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Pension newsletterSummer 2014For members of the Vodafone Group Pension Scheme

InsideIntroduction 3

Scheme merger 4 – 5

Looking after your benefits 6 – 7

Valuation results 8 – 11

Pension news 12 – 13

Online access 14 – 15

Contact details Back page

It’s been a huge year in the evolution of the Scheme. We have completed a merger with the Cable & Wireless Worldwide Retirement Plan (CWWRP). I would like to welcome our new members who transferred into the Scheme as part of this merger, which was finalised on 6 June 2014.

The merger has meant a number of changes for the Scheme, including changes to its financial position and membership (see pages 4 to 5), as well as changes to the people responsible for running it (see pages 6 to 7). However, most importantly, you will be pleased to hear that the merger has meant no changes to your benefits.

Valuation results The three-yearly actuarial valuations (financial health checks) for both the Scheme and the CWWRP were carried out as at 31 March 2013, before the completion of the merger. On pages 8 to 11, you can see the valuation results. I am pleased to say that both arrangements are well funded, having benefited from significant company contributions in April 2014 and better than expected investment returns over the last year. Overall, when you take into account the additional security available to the Vodafone Section of the Scheme, the financial positions of both sections of the Scheme are now very similar.

I hope you enjoy reading this report. We’d welcome any feedback you have, or suggestions for future editions. If you have any enquiries about your pension, please contact our Scheme administrators, Towers Watson.

John AdsheadChairman of the Trustee

“the merger has meant no changes to your benefits”

HelloWelcome to this year’s pension newsletter for members of the Vodafone Group Pension Scheme (the Scheme).

2 3

Scheme mergerOn 6 June 2014, the assets and liabilities of the CWWRP were transferred to the Scheme and a new section was created, called the Vodafone Group Pension Scheme – CWW Section. If you had benefits in the CWWRP, these are now held in the CWW Section of the Scheme. So, for example, if you were a pensioner of the CWWRP, your pension will now be paid from the CWW Section of the Scheme.

CWW Section*

If you’re still working for Vodafone, you may also be building up benefits in the Vodafone UK Defined Contribution Pension Plan. You can find out more about this separate Plan (as well as benefits in the Vodafone Group Pension Scheme) at www.vodafonepensionsupdate.co.uk

19,955 £1.9

The total membership of the Scheme is now over

£3.5 Billion

The total assets of the Scheme are now over

4 5

*CWW Section – includes all assets and liabilities from both the final salary and lifetime benefits plan sections of the CWWRP.

Vodafone Group Pension

Scheme

Vodafone Section

CWWRP members joined the Vodafone Scheme

were transferred in from the CWWRP

Assets of approximately

35,000 Members

Deferred

Pensioner

CWWRP Vodafone Scheme Total

The membership breakdown at 30 April 2014 was:

17,520 13,433 30,953

2,435 1,952 4,387

Billion

Looking after your benefitsBenefit security The merger of the CWWRP with the Scheme will not affect the security of your benefits, whether you were previously a member of the CWWRP or whether you’ve always been in the Scheme.

The assets and existing security of each arrangement will be retained and held separately under different sections of the Scheme, so the assets transferred in from the CWWRP will be used to provide benefits for members of the CWW Section. Likewise, the existing assets in the Scheme will be used to provide benefits for members of the Vodafone Section.

Investment strategy and long-term funding reviewOne of the first priorities of the Trustee Board will be to review the investment strategy and long-term funding objectives for the Scheme in conjunction with the company. The review will ensure that these are appropriate to meet the long-term objective of becoming a fully funded Scheme.

The new Trustee BoardThe Scheme is looked after by a corporate trustee body called Vodafone Group Pension Trustee Limited. There is a board of Trustee Directors, supported by a set of professional advisers. The Trustee Board runs the Scheme in the best interests of all of its members. By law, at least one-third of the Trustee Directors must be nominated by Scheme members.

