Vernon 20pg Review 2015 5th draft_Layout 1 16/03/2016 15:59 Page 2

ANNUAL

REVIEW2015 Expert writer Poynton focus Rio Games 2016 Annie Shaw is a financial Thriving branch at the Stockport wheelchair racers journalist and a Vernon heart of change in a new hope to be winning medals customer. Read her story. look village. for Team GB. Page 3 Page 6 Page 16

Great personal

service, not just a number“ processed “ by a computer. Thank you for all your help.

Ms W, Cheadle Hulme

Mortgages in retirement Find out out how Spencer and Linda Kahan benefit. Page 4

As individual as you are Vernon 20pg Review 2015 5th draft_Layout 1 17/03/2016 09:02 Page 3

AnnualReview 2015 Welcome to our Contents 2015 Annual Review 03 Financial journalist Annie Shaw gives her view on the Vernon experience

04 We meet Spencer and Linda Kahan At this time of year we reflect as they tell us more about the background to their retirement on the last 12 months, mortgage reporting back on the financial performance of the Society. 05 Your questions answered on the Personal Savings Allowance We also get an opportunity to focus on interesting stories about our customers, the 06 Poynton branch helping to secure Vernon’s people, our products and services the future for the village and its as well as our community giving customers programme, some of which is inspired by an Olympic year. We hope you enjoy the read. 08 Key performance indicators During 2015 we have succeeded in improving levels of profitability 09-11 Summary Financial Statement with a keen eye on building for the future. Change is constant and we operate in a complex marketplace with an increasingly 12 Directors' roles and responsibilities demanding regulatory environment, all of which dictates that we need to increase investment in our people and resources to ensure 13 Directors' profiles that we take these challenges in our stride and maximise our performance. This investment in people and technology will ensure 14 Directors' Remuneration Report that today’s and tomorrow’s customers can engage with us anytime, securely and with confidence. Prudent financial management puts 15 Tackling flooded homes - the Vernon us in a good place for challenges ahead. responds with partner RSA Our aim is to meet these challenges whilst still maintaining the high 16 2016 is an exciting year for Paralympic level of personal service and expertise you expect from us today. You will see us winning on many satisfaction measures throughout this hopefuls from Stockport Wheelchair Review. Within our strong operational framework, underpinned by our Racing. Head Coach Rick Hoskins tailored, common sense approach to underwriting, we can be talks about ambitions for Rio proactive with niche, innovative products that respond to changing customer needs. Our retirement mortgage product is a great 17 Vernon Compliance Manager example of this. Jackie Beard-Jones gives the inside track on being a volunteer Technical Smaller than expected pension returns, increased longevity and having to support children for longer is a reality for many customers Official for British Swimming and one couple has shared their own experience in this Review on 18 Jubilee Fund 2015 - what we do to how our retirement mortgage product has helped. make a difference In our wider community it’s no secret that public sector services for those in need, whether through circumstance, disability or job loss, 19 Brass band meets Rock 'n' Roll are under huge pressure and our Jubilee Fund continues to back passionate groups of people who are committed to filling in the gaps. 20 Workplace loyalty – interviews with We wish all our recipients in 2015 well and admire their efforts. three of our long-serving colleagues What remains constant is the way that we seek to do things at the Vernon, going that extra mile and trying to do that little bit better for our customers every day. We appreciate your continuing support and remain committed to embracing change and driving the Society forward. Mike Hanson Chief Executive

You’ll be more at home with us The Society may from time to time inform you of other products and services – you can update your marketing preferences at any time simply Head Office: by contacting us by phone, email or in writing using our details on the right. 19 St Petersgate, Stockport SK1 1HF email: [email protected] Cover image: Vernon customers Spencer and Linda Kahan www.thevernon.co.uk

02 Vernon 20pg Review 2015 5th draft_Layout 1 17/03/2016 09:03 Page 4

AnnualReview 2015 Inside track Annie Shaw is a national newspaper journalist and for several years was a financial ‘agony aunt’ for the Independent on Sunday and the Daily Express. She is co-author of the book ‘100 Ways to Beat the Credit Crunch’ and the author of the ‘Rough Guide to Family Finance’. She is a frequent expert guest on financial issues for radio and television news and writes a regular column for Saga magazine. Photo by Suki Dhanda

My career in national In a world of big banks and global newspapers“ took me to London investment and “computer says no” for many years but now that I automated decisions, Vernon offers personal attention to its customers from am a freelance I am back with the local community and tailors its my roots and for the past 18 products and services to their particular months I have been enjoying the needs. 100% experience of picking up old Full marks for the patience and diligence connections in the north. of the staff in the Bramhall and Poynton Mortgage branches who have had to excavate One of the most pleasurable has been their archives to update the accounts with Family Assist re-establishing my relationship with of me and my children from two Vernon Building Society and dusting off Findings from the most recent decades ago. my ancient passbook – a really old one Lloyds Bank Family Savings study have revealed that parental with an emerald green cover embossed We are now keen active Vernon financial support for housing costs with the name of the Society in gold. customers. As well as our ordinary accounts, my son has signed up to a is up by a fifth in just two years, The building society movement was born regular savings account –with a rather with 74% of parents believing that more than two hundred years ago to more modern passbook - to save for his it will be even higher in the future. pool the resources of ordinary people own home. I am sure we will be making Parents often gift or lend a deposit and encourage the building and use of other Vernon services the more we in these circumstances, but this ownership of homes. The movement’s settle in. We have our second Vernon can be risky as they can’t rely on tradition of mutuality, balancing the calendar on our kitchen wall and look their money being returned should interests of savers and borrowers, lives on forward to a new photograph of the they need it in future. in societies such as the Vernon, with local area as each month passes. fairness at the heart of their operations. Our Family Assist Mortgage is an Unfortunately our elegant green Vernon innovative mortgage product that shopper never visits the high street as it allows a first time buyer to borrow hangs on the back of the door as my up to 100% of a property’s makeshift filing system, containing purchase price provided that a

Really can’t fault incoming post that needs attention – relative is able to deposit savings Vernon. Friendly and

“ pending bills and letters that need reply. equivalent to 20% of the purchase understanding of our difficult “ price for a minimum of 4 years. and complicated situation We follow the activities of the Society

which no one else would Money is returned to the relative

such as sponsorship and charity events spend the time over after this period provided on Twitter and are huge fans of Vernon“ payments have been maintained. Mrs C, Sheffield Bear. Thanks to Vernon for making us feel welcome now we are back home.

