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Take control ofyour futureYour investment guide
Click to begin
Investments – an overview 3
Your options 4 – 6
Getting down to basics 7
The relationship between risk and return 8
Different types of risk 9
Helping you decide 10
Your investment options 11
What you need to do 12
Contact details 12
This guide explains the basics of investing andsuggests some simple steps you could take tohelp you invest your account. It also explains theinvestment options you have in the Vodafone UKDefined Contribution Pension Plan (the Plan).
One of the most important decisions you must make for youraccount in the Plan is how you’ll invest it. Your decision will have a big impact on your pension when you retire.
Read this guide to find out more…
ContentsHello
02 Contents
Some useful terms Account – this is the ‘pot of money’ in the Plan that belongs to you. Youraccount is invested with the aim of growing its value so you have more tospend in retirement.
Defined contribution – this is a type of pension scheme where the income you receive in retirement is based on the contributions made to your accountand the investment returns your account receives.
Funds – these are the investment funds in the Plan which you can choose toinvest your account in.
03 Investments – an overview
How you invest your account is very important. Your decision will have a direct effect onthe value of your benefits. The better your investments perform, the faster youraccount will grow and the greater your benefits will be. So it makes sense to play anactive role in deciding how your account is invested.
This may be the first time you’ve needed to make investment choices, or you may bereviewing your options to make sure they meet your current situation. Whatever choiceyou are making, deciding how to invest your account might seem like a dauntingprospect. It needn’t be. There are two simple choices:
• Self select – with self select you get to choose where to invest your account from arange of funds; or
• Lifestyle – with Lifestyle your investments automatically change depending on howfar away from retirement you are.
This guide explains your investment choices in simple terms and outlines the thingsyou’ll need to think about when investing your account.
When it comes to deciding how your pension builds up,you are in control. You decide how much to contributeto your account and how you want the money in youraccount to be invested. In short, your pension givesyou choice, flexibility and responsibility.
Do you need personal financial advice?The value of your account may go up or down depending on market conditions. Vodafone Pensions(the Plan administrator) can’t give you specific advice about your finances or investments. Thisguide and the modeller at www.vodafonepensionsupdate.co.uk will help you understand thebasics of investing, including what you should consider when choosing an investment fund. It givesgeneral information only and does not take into account your personal circumstances.
If you’d like personal investment advice, you should speak to a financial adviser. You can find thename of a local financial adviser at www.unbiased.co.uk
Investments –an overview
04 Your options – Lifestyle or self select?
The Plan offers a wide range of investment options designed to suit all types of investors. You can take advantage of one of thethree Lifestyle options, which automatically change where your account is invested as you approach retirement. Or, if youprefer a more hands-on approach to investing, you can self select your investments from a wide range of different funds.
Your options –Lifestyle or self select?
How it works. Each Lifestyle option is designed to reduce your exposure to higher-risk investments(such as equities) in favour of lower-risk investments (like bonds, gilts and cash) as you near retirement.The Lifestyle options aim to look after most people’s investment needs and recognise that these needswill differ throughout their working lives. The Lifestyle options aim to reduce the fluctuations in thevalue of your account as you get closer to retirement. The Plan offers three different Lifestyle options,each designed to target a different retirement choice – taking your account as cash, buying an annuity(a secured income) or using drawdown (a variable income).
The three Lifestyle options are identical until four years before your Target Retirement Age, followingwhich each Lifestyle option provides a different investment mix.
From May 2015, the default Lifestyle option will be the Cash Lifestyle option. Please note that theLifestyle approach before May 2015 was the option now known as Annuity Lifestyle. If you wish tocontinue with this option from May 2015, you will need to change from the default Cash Lifestyleoption in the ‘Your Account’ of www.vodafonepensionsupdate.co.uk
Lifestyle – a set approach with three options
Why it’s good. It can take the time and effort out of managing where your account is invested and yourinvestments automatically change as you approach retirement. So, if you feel uncomfortable managingyour own investments, or simply don't have the time, one of the Lifestyle options might suit you.
