Today ABN AMRO is announcing that it has reached a negotiated result with the trade unions and the ABN AMRO Pension Fund on a new pension scheme for its employees in the Netherlands as part of the new collective labour agreement (CLA). The negotiated result regarding the pension scheme has been endorsed by the bank’s Employee Council (formerly the Central Works Council), the Association of Retired ABN AMRO Employees and the Council of Participants of the pension fund. The new pension scheme will be a Collective Defined Contribution (CDC) Plan. This scheme will cover all existing and future pension obligations of ABN AMRO. With this negotiated result, ABN AMRO removes the volatility in its balance sheet and capital position introduced by the revised pension accounting standard IAS 19 and reduces volatility in its pension expenses.
Final agreement on the new pension scheme is subject to formal approval of the agreed CLA by the trade unions based on consultation with their members. The trade unions will present the CLA and the new pension scheme to their members for approval. Furthermore, final agreement is subject to formal approval by the Board of ABN AMRO Pension Fund after having received advice from its Council of Participants on the administration agreement. The outcome of these consultations is expected before 1 May 2014.
The key elements of the negotiated result are:
After final approval, all existing and future pens on obligations will be administered under the new CDC Plan
The new CDC Plan will seek to achieve an average salary system, based on maximised pension contributions by the bank and subject to tax regulations
ABN AMRO will no longer make additional contributions to restore the funding level of the ABN AMRO Pension Fund
ABN AMRO will settle future obligations by paying a EUR 500 million pre-tax lump sum (EUR 375 million after tax) to the pension fund
Caroline Princen, member of ABN AMRO’s Managing Board: "I am very pleased that we have reached a negotiated result on this complex subject. It has been a long, but above all thorough process. This result is also exceptional, as not only the the bank, trade unions and the Board of ABN AMRO Pension Fund, but also the Council of Participants of the pension fund, the Association of Retired ABN AMRO Employees and the bank’s Employee Council contributed importantly and support the result. Therefore, we would like to extend special thanks to all parties involved."
As a result of this negotiated result, ABN AMRO will be released from its financial obligations under the Dutch DB Plan, resulting in a release of the related net pension asset/liability. Furthermore, the regulatory capital filter under the Basel III phased-in approach for the effects stemming from the revised pension accounting standard IAS 19 will be removed.
The sum of the compensation payment of EUR 500 million pre-tax (EUR 375 million after tax), a EUR 200 million pre-tax lump sum (EUR 150 million after tax) for a catch-up indexation initiated by the pension fund, the release of the liability, and the effect of the removal of the regulatory capital filter, is expected to have a negative impact on the phased-in Basel III Common Equity Tier 1 (CET1) ratio of approximately 160bps. The impact on the fully loaded Basel III CET1 ratio is expected to be limited.