03 Vernon 20pg Review 2015 5th draft_Layout 1 17/03/2016 09:15 Page 5

AnnualReview 2015

We were

looking“ for a mortgage that suited our circumstances“ and the Vernon’s product was just right. Spencer Kahan

Mortgages in retirement

Spencer Kahan, 76, and his leave a residual pension pot to wife Linda, 73, have taken full beneficiaries which continues to grow Retirement mortgages advantage of the Vernon’s and is only taxed if they withdraw funds.” retirement mortgage product. Spencer, who is semi-retired from a Spencer spoke to the Review to distinguished IFA career, is convinced ...the facts tell us why… there is a huge market for retirement Aimed to meet the unique needs of mortgage products, especially for high older borrowers that are either looking “We were looking for a mortgage that net worth individuals with income to to release equity or move home. If necessary, the amount borrowed can suited our circumstances as we went into cover monthly payments. “There is plenty be paid back from the sale of the semi-retirement and the Vernon’s of interest from financiers and regulatory property when the borrower dies or product was just right. I researched the guidance to put something in place.” moves into alternative accommodation internet, took a few soundings from the such as long term care. marketplace and became a customer.” When he is not championing retirement During the term of the mortgage the mortgage developments Spencer is a borrower is responsible for meeting the Vernon’s flexible approach caters very trustee and governor of a local monthly interest. well for a retired borrower. Only the academy school which supports children interest is repaid each month with the from under-privileged backgrounds and retired or retired and starting exciting capital being repaid from the sale of the is also patron, along with his wife, of a new chapters in their lives. Retirement property on death or downsizing. number of high profile arts institutions. mortgage products allow people who These include The Royal Academy, the are asset rich, but cash poor to explore Spencer again: “It was a breath of fresh British Film Institute, the Old Vic and new opportunities without selling the air after reviewing the many equity Sadlers Wells. release products available, where you family home. avoid the need to budget for monthly Three students from the Academy were Of his experience with the Vernon payments, but then watch the debt recently offered Oxbridge places and Spencer had nothing but praise. “The quickly grow as unpaid interest is added children regularly attend rehearsals at team was absolutely superb, especially to the loan. We did not want that.” the iconic performance venues so that Mandy Torkington, who always their gifts can be identified and nurtured. responded immediately to any queries.” The loan has allowed Spencer and his wife to free up capital to make gifts to his Spencer again: “I am passionate about For more information about three sons, one of whom is setting up a giving youngsters, whatever their borrowing in retirement, visit: life overseas, to cover medical bills for backgrounds, the same opportunities as www.moneyadviceservice.co.uk. Linda and to pay back a personal loan. those more privileged, to be inspired and follow their dreams.” If you would like to learn more about Spencer continued: “By getting access our retirement mortgages, visit to capital this way we do not have to Life is certainly busy for Spencer and for www.thevernon.co.uk touch our pension. We can, if we wish, many other people of 70+ who are semi or call 0161 429 6262.

04 Vernon 20pg Review 2015 5th draft_Layout 1 17/03/2016 09:15 Page 6

AnnualReview 2015 Your personal Average loan savings 2015 Local amount in 2015 Stats Branches questions £110k answered 6 What is the Personal Savings Allowance? Established in The introduction of the new Personal Savings Allowance means that from 6 April 2016 most people Members of Staff will no longer pay tax on their cash savings income. 1924 Basic rate taxpayers can earn £1,000 a year in interest before being liable for tax. The figure is £500 for higher rate taxpayers, with no allowance for additional rate taxpayers. First-time buyers we have helped in How will my interest be paid in future? 74 From 6th April 2016 we will stop deducting tax from the 2015 interest on all savings accounts. Interest that relates = to periods before 6 April 2016 but paid afterwards will not have tax deducted. 51 Repossessions in What if I earn more than my allowance 2015 in savings income? 0 If your total taxable income is less than £17,000, you Homebuyers we helped in 2015 will pay no tax at all on your savings income. If your income is more than this you will be taxed on any Average savings interest over your Personal Savings Allowance. length of service at The HMRC has yet to make clear how they propose VBS12 to collect this tax but for most it will be through a self- 18 4 Total number Years assessment tax return. For further information on how of borrowers the allowance works and how to pay any tax due you will need to contact HMRC directly. Should I continue to save in a Cash ISA? Customers 2,727 Yes. A Cash ISA provides a shelter from tax and in Total Asset interest from it does not count towards your Personal growth over year Savings Allowance. In addition, whilst £1,000 a year in interest may sound a lot in the current low interest 37,506 rate environment, when rates increase more savers 4% will be liable to pay tax. Sheltering your money in a Cash ISA will protect you in this eventuality.

Customer Service

found staff friendly found staff to be helpful, 91% and welcoming 92% professional and efficient CUSTOMER SURVEY About The Vernon Products & Marketing RESULTS trusted us as a provider felt that the Vernon met their 89% of financial products 76% financial needs 2015 believed that we always said that our product range 87% act in their interests 73% is sufficient and comprehensive felt that we offer a viable said their accounts had alternative to high street performed as expected 83% banks 78%

value the work we do in said that the frequency of 86% the community 86% communication from us is right for them

would recommend the said that communications from Society to family/friends us were easy to understand 84% in the future 89% said that promotional material 88% is clear and not misleading 05 Vernon 20pg Review 2015 5th draft_Layout 1 17/03/2016 11:02 Page 7

AnnualReview 2015

Vernon gets behind Poynton village

Ian Keeling, the Vernon's Head of “We were also impressed by Waitrose’s Sales and Marketing, looks at the customer service levels and strong ‘green’ history of the Poynton branch and credentials, using local suppliers where possible. explains how the Society got right The store also created many new local jobs. behind the vision for Park Lane and “From the Vernon's perspective, the result of the wider village. the development meant that we become the owner of a new, purpose-built branch “Our original Poynton branch was in a large but critically, the development has brought detached building that had once been more people to ‘our end of the street’, converted from residential to retail use. It helping to attract new members - assuring occupied a sizeable plot but we were our future in the village, whilst other financial starting to question whether it was best suited institutions were leaving. for meeting our customers' future needs.

