesthis guide.

l You can pay AVCs on a money purchase basiswhere contributions will be invested in a personalaccount with a savings institution chosen by theTrustee. Each year you will receive a statementshowing the AVCs you have paid and the value ofyour AVC fund. For further details of the moneypurchase AVC arrangement please contact theadministrator. You can download the ‘Applicationto pay AVCs’ form from the Fund website, detailsof which can be found on page 14.

If you are a member of the Money Purchase sectionof the Fund you may pay additional contributions toyour Individual Account.

From 6 April 2006, you will be able to pay up to100% of your taxable earnings from the Companyinto the Fund as normal contributions and AVCs,inclusive of any contributions to other pensionarrangements and receive tax relief. The AnnualAllowance will act as a limit on the amount by whichyour pension benefits and/or pension savings cangrow in a year, before being subject to tax.

You may also pay into a personal or stakeholderpension plan.

Although AVCs and personal or stakeholder pensionarrangements may be an appropriate method ofsaving for retirement, there may be more flexibleforms of investment available to you and we stronglyadvise you to seek independent financial advicebefore you make any decisions.

Benefits from the FundThe pension you receive from the Fund will normallybe paid in monthly instalments direct to your bankaccount. Pensions are subject to income tax and, ifappropriate, this will be deducted before payment.

In addition, subject to your National Insurancecontribution history, you should also receive theBasic State Pension from State Pension Age(see page 17).

Transfer of pension from aprevious arrangementTransfers from previous schemes are not beingaccepted into the Fund.

Expression of Wish formsOne of the duties of the Trustee is to decide whoshould receive any lump sum if a member dies.To help the Trustee make this decision, you shouldcomplete the Expression of Wish form whichaccompanies this guide if you have not already doneso. Although the Trustee is not bound to follow yourwishes it will take them into account. You should atall times ensure that your Expression of Wish form isup-to-date.

If you wish to change your beneficiaries, you shouldcomplete a new form immediately. Forms can bedownloaded from the Fund website, details of whichcan be found on page 14.

Leaving the FundIf you leave the Fund, no further contributions willbe made, either by the Company or by you. Detailsof the benefits payable from the Fund on leavingcan be found on pages 8 (Money Purchase) and12 (Defined Benefit).

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MMC UK Pension Fund

Section 2

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Are you under age 30*on joining?

Yes No

Money Purchase section member

ContributionsMembers: 3% of Pensionable Salary

Company:To age 25* 3% of Pensionable Salary

From age 25* 5% of Pensionable Salary

At age 30* you can transferto be a member of the Transfer Defined Benefit section member

Defined Benefit section for future service

Don’t transfer

Continue as member of theMoney Purchase section with

5% Company contribution

* age related changes take effect on the 1st Aprilcoincident with, or immediately following, therelevant birthday.

** you may alter your Benefit Accrual Rate annuallythrough Options (see the “Flexible Defined BenefitAVC arrangement” leaflet which accompanies thisguide for further information).

The Fund in brief

Unit of pension for each year ofservice as a member of the Defined

Benefit section =

1/60th ** x Pensionable Salary

5% Member Contribution

Company pays balance of cost

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Money Purchase sectionInvestmentWhilst you are a member of the Money Purchasesection of the Fund, both your own and thosecontributions paid or credited to you on behalf ofthe Company are allocated to an Individual Account.This money will be invested on your behalf and thevalue of the Fund you have built up will be used toprovide your benefits at retirement. When you join,you will need to complete an Investment ChoiceForm, indicating your choice of investment options.

It is important that you decide how much of yourIndividual Account goes into each of the fundsand that you complete the Investment Choiceform. If you do not complete a form your IndividualAccount will be invested as decided by the Trustee.Please see the separate investment leaflet forfurther information.

Investment fundsThe Trustee has chosen a number of differentinvestment funds in which your Individual Accountcan be invested. The funds are explained in moredetail in the investment leaflet entitled ‘Choosingyour Investments’, which accompanies this guide.

The Trustee and the administrator are not able toprovide advice in connection with your investments.If you are in any doubt about your investmentchoices you are strongly recommended to seekindependent financial advice.

Investment managerThe Trustee is responsible for the investment ofMoney Purchase Individual Accounts and for theselection of the investment managers from whichyou may choose.

4

Section 3

Retirement benefitsAny examples given to you concerning the value ofyour Individual Account or your possible benefits atretirement depend on the assumptions made aboutcontribution levels, investment returns and the costof buying a pension when you retire. Whether theexamples accurately predict the benefits ultimatelypayable depends on whether these assumptions areborne out in practice. The amount of your benefitscannot be guaranteed.

Choosing your benefits at retirementYour pension, and any pension for a Spouse, Childrenor Dependent Relative, will be payable through anannuity bought from an insurance company. You willbe given details shortly before retirement of theoptions and costs of converting your IndividualAccount into a pension and any fees for arrangingthis. At retirement you will need to decide the form ofbenefits you wish to provide for yourself and yourdependants. The process of setting up your pensionmay take several weeks because of the proceduresinvolved. You can help to reduce this delay by tellingthe Trustee which options you want to take and byreturning any forms as soon as possible.

Your retirement benefits may include the following:

l Five year guarantee

If you die within the first five years of yourretirement, the unpaid balance of five years’pension payments will be paid to yourdependants or estate as a lump sum.

l Spouse’s/Dependants’ pensions

l Pension increases

You may use your Individual Account to buy a pensionwith any level of pension increases or none at all.

l Cash sum

You may be able to take up to 25% of the value ofyour Individual Account (including any AVCs) as acash sum when you retire, subject to a maximumof 25% of the Lifetime Allowance.

