AUSTRIA - BA-CA bank is going to compensate pensioners for cuts in benefits resulting from lower-than-expected performance in the Pensionskasse.

The bank transferred its pension assets into the largest Austrian Pensionskasse VBV, in 1999, after negotiations with the employees.

Four years later, 330 pensioners took BA-CA to court over cuts in their pension payments because the performance of Pensionskassen fell far below the very high expectations applied when calculating the benefits, especially when the dotcom bubble burst.

The bank will now make one-off payments to all pensioners, not only those who went to court, a spokesman for the bank, which is part of the UniCredit group, confirmed to IPE.

"We have come to an out-of-court agreement and this was accepted by almost 100% of those affected as well as our accountants," the spokesman explained.

"We will now start to implement it," he added.

Both sides have agreed not to release any details on the settlement.

But he confirmed the bank, which is still offering occupational pension provision for its employees, will stay with the VBV Pensionskasse.

Last year's subprime crisis has rekindled discussion in Austria about the act of making pension cuts in times when the markets are down.

Many of the contracts signed with Pensionskassen at their inception in the 1990s calculated benefits with expectations of around 7.5% annual performance, which soon turned out to be unrealistic.

Since 2003, the FMA has capped the actuarial interest rate to be used in contracts to 3.5%.

Nevertheless, people with older contracts are still subject to pension cuts in times of poor performance. (See earlier IPE article: Pensionskassen under pressure)

But Christian Böhm, head of the Austrian pension fund association FVPK, notes it is not only the contracts that are often faulty.

"Pensionskassen had to take on historical problems of companies such as reserves that were too small to fund pension liabilities," he explained to IPE.

At the same time, however, while the cause of pensions cuts and the reasons why people go to court over them are "very different" from company to company, he does not believe the current settlement will start a trend for increased legal activity.

"There have been other companies who made one-off payments in order to avoid legal proceedings," he noted.

"This current settlement was BA-CA specific and cannot be generalised."

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email