Rockwool's pensioners ask in vain for €20m indexation contribution
The pensioners’ association (VGR) of insulation manufacturer, Rockwool’s Dutch subsidiary has asked the employer in vain for an additional €20m pension fund contribution.
In the opinion of the VGR, the pension fund is entitled to such financial boost, as in its opinion, the company had proportionally paid insufficient premiums in the past and had concluded arrangements with its pension fund that were unilaterally beneficial to itself.
The €20m would have enabled the scheme to link pensions paid to inflation for the first time in eight years.
Last year, the €240m Rockwool scheme was among 19 pension funds that had to cut pension rights at the maximum rate of 7% as part of its recovery plan. Currently, its funding is 107.9%, almost 3 percentage points above the required minimum level.
“Following the rights cuts, as well as the lack of inflation compensation since 2006, purchasing power for Rockwool’s 700 pensioners has fallen by as much as 38%,” argued Riekus Wolzak, the VGR’s chairman. The lobbying organisation has 150 members, and was established in 2012.
Wolzak said the VGR based its claim in part in a report from an external expert – commissioned by the pension fund in 2007 – who at the time concluded that an additional €14m contribution from the employer was necessary to improve the scheme’s financial position.
The pensioners attributed the problem chiefly to insufficient premiums paid by the employer, making it impossible for the pension fund to accrue adequate financial buffers.
“Until 1998, the employer was in a position to pay contributions dependent on the scheme’s returns. As a consequence, the employer’s premium was sometimes lower than the contribution paid by its workers,” Wolzak pointed out.
“Between 1995 and 2003, the pension fund had to meet a combined premium shortfall of €10m from its own assets,” he said, referring to the report from 2007.
In the opinion of the VGR, the employer has abused its dominance by saddling up its pension fund – through a board of three employers representatives and three employees - with financial arrangements and articles of association that mainly benefited the company.
As an example of inadequate contributions in the past, the VGR cited the former final-salary arrangements under which the employer and workers contributed 6-10% and 5.6% respectively, compared with the current average salary plan, with premiums of 20% and 12.5% respectively as well as the scheme’s returns now fully benefiting the pension fund.
Although Wolzak acknowledged that the employer may have stuck to the legal rules, in the VGR’s opinion, it was morally wrong, he said.
The chairman nevertheless indicated that VGR’s members are considering bringing a legal case against their former employer.
In a response, the company said it was not considering the requested additional contribution, and denied it had made unilateral agreements. “The content and financing of the pension plan have been agreed with the unions during negotiations about the collective labour agreements,” it stressed.
Referring to the shortfall in 2007, it said that, instead of a paying a one-off contribution, it had opted for a structurally higher employer’s contribution, totalling €7m until the end of 2013, adding that its premium is to rise further this year.
Erwin Capitain, the pension fund’s chairman, declined to comment, explaining that the dispute was a matter between the VGR and the company.
The Rockwool scheme has approximately 3,000 participants in total. During 2012, it returned 9.5% on investments with a portfolio of approximately 73% of fixed income investments, 22% equity and 5% property.
Following its own rules, it cannot grant any indexation as long as its funding is less than 110%. Full inflation compensation is only possible if the coverage ratio is more than 135%.