Under current legislation your cash sum will be taxfree unless the value of your benefits from all pensionarrangements exceeds the Lifetime Allowance.

You should note, however, that any cash you takewill reduce the amount available in your IndividualAccount to purchase your pension.

Before you begin to receive a pension from yourIndividual Account, the Trustee will check to ensurethat your Individual Account is at least equal to thevalue of the State Reference Scheme.

If you have built up benefits above the LifetimeAllowance they will be subject to additional tax,which may be deducted from your benefits orcollected through self-assessment. The Governmentwill allow employees to protect their pension rightswhere they are likely to have benefits that are inexcess of the Lifetime Allowance. However, this is acomplex area and you should contact an independentfinancial adviser for further information.

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6

Early and late retirementChoosing to retire early fromCompany service Currently, you may choose to retire with animmediate pension from the Fund at any time afteryour 50th birthday, subject to the agreement of theCompany and the Trustee although you should notethat, from 6 April 2010, the earliest age at which itwill be possible to start receiving your pension willincrease to 55. Your benefits will depend on the valueof your Individual Account, the sort of pension youchoose and the cost of buying a pension at the timeyou retire.

Generally speaking, the younger you are when youretire the shorter the time your Individual Account willhave been invested and the more it will cost to buyeach £1 of pension per annum. So, if you plan toretire early, you should ensure your financial planningmeets your retirement needs. You may wish to seekindependent financial advice on this.

Retiring early on medical groundsThe Company operates an Income ProtectionScheme, which may provide an income on disability,subject to insurer acceptance. This benefit is notprovided from the Fund. Full details are availablefrom the HR Benefits Department at the followingaddress:

Westgate House52 WestgateChichesterPO19 3HF

Under exceptional circumstances, it may be possiblefor you to retire with an immediate ill-health pensionfrom the Fund. The pension may be reduced due tothe higher cost of buying the pension at an earlierage. If the cost of annuities is high, this may result ina lower pension, depending on your age and thenature of your illness.

Provision of an ill-health pension is subject to theconsent of the Company and the Trustee and theprovision of appropriate medical evidence.

Late retirementYou may continue in employment after NormalRetirement Age at the discretion of the Company,but you may not continue accruing benefits in theFund. Your Individual Account will remain investedand will be used to purchase a pension at youractual retirement date.

AVC benefits - deferred paymentWhen you retire and start taking your main benefitsunder the Fund, you may defer taking your AVCbenefits up to, but not beyond, your 75th birthday.Your AVCs will remain invested during any periodof deferment.

If you die while you are receiving your main benefitsbut deferring your AVCs, the AVCs will normally bepaid as an additional lump sum death benefit asdecided by the Trustee.

You cannot normally pay any further AVCs to theFund once you retire.

There are possible financial risks in choosing thisoption. Your AVCs that remain invested may not growas you hope. When you wish to use the AVCs toprovide retirement benefits, the cost of doing so mayhave gone up. Before choosing to defer payment ofAVC benefits, you may want to obtain independentfinancial advice on whether this is a suitable optionfor you.

Annual statementEach year you receive a personal statement showingthe value of your Individual Account and thecontributions paid into it during the year and theestimated pension that could be purchased.The estimated pension will be based on expectedfuture returns, among other factors. You will be ableto request a Fund annual report with more detailsand performance figures.

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MMC UK Pension Fund

Death in serviceIf you die in service whilst contributing as a MoneyPurchase section member the following willbe payable:

Death in service lump sumThe death in service lump sum for ContributingMembers of the Fund is three times your BasicSalary unless you select a different multiple of salarythrough ‘‘Options’’, subject to a maximum of theLifetime Allowance. It is important that you completean Expression of Wish form to assist the Trustee inthe distribution of this lump sum payment. Pleaserefer to the section on ‘Inheritance tax’ on page 18for further details of how this benefit will be paid.

Any lump sum benefits payable on your death willbe paid from the Fund where possible. You will beadvised separately if any of your cover will beprovided outside the Fund.

Spouse’s pensionYour Spouse will receive a pension equivalent to 30%of your Final Pensionable Salary at the date of death,subject to a minimum level based on the StateReference Scheme. If your Spouse is, at the date ofyour death, at least 15 years younger than you, thepension may be reduced.

Children’s pensionsIn addition to the Spouse’s pension, your Children(up to a maximum of 4) will receive pensions.Each Child will receive a pension of 5% of your FinalPensionable Salary at date of death.

This pension will stop once the Child attains age 18(or 23 if in full-time education). It can continuebeyond this age if, at the time of your death, theChild was dependent on you through physical ormental impairment.

Dependant’s pensionIf you are not married, the Trustee may choose topay a pension to a Dependent Relative where there isfinancial interdependency at the date of your death,subject to certain criteria.

Any pension paid to a Spouse, Dependent Relative orChild will be subject to income tax but its value doesnot count towards your Lifetime Allowance or therecipient’s own Lifetime Allowance.

Death after retirementIn the event of your death after retirement, yourdependants will be entitled to the benefits youspecified on retirement (see page 5). For example:

l When you retired you may have chosen to havea pension that pays a lump sum if you were to diewithin 5 years of your pension starting.

l Alternatively, you may have chosen to have apension with no lump sum payable on death.

l You may have chosen to provide a pensionpayable to a Spouse, Dependent Relative orChildren upon your death.

l You may have chosen to buy a pension with anylevel of annual increase, or none at all, and anypension payable to a Spouse, Dependent Relativeor Child will be increased accordingly.

Pension increasesThe timing of any annual increases applied to the pension will be determined by the insurancecompany with whom the pension has beenpurchased.