Your Target Retirement Age is usuallyyour normal retirement date from thescheme. This is usually either 60 or 65,unless you have chosen a differentdate. Look at the ‘Your Account’ section ofwww.vodafonepensionsupdate.co.ukfor more information.
Why it might not be right for you. Just because your investments change automatically, doesn’tmean that Lifestyle is the right approach for you. Each Lifestyle option invests in a specific range offunds, which might not suit your particular needs or circumstances. If you take an interest ininvesting and/or want particular investments for your account, then self select could suit youbetter. The choice is yours.
Annuity Lifestyle This option assumes that you may want to use your
account to buy an annuity at retirement, paying you a fixedamount each month.
If you choose the Annuity Lifestyle option, your account will beinvested in the Melody Fund until 20 years before your TargetRetirement Age, after which your account will be graduallyswitched from the Melody Fund to the Harmony Fund over a10 year period. Your account will be switched from theHarmony Fund into the Pre-Retirement Fund and Cash Fund 4 years before your Target Retirement Age, so that by the timeyou reach your Target Retirement Age, your account will beinvested 75% in the Pre-Retirement Fund and 25% in the Cash Fund.
Cash Lifestyle –the default Lifestyle option
This option assumes that you may want to take your account ascash at retirement.
If you choose the Cash Lifestyle option, your account will beinvested in the Melody Fund until 20 years before your TargetRetirement Age, after which your account will gradually switchfrom the Melody Fund to the Harmony Fund over a 10 yearperiod. Your account will be switched from the Harmony Fundinto the Cash Fund 4 years before your Target Retirement Age,so that by the time you reach your Target Retirement Age, youraccount will be invested 100% in the Cash Fund.
05 Your options – Lifestyle or self select?
Drawdown Lifestyle This option assumes that you may want to access your
account flexibly via income drawdown.
If you choose the Drawdown Lifestyle option your account willbe invested in the Melody Fund until 20 years before yourTarget Retirement Age, after which your account will begradually switched from the Melody Fund to the HarmonyFund over a 10 year period. Your account will be switchedfrom the Harmony Fund into the Cash Fund 4 years beforeyour Target Retirement Age, so that by the time you reach yourTarget Retirement Age, your account will be invested 70% inthe Harmony Fund and 30% in the Cash Fund.
1 2 3
Your Lifestyle options
See page 7 for details of the investment mix of each fund.
06 Your options – Lifestyle or self select?
Choose an investment approach for different contribution typesYour account is made up of different contribution types.
The contributions in your account are made up of:
• Company contributions
• Employee contributions
• Additional Voluntary Contributions (AVCs)
One of the benefits of the Plan is that you have the flexibility to invest your different contributiontypes in different ways.
You can of course invest all your account in Lifestyle or self select, but you also have the optionof choosing either Lifestyle or self select for each of your different contribution types. Thedifferent contributions to your account include your contributions, Vodafone contributions, AVCsand Transfer In contributions.
FactsheetsTo learn more about your investment options,you can download factsheets for each fund fromwww.vodafonepensionsupdate.co.uk
How it works. You can invest your account in a range of different funds. You can even investthe amount you’ve already built up in your account differently from your future contributions.
Self select – a flexible approach
Why it’s good. Self select lets you choose the investments you believe are right for yourcircumstances. You can also change your investments when it suits you.
Why it might not be right for you. Self select takes a little more effort than Lifestyle. Youneed to think about how you want to invest your account from the start, and then regularlykeep an eye on how it’s invested.
Your self select optionsYou need to decide what funds to invest in and how much you want to invest in each fund. Youcan also choose to invest the money already saved in your account and your futurecontributions in different ways.
A full list of your self select investment options is included in this booklet. You can downloadfactsheets for more information on each of the funds from www.vodafonepensionsupdate.co.uk
07 Your investment options
Your investment optionsIn the Plan there are three Lifestyle options and 15 self select funds to choose from. You can either choose to invest only in Lifestyle or in a range of the self select funds.
