GERMANY – The German arm of mobile phone operator Vodafone has replaced its defined benefits plan with a defined contribution plan for 9,300 employees in Germany.

Vodafone Deutschland said the move, effective June 1, was motivated by its need to concentrate on its core business of providing mobile telephony in Germany.

“Retirement provision does not belong to our core business. A defined benefit plan, where the company promises the employee something that depends on several uncertain variables, is just not the right way for Vodafone,” Horst Weismüller, a company official in charge of corporate pensions, told German pensions magazine dpn.

IPE could not reach Weismüller for additional comment on the move.

Meanwhile, the Munich office of Watson Wyatt told IPE that it had won the mandate to administrate the new DC plan.

According to the consultant, the assets from the plan would go to Vodafone Deutschland’s contractual trust arrangement – an external pension fund – and be invested according to a ‘life-cycle model’.

Simply put, a life-cycle model involves riskier but higher return investments for younger employees and safer but lower return investments for older employees.

At the end of 2005, the CTA had €264.7m in assets, 63% of which was invested in fixed income and 29% of which was invested in equities. The remaining portion went to alternative asset classes.

Vodafone Deutschland is just the latest foreign company in Germany that has replaced its DB plan with a DC plan. Last January, IBM Deutschland transferred half of its 22,000 employees to a DC scheme from a DB one in a bid to reduce its pension costs by several hundred million euros.

But Marc Oliver Heine, a senior consultant at Watson Wyatt, noted that Vodafone Deutschland’s reasons for launching its DC plan were different.

“I don’t know how much it will save by the move, but my understanding is that it had more to do with the strategy of modernising its corporate pension plan. The fact that its parent in the UK has had a DC plan for years now was also an important factor,” Heine said.

Düsseldorf-based Vodafone Deutschland has more than 29m subscribers to its mobile phone network. Its sales in 2005 were €8.4bn.

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