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MMC UK Pension Fund

LeavingIf you leave the Fund, your own contributions and thecontributions paid or credited to you on behalf of theCompany will cease.

Less than two years’Pensionable ServiceLess than 3 months’ Pensionable ServiceYou will be entitled to a refund of your owncontributions plus any AVCs, less statutorydeductions. You will be reinstated in the StateSecond Pension for this period of your employment.

More than 3 months’ but less than 2 years’Pensionable ServiceYou will be entitled to a refund of contributions asdescribed above.

As an alternative to taking a refund, you may transferthe full value of your Individual Account to anotherpension arrangement. You will receive a transfervalue quotation when you leave and you will havethree months in which to decide whether to transferyour pension or to take the cash refund, lessdeductions. See ‘‘Transferring your IndividualAccount’’ in the next column for further details.

You may not leave your Individual Account in theFund.

Two or more years’Pensionable ServiceYour Individual Account will remain invested until yourNormal Retirement Age and a pension will be boughtat that time.

As an alternative to leaving your Individual Accountinvested in the Fund, you may transfer it to anotherpension arrangement.

You may ask the Trustee for a statement of the valueof your Individual Account at any time. The Fund isnot obliged to provide another statement within12 months of the date of your last request.

Transferring your Individual AccountYou may ask the Trustee to transfer the value of yourIndividual Account to one of the following pensionarrangements as long as the transfer takes place atleast one year before your Normal Retirement Age:

l a registered pension plan with your new employer;or

l a registered personal pension plan or stakeholderplan of your choice, or

l an individual insurance policy in your name(commonly known as a ‘‘buy-out’’ policy).

The transfer value will be equal to the value of yourIndividual Account at the date of transfer. If thevalue of the State Reference Scheme is higher, thenthis higher amount will be available to transfer. Ifyou have made any AVCs, their value will be inaddition to the transfer value. A deduction may bemade for expenses.

You should seek independent financial advice beforeproceeding with a transfer.

Death before retirementIf you leave the Company but keep your benefits inthe Fund, the full value will be used to provide apension for your Spouse (subject to a minimumbased on the State Reference Scheme), orDependent Relative, and Children in the event of yourdeath before retirement.

9

Defined Benefit section

Retirement benefitsBenefits for members of the Defined Benefit sectionof the Fund are calculated according to a formula,based on salary and service.

Pension formulaFor each year of service as a member of the DefinedBenefit section of the Fund you will earn a unit ofpension as follows:

1/60th x Pensionable Salary

Each unit of pension will be adjusted at the end ofeach year (31 March) by the rate of inflation(measured by the Retail Prices Index) up to amaximum of 5% a year until you cease activemembership. Please refer to the example below forfurther details of how benefits for a member of theDefined Benefit section are calculated.

Altering your accrual ratethrough OptionsYou can alter your Benefit Accrual Rate to 1/45th,1/50th or 1/70th through “Options”. Please referto the separate Flexible Defined Benefit AVCArrangement leaflet which accompanies this guidefor further information.

Cash optionWhen you retire you have the option to exchangepart of your pension for a cash sum, which is free oftax under current legislation unless the value of yourbenefits from all pension arrangements exceeds theLifetime Allowance.

You may take up to 25% of the value of yourretirement benefits (including any AVCs) as a cashsum subject to a maximum of 25% of the LifetimeAllowance. You should note, however, that any cashyou take will reduce your pension.

Section 4

Example The following example will help to explain how your pension as a member of the Defined Benefit section of theFund builds up. In the example below, it is assumed that the RPI increases by 2.5% in each year and that yourPensionable Salary goes up by 3% each year.

Fund Year Pensionable Pension Unit of 1/60th Accumulated pension at the end of the (starts each Salary during Fund year (i.e. at 31 March)1 April) the year

Year one £30,000 1/60 x £30,000 = £500 (£500 plus 2.5% increase) = £513

Year two £30,900 1/60 x £30,900 = £515 (£1,028 plus 2.5% increase) = £1,054

Year three £31,827 1/60 x £31,827 = £530 (£1,584 plus 2.5% increase) = £1,624

Year four £32,782 1/60 x £32,782 = £546 (£2,170 plus 2.5% increase) = £2,224

Year five £33,765 1/60 x £33,765 = £563 (£2,787 plus 2.5% increase) = £2,857

At the end of year five, the pension earned would be £2,857 p.a. for this five year period.

Each year’s unit of pension is earned during the Fund year which begins on each 1 April. Each unit ofpension earned will first be increased at the end of the Fund year (i.e. on 31 March) in which it was earned.

So, for example, the unit of pension earned during the Fund year that runs from 1 April 2006 to 31 March 2007will receive its first increase on 31 March 2007. The increase will be in line with the rise in the RPI for the yearto the previous December (subject to a maximum increase of 5%) – therefore in this example, the increase at31 March 2007 will be based on the rise in the RPI for the year to December 2006.

Subsequent increases will be applied on each following 31 March.

10

Early and late retirementChoosing to retire early fromCompany serviceCurrently, you may choose to retire with animmediate pension from the Fund at any time afteryour 50th birthday, subject to the agreement of theCompany and the Trustee, although you should notethat, from 6 April 2010, the earliest age at which itwill be possible to start receiving your pension willincrease to 55.

If you retire early, your pension will be based on theunits of pension you have earned as a member of theDefined Benefit section of the Fund, revalued to youractual retirement date as described on page 9. It willthen be reduced to take account of the longer periodfor which it will be paid. The rate of reduction will beagreed by the Company and the Trustee.

Options at retirementIf you retire early, you may still have the option ofexchanging part of your annual pension for a cashsum. If you take this option, your pension will bereduced. The amount of reduction varies depending onyour age when you retire. The factors used for thiscalculation are reviewed from time to time; you will beadvised of the reduction before you make a finaldecision.