“Because of the size and location of the plot we had been previously approached by several developers, but had turned down advances as we felt they were not right for either the Society or the wider community.

“When the Waitrose development was proposed we felt it provided a significant benefit for both the Society’s members and the needs of the village itself.

“Park Lane had lost some of its vibrancy and even though there are important local I have already services nearby such as the Health Centre, recommended“ the Vernon. Civic Hall and Library, it felt as though the You are a local organisation area was starting to go into decline. We felt with local offices and that a retailer like Waitrose would breathe life knowledge and the ability

into the village by attracting new visitors to treat each mortgage application on its merits and many of who would use other local services “ not just a ‘tick box’ pass or and retailers. Waitrose took an inclusive fail criteria approach to the village, talking to residents Mrs P, Stockport and retailers, understanding their concerns and doing their best to alleviate them. 06 Vernon 20pg Review 2015 5th draft_Layout 1 16/03/2016 17:25 Page 8

AnnualReview 2015

Ian continued: “The development kick started the ‘shared- space’ scheme which has resulted in Park Lane being the thriving and friendly thoroughfare we see today. Poynton branch has become the most successful in the Society in terms of attracting new customers and savings balances and we have seen a significant increase in people using the services of Alison Lilley, our experienced Manager and Mortgage Adviser in the branch.”

She commented: “The whole area has a Mediterranean feel in the summer with all the restaurants having outdoor tables and chairs and we are definitely a lot busier. Waitrose brings people into the area as does Costa Coffee and when people sit outside there they can see the offers in our windows – they can’t miss us!

“Talking to customers we know they like to shop local and there is a great atmosphere this end of Park Lane now. We also benefit from a large car park right next door and the Council is planning street festivals to get more people along. It has worked very well for both the village and for the Vernon.”

Since 2011, Poynton has annually

opened more new savings accounts “ “ than any other branch in the Vernon Building Society network Alison Lilley Poynton Branch 07 Vernon 20pg Review 2015 5th draft_Layout 1 18/03/2016 15:49 Page 9

AnnualReview 2015 Key Performance Indicators

TOTAL ASSETS (£million) 299.7

288.1 Total assets comprise liquidity, fixed and other assets and mortgages. These assets totalled £299.7m as at 31 December 2015 (2014: £288.1m). 273.4 Asset growth is an important indication that our products and services are 267.8 in demand from existing and new members. Whilst our aim is therefore to increase assets year on year, this must be achieved in a measured and 250.9 balanced way which does not raise the Society’s risk profile or overstretch its resources.

2011 2012 2013 2014 2015

232.8 223.6 LOANS AND ADVANCES TO CUSTOMERS (£million) 208.5 200.8 191.2 Loans and advances to customers measure the amount lent by the Society secured by way of mortgages. Our aim is to increase these balances by providing our members with competitive and innovative products. During 2015, the Society advanced £40.9m (2014: £46.0m). Of the total of the £232.8m loans and advances as at 31 December 2015, £219.9m were secured on residential properties with the remainder being secured on other land and commercial premises. The total number of mortgages completed in the year was 451 (2014: 501). 2011 2012 2013 2014 2015

GROSS CAPITAL (£million) 20.1 Capital represents past profits which have been accumulated to provide 19.2 a contingency against possible future losses. It therefore protects 18.6 members’ funds. As at 31 December 2015 gross capital amounted to £20.1m or 7.3% of total shares and borrowings (2014: £19.2m or 7.2%) and 17.8 free capital amounted to £18.9m or 6.8% of total shares and borrowings 17.2 (2014: £17.9m or 6.7%). The Society’s capital comfortably exceeds the minimum level prescribed by our regulatory body.

2011 2012 2013 2014 2015 1.25

RATIO OF MANAGEMENT EXPENSES TO MEAN ASSETS (%) 1.20 The management expenses ratio shows how efficient we are at controlling costs. As a mutual organisation it is very important that we 1.15 1.15 work efficiently and keep our overheads down so that we can provide 1.14 the best rates to both borrowers and investors. The increase in the ratio in both 2014 and 2015 (to 1.25%) particularly reflects higher levels of staff, consultancy and audit costs as the Society met new regulatory and accounting requirements. 2011 2012 2013 2014 2015

ARREARS (%)

1.25 This ratio shows the total balances of accounts which are in arrears by more 1.11 than 2.5% of total balances, expressed as a percentage of total mortgage assets. Whilst the arrears percentage has fallen from 1.25% at the end of 2014 to 1.11%, in recent years we have seen an increase principally due 0.82 0.73 to one large account. The number of accounts in arrears by more than 2.5% of the mortgage balance, at 19, remains lower than at the end of 2014 0.5 (24). We take a responsible approach to new lending, and a proactive and sympathetic approach to borrowers experiencing difficulties. At 31 December 2015 there were 8 cases where repayments were 12 months or more in arrears, with mortgage balances outstanding of £617,000 (2014: 9 2011 2012 2013 2014 2015 and £730,000). The arrears on these accounts totalled £111,000 (2014: £87,000). No properties were taken into possession during the year. 08 Vernon 20pg Review 2015 5th draft_Layout 1 18/03/2016 15:26 Page 10

AnnualReview 2015 Summary Financial Statement

This Summary Financial Statement is a summary of information in the audited Annual Report and Accounts, the Directors’ Report and Annual Business Statement, all of which will be available to members and depositors free of charge on demand at every office of the Vernon Building Society and from its website www.thevernon.co.uk from 13th April 2016.

