Siemens is facing a €100 million legal claim in Austria from 120 angry former managers over cuts to their pension payments
The claimants say a series of cuts to their pension have contradicted earlier promises of increases to their retirement benefits. They point to information in a company brochure that states their benefits would "in all cases increase by 1.5%" every year. For their part lawyers representing the German electronic giant have dismissed the statement as a "printing error".
Dire returns over the past decade have seen Siemens Austrian pension fund (which has scheme assets of over €600 million) cut its benefits by around 25% since 1998.
That was the year in which the ex-bosses claim some 6,000 pensioners transferred into the main Siemens pension fund were promised 1.5% annual increases.
Another bunch of disgruntled pensioners failed to win compensation for their benefit cuts in an Austrian Supreme Court ruling in December.
Their lawyer, however, is confident that the emergence of new printed evidence promising benefit increase guarantees will convince the Austrian Labour and Social Court to award damages to the pensioners.
The lawyer representing Siemens, Jens Winter of CMS Reich-Rohrwig Hainz, told Austrian daily die Presse that "it's true that there was a printing error in the brochure."
Winter added though that he believes the case should not rest on a single statement whilst ignoring "80 others" in scheme communications that apparently contradict this.
The Supreme Court agreed with this interpretation in December before the new evidence had come to light. The court ruled that scheme communications should be analysed in their entirety and a case could not rest on the selective use of one phrase.
The Supreme Court also ruled that the pensioners should have launched legal action earlier, as all the scheme information was clarified by 2005.
Most of the 6,000 pensioners affected by the benefit cuts are legally unable to bring a court case as their participation in the Siemens Pension Plan was fully approved by a company agreement with its labour force.
Only the managers who weren't party to this agreement can bring the case, but they are claiming on behalf of their former workers too.
Austrian corporate pension plans are having a torrid time as far as their investments are concerned.
The country's funds lost 3.97% on average in 2011 up to September, with Siemens Pension Fund losing 'only' 2.85% over the past year.
Earlier this month it was reported that around 75% of pensioners in Austrian company pension schemes will have a reduced level of benefits this year due to the poor financial state of the country's pension funds.
The average benefit cut for those affected is said to be five percent.
Austrians who saved into pension funds with high actuarial interest rates of 5.5% or more are reported to be worst affected by benefit cuts.
This is because the return expectations of their pension funds have been exposed as hopelessly unrealistic, forcing the funds to save on benefits.
The Siemens case echoes the 'small print lottery' that some UK pension schemes have faced over the last 18 months. This came after funds were given the go ahead to link benefit increased to the Consumer Price Index of inflation instead of the more generous Retail Price Index of inflation.
dbillingham@wilmington.co.uk