Retiring early on medical groundsThe Company operates an Income ProtectionScheme, which provides an income on disability,subject to insurer acceptance. This benefit is notprovided from the Fund. Full details are availablefrom the HR Benefits Department at the address below:

Westgate House52 WestgateChichesterPO19 3HF

Under exceptional circumstances, it may be possiblefor you to retire with an immediate ill-health pensionfrom the Fund. The pension may be reduced to takeaccount of the longer period for which it will be paid.

Provision of an ill-health pension is subject to theconsent of the Company and the Trustee and theprovision of appropriate medical evidence.The Trustee would require evidence of yourcontinuing ill health on an ongoing basis up to yourNormal Retirement Age.

Late retirementYou may continue in employment after NormalRetirement Age at the discretion of the Company,but you may not continue accruing benefits in theFund. You may be able to draw an immediatepension or defer drawing it until you actually retire,when the Trustee may increase the pension for latepayment in line with actuarial advice.

Death in serviceIf you die in service whilst contributing as a memberof the Defined Benefit section of the Fund thefollowing will be payable:

Death in service lump sumThe death in service lump sum is three times yourBasic Salary unless you select a different multiple ofsalary through ‘‘Options’’, subject to a maximum ofthe Lifetime Allowance. It is important that youcomplete an Expression of Wish form to assist theTrustee in the distribution of this lump sum payment.Please see page 2 for further details.

Any lump sum benefits payable on your death willbe paid from the Fund where possible. You will beadvised separately if any of your cover will beprovided outside the Fund.

Spouse’s pensionYour Spouse will receive an amount equal to 60%of the pension you would have received at NormalRetirement Age as a member of the Defined Benefitsection of the Fund had you stayed in the Fund untilthen including all revaluations received prior to thedate of your death (but with no further allowance forany future revaluations). The pension will be paid inmonthly instalments for the rest of your Spouse’s life.If your Spouse is, at the date of your death, at least15 years younger than you, the pension may be reduced.

Children’s pensionsChildren’s pensions are also payable for the benefitof Children (up to a maximum of 4). Each Child willreceive 10% of the pension you would have receivedat Normal Retirement Age had you stayed in theFund until then including all revaluations receivedprior to the date of your death (but with no furtherallowance for any future revaluations). If there is noSpouse’s or dependant’s pension payable in respectof the member, each Child’s pension will be doubled.Children’s pensions will normally be paid until age 18,or until age 23 if in full-time education. It can continuebeyond this age if at the time of your death, the Childwas dependent on you through physical or mentalimpairment.

Dependant’s pensionIf you do not have a Spouse, the Trustee may chooseto pay a pension to a Dependent Relative wherethere is financial interdependency at the date of yourdeath, subject to certain criteria.

Death after retirementIn the event of your death after retirement thefollowing benefits are payable:

Five year pension guaranteeIf you die within the first five years of your retirement,the unpaid balance of five years’ pension paymentswill be paid as a lump sum by the Trustee. The Trustee will always try to follow your wishesas to whom the lump sum will be paid but it retainsdiscretion so that under current legislation there isno liability for inheritance tax.

Spouse’s pensionYour Spouse will receive a pension equal to 60% ofyour pension at the date of your death. The value, atthe date of your death, of any pension you gave upfor cash will be included for the purpose of thiscalculation. The pension would be paid in monthlyinstalments for the rest of your Spouse’s life.

If your Spouse is, at the date of your death, at least15 years younger than you, the pension may be reduced.

Children’s pensionsChildren’s pensions are also payable for the benefitof Children (up to a maximum of 4). Each Child willreceive 10% of what would have been the pensionwhen you died if you had not converted any of yourpension into a cash sum. If there is no Spouse’sor dependant’s pension payable in respect of themember, each Child’s pension will be doubled.Children’s pensions will normally be paid until age 18, or until age 23 if in full-time education. It can continue beyond this age if at the time ofyour death, the Child was dependent on you throughphysical or mental impairment.

Dependant’s pensionIf you do not have a Spouse, the Trustee may chooseto pay a pension to a Dependent Relative wherethere is financial interdependency at the date ofyour death, subject to certain criteria.

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MMC UK Pension Fund

Pension increasesOnce in payment, your pension or any Spouse’s,Dependent Relative’s or Children’s pensions will beincreased each year in line with the RPI increase, upto a maximum of 2.5% per annum, as required bycurrent legislation. This increase, together with any discretionary increases the Trustee and theCompany agree to give will be made from1 September each year.

Where your pension has been in payment for lessthan a full year at 1 September, you will receive aproportionate increase based on the number ofmonths that your pension has actually been paid.

Money Purchase AVCbenefits - deferredpaymentWhen you retire and start taking your main benefitsunder the Fund, you may defer taking your moneypurchase AVC benefits up to, but not beyond, your75th birthday. Your AVCs will remain invested duringany period of deferment.

If you die while you are receiving your main benefitsbut deferring your AVCs, the AVCs will normally bepaid as an additional lump sum death benefit asdecided by the Trustee.

You cannot normally pay any further AVCs to theFund once you retire.

There are possible financial risks in choosing thisoption. Your AVCs that remain invested may not growas you hope. When you wish to use the AVCs toprovide retirement benefits, the cost of doing so mayhave gone up. Before choosing to defer payment ofAVC benefits, you may want to obtain independentfinancial advice on whether this is a suitable optionfor you.

Deferred payment does not apply to Flexible DefinedBenefit AVCs, which must be taken at the same timeas your main benefits from the Fund.

