Pension Update An update about your pension and changes to your investments in the Vodafone UK Defined Contribution Pension Plan

Transcription

1 Pension Update An update about your pension and changes to your investments in the Vodafone UK Defined Contribution Pension Plan Click to get started

2 Inside Changes to your investments 4 Reasons for the investment review 5 Investment options 6 & 7 More choice 8 & 9 Fees 8 & 9 Timeline 10 Plan news 10 Improving communications 11 Welcome to the first edition of Pension Update the newsletter for members of the Vodafone UK Defined Contribution Pension Plan (the Plan). To keep you informed about your pension, the Trustee has introduced this annual newsletter. Inside you ll find updates about what the Trustee is doing to ensure that the Plan is run in the best interests of members, as well as details of other news affecting your pension. The change will happen automatically, so you don t need to do anything Alongside Plan news, this edition focuses on changes to your investment options. These changes will take place during July and aim to improve the performance and risk profile of certain investment options. The change will happen automatically, so you don t need to do anything. Find out more on pages 4 to 10. I hope you find this newsletter interesting and informative. As always, we welcome your feedback. John Adshead Chairman of the Trustee 2 3

3 Changes to your investments The Trustee of the Vodafone UK Defined Contribution Pension Plan (the Plan) regularly reviews the investment options available to members. Reasons for the review Part of the Trustee s role is to review the Plan s investment options to make sure they are suitable for members. This includes: The aim is to improve the performance and risk profile of certain funds. Your investments will be switched to a new provider over the summer. The switch will also give you more funds to choose from. The change will happen automatically, so you don t need to do anything. After the changes, the funds available to you will continue to have the same objectives as those currently available. Some of the new funds will be made up from a different mix of underlying assets (for example, shares, bonds and cash) and may be looked after by different investment managers. In most cases, the fees (annual management charges) linked to the new investment options will be lower. This means you can save more of the money you invest. 1 2 Reviewing performance The Trustee ensures that the investment options are performing well against their objectives. For example, an investment option s target may be to match the change in the value of the FTSE 100. If an investment hasn t performed well compared with its objective, the Trustee might update the underlying funds it is made up from or switch investment managers. Providing a range of options The Trustee ensures that there is a suitable range of investment options, with different levels of risk and return, for members to choose from. As part of the review, the Trustee has added three more investment options to the current range. 3 4 Selecting highly-rated managers and funds Investment funds are looked after by managers who aim to ensure that the investments meet or beat their performance objectives. The funds are also rated by the Trustee s adviser depending on their likelihood of meeting their performance objectives (i.e. how likely they are to meet their aims). As part of the review, the Trustee has selected some of the most highly-rated funds and investment managers for members. Ensuring fees are competitive As well as selecting an appropriate range of funds for members, the Trustee ensures that the fees associated with each fund are competitive. You can find out more about the changes and each investment s objectives on the following pages or by looking at the Plan website 4 5

4 Investment options Each investment option is made up from a range of different assets, for example, shares, bonds and cash. In some of the new investment options, the mix of assets has been updated to improve their expected performance relative to the risk associated with the fund (i.e. the likelihood that it will meet its aim). Emerging market equities are investments in equities (see above) from areas with developing economies. They are expected to achieve higher returns than equities from developed countries over the long term. Emerging market equities are usually higher risk than developed country equities. Corporate bonds are loans to companies or organisations. Bonds provide income either at a fixed or variable rate. Their market value will rise and fall, but not usually as sharply as the value of shares. Remember, your investments will automatically be switched to the new options, so you don t need to do anything. Fund name Types of asset Equities are part ownership in a company. Generally, equities are expected to produce strong returns in the long term compared with bonds or cash. They can fall as well as rise in value, sometimes sharply. The overall aims of the investment options have remained the same. So, if you have chosen a fund because you want it to increase in value and were happy with the risk profile, the new option will continue to have the same aim and risk profile. Absolute return investments aim to achieve a return greater than cash investments from a pool of investments over a specific period (usually three to five years). Gilts (fixed interest) are bonds issued by the UK Government which provide a fixed rate of return. Gilts (index-linked) are bonds issued by the UK Government which provide a rate of return linked to inflation. Cash invests in cash holdings (similar to a bank account) and other money market instruments (e.g. very short term loans, term deposits etc). Cash is considered to be a low-risk investment because its value does not change as much as other investments. As part of the updates, the passive global equity fund has been renamed the passive overseas equity fund. A new passive global equity fund has been introduced find out more on pages 8 and 9. Current asset mix New asset mix Melody Symphony Harmony Active global equity Passive global equity* Passive overseas equity (formally passive global equity) Active UK equity Passive UK equity Active emerging market equity Target return Bond fund Index-linked gilt* Pre-retirement Mix of bonds and gilts that will aim to change in line with annuity prices Cash Shariah* *New fund available to select from 14 August

