ING's decision to freeze pension increases for ex-employees in line with inflation for the second year in a row has resulted in its pension scheme trustees calling in three external experts to decide whether the decision is fair

The banking and insurance firm's senior management decided at the beginning of March that no funding would be made available in 2011 to increase the pensions of former workers, despite the company posting decent recent results.

The bank has not ruled out similar measures being taken in the coming years. It claims that continuing uncertainties on the financial markets and the need to pay back a remaining €5bn of the total €10bn debt that the bank owns the state, has forced it to suspend a rise in pension benefits costs.

ING's pension scheme has responded by saying that it had been promised that only 'extreme circumstances' would affect financing of the scheme and claim that there is no case for the suspension at present.

Hillard van der Steeg, chairman of the Commission Communication of the Participant's Council, says that the council was surprised by the decision, particularly as it came after ING reported good results. The bank achieved a €1.04bn net profit in Q3 of 2010.

"Like the trustees we are not convinced that the circumstances, which according to ING led to this decision, are to be considered so extreme that ING can use them as a reason not to support the scheme with funding to increase pensions," said Van der Steeg. "We support the decision of the scheme to call in three arbiters."

The decision of the bank was made even more controversial after it voted to award the complete board huge bonuses, with Chairman Jan Hommen recommended to receive €1.35m.

The news sparked a debate in the Dutch parliament and saw many customers closing their accounts.

In response, the board turned down the bonuses this week. Hommen said in a statement: "we underestimated the signal this would send to society."

The pension scheme, however, sees the bonuses as another sign that the needed indexation freeze is unnecessary and a sign of the board having its priorities in the wrong place.

Unlike most pension schemes in the Netherlands, the increases of the former employees of ING do not depend on the funding ratio of the fund as the employer finances the indexation of pensions. The pension scheme can only increase the pensions if the bank makes funds available.

Once the arbiters have made their decision, it will be treated as final.

azeevalkink@wilmington.co.uk    

First published 24.03.2011