Leaving If you leave the Fund, no further contributions will beallowed either by the Company or by you.

Less than two years’Pensionable ServiceLess than 3 months’ Pensionable ServiceYou will be entitled to a refund of your owncontributions together with any AVCs, less statutorydeductions. You will be reinstated in the StateSecond Pension for this period of your employment.

More than 3 months’ but less than 2 years’Pensionable ServiceYou will be entitled to a refund of your owncontributions as described above. As an alternativeto taking a refund, you may opt for a full transfervalue to another registered pension arrangement.

You will receive a transfer value quotation when youleave, and will have three months in which to decidewhether to transfer your pension or to take the cashrefund less deductions. See ‘‘Transferring yourbenefits’’ overleaf for further details.

You may not leave your contributions in the Fund.

Two or more years’Pensionable ServiceYou will be entitled to a deferred pension, payablefrom Normal Retirement Age. This will be calculatedbased on the units of pension you have earned as amember of the Defined Benefit section of the Fund,revalued to your actual date of leaving as describedon page 13.

As an alternative to a deferred pension, you mayask the Trustee to transfer the value of your pensionbenefit to an alternative pension arrangement.See “Transferring your benefits” overleaf forfurther details.

You will receive a written statement showing yourentitlement within 3 months of your request.The cash equivalent will be guaranteed for 3 monthsfrom the date it was calculated. The Fund is notobliged to provide another statement within12 months of the date of your last request.

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MMC UK Pension Fund

13

Inflation protectionTo help offset the effects of inflation your deferredpension will be increased each year in line with theRPI increase up to a maximum of 5% per annumbetween the date you leave and your NormalRetirement Age. Once in payment your deferredpension will be increased each year in the same wayas set out on page 12.

Death before retirementIf you should die before retirement, a Spouse’spension equal to 60% of your deferred pension,including any increases up to the date of your death,will be payable for the rest of your Spouse’s life.Children’s pensions may also be payable at the ratesdescribed on page 11.

Transferring your benefitsYou may ask the Trustee to transfer the value of yourpension benefit to one of the following pensionarrangements as long as the transfer takes place atleast one year before your Normal Retirement Age:

l a registered pension plan with your new employer;or

l a registered personal pension plan or stakeholderplan of your choice, or

l an individual insurance policy in your name(commonly known as a “buy-out” policy).

The transfer value will take the form of a capitalsum, known as the cash equivalent, representingthe value of the benefits you earned as a memberof the Defined Benefit section of the Fund up to thedate you left. The cash equivalent is based on agreedassumptions and is calculated to be sufficient, at thedate of calculation, to provide the pension at yourNormal Retirement Age. Allowance is made forany guaranteed or statutory increases to beapplied between the date you leave and yourNormal Retirement Age, but not for any possiblediscretionary pension increases. An amount maybe deducted for expenses.

If you have been a member of the Money Purchasesection of the Fund, the amount of your IndividualAccount will be in addition to the cash equivalentfrom the Defined Benefit section. Similarly, if youhave made any money purchase AVCs, their valuewill be in addition to the Defined Benefit cashequivalent.

You should seek independent financial advice beforeproceeding with a transfer.

Further informationLooking after your interestsThe Fund is established under a trust andadministered by a corporate trustee, MMC UKPension Fund Trustee Ltd. Amongst other things, thismeans that the Fund’s assets are legally separatefrom those of the Company and the Trustee isresponsible for ensuring that members’ entitlementsare protected. The administration of benefits and theinvestment of the Fund’s assets fall within theresponsibility of the Trustee.

The members of the board of MMC UK Pension FundTrustee Ltd serve as individual Trustee Directors.Most of the Trustee Directors are appointed by theCompany but at least a third of them are MemberRepresentative Trustee Directors (‘‘MRTDs”).The procedure for appointing MRTDs is through theirnomination by the Pensions Forum from among itselected staff members and subject to approval by theother Trustee Directors. The Pensions Forum is acommittee established by MMC UK Pension FundTrustee Ltd., to which a number of active membersof the Fund and pensioners are elected by activeFund members and pensioners from thesameconstituency.

You can contact the Trustee through theadministrator as described below:

Postal address:

MMC UK Pension FundPO Box 476Westgate House52 WestgateChichester PO19 3WZ

Tel: 0845 6000293Fax: 01243 522001Email: mmcpensions.uk@mercer.comWebsite: www.pensions.uk.mmc.com

Keeping you in the pictureKnowing where you stand with your pension is veryimportant. As a Contributing Member of the Fund,you will be sent regular information designed to keepyou in the picture about your benefits and the Fundin general. You will also receive details of specificchanges, events and options relating to the Fund.

Pension benefits basis that appliesfrom 1 April 2006This booklet describes the basis for calculatingbenefits earned from 1 April 2006 onwards. Memberswith continuous membership of the Fund, whoearned benefits on a different basis up to 31 March2006, should refer to their previous schemedocumentation together with the information inthis guide.

Opting out of the FundIf you are a permanent employee, you will beautomatically entered into the Fund unless youindicate to the contrary.

You may decide not to join the Fund at all or to optout at a later date and make your own pensionarrangements. This decision should not be takenlightly and you are encouraged to take independentfinancial advice before doing so as the Company willno longer provide pension benefits for you or yourdependants other than standard benefits for leavers(see pages 8 and 12) in respect of any benefitsaccrued to the date of opt out. Please note that onceyou have opted out of the Fund your life assurancecover will be reduced to two times your Basic Salary,although you may select a different multiple throughOptions.

Should you decide to opt out of the Fund, you willneed to complete a form, which can be obtainedfrom the administrator at the address in the previouscolumn. If you wish to rejoin the Fund subsequently,you will only be able to do so with the Company’sand the Trustee’s consent, and you may be subject tospecial terms.