5 More choice As part of the investment review, the Trustee has introduced three new funds which will give members more choice about where they invest their account. Passive global equity fund This fund invests in equities from developed countries across the world. The aim is to achieve high investment returns over the long term. Passive investments aim to follow the performance of certain markets or an index, for example, the FTSE 100. Index-linked gilt fund This fund invests in index-linked gilts. These are gilts that are linked to a UK inflation index. If the index increases in value, so will the investment. Shariah fund This fund invests in assets (predominantly equities) in line with Islamic investment principles. For example, it will not invest in companies which sell alcohol, pork products, military equipment or weapons. You can find out more about all of the investment options on the Plan website: documents/investment_documents Fees Generally, all investments come with a fee, which is also known as an annual management charge. As part of the move to the new investment options, the Trustee has reviewed the annual management charge for each fund. It has ensured that the majority of the new fees are lower than those for the current range of funds. This is great news for members, as it means you get to keep more of the money you ve saved. What is an annual management charge? This is an annual fee that is a percentage of your investments used to pay for the running of the investment fund. It covers costs like accounting charges and administration expenses. One-off costs There are costs involved with switching investments from one fund to another. The Trustee believes that the expected better performance, improved risk profile and lower ongoing fees associated with the majority of the new range of investment options will outweigh the one-off cost for the switch. The one-off cost will be no greater than 1% of the value invested in a single fund. However, the Trustee is looking to minimise this cost wherever possible and, in many cases, there will be no costs for the switch. Fund Current annual management charge Melody 0.45% 0.23% Symphony 0.55% 0.48% Harmony 0.59% 0.41% Active global equity 0.95% 0.75% Passive global equity * % Passive overseas equity (formerly called passive global equity) 0.17% 0.14% Active UK equity 0.59% 0.74% Passive UK equity 0.10% 0.12% Active emerging market equity 1.09% 0.83% Target return 0.92% 0.85% Bond 0.45% 0.12% Index-linked gilt * % Pre-retirement 0.18% 0.15% Cash 0.10% 0.18% Shariah * % New annual management charge The fees can change from time to time. The latest fees are available on the factsheet which can be found at * New fund available from 14 August

6 Timeline While your investments are moved to the new options, there will be a short period when you ll be unable to make changes to where your account is invested (known as a blackout period). Once the blackout period has finished, you will be able to make changes to your investment options in the decision area on the Plan website: 27 June August 2013 Blackout period started no investment changes can be made Investments are switched to new options Blackout period ends you can change investment options You don t need to do anything. The switch to the new investment options will happen automatically. Plan news Automatic enrolment You may have seen adverts in the national press encouraging people to join their workplace pension scheme. This is part of new legislation that the government is introducing called automatic enrolment. Automatic enrolment means that companies, like Vodafone, must ensure that all their employees are enrolled into a pension. People who are enrolled have the option to opt out but, if they do, may be missing out on valuable contributions from the company. As you re already a member of the Plan you re not affected by this change. If you choose to leave the Plan in the future and remain employed by Vodafone, you may be enrolled back into the Plan in the future. Harmonisation of former Cable and Wireless Worldwide pension arrangements The company s plans to integrate the two businesses started shortly after the merger. As part of the integration, later this year former Cable and Wireless Worldwide employees will join the Plan and start saving for their retirement with Vodafone. Improving communications In 2012, the Trustee carried out a review of Plan communications. As part of this review, it set some targets to improve the way members use the communications and tools available to them. This newsletter is part of a series of improvements that the Trustee is planning to make to the communications it sends to members. You will also have noticed updates to your annual pension statement. Pension statement update Your pension statement is available online throughout the year, unless you re a deferred member (you no longer make contributions to the Plan) when the statement is sent to your home address. The move online means that it s easier for you to review your retirement savings and instantly make changes to your contribution rate or investment choices. Have you reviewed your statement? This improvement has shown a significant increase in the number of members reviewing their statement, using the modeller and making the most of Vodafone s matched contributions by increasing their contribution rate. 1, ,703 1, , Number of: Statement downloads Modeller uses Visits to decision area View your latest statement at: 5,748 1,548 4,

7 Contact details Find out more about investing in the Plan guide: investment/dc_plan_investment_guide.pdf Review the investment options in detail by downloading the factsheets: Tel: or +44 (0) Write: Vodafone Pensions, Towers Watson, PO Box 545, Redhill, Surrey, RH1 1YX 12