All you need to know

Why do we offer a company pension? The reason is simple. Extra preparation for your future is important because the state pension when you retire will barely be enough to maintain your current standard of living. Vodafone wants to help with this. With the Vodafone Pension Plan, we are making you an offer to finance your retirement jointly – with a number of options for flexible preparation in line with your individual needs.

Learn more about the basics of company pensions – this information may help you make decisions about your Vodafone Pension Plan.

A fund-based pension plan – what does that mean?

Funds? Shares? Worried if your pension is genuinely secure? Relax. Learn more about fund-based pension plans and why Vodafone has opted for this model.

What models are there for company pension plans?

The law provides multiple models for company pension plans. This means that your employer has different options for structuring and funding your pension entitlements.

Vodafone has elected to provide an employer-operated, fund-based pension plan. Employer-operated means that Vodafone itself is responsible for the benefits that have been promised to you and pays them out to you, as opposed to a third party such as a direct insurer or dedicated pension fund. All contributions are invested in a special fund so that they can grow further.

Why has Vodafone decided on a fund-based solution?

The fund-based solution and investment strategies give you the flexibility you need to make decisions about financing your retirement based on your current individual needs.

We have selected investment funds for you in partnership with an external investment adviser. You can choose between three different investment strategies: growth, balance or security. Would you prefer to invest in shares or concentrate more on fixed-income securities? You can decide for yourself when choosing an investment strategy. You can change strategy at any time or retain it until you retire. Something good to know is that each investment strategy continuously reduces your equity exposure until you retire.

Unlike with direct private investments in investment funds, you cannot lose anything – Vodafone guarantees all contributions for you. The life cycle model is a trusted approach for company pensions: the mix of bond and equity funds takes into account your current needs when investing capital, with the focus moving from capital generation in the early years to capital preservation when you are closer to retirement.

How your pension is taxed

Your company pension is part of your income and therefore subject to tax.

Paying in

All contributions are paid in tax-free. This usually gives you great benefits for your personal contributions. These contributions are deducted from your gross salary, reducing your gross income and the amount used to calculate the taxes you are charged. Less gross income means less tax to pay. So, while your full contribution is put into your pension account, it feels like you are only missing out on half of it thanks to the tax savings.

Paying out

When it is time to pay out, however, you will be subject to the normal taxes. On the other hand, your tax rate in retirement is usually lower than during your working life. This is because your income will most likely be lower. Vodafone normally only pays out your pension balance on 31 January of the year following your retirement. Paying out your pension at this time usually benefits your tax, since you will already be receiving a state pension lower than your gross salary. That in turn means that the amount used to calculate your tax is also lower than if your pension were paid out in your last year of work.

How your pension works with social security

Social security deductions are payable for company pensions; these deductions differ when paying in and paying out.

Paying in

When paying in, your contributions are not subject to social security deductions if they do not exceed four per cent of the income threshold – and they are tax-free, too. In 2020, four per cent of the income threshold equals €3,312, with that figure rising to €3,408 in 2021.

By paying into your company pension, you also save on social security deductions that otherwise go into the state pension scheme. This reduces your state pension entitlements slightly, though the Vodafone Pension Plan normally more than makes up for this.

Income above the income threshold is generally not subject to social security deductions, so additional contributions in excess of the income threshold do not lead to savings in this regard.

Paying out

The regular social security deductions must be applied when your pension balance is paid out. When you are retired, you no longer need to pay into the state pension and unemployment insurance schemes, though you are responsible for the full amount of your health and nursing insurance – even the part your employer used to pay.

If you sacrifice parts of your salary that are above the income threshold when you are paying in, you will not save on social security deductions. While earnings above the income threshold are generally not subject to deductions, you will have to pay social security deductions if your income falls beneath the income threshold after retirement. It may therefore be the case that parts of your income that were deduction-free when you were paying into your pension then become subject to deductions when your pension is paid out during retirement.