EUROPE – The European Bank for Reconstruction and Development says it is close to an agreement with staff over changes to its retirement structure.

Communications director Brigid Janssen told IPE that the bank and employees were “very close” to a resolution after a series of meetings over the last 12 months. At issue is the recent erosion of pension provisions for employees.

Janssen said the bank, owned by its members and the European Investment Bank, has been “very, very active” in recent months in the quest for a solution, which must also fit with its “responsible approach” to budget.

EBRD employees each pay a “standard level” 8% contribution towards a money purchase scheme which pays a lump sum. Janssen said the bank matched the contribution.

A further lump sum, equal to the final salary, multiplied by 1.17 and by the number of service years, is also offered to purchase annuities.

But because of recent poor market returns and the increased cost of annuities, employees face an erosion of pension provisions.

This contrasts with the 70% replacement ratio mentioned by the bank in recruitment literature to employees.

Janssen said that the figure was “a notional target”. The Financial Times today reported staff discontent at the change of what they had considered a promise.

“This was never a legally binding agreement. The bank’s obligation is to pay a lump sum payment,” she commented.

“The discussions that we are having now are not about a problem with the structure or understanding it. It is about the value of the plan.”

Janssen said the parties are in the final stages of choosing “a balance between two options” but declined to elaborate and indicated that an agreement will be shortly achieved. She also dismissed the possibility of a strike.

“This is a matter we take very seriously, it is a concern for everybody, the bank, management of the bank and the shareholders,” she said. “The discussions now are to try and figure what is the most appropriate way to restore some value to the retirement plan.”

The solution could involve increasing the current 60-year retirement age and increasing both bank and employee contributions.

She said it was not possible to quantify the amount needed to put things right, but said that the €19m figure quoted by the press was “absolutely misleading” because it would involve the bank alone footing the bill.

Staff representatives were not available due to an annual meeting currently in Belgrade.