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Impact of the financial crisis on company pensions

The impact of the financial crisis may mean that companies do not have to adjust their pension benefits, as the Federal Labour Court (Bundesarbeitsgericht, BAG) ruled on April 15, 2014 (docket number: 3 AZR 51/12). The Court ruled that the Defendant, one of Germany’s largest banks, does not have to adjust its company pension because of its poor economic situation due to the financial crisis.  Since 1998, the Plaintiff has been drawing a company pension from its former employer, another bank.  Every three years the bank adjusted the pension, most recently in 2007.  In 2009, the bank was merged into the Defendant’s business; the Defendant bank subsequently refused to adjust the Plaintiff’s pension in 2010 due to its economic situation. 

According to sec. 16 para. 1 of the German Company Pensions Act (Betriebsrentengesetz, BetrAVG) the employer has to review and decide whether to adjust current pension benefits every three years.  However, it is not obliged to make such an adjustment if it is unlikely to be able to compensate for the adjustment from its revenues made in the period until the next adjustment date.  As the Defendant had made economic losses in 2008 and 2009 and even had to draw on capital from the Financial Market Stabilisation Fund, its decision not to adjust the pension benefits in 2010 was commensurate with equitable discretion and therefore justified.