BMW 2014 Annual Report Download - page 191

191 STATEMENT ON CORPORATE GOVERNANCE
Retirement and surviving dependants’ benefits
The provision of retirement and surviving dependants’
benefits for Board of Management members was changed
to a defined contribution system with a guaranteed
minimum return with effect from 1 January 2010. How-
ever, given the fact that board members appointed for
the first time prior to 1 January 2010 had a legal right to
receive the benefits already promised to them, these
board members were given the option to choose between
the previous system and the new one.
In the event of the termination of mandate, Board of
Management members appointed for the first time prior
to 1 January 2010 are entitled to receive certain defined
benefits in accordance with the old pension scheme
rules. Pensions are paid to former members of the Board
of Management who have either reached the age of 65
or, if their mandate was terminated earlier and not ex-
tended, to members who have either reached the age of
60 or who are unable to work due to ill health or accident,
or who have entered into early retirement in accordance
with a special arrangement. The amount of the pension
is unchanged from the previous year and comprises a
basic monthly amount of € 10,000 or € 15,000 (Chairman
of the Board of Management) plus a fixed amount. The
fixed amount is made up of approximately € 75 for each
year of service in the Company before becoming a mem-
ber of the Board of Management and between € 400 and
€ 600 for each full year of service on the board (up to a
maximum of 15 years). Pension payments are adjusted
by analogy to the rules applicable for the adjustment of
civil servants’ pensions: the pensions of members of
the
Board of Management are adjusted when the civil
servants remuneration level B6 (excluding allowances)
is increased by more than 5 % or in accordance with the
Company Pension Act.
When a mandate is terminated, the new defined contri-
bution system provides entitlements which can be paid
either (a) in the case of death or invalidity as a one-off
amount or over a maximum of ten years or (b) upon re-
tirement – depending on the wish of the ex-board mem-
ber concerned – in the form of a lifelong monthly pen-
sion, as a one-off amount, in a maximum of ten annual
instalments, or in a combined form (e. g. a combination
of a one-off payment and a proportionately reduced
lifelong monthly pension). Pensions are paid to former
members of the Board of Management who have either
reached the statutory retirement age for the state pen-
sion scheme in Germany or, if their mandate had termi-
nated earlier and had not been extended, to members
who have either reached the age of 60 or are perma-
nently unable to work, or who have entered into early
retirement in accordance with a special arrangement.
In addition, following the death of a retired board
member who has elected to receive a lifelong pension,
60 % of that amount is paid as a lifelong widow’s pen-
sion. Pensions are increased annually by an amount of
at least 1 %.
The amount of the retirement pension to be paid is
determined on the basis of the amount accrued in each
board member’s individual pension savings account.
The amount on this account arises from annual contri-
butions paid in, plus interest earned depending on the
type of investment.
Depending on the length of membership in the Board
of Management and previous activities, the annual con-
tribution to be paid amounts to between € 350,000 and
€ 400,000 for each member of the Board of Management
and € 700,000 for the Chairman of the Board of Manage-
ment. The contributions are credited, along with inter-
est earned, to the personal savings accounts of board
members in monthly amounts. The guaranteed minimum
rate of return p. a. corresponds to the maximum inter-
est
rate used to calculate insurance reserves for life in-
surance policies (guaranteed interest on life insurance
policies). A Board of Management member entering
of-
fice at 50 years of age and serving as member of the
Board of Management to the age of 60 can expect a re-
tirement
savings capital of € 4.2 million.
In the case of invalidity or death, a minimum contribu-
tion of the potential annual contributions will be paid
until the person concerned would have reached the age
of 60.
Contributions falling due under the defined contribution
scheme are paid into an external fund in conjunction
with a trust model that is also used to fund pension ob-
ligations to employees.
Income earned on an employed or a self-employed ba-
sis up to the age of 63 is offset against the pension entitle-
ment. In addition, certain circumstances have been
specified, in the event of which the Company no longer
has any obligation to pay benefits. In such cases, no
transitional payments will be made.
Board of Management members who retire immediately
after their service on the board and who draw a retire-
ment pension are entitled to purchase vehicles and
other services of the BMW Group at conditions that also
apply in each relevant case for pensioners and to lease
BMW Group vehicles in accordance with the guidelines