Vodafone 2012 Annual Report Download - page 135

Business review Performance Governance Financials Additional information
133
Vodafone Group Plc
Annual Report 2012
23. Post employment benets
Background
At 31 March 2012 the Group operated a number of pension plans for the benet of its employees throughout the world, which vary depending
onthe conditions and practices in the countries concerned. The Group’s pension plans are provided through both dened benet and dened
contribution arrangements. Dened benet schemes provide benets based on the employees’ length of pensionable service and their nal
pensionable salary or other criteria. Dened contribution schemes offer employees individual funds that are converted into benets at the time
ofretirement.
The Group operates dened benet schemes in Germany, Ghana, Ireland, Italy, India, the United Kingdom and the United States. Dened
contribution pension schemes are currently provided in Australia, Egypt, Greece, Hungary, Ireland, Italy, Kenya, Malta, the Netherlands, New
Zealand,Portugal, South Africa, Spain, the United Kingdom and the United States. The Group’s principal dened benet pension scheme in the
United Kingdom was closed to new entrants from 1 January 2006 and closed to future accrual for existing members on 31 March 2010.
Income statement expense
2012 2011 2010
£m £m £m
Dened contribution schemes 145 130 110
Dened benet schemes (2) 4 50
Total amount charged to the income statement (note 32) 143 134 160
Dened benet schemes
The principal actuarial assumptions used for estimating the Group’s benet obligations are set out below:
201212011120101
% % %
Weighted average actuarial assumptions used at 31 March:
Rate of ination 3.0 3.1 3.5
Rate of increase in salaries 2.9 2.9 4.6
Rate of increase in pensions in payment and deferred pensions 3.0 3.1 3.5
Discount rate 4.7 5.6 5.7
Expected rates of return:
Equities 7.4 8.2 8.5
Bonds24.2 5.1 5.1
Notes:
1 Figures shown represent a weighted average assumption of the individual schemes.
2 For the year ended 31 March 2012 the expected rate of return for bonds consisted of a 4.6% rate of return for corporate bonds (2011: 5.3%; 2010: 5.5%) and a 2.6% rate of return for government bonds (2011: 3.6%; 2010:4.0%).
The expected return on assets assumptions are derived by considering the expected long-term rates of return on plan investments. The overall rate
of return is a weighted average of the expected returns of the individual investments made in the Group plans. The long-term rates of return on
equities are derived from considering current risk free rates of return with the addition of an appropriate future risk premium from an analysis of
historic returns in various countries. The long-term rates of return on bonds are set in line with market yields currently available at the statement of
nancial position date.
Mortality assumptions used are consistent with those recommended by the individual scheme actuaries and reect the latest available tables,
adjusted for the experience of the Group where appropriate. The largest scheme in the Group is the UK scheme and the tables used for this scheme
indicate a further life expectancy for a male/female pensioner currently aged 65 of 23.6/24.4 years (2011: 23.5/24.3 years, 2010: 22.3/25.4 years)
and a further life expectancy from age 65 for a male/female non-pensioner member currently aged 40 of 27.2/26.7 years (2011: 27.0/26.6 years,
2010: 24.6/27.9 years).
Measurement of the Group’s dened benet retirement obligations are particularly sensitive to changes in certain key assumptions including the
discount rate. An increase or decrease in the discount rate of 0.5% would result in a £203 million increase or a £230million decrease in the dened
benet obligation respectively.
Charges made to the consolidated income statement and consolidated statement of comprehensive income (‘SOCI’) on the basis of the
assumptions stated above are:
2012 2011 2010
£m £m £m
Current service cost 11 12 29
Interest cost 85 95 77
Expected return on pension assets (99) (103) (76)
Curtailment/settlement 1 – 20
Total included within staff costs (2) 4 50
Actuarial losses/(gains) recognised in the SOCI 365 (190) 149
Cumulative actuarial losses recognised in the SOCI 671 306 496