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Rentokil Initial 2015 Pension Scheme (the “Scheme”) Financial Healthcheck

2015 Financial Healthcheck

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Welcome to the Financial Healthcheck of the Rentokil Initial 2015 Pension Scheme (the Scheme).

The Trustee is providing this financial healthcheck to help you understand more about the Scheme’s financial situation following completion of the actuarial valuation as at 31 December 2015. This valuation is an assessment by the Scheme’s Actuary to work out how much money needs to be put into the Scheme to make sure pensions can be paid in the future. It also comments on recent developments. It’s for information only; you don’t need to take any action. We hope you find it useful.

If you have questions about this document, or would like any more information about it, please contact the Pensions Department by:

emailing: pensions@rentokil-initial.comphoning: 01293 858191or writing to: Pensions Department Rentokil Initial plc Compass House Manor Royal Crawley RH10 9PY

Please help us to keep in touch with you by telling the Scheme Administrator (see page 10) if you change address. You should also contact them if you have any queries relating to your own benefits.

Yours sincerely

Chris Pearce

Chairman of the Trustee, the Rentokil Initial 2015 Pension Scheme For and on behalf of Rentokil Initial Pension Trustee Limited (the Trustee)

Please help us to keep in touch with you by telling us if you change address.

Financial Healthcheck

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2015 Financial Healthcheck

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31 December 2015 actuarial valuation resultsEvery three years, the Trustee carries out an actuarial valuation to ensure that there are sufficient funds in the Scheme to pay your benefits. They also review whether the contributions due to be paid to the Scheme remain appropriate.

The most recent actuarial valuation of the Scheme showed that, on 31 December 2015, the funding position was as follows:

As the Scheme was in surplus, and because no further benefits are building up in the Scheme, no contributions are currently required to be paid to the Scheme by Rentokil Initial. Rentokil Initial had been paying money into a separate arrangement called an escrow, but given the surplus these contributions have ceased and the £10m that had previously been paid into the escrow was returned to Rentokil Initial in January 2017. Rentokil Initial will continue to pay the running costs of the Scheme directly.

How has the position changed since the previous Financial Healthcheck?You were last sent a Financial Healthcheck in early 2016, which was the first for the Scheme following the bulk transfer from the Rentokil Initial Pension Scheme in November 2015. This set out the estimated position as at 12 November 2015 and showed that the funding position was 99%, and the Scheme had a deficit of £13m. The funding position therefore improved slightly between 12 November 2015 and 31 December 2015.

The main reason for the improvement in the funding position was the fact that, as part of the actuarial valuation, the Trustee agreed to update the assumptions used to determine the estimated amount that the Scheme needs to provide benefits to reflect the most recent data. For example, recent analysis has shown that life expectancy in the UK has not been increasing as fast as previously projected. This was reflected in the updated assumptions adopted by the Trustee meaning that pensions are now assumed to be paid for a slightly shorter period than before.

Further details on how the Scheme operates and how the Trustee decides on the contributions payable are set out later.

Value of the Scheme’s assets (excluding money purchase AVCs) £1,424.5m

Estimated amount that the Scheme needs to provide benefits (liabilities) £1,413.7m

Surplus of assets relative to liabilities £10.8m

Funding level (ratio of assets to liabilities) 100.8%

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How are the Scheme’s assets invested?Factors affecting the funding level are very changeable, particularly stock market performance, interest rates and life expectancy. This means that the funding level can go down as well as up. Given the potential changes in the funding level, the Trustee aims to invest predominantly in assets that are expected to change in value in line with the liabilities of the Scheme. A detailed review of the Scheme’s asset strategy was carried out as part of the actuarial valuation. As a result of this, the investment strategy of the Scheme was updated to be as follows:

l 75% in government bonds l 10% in bonds issued by UK companies l 15% in a diverse range of growth assets such as company shares and property

The Trustee continues to look at ways in which the assets can be better invested to move in line with the liabilities of the Scheme.

Funding position as at 31 December 2016Given potential changes in the funding level, the Trustee receives annual reviews from the Scheme Actuary on the Scheme’s funding position, as well as estimated updates at least quarterly.

The annual review as at 31 December 2016 has been completed, based on unaudited asset values and shows an improvement in the funding level as follows:

The liabilities of the Scheme increased significantly over the year due to a fall in the yield on government bonds particularly following the result of the EU referendum. The values of assets increased significantly as well and the funding level improved by about 3% over the year with the investment strategy adopted.

The Trustee will continue to monitor the funding level at least quarterly, and the next Financial Healthcheck will be sent out in 2018 showing the position as at 31 December 2017 following completion of the next annual review.

Value of the Scheme’s assets (excluding money purchase AVCs) £1,703.0m

Estimated amount that the Scheme needs to provide benefits (liabilities) £1,639.2m

Surplus of assets relative to liabilities £63.8m

Funding level (ratio of assets to liabilities) 103.9%

Value of the Scheme’s assets (excluding money purchase AVCs) £1,424.5m

Estimated amount that the Scheme needs to provide benefits (liabilities) £1,413.7m

Surplus of assets relative to liabilities £10.8m

Funding level (ratio of assets to liabilities) 100.8%

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How the Scheme operates How is my pension paid for? The assets of the Scheme are invested so that it can pay pensions to members when they retire. The money to pay for members’ pensions is held in a common fund. It is not held in separate funds for each individual, except for the money purchase AVC funds.