SUMMARY DIRECTORS’ REPORT Within this context, the 4.0% growth in total assets reported by the Society in 2015 to £299.7m (2014: £288.1m) demonstrates a The directors have pleasure in presenting their 92nd Summary positive performance, with significant growth in both mortgage Financial Statement for the year ended 31st December 2015. and savings balances. In the previous two years we had ACCOUNTING FRAMEWORK adopted a policy of protecting savers’ rates at levels above the industry average however in 2015 market pressures meant that Due to changes in accounting reporting requirements the the Society had to reduce savers’ rates to stem inflows of funds Society has adopted FRS 102 "new UK GAAP" in this year’s and to manage liquidity effectively. annual report and accounts. This has impacted items in the Income Statement and Statement of Financial Position due to The Society has continued to build its capital base through the changes in accounting policies from those used previously. delivery of a profit for the year after tax of £970,000 (2014: Accordingly, the comparative financial information is different £627,000). from that previously reported. Mortgage lending and products BUSINESS STRATEGY We are pleased to report that against an increasingly As a mutual organisation the Society’s fundamental objective is competitive environment the Society has lent £40.9m in the to satisfy the financial needs of its customers by being a year (2014: £46.0m). To ensure that we continue to meet trustworthy provider of competitive savings and mortgage customers’ changing needs during the year we launched an products. The Society also places importance upon providing innovative retirement mortgage that provides mortgage employment within our local communities and support for finance for borrowers after they have ceased working based on community activities. their pension income.

We are committed to safeguarding our members’ interests by Our desire for long term relationships with our customers meant ensuring that we act with integrity and that the service and that we were delighted that 89% of customers whose mortgage advice provided to them is appropriate, fair and delivered in a schemes matured in 2015 elected to take a new mortgage professional manner. Our strategy to achieve these goals is product with us – a figure well above the market average. As a based upon embedding positive and ethical values in our result of such initiatives total mortgage balances had increased internal behaviours and culture. to £232.8m by the year end (2014: £223.6m).

The ultimate long-term measure of our success will be the The Society has a responsible lending policy and a proactive achievement of outstanding levels of customer satisfaction approach to assisting borrowers in difficulty which is reflected in which is reflected in the achievement of growth within the the fact that no properties were taken into possession during Society’s assets and customer numbers. the year. Whilst the level of arrears at the end of December 2015 was higher than the previous year, this principally reflects The Board adheres to prudent building society principles and one large account for which progress is being made to rectify values and prepares strategic plans that respond to changes in matters with no Society losses expected. Excluding this case, our markets and are challenging but do not expose the Society overall the position improved throughout the year and the to excessive or inappropriate risk. The Board regularly reviews number of cases in arrears reduced from 2014. both its own composition and that of the management team to ensure that the Society is well placed to deal with future Investment and savings products challenges with confidence. There seems no prospect in the medium term of an end to the As Cheshire’s only independent building society we remain fully low interest environment and therefore we took the decision to committed to continuing to deliver the benefits of mutuality to reduce rates in line with our competitors so that we could make our local communities. our previously restricted savings products available to new customers. Unfortunately the savings market continued to see BUSINESS REVIEW rates fall and we again needed to place restrictions on Performance in 2015 account availability in December before planning further small rate reductions in March 2016. We are aware that this is 2015, like 2014, was characterised by increasing levels of global frustrating to our many savers, however we trust that they will economic uncertainty and the significant fall of oil prices. Within understand that we need to respond to market pressures so as the UK inflation and unemployment levels remained relatively to avoid imbalances in the flows of retail funds. low, wage growth whilst stronger than in recent times was still not significant and the consequences of measures designed to tackle the fiscal deficit continue to contribute to the uncertain economic environment and financial pressures faced by many households. 09 Vernon 20pg Review 2015 5th draft_Layout 1 18/03/2016 15:26 Page 11

AnnualReview 2015 Summary Financial Statement

Summary Directors’ Report (cont.) SIGNIFICANT ITEMS Summary a) FSCS levy In common with all regulated UK deposit takers the Society Financial Statement pays levies to the Financial Services Compensation Scheme for the year ended 31 December 2015 (‘FSCS’) and during 2008 claims were triggered against the FSCS. As a contributor to the FSCS we are required to meet liabilities arising from these claims which are shared between Results for the year Group & Group & scheme members in proportion to their level of retail deposits. Society Society Up to 2012 these liabilities were restricted to the interest on the 2015 2014 funds however from 2013 we have a requirement to also pay £’000 £’000 monies in respect of the capital losses incurred.

Alongside the transition to FRS 102, the Society has adopted Net interest receivable 4,999 4,578 IFRIC 21 as the basis for calculating the FSCS levy. This has resulted in the Society holding a smaller provision based on one Other income and charges 17 29 year’s liability rather than two. This change has been reflected in the 2014 opening balance sheet and results in a provision of Administrative expenses (3,671) (3,356) £71,000 at 31 December 2015. Provisions for bad and doubtful debts (61) (55) b) Closure of Edgeley branch Provision for FSCS levy (144) (173) As reported last year having reviewed the efficiency of our Recovery of impairment losses distribution channels in light of the need to continue to invest in on loans and advances to new technology platforms to support changing customer needs credit institutions 42 - and their preferred methods of interacting with the Society we Recovery / (Impairment) reached the difficult decision to close the Edgeley branch in of Edgeley branch 49 (172) March 2015, reflecting the short distance from our St. Petersgate branch. Profit for the year before taxation 1,231 851 In the 2014 accounts we made a provision totalling £172,000 to cover potential costs and the property write down which on the Taxation (261) (224) advice of selling agents was anticipated on the closure and subsequent disposal of the branch premises. In July 2015 the Society completed the sale of the premises and achieved a Profit for the year 970 627 better than expected sale price which has resulted in a £49,000 write back of the provision in the 2015 accounts.

Profitability and capital Financial position at Group Group As a mutual, the Society does not have to pay shareholders the year end 2015 2014 and only retains sufficient profits to maintain capital at Assets appropriate levels to sustain future growth and activity. This means we can invest more into our products, keeping them Liquid assets 64,997 62,456 competitive. The additional profit we have generated in 2015 Mortgages 232,775 223,620 has allowed us to further strengthen the Society’s capital Fixed and other assets 1,874 2,050 position which is key to safeguarding members’ interests. We have also been able to offer lower priced mortgages to both new and existing customer which should help us maintain Total assets 299,646 288,126 growth despite the fiercely competitive market.