If you leave the Fund to take out a personal orstakeholder pension arrangement the Company willnot contribute towards it on your behalf.

If you have been a member of both the DefinedBenefit section and the Money Purchase section ofthe Fund, you will remain entitled to both thesebenefits on leaving.

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Section 5

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MMC UK Pension Fund

Paying into other pensionarrangementsMembers of the Fund can also contribute to theirown personal pension arrangements, whether apersonal pension policy or a stakeholder policy.

Staying in touchKeeping in touch while you are with the Company isone thing, but it’s easy to lose touch if you move on.

If you leave the Company and your benefits remain inthe Fund, the Trustee will keep a record of your lastknown address so that you can be contacted aboutyour benefits or any issues affecting the Fund. It isimportant that you keep the administrator informed ofany change of address once you have left.

If for any reason you lose track of the Trustee’s or theCompany’s address, you will be able to contact themthrough the Pension Tracing Service. In common withother pension schemes, the Trustee providesinformation about the Fund, including a contactaddress for inclusion in a pension registry.

The address to write to is:

Pension Tracing ServiceTyneview ParkWhitley RoadNewcastle upon TyneNE98 1BA

Help at handThe aim of the Trustee is to give you clear, straightforwardinformation which is timely and easy to understand.However, communication is a two way process and werecognise that there may be occasions when there arequestions you want to ask, or issues you would like todiscuss with someone. In the first instance, pleasecontact the administrator at the address on page 14.

Seeing eye to eyeMost queries or problems can be dealt with andresolved, informally, as they arise. However, in rare casesa disagreement may occur which requires a more formalprocedure for its resolution. In these circumstances aformal request may be made to invoke the Fund’sInternal Dispute Resolution Procedure (IDRP).

The IDRP does not apply to disputes betweenemployees and the Company, or the Company and theTrustee. Also, it cannot be used for complaints ordisputes which are already the subject of courtproceedings or under investigation by the PensionsOmbudsman.

The IDRP is a two-stage process. Under the first stageyour complaint or dispute will be considered anddecided upon by the Pensions Manager of the Fund.If you are happy with the decision, the process endsthere. However, if you are not satisfied with the result ofthe first stage, you will have six months in which to askthe Trustee to reconsider and decide upon yourcomplaint under stage two. Normally, a decision undereither stage will be made within two months.

Complaints and appeals must be made in writing andmust provide some specific information. If you areunable, or you do not wish, to make the complaint or anappeal yourself, you can nominate someone else to acton your behalf.

The Trustee aims to make the need for formalcomplaints the exception rather than the rule.However, should the need arise, full details of theprocedure are available from the administrator at theaddress on page 14.

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MMC UK Pension Fund

Outside helpIn addition to the Fund’s own arrangements, theGovernment has established two independentagencies to help, should an issue arise which cannotbe resolved directly between a pension scheme and amember or beneficiary. They are The Pensions AdvisoryService (TPAS) and the Pensions Ombudsman. TPAS isavailable to assist members and beneficiaries of theFund in connection with queries at any time, ordifficulties encountered at any stage of the disputesprocedure. TPAS will offer advice on a particular caseand, if necessary, may refer it to the PensionsOmbudsman who acts as an independent arbitrator indisputes between pension schemes and theirmembers.

The address of both TPAS and the PensionsOmbudsman is:

11 Belgrave RoadLondon SW1V 1RB

The Pensions RegulatorThe Pensions Regulator was set up by the PensionsAct 2004 to help ensure that work-based pensionschemes in the UK are properly run. It is able tointervene in the running of schemes where trustees,employers or professional advisers have failed in theirduties. The Pensions Regulator can be contacted atthe following address:

The Pensions Regulator Napier House Trafalgar Place Brighton East Sussex BN1 4DW

Tel: 0870 606 3636Email: customersupport@thepensionsregulator.gov.ukWebsite: www.thepensionsregulator.gov.uk

Data protection legislationThe Trustee works together with the Company toprovide the benefits as set out in this guide.The information shared will be used to administer anybenefits under the Fund. Only such details as arerequired to fulfil obligations to members and legaland regulatory obligations will be collected andstored. Your personal data will be treated in strictestconfidence and will only be disclosed to others inlimited circumstances, for example to productproviders in the course of preparing or implementingadvice or to meet legal or regulatory requirements.

Where you are asked to supply information relating toyour dependants, you should inform those individualsfirst; they might like to read this guide to find out howpersonal data is handled. Where information isrequired from your doctor this will not be soughtwithout your permission. If you have a financialrepresentative or independent financial adviser, theTrustee will liaise with that person or firm and shareinformation only on your written instructions. If youdie while you are a member of the Fund the Trusteewill liaise with your personal representative(s),relatives and possibly your work colleagues who maysupply us with information relating to you. Ifinformation is used to conduct statistical analysis andsurveys, you would not be identified personally.

Please note that all the information asked for isnecessary and without it the Trustee would not beable to administer your benefits under the Fund.

The State Pension SchemeThe State Pension Scheme is in two parts:

l the Basic Pension (the ‘‘old age’’ pension) whichis a flat-rate pension paid to everyone who haspaid enough National Insurance contributions,and

l the State Second Pension (S2P) which is basedon an employee’s earnings between a Lower andan Upper Earnings Limit throughout his or herworking life.

State pensions are paid from State Pension Age,which is currently 65 for men, 60 for women.

However, a common State Pension Age of 65, forboth men and women, is being phased in by theGovernment between the years 2010 and 2020.