The merger between the Scheme and the CWWRP has led to changes to the Trustee Board, which is now made up of the following:

John AdsheadChairman, Independent

David AubreyMember nominated (former CWWRP Trustee Director)

Bob CostaCompany appointed

Philip HowieCompany appointed

David JealMember nominated

David MorganMember nominated (former CWWRP Trustee Director)

Alan PickeringIndependent (former CWWRP Trustee Director)

Paul Stephenson Company appointed

Robin TurnerMember nominated (former CWWRP Trustee Director)

6 7

Valuation resultsEvery three years, the Scheme actuary carries out a full actuarial valuation of the Scheme’s financial position. Think of this as a ‘health check’ of the Scheme’s finances. In this section we’ve summarised the valuation results for both the Scheme and the CWWRP as at 31 March 2013 (before the merger) and 31 March 2014 (but including the additional contributions paid by the Company on 3 April 2014).

CWWRP

31 March 2013

31 March 2014

Assets

Assets*

£1,329m

£1,673m

-

-

=

=

Liabilities

Liabilities

£1,775m

£1,716m

31 March 2010

Assets£1,076m

Liabilities£1,243m- =

Deficit

Deficit

Funding level

Funding level

75%

97%

£446m

£43m

Funding level

87%Deficit

£167m

31 March 2013

31 March 2014

Assets

Assets*

£2,194m

£2,226m

-

-

=

=

Liabilities

Liabilities

£2,185m

£2,102m

£9m

£124m

30 September 2010

Assets£1,432m

Liabilities£1,680m- =

Surplus

Surplus

Funding level

Funding level

100%

106%

Funding level

85%Deficit

£248m

8 9

Vodafone Scheme

In these calculations, the actuary has assumed that the Scheme will continue to be run in the same way as it is now, known as an ongoing funding basis.

*These figures are based on unaudited asset values (and therefore are subject to change) and include the contributions paid to both schemes on 3 April 2014. Without these contributions the deficit in the Vodafone Scheme would have been £368m equivalent to a funding level of 79% and in the CWWRP the surplus would have been £84m equivalent to a funding level of 104%.

The actuary also carries out a valuation on the basis that the Scheme wound up at 31 March 2013. The funding level on this basis (known as the discontinuance funding level) was 44% for the Vodafone Scheme (a deficit of £1,677 million) and 75% for the CWWRP (a deficit of £628 million). The Trustee is required by law to include this information. It does not mean that there are plans to wind up the Scheme.

Turn over to find out more about the payments the Company has made

Vodafone’s ongoing supportThe Trustee and the company have drawn up a recovery plan and schedule of contributions, which detail the payments Vodafone will make to both schemes to improve the funding level.

10 11

The company also made a payment of

to the CWWRP on 3 April 2014. Any further contributions to the CWW Section will be determined by the level of any deficit at the next valuation.

£40 Million

one by 30 September 2020 and one by 30 September 2021.

In addition, the company will make further payments of

£45 Million2 X

Future valuationsThe Scheme’s next full actuarial valuation will be as at 31 March 2016.

Some things you should know• There have been no payments to Vodafone

or CWWRP from the Scheme in the last 12 months.

• The Pensions Regulator has not needed to use its powers to change the Scheme, give direction on working out its funding target or impose contribution rates on the Scheme.

If the Scheme started to wind upIt is not intended or expected that the Scheme will wind up in the foreseeable future. However, if the Scheme were to discontinue, Vodafone would have to pay enough money into the Scheme to secure all members’ benefits through an insurance company. If Vodafone didn’t have enough money to secure benefits in full, and the Scheme was eligible, the Pension Protection Fund would take over the Scheme and pay compensation to members, up to a limit.

Information about the compensation provided by the Pension Protection Fund can be found on its website: www.pensionprotectionfund.org.uk

£325 Million

The company made a payment of

to the Vodafone Scheme on 3 April 2014.

Further changes to lifetime and annual allowancesThe amount of pension you can build up is limited by some allowances set by the government.

