UK - Credit Suisse First Boston's plans to consolidate its 14 final salary and money purchase schemes will make it vulnerable to discrimination claims, leading lawyers say.
The investment bank – which owns Credit Suisse Asset Management – is scrapping the existing schemes for its 47,000 UK-based workers in favour of a new arrangement called DC Plus, which will provide employer contributions according to age and CSFB corporate profitability.
Employees who are 39 or younger will receive a basic contribution of 7.5%, while those aged 40 to 49 will get 10%. Staff who are 50 or older will receive 12.5%.
At the same time, CSFB will increase its contributions by 0.5 percentage points for every one point above its annual profits target of 11% return on equity. ROE is the amount earned on a company’s common stock investment for a given period and is a measure of how effectively shareholders money is being used.
A CSFB memo said the replacement scheme was simple, linked benefits to success and was both “affordable and sustainable”.
However, lawyers warn that setting up a scheme with age-related contributions will leave it vulnerable to claims under impending anti-discrimination legislation.
Dickinson Dees partner Martin Jenkins said: “I can see them having to unpick it. If the trustees are told that the benefits structure is unsustainable and discriminatory, then the trustees will have to dismantle it.”
Baker & McKenzie associate Robin Simmons said: “There is certainly a risk element here. If there’s no carve out in the legislation which will allow DC schemes to have age related contributions, there’s going to be a real problem. It’ll be an absolute nightmare for a number of DC schemes, because most of them are structured in this way.”
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