Contracting outAs a member of the Fund, you are contracted outof the State Second Pension (S2P). As a result,depending on your level of earnings, you will notbe entitled to all or part of the pension you wouldotherwise have received from S2P in respect ofyour service. In order to contract out, the Fundhas to meet certain requirements laid down bythe Government. The most important of theserequirements is that the Fund must provide benefitswhich are broadly equivalent to, or better than, amodel scheme set by the Government. This is knownas the State Reference Scheme Test.

As you are contracted out of the State SecondPension (S2P) you pay reduced National Insurancecontributions. The rate of these contributions isreviewed regularly by the Government. Although youare contracted out of S2P, you will still be entitled toreceive the Basic State Pension, subject to a fullNational Insurance record, from State Pension Age.Some members may also receive a small S2P top-up.

Temporary absenceIf you stop receiving contractual pay or statutory sickpay, your membership of the Fund may, under certaincircumstances, be continued with the Company’s andthe Trustee’s consent.

Ordinary maternity leaveDuring ordinary maternity leave your pension benefitswill continue. If, and for so long as, you qualify forStatutory Maternity Pay (SMP) or you receivecontractual pay from your employer, yourPensionable Service under the Fund continues as ifyou are working normally. Your pension benefits willcontinue and will be based on the Pensionable Salarythat would have applied had you been workingnormally. You continue to pay contributions but theyare based on the pay you actually receive duringordinary maternity leave (rather than on yourPensionable Salary). If you are a member of theDefined Benefit section of the Fund who has electedto pay Flexible Defined Benefit AVCs under Options,contributions will be deducted at the rate appropriateto the accrual rate you have selected. Your deathbenefits will be similarly continued.

If you do not receive SMP or do not receivecontractual pay from your employer, yourPensionable Service and benefits continue, aspreviously described, for the ordinary maternity leaveperiod of 26 weeks.

You do not pay any contributions during any unpaidordinary maternity leave. Your employer pays its owncontributions in respect of you and, for MoneyPurchase section members, the difference betweenthe contributions you would have paid to the Fundhad you been working normally (but not anyadditional voluntary contributions) and those youactually pay during ordinary maternity leave.

17

Additional maternity leaveAny additional maternity leave that you take will beunpaid. Your pension benefits for that period will notbe continued but you may be able to make up yourmissed contributions when you return to work inorder to maintain continuous Pensionable Service.Your death benefits will be continued during thisperiod. For further information on the conditionsthat apply following your return to work please referto the Maternity Policy on the Mercer intranet.

If, following maternity leave (either ordinary oradditional), you do not return to work, and you havenot left the Fund earlier, you will then be treated asleaving service and the Fund. Your date of leavingthe Fund is then taken as the date any maternity pay(either statutory maternity pay or contractual pay)stops or, if later, when your ordinary maternityleave ends.

You will remain covered for the death in servicebenefits described on pages 7 and 11 throughoutthe whole period of your absence from work.The pension benefits will be based on yourPensionable Salary at its full, unreduced, level.The lump sum is based on Basic Salary.

Paternity leaveDuring paternity leave your pension and deathbenefits will continue as if you were working normally.Your contributions to the Fund will continue to bebased on actual pay received.

Adoption leaveDuring adoption leave your pension and deathbenefits will be treated in exactly the same way asdescribed above for maternity leave. However, foradoption leave, references to ‘‘maternity leave’’, and‘‘Statutory Maternity Pay (SMP)’’ should be taken toread “adoption leave” and “Statutory Adoption Pay(SAP)” respectively.

Marital StatusIt is your responsibility to ensure that the Trustee iskept informed of any change in your marital status.If you are not legally married to your partner (or arenot registered as civil partners) and there is noSpouse’s pension payable, the Trustee may considerpaying a pension to a Dependent Relative, subject tocertain criteria. Any such payments are given at theabsolute discretion of the Trustee.

DivorceThe Trustee must comply with any order madeby a Court following a divorce or dissolution ofa civil partnership.

Insured benefitsThe lump sum benefit payable on death is securedunder an insurance policy specifically to provide thisbenefit. In normal circumstances, the full benefit willbe provided automatically without any enquiry intoyour state of health. Restrictions may be imposed onyour benefit in certain circumstances and you will benotified if these apply to you.

Income taxAll Fund pensions are paid subject to income tax,as appropriate.

Inheritance taxUnder present legislation, lump sum death benefitspaid under the Fund will not normally be subject toInheritance Tax. To achieve this the Fund is arrangedso that the Trustee has absolute discretion to decidewho receives the lump sum payments. Normally theTrustee will follow your wishes. You should let theTrustee know who you would like to receive themoney by completing the Expression of Wishform accompanying this guide. Expression ofWish forms can be downloaded from the websiteshould your circumstances change or you changeyour mind at any time.

18

19

MMC UK Pension Fund

HM Revenue & Customs registrationand restrictionsThe Fund is registered with HM Revenue & Customs.This means that the Fund and the members receiveimportant tax concessions. However, these taxconcessions only apply to the value of a member’sbenefits up to certain levels, each year and in total.These limits are increased annually by HM Revenue &Customs. Any pension paid by the Fund is taxedunder the PAYE system.

Tax advantagesThe Fund has been registered with HM Revenue &Customs under the Finance Act 2004. Membership ofthe Fund currently brings with it several important taxadvantages under this Act:

l Full tax relief on your contributions up to theAnnual Allowance.

l A cash sum option on retirement, which will betax free unless the value of your benefits from allpension arrangements exceeds the LifetimeAllowance.

l Lump sum death benefits paid to dependants arenormally tax free.

l You are not taxed on the Company’scontributions.

l Favourable tax relief on the Fund’s investments.