Annual AllowanceThis is the maximum that your pension savings (excluding State Pension) can increase by in a tax year without you having to pay an additional tax charge. The Annual Allowance has been reduced from £50,000 to £40,000 for the 2014/15 tax year.

Lifetime Allowance This is the maximum amount of pension savings you can save over your lifetime without paying a tax penalty. The Lifetime Allowance has been reduced from £1.5 million to £1.25 million for the 2014/15 tax year.

If you had pension savings over £1.25 million at 5 April 2014, you can apply for Individual Protection 2014 from August 2014. Individual Protection 2014 will provide protection up to a maximum of £1.5 million. Any amount you save above this will be subject to a tax charge.

Jargon busterLiabilities – an estimate of the amount the Scheme needs to pay benefits to members now and in the future.

Assets – the value of the Scheme’s investments and monies held to pay benefits to members.

Defined benefit – a pension scheme where the benefits you receive are based on a set formula, normally using your salary and the length of time you’ve been a member.

Defined contribution – a pension scheme where the benefits you receive are based on the money you’ve built up. This could be from contributions that you have made, company contributions or investment returns.

12 13

Pension news In the 2014 Budget, the government announced some radical proposals to give pension scheme members more choice when they take their benefits at retirement.

Taking pension savings as cash from defined contribution schemesThe government has proposed that at retirement (minimum age 55) savers will be able to access as much of their pension savings as they like in cash from April 2015. Currently, 25% of this lump sum is tax free, which will not change. Then, the remaining cash would be taxed at your normal rate of income tax, rather than 55% as it is currently.

Transferring benefits between pension schemesBecause of the increased flexibility to take defined contribution benefits as cash, the government anticipates that more people may choose to transfer their Defined Benefit (DB) pension into Defined Contribution (DC) schemes.

For public sector DB schemes, like teachers’ pensions, this could lead to a cost to the taxpayer. In order to reduce this risk, the government plans to remove the option for members to transfer out of public sector schemes. The government is also reviewing whether similar restrictions will be applied to private sector DB schemes, like the Vodafone Group Pension Scheme.

Now

Age 57

2028 2040s

Age 59

Age 55

Rise in minimum retirement ageThere are proposals to increase the minimum retirement age from 55 to 57 from 2028. This means that members of both DB and DC schemes would not be able to access their pension savings until at least age 57. This would be in line with the rise in the State Pension Age, therefore potentially increasing to age 59 in the mid-2040s.

Do you have a small pension pot?From 27 March 2014, members who have small pension accounts (totalling under £30,000 across all pension arrangements or less than £10,000 in any one scheme) can take their whole account as a lump sum, rather than buying an annuity. This has increased from £18,000.

Online access

Approaching retirement?If you’re within six months of retiring, you can use ePA to get a retirement quotation to help you plan ahead.

Moved house?You can let us know your new address details through ePA.

Online payslipsPensioners can access their P60 on ePA. Log on to https://epa.watsonwyatt.com/doc/VOD/login.htmIf you have any problems accessing your account, contact Towers Watson.

Change of circumstances? The Scheme also provides valuable benefits for your dependants if you die. To make sure the Trustee knows who you’d like these benefits paying to, you can complete an expression of wish form online.

Visit www.vodafonepensionsupdate.co.uk and select one of the links from the decision area.

14 15

Towers Watson administers members’ benefits for both the Vodafone and CWW Sections.

To make it easy to manage your pension, Towers Watson provides an online administration system (ePA).

Thinking about moving your benefits?If you’re thinking about moving your benefits to another pension scheme, you can request a transfer out illustration, which will show you the value of your benefits if you were to transfer them.

If you would like further information about the Scheme (including the latest full Actuarial Valuation Report), please contact the Scheme administrators:

Vodafone Pensions

Contact details

14

www.vodafonepensionsupdate.co.uk

Vodafone Group Pension Scheme, Towers Watson, PO Box 545, Redhill, Surrey RH1 1YX

Tel: 0800 917 1192

Email: vodafonepensions@towerswatson.com

Please also keep us updated if your details change, for example if you change address.