How is the amount the Scheme needs worked out? The Trustee obtains regular valuations of the benefits earned by the members, the assets held by the Scheme, and the resultant shortfall or surplus from the Scheme Actuary. Using this information, the Trustee comes to an agreement with Rentokil Initial on whether any contributions are required to be paid to the Scheme and this is recorded in a Schedule of Contributions.

The importance of Rentokil Initial’s support The Trustee’s objective is to ensure that the Scheme has enough money to pay pensions now

and in the future. However, the success of the Scheme relies on Rentokil Initial continuing to support it because:

l Rentokil Initial will be paying the future expenses of running the Scheme

l The funding level can fluctuate, and if there is a funding shortfall, Rentokil Initial will usually need to put in more money

l The target funding level may turn out not to be enough, in which case Rentokil Initial would need to put in more money

If you have not yet retired and wish to transfer the benefits you have built up to another pension fund, it is possible that the Scheme’s funding level could affect the level of future transfer payments, although this is not currently the case. If you are thinking of transferring your benefits, we suggest you seek independent financial advice before taking any action. You can find a list of local Independent Financial Advisors (IFAs) at www.unbiased.co.uk.

Regardless of the funding level, the Scheme will continue to pay benefits in full as long as it remains in existence.

However, if the Scheme is wound up (comes to an end) there might not be enough assets to pay the full amount of the pension you have built up. In this situation, Rentokil Initial is obliged to pay in an additional amount for the Scheme to secure members’ benefits with an insurance company.

The Scheme Actuary has estimated that if the Scheme had been wound up on 31 December 2016 and the benefits were secured with an insurance company, the Scheme’s assets would have been around 88.2% of the amount needed to secure the benefits earned to date. This compares to the position as at 31 December 2015 which was estimated to be 84.3%

This does not mean that Rentokil Initial is planning to wind up the Scheme at present. Legislative requirements simply mean that we have to provide you with this information from time to time.

What would happen if the 2015 Scheme is wound up?

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Why does the funding plan not call for full solvency at all times? Full solvency assumes that benefits will be secured by buying insurance policies. Insurers are obliged to take a very cautious view of the future and need to make a profit. The cost of securing pensions in this way also takes into account the future cost of administration by the insurer. In contrast, our funding plan assumes that Rentokil Initial will continue in business and support the Scheme.

The Pension Protection Fund If Rentokil Initial became insolvent and defaulted on its obligation to the Scheme then you may have to rely on the Pension Protection Fund (PPF) for possible compensation. The Government set up the PPF to pay benefits to members if a scheme with an insolvent employer does not have enough money to cover the cost of securing all members’ benefits with an insurer. If the Scheme was to be taken over by the PPF then, depending on your age and when your benefits are earned, the pension you would receive may be less than the full benefit you have earned in the Scheme. Further information and guidance is available on the PPF’s website at www.pensionprotectionfund.org.uk.

Alternatively, you can write to the PPF at Renaissance, 12 Dingwall Road, Croydon, Surrey, CR0 2NA. Please note that Rentokil Initial has no intention of winding up the Scheme.

Use of personal dataIn providing actuarial services to the Trustee, including preparing this Summary Funding Statement, the Trustee, its adviser Aon Hewitt and the Scheme Actuary require access to personal data about members and their dependants. The Data Protection Act governs how the Trustee, Aon Hewitt and the Scheme Actuary use and store personal data. You can find out more information about how your personal information is used in the provision of actuarial services at www.aonhewitt.co.uk/privacy-statement. Should you have further questions regarding the processing of your personal information, please contact the Trustee in the first instance, contact details can be found on the first page. General guidance is also available from the Information Commissioner’s website at www.ico.org.uk.

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2015 Financial Healthcheck

Pension Fraud – a reminderWe have previously warned about pension scams, where fraudsters try to obtain your pension savings by promising high investment returns or options not available under the Scheme (usually because they are illegal!). The Government has now proposed legislation which makes it harder for fraudsters. However, they continue to operate and are getting more sophisticated, so members should remain vigilant. Any offer that sounds too good to be true, supposedly finds a way around UK Pension legislation to provide your benefits, or promises high returns, is likely to actually be too good to be true and you may lose a large part of your retirement savings.