Trust Deed and RulesThe Trustee administers the Fund in accordancewith the Trust Deed and Rules which meet currentlegislative requirements.

This guide provides a summary of the Fund anddoes not cover all the Fund’s detailed provisionswhich are set out in the formal Rules. The Rulesmay be inspected at the office of the administrator by prior arrangement. Alternatively, copies may beobtained from the administrator at the address onpage 14, although a charge may be made.

In the event of a conflict between the terms of thisguide and those of the Rules, the Rules will prevail.

Amendment and discontinuanceSubject to the Fund Rules the Company reserves theright to amend or discontinue the Fund at any time.If your benefits or rights are affected you will begiven written notice. Retirement benefits to whichyou have already become entitled would, however,be safeguarded in accordance with the detailedprovisions laid down in the Trust Deed and Rules.If the Fund winds up and the assets are insufficientto meet the liabilities, the treatment of your benefitswill depend on whether or not the Company is inliquidation or receivership.

If the Company goes into liquidation or receivership,the shortfall would be a debt on the Company.Failing this, you may be entitled to a payment underthe Pension Protection Fund (PPF). The PPF will onlypay up to 90% of pension benefits for DefinedBenefit section members who have not yet reachedNormal Retirement Age and limits total benefits to amaximum of £25,000 a year.

If the Company is not in liquidation or receivership,it will have an obligation to make up the shortfall onwinding up the Fund.

Benefits non-assignableYour benefits under the Fund cannot be assigned orused as security for a loan.

Notes

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Annual Allowance is a limit set by the Government on the amount by which your pension benefits and/or pension savings cangrow in a year (1 April to 31 March) before being subject to tax. The growth in your benefits can becalculated by adding up the following:

l Any money purchase contributions (e.g. contributions to the Money Purchase section of the Fund orAVCs) made by you or paid or credited by the Company during the year; and, if applicable

l The amount by which your defined benefit pension entitlement has increased over the year, multiplied by10; and, if applicable

l The growth in any other pension savings (excluding statutory revaluation on deferred pension benefits).

The Annual Allowance has been set at £215,000 for the 2006/07 tax year.

Basic Salary is your current annual base salary, excluding car allowances, bonuses or any other benefits.

Benefit Accrual Rate is the rate at which your pension builds up in the Defined Benefit section of the Fund. The core BenefitAccrual Rate is 1/60th.

Children are your children or your Spouse’s children who are financially dependent on you and are under age 18, orunder age 23 if still in full-time education (or beyond if mentally or physically disabled).

Company is Marsh & McLennan Companies UK Ltd, the Principal Employer.

Contributing Member is a member who is currently paying contributions to the Fund and building up retirement benefits.

Defined Benefit section is the section of the Fund in which retirement benefits are provided on a career revalued basis, whereby youearn a unit of pension for each year of Pensionable Service based on your Pensionable Salary during thatyear. Each unit of pension is increased at the end of the year and annually thereafter up to 31 March beforeyou retire, leave or die. Full details are given in Section 4 of this guide.

Dependent Relative is any one or more of the following:

l a Child who is under the age of 18 years or under age 23 if still in full-time education, and

l any person who in the opinion of the Trustee is financially dependent on you.

Final Pensionable salary is the highest annual average of any 36 consecutive months’ Pensionable Salaries in the last 10 years.

Fund is the MMC UK Pension Fund.

Individual Account is an account set up in your name whilst contributing to the Money Purchase section of the Fund.

Lifetime Allowance is a limit set by the Government on the amount of pension savings that will qualify for tax relief.This allowance will start at £1.5 million worth of benefits from registered pension arrangements from 2006,rising to £1.8 million in 2010.

The Lifetime Allowance will apply to all of the pension benefits you build up over your entire working life andwill be triggered by a benefit crystallisation event such as payment of retirement income or death benefits.

Lower Earnings Limit is the level of earnings at which benefits under the State Second Pension start accruing. This figure is(LEL) set by the Government and adjusted each year. It is broadly equal to the Basic State Pension.

Money Purchase section is the section of the Fund in which an Individual Account is credited with contributions from both you andthe Company, which earns investment returns over time. The value of your Individual Account is then usedto purchase your benefits at retirement. Full details are given in Section 3 of this guide.

Normal Retirement Age is age 65.

Pensionable Salary is your Basic Salary less an amount equal to the LEL. For members working on a part-time basis the LEL ispro-rated before being deducted.

Pensionable Service is the number of consecutive completed years and days that you are a Contributing Member of the Fund.

RPI increase means the percentage increase in the Retail Prices Index over a defined 12 month period.

Scheme Actuary is appointed by the Trustee to provide actuarial advice relating to the Fund.

Spouse is your legally married husband or wife. Under the Civil Partnership Act 2004, a registered civil partner willbe treated the same as a Spouse for pension purposes.

State Pension Age for men is 65. For women born:l before 6 April 1950, it is 60;l after 5 April 1955, it is 65;l between 6 April 1950 and 5 April 1955 it is on a sliding scale between 60 and 65.

State Reference Scheme this provides for a benchmark pension broadly equal to 1/80th of average earnings between the LEL and UELover the last 3 tax years, for each year of Pensionable Service, with a 50% Spouse’s pension.

State Second Pension provides a pension in addition to the Basic State Pension. Members of the Fund are contracted out of all or(S2P) part of S2P.

Upper Earnings Limit is the level of earnings at which benefits under the State Second Pension cease accruing. It is adjusted (UEL) by the Government each year.

Definitions

This booklet applies to members of the Mercer sectionof the MMC UK Pension Fund. A separate bookletdescribes the Fund in relation to other members.

Please see overleaf for Definitions

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