205 Vodafone Group Plc Annual Report 2024 205
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Vodafone Group Plc Annual Report 2024
The main defined benefit plans are administered by trustee boards which are legally separate from the Group and consist of representatives who are employees, former employees or are independent from the Group. The trustee boards of the pension plans are required by legislation to act in the best interest of the participants, set the investment strategy and contribution rates and are subject to statutory funding regimes. The Vodafone UK plan is registered as an occupational pension plan with HM Revenue and Customs (‘HMRC’) and is subject to UK legislation and operates within the framework outlined by the Pensions Regulator. UK legislation requires that pension plans are funded prudently and that valuations are undertaken at least every three years. Separate valuations are required for the Vodafone Section and CWW Section. The trustees obtain regular actuarial valuations to check whether the statutory funding objective is met and whether a recovery plan is required to restore funding to the level of the agreed technical provisions. The 31 March 2022 triennial actuarial valuation for the Vodafone Section and CWW Section of the Vodafone UK plan showed a net surplus of £248 million (€290 million) on the funding basis, comprising of a £97 million (€113 million) surplus for the Vodafone Section and a £151 million (€177 million) surplus for the CWW Section. No further contributions are due in respect of the Vodafone UK plan at this time. The next actuarial valuation has an effective date of 31 March 2025. These plan-specific actuarial valuations differ to the IAS 19 ‘Employee Benefits’ accounting basis, which is used to measure pension assets and liabilities presented in the Group’s consolidated statement of financial position. Funding plans are individually agreed for each of the Group’s other defined benefit plans with the respective trustees or governing board, taking into account local regulatory requirements. It is expected that ordinary contributions of €29 million will be paid into the Group’s defined benefit plans during the year ending 31 March 2025. The Group has also provided certain guarantees in respect of the Vodafone UK plan; further details are provided in note 29 ‘Contingent liabilities and legal proceedings’ to the consolidated financial statements. The investment strategy for the UK plans is controlled by the trustees in consultation with the Group and the plans have no direct investments in the Group’s equity securities or in property or other assets currently used by the Group. The allocation of assets between different classes of investment is reviewed regularly and is a key factor in the trustee investment policy. The trustees aim to achieve the plan’s investment objectives through investing partly in a diversified mix of growth assets which, over the long term, are expected to grow in value by more than the low-risk assets. The low-risk assets include cash and gilts, inflation and interest rate hedging and in-substance insured pensioner annuity policies in both the Vodafone Section and CWW Sections of the Vodafone UK plan and an insured pensioner annuity policy in the Vodafone Ireland Pension Plan. A number of investment managers are appointed to promote diversification by assets, organisation and investment style and current market conditions and trends are regularly assessed, which may lead to adjustments in the asset allocation. The key risks in relation to the Vodafone UK plan are set out below, alongside a summary of the steps taken to mitigate each risk. Risk description Mitigation Investment strategy risk
The plan adopts a liability driven investment framework, by investing in assets that aim to match the characteristics of the Vodafone UK Plan's liabilities. This can help to hedge the risk of future changes in interest rate and inflation and also reduce balance sheet volatility. The Vodafone UK Plan's funding targets include a margin for prudence to reflect uncertainty in future life expectancy. Both sections of the Vodafone UK Plan have pensioner annuity policies which help reduce exposure to changes in longevity. Longevity risk is also monitored by the trustees on a regular basis through its risk management framework. There is open communication with the trustees and advisors of the Vodafone UK Plan to understand the impact of any changes in regulation and to proactively address potential resulting risks.
Underperformance of the investment strategy relative to the changes in the Vodafone UK Plan's liabilities, which are sensitive to interest rates and inflation, potentially leading to shortfalls in meeting pension obligations. Longevity risk Pensions paid by the Vodafone UK Plan are guaranteed for life, and, therefore, if members are expected to live longer, the liabilities increase. Regulatory risk Changes in pension regulations and accounting standards can impact the Group's pension obligations and reporting requirements.
Actuarial assumptions The Group’s plan liabilities are measured using the projected unit credit method using the principal actuarial assumptions set out below: 2024 2023 2022 % % % Weighted average actuarial assumptions used at 31 March 1 Rate of inflation 2 2.9 3.0 3.3 Rate of increase in salaries 3 3.0 3.0 3.1 Discount rate 4.5 4.5 2.5 Notes: 1 Figures shown represent a weighted average assumption of the individual plans. The current year weighted averages do not include Vodafone Italy’s defined benefit plan assumptions. See note 7 ‘Discontinued operations and assets held for sale’ for more information. 2 The rate of increase in pensions in payment and deferred revaluation are dependent on the rate of inflation. 3 Relates only to schemes open to future accrual primarily in Germany, Ireland and India.
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