Outlook Liabilities Despite the challenging economic backdrop we view the Shares 247,844 234,297 future with confidence and believe that our policy of acting Borrowings 30,001 33,074 with integrity and placing our members at the centre of Other liabilities 1,561 1,401 everything we do will continue to resonate with them and provide a solid platform for future growth. Provision for FSCS levy 71 91 Reserves 20,169 19,263

Total liabilities 299,646 288,126

10 Vernon 20pg Review 2015 5th draft_Layout 1 18/03/2016 15:26 Page 12

AnnualReview 2015 Summary Financial Statement

Group Group Summary Of Key Financial Ratios 2015 2014

GROSS CAPITAL as a percentage of shares and borrowings 7.26% 7.20% Gross capital comprises reserves. The ratio gives an indication of the extent to which the Society is funded by retained earnings. The higher the percentage the greater the protection for investors’ funds.

LIQUID ASSETS as a percentage of shares and borrowings 23.39% 23.35% The liquid assets as a percentage of shares and borrowings ratio is a measure of the proportion of the Society’s total shares and borrowings that are matched by assets in the form of cash or are readily convertible into cash.

PROFIT for the year as a percentage of mean total assets 0.34% 0.22% Profit for the year as a percentage of mean total assets is similar to a company’s ‘return on capital’. The directors believe that the profit for the year is consistent with maintaining the gross capital ratio in order to deliver the benefits of mutuality in the future.

MANAGEMENT EXPENSES as a percentage of mean total assets 1.25% 1.20% The management expenses ratio measures the proportion that the Society’s administrative expenses bears to mean total assets. Mean total assets are calculated as the average of 2015 and 2014 total assets at the year end.

Approved by the Board of Directors on 22nd March 2016.

D Bailey, Chair J Hughes, Vice Chair M J Hanson, Director and Chief Executive

Independent auditor’s statement to the members and depositors of Vernon Building Society

We have examined the Summary and its conformity with the relevant section 76 of the Building Societies Act Financial Statement of Vernon Building requirements of section 76 of the Building 1986 and regulations made under it, is Society (‘the Society’) for the year ended Societies Act 1986 and regulations made nevertheless necessary to include to 31 December 2015 set out on pages 9 to 11. under it. ensure consistency with the full Annual Report and Accounts, the Annual This auditor’s statement is made solely to Basis of opinion Business Statement and Directors’ the Society’s members, as a body, and Report of the Society for the year Our examination of the Summary to the Society’s depositors, as a body, in ended 31 December 2015. accordance with section 76 of the Financial Statement consisted primarily of: Building Societies Act 1986. Our work has Our report on the Society’s full Annual n Agreeing the amounts and disclosures been undertaken so that we might state Report and Accounts describes the basis included in the Summary Financial to the Society’s members and depositors of our opinions on those Annual Report Statement to the corresponding items those matters we are required to state to and Accounts, the Annual Business within the full Annual Report and them in such a statement and for no Statement and Directors’ Report. Accounts, Annual Business Statement other purpose. To the fullest extent and Directors’ Report of the Society permitted by law, we do not accept or Opinion on Summary for the year ended 31 December assume responsibility to anyone other Financial Statement 2015, including consideration of than the Society and the Society’s whether, in our opinion, the On the basis of the work performed, in members as a body and the Society’s information in the Summary Financial our opinion the Summary Financial depositors as a body, for our work, for this Statement has been summarised in a Statement is consistent with the full statement, or for the opinions we have manner which is not consistent with Annual Report and Accounts, the Annual formed. the full Annual Report and Accounts, Business Statement and Directors’ Report Respective responsibilities of the Annual Business Statement and of the Society for the year ended 31 December 2015 and conforms with the directors and auditor Directors’ Report of the Society for that year; applicable requirements of section 76 of The directors are responsible for preparing the Building Societies Act 1986 and the Summary Financial Statement within n Checking that the format and regulations made under it. the Annual Review 2015 document, in content of the Summary Financial accordance with applicable United Statement is consistent with the Jessica Katsouris Kingdom law. requirements of section 76 of the for and on behalf of KPMG LLP, Building Societies Act 1986 and Statutory Auditor Our responsibility is to report to you our regulations made under it; and opinion on the consistency of the Chartered Accountants Summary Financial Statement within the n Considering whether, in our opinion, 1 St Peter’s Square Annual Review 2015 document with the information has been omitted which Manchester full Annual Report and Accounts, Annual although not required to be included M2 3AE Business Statement and Directors’ Report under the relevant requirements of 22nd March 2016

11 Vernon 20pg Review 2015 5th draft_Layout 1 18/03/2016 15:26 Page 13

AnnualReview 2015 Directors’ roles and responsibilities

THE ROLE OF THE BOARD In order to allow sufficient time to build up the depth of knowledge required to perform the role effectively non- The Board is responsible for directing and supervising the executive directors are appointed on the assumption that they Society’s affairs, ensuring that it meets its statutory and should be able to serve for two to three terms, if elected by the regulatory obligations and protecting the interests of its members to do so and if their performance merits this. members. It also has a duty to ensure that the Society maintains proper accounting records and effective business control BOARD SUB COMMITTEES: systems. Audit Committee Each year directors are responsible for the preparation of this Annual Review, the Annual Accounts, an Annual Business The Audit Committee, comprised solely of non-executive Statement, a Directors’ Report and ancillary reports and directors, ensures that adequate systems of internal control are statements. in place, that the integrity of financial information is maintained and that the internal and external audit functions operate effectively. The Board currently comprises two full time executive directors and five non-executive directors. Executive and non-executive directors have the same legal roles however there are Nominations Committee important differences between the two. The two executive To maintain the independence and vitality of the Board its directors are part of a management team, led by the Chief composition and skills are monitored by the Nominations Executive, whose role is to develop strategy and to manage Committee which comprises as a minimum the Chair, Vice- the business. Chair and Chief Executive.

The role of the non-executive director has the following key Remuneration Committee elements:- The Remuneration Committee currently comprises four non- Strategy – non-executive directors constructively challenge executive directors and reviews and recommends to the Board and help to develop proposals on strategy by making a the policy and practice on the remuneration of executive creative and informed contribution. directors. The work of the Committee is further described in the Directors’ Remuneration Report on page 14. Performance – non-executive directors scrutinise the performance of executive management in meeting agreed Compliance and Risk Committee strategic objectives. The Compliance and Risk Committee consists of two non- executive directors, the Chief Executive, the Finance Director Resources – non-executive directors ensure that the and the Head of Compliance and Risk. The Committee necessary resources are in place for the Society to meet its considers the adequacy of internal controls and compliance objectives. This includes the determination of executive with prudential and conduct regulatory requirements and remuneration. codes of practice. The work of the Compliance and Risk Committee is reviewed by the Audit Committee and to Risk – non-executive directors satisfy themselves that systems of maintain objectivity no non-executive director is a member risk management are robust and effective and that the of both. Society’s systems and controls for managing these risks are being complied with. This role requires them to ensure that potential risks facing the Society have been identified and that the appropriate counter measures are in place.