Investment fund Investment mix
Equities
Emerging market equities
Absolute return
Corporate bonds
Gilts (fixed interst)
Gilts (index-linked)
Cash
Melody Fund
Symphony Fund
Harmony Fund
Active Global Equity Fund
Passive Global Equity Fund
Passive Overseas Equity Fund
Investment fund Investment mix
Active UK Equity Fund
Passive UK Equity Fund
Active Emerging Market Equity Fund
Target Return Fund
Bond Fund
Index-linked Gilt Fund
Investment mix key
Self select funds
Investment fund Investment mix
Pre-retirement Fund
Cash Fund
Shariah Fund
Mix of corporate bonds and giltswhich will aim to change in line
with level annuity prices
Emerging market equities are investments in equities from areas with developing economies. They are expected to achieve higher returns thanequities from developed countries over the long-term. Emerging market equities are usually higher risk than developedcountry equities.
08 Getting down to basics
Before you can decide how to invest your account, you need to know how investment funds are managed, the different typesof investments available to you, and the risk and return associated with these investments.
Getting down to basics
What is an index?An index is a group of investments. For example, the FinancialTimes Stock Exchange (FTSE) All-Share Index is made up of allthe shares quoted on the London Stock Exchange. The FTSE100 is made up of the hundred largest companies listed onthis stock exchange.
Managing investments –active vs passive managementThe investment funds that you can invest your account in aregenerally managed in one of two ways:
• Active management – where the investment manager uses theirexpertise to try to outperform a particular market index or achieve areturn above cash or inflation. Funds managed in this way mayperform better than passively managed funds, but they can alsounderperform if the investment manager makes the wrong choices.
• Passive management – where the investment manager aims toperform in line with a particular market index. The fund then follows(or ‘tracks’) the returns for that index. These funds are sometimescalled ‘index funds’. Funds managed in this way shouldn’t performsignificantly better or worse than the underlying markets they are tracking.
Types of investmentThere are many types of investments. The funds that you can choose from will, in the main, be invested in one or more ofthe following areas:
Equitiesare part ownership in a company. Generally, equities are expected to produce strong returns in the long term compared withbonds or cash. They can fall as well as rise in value, sometimes sharply.
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).
Corporate bonds are loans to companies or organisations. Bonds provide income either at a fixed or variable rate. Their market value will riseand fall, but not usually as sharply as the value of shares.
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.
09 The relationship between risk and return
When it comes to investing, risk andreturn are related. The higher a fund’spotential long-term returns, the higherthe risks of lower (or even negative)short-term returns. Each type ofinvestment has the potential to delivercertain levels of return, but there arecertain risks attached as well.
Therelationshipbetweenrisk andreturn
High
Potential risk
Cash
Bonds & gilts
Absolute return
Equities
Emergingmarket equities
High
Low
Keep in mind...• You can’t rely on past performance as a guide to future performance.
• The value of equities, bonds and other types of investments can go down as well as up in value. You may notget back the amount you have invested.
• In addition to the investment categories above, some of the investment options in the Plan may invest inother investment classes such as commodities, hedge funds or infrastructure.
Potential return
10 Different types of risk
There are many different types of risksassociated with investing. Below we haveexplained some of the major risks youshould think about before making aninvestment decision.
Differenttypes of risk
Investment riskthis is the potential for yourinvestment to fall in value. It’swhat most of us think aboutwhen we think of ‘risk’. Equitiesand property and, to a lesserextent, bonds, are most likely tobe affected by investment risk.
Inflation riskif your investment returns arelower than inflation, the ‘real’value of your pensionaccount goes down. Typically,cash investments are mostlikely to be affected byinflation risk, particularly overthe longer term.
Pension conversion riskdescribes the risk that your account in the Plan will buy less pension asyou get closer to retirement. The cost of exchanging your account for apension is linked to the price of bonds and gilts. You can help reduceconversion risk by investing your account in bonds and gilts as youapproach retirement.
Remember...Your investment choices and attitude to risk might change depending on your circumstances. Whenchoosing how to invest your account, you’ll need to think about how close you are to retirement, yourpersonal and financial situation, and whether you’re generally a cautious investor or you’re comfortabletaking some risk.
The ‘helping you decide’ checklist of things to think about when choosing an investment. If you would likepersonal advice about your investments, you should speak to an independent financial adviser (IFA).
