Vodafone pensions

Funding update

Every three years, the Scheme actuary carries out a full actuarial valuation of the Scheme’s financial performance. We like to think of this as a ‘health check’ of the Scheme’s finances. Between each three-yearly valuation, the Scheme actuary produces an approximate update of the Scheme based on the assumptions used at the last valuation.

The most recent actuarial valuation of the Scheme (as at 31 March 2016) has now been finalised and since this date the Scheme actuary has also performed an annual update as at 31 March 2017, known as the actuarial report.

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 basis.

Below we’ve summarised the funding position from the full actuarial valuation as at 31 March 2016 and the latest funding update as at 31 March 2017 for both Sections, including the latest position that was disclosed in the 2015/16 newsletter (as at 31 March 2015).

Vodafone Section

31 March 2017 (actuarial report)

Assets
£2,263m
-
Liabilities
£2,734m
=
Deficit
£471m
Funding level
83%

31 March 2016 (actuarial valuation)

Assets
£1,904m
-
Liabilities
£2,251m
=
Deficit
£347m
Funding level
85%

31 March 2015 (actuarial report)

Assets
£1,912m
-
Liabilities
£2,267m
=
Deficit
£355m
Funding level
84%

The actuary also carried out a valuation on the basis that the Vodafone Section wound up at 31 March 2016. The funding level on this basis (known as the discontinuance funding level) was 48%, a deficit of £2,083m. The Trustee is required by law to include this information. It does not mean that there are plans to wind up the Vodafone Section.

Jargon buster

Liabilities – an estimate of the amount the Scheme needs to pay in benefits to members, both now and in the future.

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

CWW Section

31 March 2017 (actuarial report)

Assets
£2,588m
-
Liabilities
£2,611m
=
Deficit
£23m
Funding level
99%

31 March 2016 (actuarial valuation)

Assets
£2,266m
-
Liabilities
£2,208m
=
Surplus
£58m
Funding level
103%

31 March 2015 (actuarial report)

Assets
£2,333m
-
Liabilities
£2,352m
=
Deficit
£19m
Funding level
99%

The actuary also carried out a valuation on the basis that the CWW Section wound up at 31 March 2016. The funding level on this basis (known and the discontinuance funding level) was 71%, a deficit of £906m. The Trustee is required by law to include this information. It does not mean that there are plans to wind up the CWW Section.

Since we last sent you the 2015/16 newsletter and reported the funding level at 31 March 2015, the funding position for each Section has improved over the year to 31 March 2016. These improvements were mainly as a result of actual experience being better than assumed, for example price inflation being lower than expected. However, the impact of this was partially offset by the effect of lower gilt yields, which increased the value placed on the liabilities.

Over the year since the actuarial valuation to 31 March 2017, the funding position for each Section has worsened. This deterioration in the funding positions is due to the effect of lower gilt yields and a rise in the expected future inflation, which both increase the value placed on the liabilities.

The Company’s ongoing support

As part of the 31 March 2016 actuarial valuation, the Trustee and the Company have drawn up a recovery plan and schedule of contributions, which detail the payments the Company will make to each Section to improve the funding level and address the shortfall in each section.

The Company made payments of £184.5 million into the Vodafone Section and £58.5 million into the CWW Section in October 2017.

The Company remains committed to supporting the Scheme.

Future valuations

The Scheme’s next full actuarial valuation for both sections will be as at 31 March 2019.

There have been no payments to the Company 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.

Some things you should know if the Scheme were to wind up:

It is not intended or expected that the Scheme will wind up in the foreseeable future. However, if the Scheme were to discontinue, the Company would have to pay enough money into the Scheme to secure all members’ benefits through an insurance company. If the Company 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