Independence – All non-executive directors are required to be independent and free of any interests which could influence Thanks for the the impartial exercise of their judgement. excellent“ service you provided me with setting Competence, fitness and propriety – All directors are up my mortgage. I’m

included within the Financial Conduct Authority and Prudential

really happy with your Regulation Authority ‘Approved Persons’ regime and must be individually approved by the FCA and PRA before taking up personal service.“ A lot their post. All directors must meet the FCA and PRA’s better than the big requirements regarding competency, fitness and propriety and banks. integrity. Mr F, Priors Marston

The performance of each director is appraised on an annual basis and is considered by the Nominations Committee before they are proposed for reappointment.

12 Vernon 20pg Review 2015 5th draft_Layout 1 16/03/2016 16:30 Page 14

AnnualReview 2015 Directors’ profiles

Donald Bailey Alan Murdoch Michael Hanson Chair Non-Executive Chief Executive Don Bailey is a Director & Director chartered Alan Murdoch is a Mike Hanson joined accountant, chartered surveyor the Society in 1989. insolvency practioner and is a consultant He was appointed to and has considerable with Scanlans the position of Chief experience in Consultant Surveyors Executive in 1996. He business finance and the lending LL P based inManchester and has is a chartered accountant, an associate industry. He was appointed to the Board expertise in both commercial and of the Chartered Institute of Bankers and in 2006 and became Chair in May 2013. residential property matters. Alan joined a member of the Upper Tribunal He is also Chair of the Nominations the Board in November 2007 and is Chair (Financial Services and Markets). Mike is Committee. of the Audit Committee. a Trustee of Stockport District Citizens Advice Bureau and of the North West Young Peoples’ Development Trust.

John Hughes Susan Jee Andrew Entwisle Vice Chair Chair of Finance Director John Hughes joined Remuneration Andrew Entwisle the Board in April Susan Jee joined the joined the society in 2014 and became its Board in December 1992 and was Vice Chair, and Chair 2014. Susan is a appointed to the of the Compliance & Chartered Accountant Board as Finance Risk Committee in and has extensive Director in 2003. January 2015. John brings significant experience of managing financial and Andrew is a certified accountant and experience of strategic planning and risk strategic issues as Group Finance has an extensive knowledge and management to the Board having held a Director of British Nuclear Fuels plc. Susan understanding of the financial and wide range of senior roles within a major has also had extensive experience of accounting environment within which building society and a high street bank, pension fund management and is building societies operate. He also has most recently as the latter’s Managing currently a non-executive director and responsibility for the Society’s mortgage Director of Retail Banking. Treasurer of the Riverside Group Limited, and savings operations and IT functions. a substantial housing association which manages a portfolio of properties across the United Kingdom. Susan is Chair of the Society's Remuneration Committee.

John Longworth Senior Independent Attendance at meetings and time commitment Director This table shows the attendance record of each director at meetings held during John Longworth was the year. The maximum number of meetings which the director could have appointed to the attended is shown in brackets. In addition to this directors also spend time in Board in 2004 and preparation for meetings and attending training courses and external events. served as Chair between 2008 and Compliance Board Audit Remuneration Nominations 2013. He is a solicitor who brings a broad & Risk range of legal experience and insight to the Board and has previously been a D Bailey 10 (12) - 8 (8) 5 (5) 2 (6) senior partner of Bromleys, Ashton-under- J Hughes 12 (12) - 8 (8) 3 (4) 6 (6) Lyne, where he continues to practise. John has been nominated as the PC Okell 1 (1) - 2 (2) 0 (1) 1 (1) Society's Senior Independent Director. JM Longworth 10 (12) 4 (5) 8 (8) 4 (5) -

A S Murdoch 12 (12) 5 (5) 6 (6) - -

S Jee 11 (12) 4 (5) 2 (2) - -

M J Hanson 12 (12) - - 5 (5) 6 (6)

A Entwisle 12 (12) - - - 6 (6)

13 Vernon 20pg Review 2015 5th draft_Layout 1 18/03/2016 16:23 Page 15

AnnualReview 2015 Directors’ Remuneration Report

The purpose of this report is to inform members of the current policy for the remuneration of the Society’s executive and non-executive directors. It provides details of directors’ remuneration and explains the basis of its calculation.

REMUNERATION COMMITTEE NON-EXECUTIVE DIRECTORS’ REMUNERATION The Remuneration Committee currently comprises four non- Non-executive directors have contracts for service. They are executive directors with Susan Jee recently taking over as remunerated solely by a fee which reflects the time spent on Committee Chair from John Longworth. Society affairs including membership of Board Committees, preparation for meetings and attendance at external seminars EXECUTIVE DIRECTORS’ REMUNERATION and training events. They do not receive any other salary, The Remuneration Committee reviews and recommends to the pension, incentives or other benefits from the Society. Board the policy and practice on the remuneration of ADVISORY VOTE executive directors and senior managers. It seeks to ensure that executive remuneration levels are fair and reasonable, Item 6 of the Notice of Annual General Meeting invites reflecting market comparatives from similar financial institutions members to receive and vote upon this Directors’ and each individual’s personal development and contribution Remuneration Report for the year ended 31st December 2015. to the Society’s performance. DIRECTORS’ EMOLUMENTS FOR 2015 The Remuneration Committee also ensures that executive Total Directors’ emoluments of £407,000 (2014: £389,000) are remuneration policies encourage the prudent identification analysed as shown in the tables below. and effective management of the risks facing the Society and the fair treatment of its members. Non-Executive 2015 2014 The Remuneration Committee determines the annual incentive Directors Fees £’000 Fees £’000 scheme which provides non pensionable rewards linked directly to the achievement of key performance targets aligned to D Bailey 32 30 business objectives. P C Okell 2 23 The Remuneration Committee has reviewed the relevance and (to 31January 2015) appropriateness of the executive directors’ and senior S G Spilsbury managers’ annual incentive scheme in the light of the UK - 11 Corporate Governance Code and the FCA’s Remuneration (to 30 June 2014) Code. The Committee believes that given the prudent culture J M Longworth 23 21 of the Society, the management structure and the low proportion of incentive scheme remuneration to total executive A Murdoch 23 21 directors’ remuneration it is appropriate to continue the annual incentive scheme in its current form. J Hughes (from 1April 25 16 Both executive directors are employed on rolling six month 2014) service contracts and are members of the Society’s defined contribution group personal pension scheme. All pension costs S Jee (from 1December 23 2 attributable to executive directors are fully disclosed in this report. 2014)

