Vodafone scheme completes CWW merger with £325m employer payment

The company put the assets and liabilities of the Cable & Wireless Worldwide Retirement Plan into a new section of the Vodafone Group Pension Scheme last month.

Many trustees and employers might consider merging their schemes as a result of corporate reorganisation or to streamline governance, but can face difficulties in reconciling different levels of funding. 

Following the purchase of Cable & Wireless Worldwide, we decided it would be more efficient to merge the schemes

Vodafone spokesperson

A spokesperson for Vodafone said: “Both organisations have large UK pension schemes and following the purchase of Cable & Wireless Worldwide, we decided it would be more efficient to merge the schemes.”

The Vodafone scheme’s summer newsletter stated the contribution was made to bring the funding level of the Vodafone section of the scheme more in line with that of the CWWRP, boosting it to 97 per cent at March 31 2014, from 75 per cent at the same time the previous year.

The company also contributed £40m to CWWRP at the same time, supporting an increase in its funding level to 106 per cent at March 31 2014 from 100 per cent the previous year.

If the contributions had not been made, the funding levels of the Vodafone scheme and CWRRP would have been 79 per cent and 104 per cent, respectively. 

Approximately £1.9bn of assets were transferred in from CWWRP, making the total assets of the Vodafone Group Pension Scheme more than £3.5bn. 

The company will make a payment of £45m to the scheme by September 30 2020, and another of this amount by the same time the following year.

The scheme is overseen by a single trustee board, consisting of representatives from both the Vodafone scheme and former CWWRP. 

The company’s spokesperson said the trustees are reviewing the scheme’s investment strategy post-merger but no decisions have yet been made.

Managing funding differences

Lesley Browning, partner at law firm Norton Rose Fulbright, said schemes carrying out a merger generally maintain separate sections for the assets and liabilities that are transferred in, “because trustees and companies would look at their two schemes, which had very different funding levels, and would think, ‘How would we make this work?’”

Nick Griggs, partner at consultancy Barnett Waddingham, said a difference in funding levels is one of the main reasons schemes may not be fully merged.

“You’re probably only keeping these sections separate because you can’t reconcile the security differences between [the schemes] that would allow you to merge both sections together, but you still want [to do] it because you’d only need one trustee board, for example,” he said.

Griggs said the simplest way of solving this difference is for the company to top up the less well-funded scheme to protect the security of members’ benefits.

However Browning said having separate sections means the scheme will not be able to achieve the same economies of scale that it could if fully merged as, for example, it would still need to carry out two valuations.