11 Helping you decide
Helping you decideBelow are some questions to help you decide which types of investment you may want to consider. If you need personal adviceabout your finances and investments, you should speak to a financial adviser.
What are yourinvestmentaims?
...want funds with the potential for stronger long term growth andare prepared for your investments to fall in value in the short term.
...want funds that offer steadier returns but do not have thepotential for such high rates of return.
If you... Consider investing in...
Equities and absolute returns
Bonds, gilts and cash
...want your investments to have the potential to outperform aparticular index (with the risk of underperformance).
...want your investments to match the returns of a particular index.
Actively managed funds
Passively managed funds
How far areyou fromretirement?
...are a long way from retirement, you are probably able to takemore investment risk.
...are closer to retirement, you may want to protect the value ofyour account.
Equities and absolute returns
Bonds, gilts and cash
What does riskmean to you?
...think risk means the value of your investments falling by largeamounts.
...think risk means the value of your investments not keeping pacewith inflation.
Bonds, gilts and cash
Equities and absolute returns
What potentialreturns are youlooking for?
Remember – the Lifestyle options invest in a combinationof investment types. Download the fund factsheets formore details. www.vodafonepensionsupdate.co.uk
Access your account online!You can access and update your account online. For example, youcan download factsheets for each investment fund, switchinvestments, increase your contributions and update yourexpression of wish form securely online.
Simply visit www.vodafonepensionsupdate.co.uk and go to ‘YourAccount’. You’ll then be prompted to enter your own password andemployee number. If you have forgotten your password or havetrouble logging in, please use the ‘Forgotten your password?’ link.
12 What you need to know
What you need to do
Contact the Vodafone Pensions administration team:
Web: www.vodafonepensionsupdate.co.ukPhone: 0800 917 1192 (9am – 5pm, Monday to Friday)Email: [email protected]: Towers Watson, PO Box 545, Redhill, Surrey RH1 1YX
This guide provides an overview of how investments work and your investment options. It is for general guidance only.You’re responsible for carrying out your own investigations before deciding how to invest your account, and should takeindependent financial advice if you’re not sure what to do or if you want specific advice about your own circumstances.
Every effort has been made to ensure that this guide is accurate. If there is any conflict between it and the Trust Deed andRules, then the Trust Deed and Rules will take priority.
March 2015
For more information about your Vodafone pension...
How to switch or change investmentsYou can change or switch your investment funds at any time bylogging on to www.vodafonepensionsupdate.co.uk. Click on‘My Account’ and follow the ’Change investments’ link. You’llthen be prompted to enter your own password and employeenumber. If you have forgotten your password or have troublelogging in, please use the ‘Forgotten your password?’ link.
What happens if you don’t choose an investment fund?We strongly encourage you to play an active part in choosinghow your account is invested. However, if you don’t make aninvestment choice when you first join the Plan, your accountwill be invested in the Cash Lifestyle option.
This doesn’t mean that the Trustees recommend this option orthat it’s suitable for everyone. You can read more about the Cash Lifestyle option and other Lifestyle options from thefactsheet available online onwww.vodafonepensionsupdate.co.uk
If the Cash Lifestyle option doesn’t suit your investment needs,you can log on to the website to choose a different fund.
How the funds are managedThe investment funds are managed by a number of differentinvestment managers who’ve been selected in consultationwith the Trustees’ investment adviser. The individual managersmanage investments in different ways. They’ve been selectedbecause of the quality of their investment processes andpeople, and because their investment approach is in line withthe objectives of the Trustees. They also complement eachother, making sure you have a wide range of investment fundsto choose from.
The Trustees regularly monitor the performance and suitabilityof the managers and, if necessary, will make changes.
ChargesThere is a charge for investment management. These chargesare built into the price of the investment funds. Charges varyfor each fund and between fund managers.
Keeping track of your accountEach year, you’ll receive a benefit statement letting you knowthe value of your pension as at the previous 31 December. It willalso show the investments you have bought and sold during theyear and the funds in which your account is invested.
Your benefit statement is very useful for helping you to plan for retirement.
If you want to keep track of how your account is performingmore regularly, you can log on towww.vodafonepensionsupdate.co.uk
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