Any fees received by the Chief Executive in respect of his Total 128 124 membership of the Upper Tribunal are paid to the Society. His directorship of Stockport Citizens Advice Bureau is not remunerated and is mainly performed outside of working hours.

Executive Directors Salary Incentive Scheme Benefits Pension Contributions Total

£’000 £’000 £’000 £’000 £’000

2015 M J Hanson 126 19 8 22 175

2015 A Entwisle 76 11 7 10 104

2014 M J Hanson 124 15 7 22 168

2014 A Entwisle 75 6 7 9 97

14 Vernon 20pg Review 2015 5th draft_Layout 1 17/03/2016 09:37 Page 16

AnnualReview 2015

Flood Rescue The Vernon worked in partnership with major UK insurer RSA to process £17,000 worth of claims from people in flooded homes. Here’s what happened.

The recent floods in December, caused the floods. RSA has had two claims from by storm Desmond, Eva and Frank meant Vernon Building Society customers, both that over Christmas RSA’s claims teams of which are being dealt with by experts worked tirelessly to help customers who within the insurer. were affected, including sending out the RSA's personal, hands-on approach to Emergency Response Vehicle (ERV) to claim handling makes the insurer a help provide support. The ERV is equipped natural partner for the Vernon. They work with sophisticated communication hard to settle claims quickly and facilities and is there to provide professionally, helping customers to assistance to people affected whether Emergency Response Vehicle (ERV) replace lost or damaged items or carry they are one of RSA’s customers or not. out repair work with minimum waiting Throughout the floods at the end of times and as little fuss as possible. December RSA’s claims team were cancelling holidays and they opened I was very pleased part of their Peterborough office over the

that the Vernon were Bank Holiday to make sure that every The Vernon offers comprehensive

“ home insurance through RSA. prepared to consider the customer got the service they deserved. unusual circumstances“ Their home emergency response unit To find out more, visit involved, when other helped hundreds of customers with www.thevernon.co.uk or your lenders were not. advice and guidance, as well as finding local branch. Dr H, Salford them temporary accommodation when needed. Additionally they had loss adjusters on the ground visiting all customers who had been affected by

15 Vernon 20pg Review 2015 5th draft_Layout 1 17/03/2016 09:45 Page 17

AnnualReview 2015 Racing to Rio

In August and September this year all eyes will fall on Rio de Janeiro for the biggest sporting event in the world – the Olympic and Paralympic Games. Over 10,500 athletes from 206 countries will compete in 306 medal events and one of the recipients from this year’s Vernon Jubilee Fund hopes to have competitors there.

We have world Rick Hoskins, Head Coach at will have competed in the IPC Grand Prix in Dubai and be looking forward to Switzerland “ Stockport Wheelchair Racing, spoke class athletes here in May to try to reach the qualifying times to the Review about his ambitions “who can win and represent their country in Brazil. for the team. “The amazing thing is that most of these medals in Rio “We have world class athletes here in Stockport athletes only got into the sport in the last few who I am confident can make qualifying years and are already excelling.” Rick Hoskins times and win medals in Rio,” said Rick. The Vernon's Ian Keeling commented: “We “Cash from the Jubilee Fund helped Dan wish Rick and the team every success in Bramall win a silver medal in the International getting to Rio and will watch their progress Paralympics Committee (IPC) World with great interest. It’s fantastic that there is Championships in Doha in October last year so much talent right here in Stockport.” and he is working hard to go one better,” he added. Rick dreams of building the club’s own track as they currently share space with Stockport Andrew Small, ranked 4th in the world for Harriers, but the surface is too soft. “We can 100m, is fighting for a place in the GB team get support for it from charitable schemes, after success in 2015. Carly Tait, ranked 7th in but will still need local sponsorship from the world last year, will also compete. She companies if we can.” has attracted support from employers, The Co-op, since breaking into the world’s top 10. To keep an eye on the push for Rio or if you are interested in getting involved in Also aiming for qualification times is Nate supporting the club contact Rick on Williams, who will be in the T34 class. 0161 428 1822 or mob: 07946 843904 or email: Carly Tait, in the world’s top 10 Rick again: “By the time you read this all four rick.hoskins@stockportwheelchairracing

16 Vernon 20pg Review 2015 5th draft_Layout 1 18/03/2016 10:42 Page 18

AnnualReview 2015 In the Swim

Jackie Beard Jones has been the Vernon’s Compliance Manager for the last five years, but at the weekend she can be found poolside volunteering as a Technical Official for British Swimming. We caught up with her to find out more.

“My son Ciaran started out swimming at a when Ciaran won the 100m backstroke title. small club and my husband Iain and I started "It was a fantastic achievement, especially volunteering there before getting involved considering Ciaran had been out with an solely at Stockport Metro swimming club. That’s injury for six months in the season," she said. when I was asked to undertake a timekeepers’ qualification. It all went from there.” With husband Iain also involved as a swimming teacher and coach Jackie looks Jackie has been a Technical Official for set to be officiating poolside for the seven years, and worked through a series of foreseeable future. “It’s how I relax,” qualification stages which included theory she said. “I love it.” sessions, mentoring, poolside training and written exams to become a referee four years ago.

Jackie explained: “Being a Technical Official can be very varied, and as a referee it means I can be involved in any aspect of officiating: - judging turns or stroke, starting, at the finish, timekeeping, mentoring trainee’s or refereeing, which I have done up to national level of the sport.”

