Pensions and Retirement

ScottishPower provides employee retirement benefits that are market competitive and in line with best practice standards. Over 75% of all employees contribute to our pension plans.

We have three pension schemes – two final salary schemes, which are closed to new entrants and the ScottishPower Stakeholder Plan.

Our longer serving employees benefit from our two final salary pension schemes which have the security of building up valuable pension benefits with flexible, innovative options for topping up their Scheme benefits.

Our schemes are well funded and managed by effective, responsible trustee bodies committed to safeguarding these pension schemes for all members.

A summary of the features of our pension schemes is shown in the table below.

* Or 0% for those participating in the Pension Salary Sacrifice Agreement (Pension Plus)

ScottishPower pays twice the employee’s chosen contribution level into the Stakeholder Pension Plan.

Our Stakeholder Plan provides employees with an incentive to save for retirement with the company's support in an easy, flexible and tax efficient way. It also includes life assurance cover. As at 31 December 2010 there were 753 contributing members, and the total value of the Plan was £14.2 million.

ScottishPower supports employees preparing for retirement in many ways such as:

• Helping them understand the financial benefits payable from our pension schemes to enable them to make better Informed financial choices
• Clearly articulating the process from our administrators, issuing the first quotation six months in advance of the Member's Normal Pension Age, to requesting a quotation of retirement benefits from our administrator, through to final benefit settlement
• Assistance with practical issues they may face in retirement by facilitating attendance at pre-retirement courses sponsored by third party providers.

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Pensions Communication

We use a range of different approaches and media to communicate our pension arrangements, targeting support appropriately throughout the employment lifecycle – pre-employment, induction programmes, mid-career, lifestyle changes, leaving service, pre-retirement and post retirement.

We also offer a dedicated pensions helpline, one-to-one on-site pension surgeries, annual pension scheme newsletters and a pensions website that all members can access.

This allows employees and scheme members to view information on the financing and management of the schemes and enables employees to calculate estimates of pension benefits and access their benefit statements online.

All pension plan members are provided with annual Benefit Statements, incorporating State benefit forecasts, Plain English guides to all pension arrangements and access to Individual Financial Advice providers.

We also provide our retired Employee Associations with bi-annual pension scheme updates.

During 2010 we held a number of road shows and surgeries for staff, including presentations at employee team meetings, one-to-one surgeries and setting up stalls in canteens and staff breakout rooms. This involved providing employees with information on the key benefits and the financing and management of the company’s pension schemes, while independent financial advisers were available to offer more general advice.

We also held pensions forums in June and November at which retired staff associations could meet the pensions management team for an update on the schemes’ funding and management.

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Pension Scheme Management

2010 saw a greater level of stability in stock markets than 2009. The schemes currently have less than 50% of the assets invested in equities, the remainder being invested in Government and corporate bonds, cash, property and infrastructure funds.

ScottishPower Pension Scheme

Asset and liabilities values of the fund at 31st December 2010 were £2.336 billion and £2.412 billion respectively, giving a funding level of 97%. The scheme has completed its 2009 Actuarial Valuation. With effect from 1st July 2010, employer contributions increased from 15% to 21.8% of pensionable salaries. Additionally, ScottishPower agreed to contribute deficit repair contributions of £11.7m for seven years. The first payment was made in July 2010. Future payments will be made in April 2011 and annually in April thereafter. The £11.7m contribution will be increased each year in line with increases in the Retail Prices Index from April to April.

Manweb Group Pension Scheme

Asset and liabilities values of the fund at 31st December 2010 were £825million and £1.017 billion respectively, giving a funding level of 81.1%. The scheme has completed its 2009 Actuarial Valuation. With effect from 1 July 2010, employer contributions increased from 20.3% to 23.9% of pensionable salaries. Additionally, ScottishPower agreed to contribute deficit repair contributions of £23m for seven years. The first payment was made in July 2010. Future payments will be made in April 2011 and annually in April thereafter. The £23m contribution will be increased each year in line with increases in the Retail Prices Index from September to September.

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Employee Share Plans

We offer two employee share plans to enable employees to benefit from the successful performance of the IBERDROLA Group.

Share Incentive Plan

The company deducts money from employees’ pre-tax salary and uses it to purchase shares, which are held in trust on the employee’s behalf. This scheme also includes the bonus of free matching shares for every partnership share acquired, up to a monthly maximum. Dividends are paid on these shares twice a year.

Sharesave Scheme

The company also operates a Sharesave Scheme (Save As You Earn), whereby employees pay into a savings scheme from their after tax pay for a period of three or five years. They receive a guaranteed tax-free bonus at the end of the savings contract and the option to buy shares at a set price, or cash in their savings.

A total of 71% of employees are paying into the Share Incentive Plan and 44% of employees are paying into Sharesave. Based on the December 2010 payroll, the average monthly contribution for the Share Incentive Plan was £89 per employee, while the average monthly saving under Sharesave in 2010 was £118 per employee.

During 2010 a revised Share Incentive Plan was made available to all employees. The new plan was structured in a similar way to previous Share Incentive Plans, but had an enhanced matching facility for the first 12 months. This enhanced matching facility saw the company matching shares purchased by employees on a 2 for 1 basis, up to the first £50 invested. With effect from March 2011, the matching offer reverted to the 1:1 basis as agreed originally.

This new plan delivers on a commitment made by IBERDROLA to ensure that all ScottishPower employees would continue to have access to employee Share Incentive Plans comparable to those that were available before the integration with IBEDROLA.

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Other Employee Benefits

Your Choices

The “Your Choices” employee benefits scheme allows employees and their families to access an extensive range of discounts and offers on products and services including leisure, family days out, retail vouchers, shopping, health and holidays.

Gym Facilities

“Powerclubs” – well equipped fitness centres, staffed by professional instructors, are available at several of the company’s larger work sites and are open to all employees for a nominal monthly fee.

In addition, through “the Your Choices” benefits scheme employees can get discounted gym membership at a range of external health and fitness clubs, nationwide.

Vauxhall Partners Programme

Through our partnership with Vauxhall Motors, employees and their immediate families can save money on the list price of a wide range of new Vauxhall cars, as well as access generous discounts on factory fitted options, delivery charges plus better than market deals on car insurance and car financing.

Give As You Earn

The company operates a Give As You Earn scheme, enabling employees to make tax efficient charitable donations via the company payroll. In 2010, an average of 578 employees contributed £50,373 to good causes via the Give As You Earn scheme.

Childcare Vouchers

In partnership with Computershare Voucher Services the company’s Childcare Voucher Scheme allows employees to save money on their childcare costs by exchanging a portion of their pre-tax monthly salary to receive the same amount (free of tax and national insurance) in childcare vouchers.

Social & Recreational Societies

Social and Recreational Societies operate at a number of the company’s main work locations allowing employees to participate, with their colleagues, in a range of social, recreational, cultural and sporting activities.

Typical events range from theatre outings to dances, karaoke nights, shopping trips, or employees can join one of the many sporting clubs such as hill walking, skiing, golf and football.

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