GERMANY – Industrial group Siemens AG has called its switched to a defined contribution pension system a “leap forward”.

Siemens’ Thomas Nitz presented the changes brought about by the Munich-based group’s new pension policy in a briefing titled "the leap forward" at the annual meeting of the corporate pension association ABA, or Arbeitsgemeinshcaft fuer Betriebliche Alterversorgung.

Nitz said the firm, which introduced a sort of insurance for its workers in 1872, sought to put "old-age care on a solid base". But, the official said: "This requires a complete re-shaping of our company scheme.”

The switch from a traditional monthly payout was described as "the most significant change".

The so-called Siemens-Modell entails a basic contribution, a minimum guaranteed interest rate of 2.75% and a single "final surplus credit note".

The new system, he said, "was worth it" for workers.

Nitz explained they would benefit from greater flexibility, being able to choose between a payout in instalments or a pension. The list of potential benefits also included the chance to enjoy higher minimum guarantee rates and the "higher contribution for earlier career" option.

To ensure transparency, Siemens will issue an account statement, he added.

"We are confident that the more workers devote attention to the new system, the more they will know how to value the company pension fund.”

Employees who started as of May 1 2003 will be included

Last week the company said its main pension schemes returned 12% on an annualised basis – although they were still underfunded by more than three billion euros.