Commerzbank scraps pension scheme

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Commerzbank building in Leipzig

Commerzbank scraps pension scheme

BBC.com

January 6, 2003

Germany's Commerzbank has decided to halt company pension schemes for as many as 24,000 of its employees.

The move, which has been condemned by workers' unions as "scandalous", is part of cost cutting measures.

The bank said tough economic conditions meant it had to trim costs, thought to be about 4.5bn euros ($5.7bn) a year.

By stopping the payments into pensions for its workers in Germany from 2005, Commerzbank is thought likely to save a maximum of about 30m euros a year.

The bank will still have to pay into German state pension funds.
Workers retiring from Commerzbank will not lose the benefit of funds already contributed to the company scheme. But payments into it will cease from next year.

Challenge

Unions said they had instructed lawyers to investigate whether the move was legal and how and when it could be challenged.

They also questioned Commerzbank's claim that difficult economic conditions have forced its hand.

According to a union spokesman, the recent rebound in stock markets and signs that global growth is picking up mean the company is emerging from a crisis rather than entering it.

Analysts said Commerzbank may simply have decided to push ahead with the change when they felt the conditions favoured employers rather than employees.

The bank said the decision had been "painful". Service sector union Verdi said it was "scandalous" and "extremely unfair" considering the pensions of management board members were not being stopped.

Target

Commerzbank - which employs about 33,000 people worldwide - also has been the subject of takeover speculation in recent months, though analysts said this pensions decision does little to make a buyout more likely.

Germany's banking sector has been through one of the worst slumps in its history, with the country's economy hard hit by global economic slowdown and struggling to recover.

Commerzbank was particularly hard hit because its customer base is made up of about 40% small-and medium-sized businesses.

As growth slowed, the number of these businesses going bust increased.