The list below sets out some of these tell-tale warning signs that you may be a target of a pensions scam:l Being offered pensions access below age 55,l Unsolicited offers of a “free pension review”,

a “one-off investment opportunity” or a “legal loophole”

l Marketing materials promising high returns (e.g. over 8%) on your investment

l Paperwork delivered to your door by courier that requires immediate signature

l Overseas transfer of funds; and/orl A proposal to put your money into a single or

complicated investment

To download the booklet go to: www.thepensionsregulator.gov.uk/individuals/ dangers-of-pension-scams.aspx

If you have concerns about becoming a victim of a pension scam, or if you would like to find out more, then you should contact The Pensions Advisory Service at: www.pensionsadvisoryservice.org.uk or call 0300 123 1047

If you think you may already be a victim of a pension scam, contact Action Fraud at: www.actionfraud.police.uk or call 0300 123 2040

Changes to State PensionsThe new single tier State Pension came into effect for everyone reaching their State Pension Age on or after 6 April 2016.

While in the long term this will simplify the State Pension, there are complicated transition arrangements to ensure everyone receives a fair pension. These are based on the old State Pension and the additional pensions paid from the State Earnings Related Pension Scheme (SERPS), the State Second Pension (S2P) and occupational pensions schemes such as our Scheme (where some members paid lower NI contributions instead of building up benefits in SERPS or S2P).

As part of this change, and like many other schemes, our administrators are working with Her Majesty’s Revenue & Customs (HMRC) to ensure that its records and the Scheme’s records are consistent. This is to make sure that members get the right benefits from the State and from the Scheme. This is a big project and it is likely to be 2018 or 2019 before it is completed.

If there are inconsistencies that cannot be resolved, it is possible that some members’ benefits will need to be adjusted (upwards or possibly downwards) to ensure that they receive the correct benefits from the State and the Scheme combined. We will keep members informed of progress on this project.

News Round-up

Defined Contribution (DC) flexibilities at retirementIn April 2015, the Government introduced increased flexibility for DC savers, including those making Additional Voluntary Contributions (AVCs). This means you now have much more freedom and choice in how you access your Scheme AVCs. At your retirement date, you have the option of taking your AVCs in a number of ways including the following:

Cash only Put them towards your tax-free cash lump sum at retirement. If you have more AVCs than the maximum tax-free cash lump sum you are allowed to take, then any leftover AVCs can be

taken as cash taxed at your marginal rate or used to purchase an annuity.

AnnuityRegular, guaranteed income throughout retirement. You can choose your annuity provider but you must provide us with details at the same time you take your main Scheme benefits.

Transfer outYou can transfer out your AVCs to another pension provider. Many providers will allow you to take your pension through flexible drawdown. If you choose this option, you must provide us with details of the transfer prior to taking your main Scheme benefits.

As your Scheme pension is a DB pension, there is no change to your main Scheme benefits as a result of these changes. However, you can access the new pension freedoms if you transfer your benefits out of the Scheme.

The new freedoms are particularly relevant if you have Scheme AVCs. A transfer of your benefits out of the Scheme could have enduring financial consequences for you and is a choice that should be considered carefully. Please be aware that some members who have transferred their benefits out of the Scheme have been targeted by scammers.

See page 8 for more information on pension scams and how you can keep your pension safe.

Here are some useful points to note around taking a transfer value from the Scheme: l If you’re transferring to a DC scheme, and the value of

your DB benefits is over £30,000, it is a legal requirement for you to take advice from an authorised and impartial financial adviser. As part of processing your transfer, the administrator of the Scheme will ask you to provide evidence of this. The Government wants to help ensure members do not make decisions they may regret later.

l The process involved in taking a transfer value can often take several months. We recommend that members plan in advance to allow for these timescales

How do increased DC flexibilities relate to my Defined Benefit (DB) pension?

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Lifetime Allowance (LTA) – limit reduced The LTA is the total value of pension benefits that you can build up tax efficiently during your lifetime. The LTA for the 2016/17 and 2017/18 tax years is £1 million, reduced from £1.25 million in 2015/16. From April 2018, this allowance will increase annually in line with the Consumer Prices Index (CPI). The percentage of pension value that may be taken as a tax-free lump sum will remain at 25% of the value of your pension savings up to the LTA. To find out more about the protections offered for individuals at risk of exceeding the LTA, go to www.gov.uk/guidance/ pension-schemes-protect-your-lifetime-allowance

Annual Allowance (AA) – new structure in place The AA is the amount of pension benefits that you can build up in a year tax efficiently. As of April 2016, the standard £40,000 AA now reduces on a sliding scale (the Tapered

Annual Allowance) for members with taxable income over £110,000 (excluding any pension savings). With the Tapered AA, for every £2 of Adjusted Income over £150,000, the AA reduces by £1 down to a minimum of £10,000. Adjusted Income is the total taxable income from all sources, plus the value of UK pension contributions made by you, and on your behalf by your employer, in a tax year. For more information, visit www.gov.uk/tax-on-your-private-pension/annual-allowance

Scheme documentsYou can ask for a copy of the Scheme documents by calling 01293 858191. These formal documents include the Report and Accounts, as well as the Statements of Funding and Investment Principles and the Schedule of Contributions and Actuarial Valuation report.

Where can I get more information? Contact the Pensions Department if you want a copy of any Scheme documents; contact details can be found on the first page.

For specific queries about your own benefits, contact: Capita, PO Box 3212, Bristol, BS1 9JP

Tel: 0344 391 2402 Fax: 0344 391 1999

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