Vodafone Executive Pension Plan Investment. Make the most of now.

Transcription

1 Vodafone Executive Pension Plan Investment Make the most of now.

2 Finance for Beginners Are you wondering what all the terminology means? Here s an explanation of some of the most frequently-used terms in this booklet. Investment funds Investment funds pool together the financial means of many investors and invest them according to their focus into different assets. The focus of the fund determines what kind of securities a fund invests in. The Vodafone Executive Pension Plan contributions are invested in a mix of: One equity fund, One bond fund, and One money market fund. Investment funds are administered by capital investment companies. s s are investment funds that invest mostly or exclusively in shares. In this way, the investors have a stake in the growth of different companies without becoming a shareholder. Risk is reduced by investing in a wider range of shares. Equity funds may offer higher return than bond or money-market funds but they expose you to more risk. s s invest in fixed-interest securities like government gilts, municipal loans, German Pfandbriefe and industrial obligations. Bonds are traded like shares on the capital market. They issue a constant payment (coupon) during their whole duration. Their value on the capital markets depends on the market interests. When market interests increase, the market value of the bonds falls while decreasing market interests lead to a rise in value of the bonds. s are safer than equity funds but may provide fewer return. Money market funds Money market funds invest in bank savings with short duration (max. 1-2 years) or in variable investment bonds whose value will not vary much with changing market interests. Therefore money market funds are safe investments with limited yield chances. In the investment strategies of the Vodafone Executive Pension Plan, money market funds are used to secure the return achieved by the invested pension contributions. Investment into money market funds starts at age 50 in the Conservative investment strategy, and at age 55 in the Balance and Growth strategies. Safety first! That s my device when it comes to financial planning. Of course I also want to benefit from the positive share market performance. That s why I m opting for Conservative for me it s the perfect combination of the different investments.

3 You may not have thought a lot about your pension lately. Retirement may seem far off and only slightly relevant to your life right now. Or you may feel concerned about your financial future. Whatever your situation, it is becoming increasingly necessary for you to think about your future pension. One of the things that s clear is that the state pension is unlikely to provide you with the right level of income to support your lifestyle. The pension gap (the difference between your final salary and the state pension) will increase. As a result a good company pension plan and private pension provision are necessary to ensure that you have a satisfactory pension. We are introducing the Vodafone Executive Pension Plan so that you have a financially-secure and attractive tool with which to invest for your future. The Plan manages the balance between individual opportunity and financial security. While benefiting from the capital markets, 1 The higher the opportunities for returns, the higher the risk of investment. the Vodafone Executive Pension Plan also provides protection and helps you to build a retirement plan to suit your life choices. Have you ever realised how restricted you are with the onesize-fits-all approach to pensions? At Vodafone, we want to help you live your dreams. To do this, Vodafone cannot and will not take the responsibility for designing your future for you. You know your choices, you know how your finances will contribute to them. Therefore, you are the only person who should decide on what your retirement should be like. And that s why from now onwards the Vodafone Executive Pension Plan gives you the tools so that you can make all your important pension decisions. This flyer gives you a short overview on how investment in the Vodafone Executive Pension Plan works. More information can be found on the website: Here you can also find an online calculator which simulates the possible growth of your pension account. Want to talk to somebody about the Vodafone Executive Pension Plan? Our hotline staff will provide you with further assistance. Please note: This flyer offers only a simplified overview of the Vodafone Executive Pension Plan. It does not make any forecasts about the development of the investment strategies and does not give any recommendations about selecting a certain investment strategy. The hotline will also give no financial advice. The only legally-binding document is the respective German plan document as approved by the German Board. Perfect harmony is very important to me not only when I m playing in my band but also in my financial planning. Balance is what suits me best.

