RWE sets up deferred pay pension scheme
GERMANY – Utilities giant RWE has set up a deferred pay company pension scheme for its employees.
“Are legal pensions sufficient for people to maintain their standard of living when they retire?” Essen-based RWE asked rhetorically in its latest annual report. “This question is also pondered by many RWE employees.
“We thus supplemented our company pension plan with a new option in September 2004. Our staff members can now pay part of their compensation into an additional deferred compensation company pension scheme.” It said the benefit is that this pension component is funded by untaxed income.
RWE assumed lower discount rates for its pension arrangements in 2004. The German rate fell to five percent from 5.5% in 2003 while the rate used for foreign plans was down to 5.25%-6.25% from 5.55%-6.75%.
It said its accrued provision for unfunded benefit obligations has fallen to €11.5bn from €11.9bn at the end of 2003.
The fair value of plan assets edged up to €6.7bn from €6.6bn. Its provisions for pensions ended 2004 at €11.8bn – down from €12.3bn a year before.
A report from Deutsche Bank last year said RWE was among a number of large German firms that have the largest pension funding deficits as a percentage of their market capitalization.