“I love meeting friends from around the country, the camaraderie and banter, but it’s mostly about being there for the swimmers – that is the most important bit – and giving something back to the sport.”

Jackie has had the privilege of being appointed to referee several national championships.

This April she will be a Technical Official at the British Swimming Championships in Glasgow, which is also the qualifying event for the Olympics. “I am looking forward to that,” she said.

Jackie has been proud to be associated with Stockport Metro Swimming. “They have been really successful and produced some great champions.”

And there is a champion at home too now. Jackie’s proudest moment was last year at the national ASA Swimming Championships

The technical official

role is very varied and I can “ “ be involved in any aspect of the job Jackie Beard Jones

17 Vernon 20pg Review 2015 5th draft_Layout 1 17/03/2016 09:57 Page 19

AnnualReview 2015

Musical magic for charity Vernon Building Society’s Rock‘n’Roll brass band concert raised £2,000 for local charities Stockport Foodbank and the Furniture Station, both based in Hazel Grove.

At a challenging time The event was a great success with over Joanne Watson, Fundraiser at The “ 250 attendees enjoying the musical Furniture Station said: “The band did a where funding is tight the performance by the Vernon Building tremendous job, our guests enjoyed their “ Society (Poynton) Brass Band. Proceeds night and we raised a lot of money for Vernon has been incredibly supportive from ticket sales and refreshments on the two great causes. At a challenging time night totalled £1,480 which went to the where funding is tight, the Vernon Building two charities. In addition, a surprise £520 Society has been incredibly supportive Joanne Watson donation by the Vernon Jubilee Fund towards the work carried out at The Furniture took the total raised to £2,000. Station and Stockport Foodbank.”

Nigel Tedford (Stockport Foodbank) and Joanne Watson (The Furniture Station)

18 Vernon 20pg Review 2015 5th draft_Layout 1 18/03/2016 13:54 Page 20

AnnualReview 2015

£10,000 for good causes in Stockport

The Vernon Building Society's Jubilee The awards given out at the presentation evening were:

Fund awarded £10,000 to successful local charity Group Name Votes Funding and community groups at an annual presentation Beacon Counselling 436 £ 1,132.70 evening in November. Allotments Love Life 375 £ 974.62 There were 66 applications for the 2015 fund, with 20 finalists Stockport Dynamoes FC 306 £ 795.82 chosen to receive funding. Stockport Foster Carers Association 304 £ 790.64 The groups were awarded monies from the Society’s Jubilee Fund to enable them to continue their work in the local area Early Essentials Stockport 275 £ 715.49 with Stockport Express readers casting a record 3,850 votes to Stockport Wheelchair Racing 271 £ 705.12 determine each group’s share of the £10,000 fund. Stockport Foodbank 260 £ 676.62 Staff from the Society also voted to award an additional £500 of funding to The Weekend Day Care Centre for Dementia Care, Brinnington Activity Group 219 £ 570.37

based in Offerton, which provides weekend and bank holiday Walthew House 213 £ 554.83 care to local people diagnosed with dementia. Stroke Information 201 £ 523.73 The Vernon’s Chief Executive, Mike Hanson, said: “Our Jubilee Friends of Tangshutt 191 £ 497.82 Fund continues to highlight the good work going on in The Weekend Day Care Centre Stockport. It’s great that these groups are receiving the 173 £ 451.17 for Dementia Care recognition that they deserve as well as funding. We will be keeping in touch to hear more about their progress and how Brinnington Community Art Group 169 £ 440.81

the fund has benefited them.” Inspired Stockport CIC 149 £ 388.98

The Vernon’s Jubilee Fund has donated over £40,000 of funding Beechwood Cancer Care Centre 101 £ 264.60 to more than 50 local charity and community groups since 2012. The Society has also sold a calendar featuring stunning SPARC Under 30's Group 88 £ 230.91

photographs of the local area through their branches to raise Signpost Stockport Young Carers 45 £ 119.48 money for the fund. Together Trust 37 £ 98.75 For more information about the Jubilee Fund visit Action for Sick Children 25 £ 67.65 www.thevernon.co.uk

19 Vernon 20pg Review 2015 5th draft_Layout 1 16/03/2016 17:42 Page 1

AnnualReview 2015 108 years young: Kevin, Cathy and Angela celebrate long service at the Vernon

Putting the focus on people

Three of our longest serving staff Mortgage Manager Kevin Baggs has 37 members, Cathy, Kevin and The average length of service at years’ service and said how much he Angela, share over 100 years of the Vernon increased to 12 years had enjoyed the journey. “Where did all the years go?” he commented. “From collective service. We chatted in 2015 and 12 employees have passed 25 year milestones. starting as a Branch Cashier to my to them about their experiences current position as Mortgage Manager; 12 11 and the Society’s outstanding 10 the variety in my work and responsibilities 9 8 levels of workplace loyalty and 7 has brought me into contact with many commitment. different customers, surveyors, solicitors, area which I have always favoured. It and financial advisers, as well as work Joining the Vernon in 1985, Angela Smith, was an honour some years later to be colleagues. HR Manager, believes that a culture-fit asked to become the Society's first ever is the foundation of retention: “It’s vital dedicated HR Manager, a role I cherish “Hopefully I have helped all of them in that we hire people who will complement to this day!” some way by introducing them to the our culture - the Vernon is a building With an incredible 40 years under her services the Society provides. Whether society focused very much on people belt, Cathy Wood, Mortgage I could have contributed as much and service.” Administrator, is the Society’s longest elsewhere I will never know, but I have certainly enjoyed what I have achieved Angela’s experience identifies the serving staff member. She says: “I’m here.” important contribution of workplace immensely proud to have been a part of the Vernon for all these years. Being a flexibility and personal development. If you or someone you know is interested mutual, the customer truly is at the heart “After being offered a flexible role whilst in joining our team, you can register your my family were young I was also of everything the Society does – a interest on our website encouraged to study for professional community bedrock that has supported www.thevernon.co.uk/careers qualifications. Stockport families and businesses for generations. If I had the chance to start “I was invited to enter the world of my career over, I would apply to the personnel and training at the Vernon, an Vernon in a heartbeat.”

In 2015 the Vernon was a finalist for the Moneyfacts 'Regional Lender of the Year Award'

20