4 Investment strategies With the Vodafone Executive Pension Plan, you make the important decisions. How much do you want to invest? How do you want your additional voluntary contributions to be invested? It s up to you to decide whether you want to make any voluntary monthly contributions, how much to contribute and how these contributions are invested. Whether you contribute from your base income or from a one-off payment or both it s your choice. And you do not make a commitment for eternity: you can invest as much as your current situation permits. If you don t have any special financial commitments at the moment you may want to invest a little bit more. Maybe you will have increasing costs in the future children, a house, a new car? Then just reduce your contributions or drop out completely for a while. 2 Safe money investments usually mean lower yields. What you really should keep in mind is that the higher the return opportunities the higher the risk. This also means that safe investments provide lower return. This is why one cannot say which investment strategy is the best. It s about personal choice and you are the only person to decide which strategy fits you best. Do you like to take risks and keep your nerves if your investment doesn t grow as well as you had hoped for a while? Would you rather play it safe and put up with lower return in the value of your assets? Or do you want a balance between opportunities and safety? Remember: it is your provision for your old age we are talking about and the safety of your investment is key. To help you along, we have set up two safety nets for you. First a minimum payout. Your contributions are Conservative strategy Age 30 Equi And how do the investment strategies work? All contributions are invested in a mix of three types of investment funds: one equity fund, one bond fund, and one money market fund. The Growth strategy focuses more on the yield-oriented equity fund and the Conservative strategy contains more of the balanced bond fund, and the safe money market fund. Balance lies in the middle. Balance strategy Growth strategy Equit Equ

5 ty fund safe, whichever strategy you invest in because Vodafone guarantees that at the end you will get a payout of at least the amount of all contributions made by Vodafone and yourself no matter how the investment funds will develop. The second safety net is the implementation of life-cycle-models. Safety with life-cycle-models The objective of the Vodafone Executive Pension Plan is to build a capital in order to secure your retirement. So there is one important rule to keep in mind: Younger employees need to build up capital first. They can better afford to take the return opportunities that go with higher risks. Potential losses can be balanced until the beginning of retirement. Higher yields should be the focus. Age 40 Age 50 Money market fund Older employees need to focus on hedging capital. Possible losses cannot be balanced until the beginning of retirement. That means shifting from more risky investments to safer ones even if these don t yield as much return. The bond and money market fund are the priority at this stage. With the life-cycle model within the Vodafone Executive Pension Plan, your investments are automatically adjusted according to your age. Each investment strategy is based on its own life-cycle. This life-cycle determines the mix of the three funds (equity fund, bond fund, money market fund) in which your contribution is invested at every age. It follows the principle that the younger you are, the higher the portion of the equity fund. With increasing age the portion of the bond fund increases and later on the money market fund is added. This principle applies to all investment strategies. Your selected investment strategy and the life-cycle model together determine the mix of your investments. The Growth strategy always contains a larger portion of the equity fund than the other strategies. On the other hand, the Conservative strategy contains a higher proportion of bond investment right from the beginning. On the left is a little overview on how the investment strategies change over time. y fund You will find the exact composition of the strategies for each age on the website. ity fund

6 I go for Growth even if there is always a little risk involved. After all, pension provision means long-term planning and from now until I actually retire potential losses can be balanced. Selecting contributions and investment strategy this is how it works You will register all your decisions online. In order to do so, please go to the website and select the menu item My account. Before you can enter this section you have to type in your user ID and personal password. You will receive all this information in a personal letter. Deciding on contributions You can then decide whether and how much of your salary will go towards voluntary contributions into the Executive Base Plan. You can adjust the level of your voluntary contribution at any time for future contributions. You will need to make your decision before you get your salary payout. The same applies to contributions into the Deferred Compensation. With every one-off payment you get, you can decide whether or not to contribute and how much to contribute. You may wish to drop out of the scheme for some time. All contributions will then be automatically deducted from your salary and invested. Deciding on investment strategy All contributions (your own voluntary contributions and those made by Vodafone) will be invested in the selected strategy. You can choose a different investment strategy for the Deferred Compensation than for the Executive Base Plan. If you don t make a decision at all the Balance strategy will be automatically selected for you. Changing the investment strategy In principle you could change the strategy for the Executive Base Plan at any time and every time you are about to receive a one-off payment for the Deferred Compensation. In both cases your contributions and return from prior investments will also follow the new investment strategy. But please keep in mind that investment strategies are designed on a long-term basis. Therefore you should consider the long-term implications of your investment strategy decision. A constant change of the investment strategy does not make sense. Rather, you should think about which investment strategy fits you the best. 3 Think long-term whenever you are thinking about investing into your pension provision! Questions? Get help from the hotline: (German), 9 17 Uhr (MEZ) (English), 10 a.m. 6 p.m. (CET)