Mercedes 2015 Annual Report Download - page 121

128 B | COMBINED MANAGEMENT REPORT | REMUNERATION REPORT
Commitments upon termination of service
Retirement provision
The pension agreements of some Board of Management members
include a commitment to an annual retirement pension, cal-
culated as a proportion of the former base salary and depending
on the number of years of service. Those pension rights were
granted until 2005 and remain valid; the same procedure was
applied for the relevant hierarchy level for Wilfried Porth for
the period before his membership of the Board of Management.
The pension rights have been frozen at that level, however.
Payments of these retirement pensions start upon request when
the term of service ends at or after the age of 60, or are paid
as disability pensions if the term of service ends before the age
of 60 due to disability. The respective agreements provide
for 3.5% annual increases starting when benefits are received
(with the exception that Wilfried Porth’s benefits are adjusted
in accordance with applicable law). The agreements include
a provision by which a spouse of a deceased Board of Man-
agement member is entitled to 60% of that member’s pension.
That amount can increase by up to 30 percentage points
depending on the number of dependent children.
Effective as of January 1, 2006, the pension agreements of the
Board of Management members were replaced by a new
arrangement, the “pension capital system”. Under this system,
each Board of Management member is credited with a capital
component each year. This capital component comprises an
amount equal to 15% of the sum of the Board of Management
member’s fixed base salary and the actual annual bonus, multi-
plied by an age factor equivalent to a rate of return of 6% until
2015 and 5% as of 2016 (Wolfgang Bernhard and Wilfried Porth:
5% for all years). These contributions to pension plans are
granted only until the age of 60. The benefit from the pension
plan is payable to surviving Board of Management members
at the earliest at the age of 60, even if retirement is before 60.
If a member of the Board of Management retires due to dis-
ability, the benefit is paid as a disability pension, even before
the age of 60.
In 2012, Daimler introduced a new company retirement benefit
plan for new entrants and new appointments for employees
paid according to collective bargaining wage tariffs as well as
for executives: the “Daimler Pensions Plan.” As before, the
new retirement benefit system features the payment of annual
contributions by Daimler, but is oriented toward the capital
market. Daimler makes a commitment to guarantee the total
of contributions paid, which are invested in the capital market
according to a precautionary investment concept. The Super-
visory Board of Daimler AG has approved the application of
this new system for all members of the Board of Management
newly appointed since 2012. The amount of the annual con-
tributions results from a fixed percentage of the base salary
and the total annual bonus for the respective financial year
calculated as of the balance sheet date. This percentage is 15%.
This calculation takes into consideration the targeted level
of retirement provision for each Board of Management member
– also according to the period of membership – and the result-
ing annual and long-term expense for the Company. The contri-
butions to retirement provision are granted until the age of 62.
The benefit from the pension plan is payable to surviving Board
of Management members at the earliest at the age of 62,
irrespective of their age upon retirement. If a member of the
Board of Management retires due to disability, the benefit
is paid as a disability pension, irrespective of his or her age
upon retirement.
Payments under the pension capital system and the
Daimler Pensions Plan can be made in three ways:
– as a single amount;
– in twelve annual installments, whereby interest accrues
on each partial amount from the time payments commence
until the payout is complete (Pension Capital 6% or 5%;
Daimler Pensions Plan in accordance with applicable law);
– as an annuity with annual increases (Pension Capital 3.5%
or in accordance with applicable law; Daimler Pensions Plan
in accordance with applicable law).
The contracts specify that if a Board of Management member
passes away before retiring for reason of age, the spouse/
registered partner or dependent children is/are entitled to
the full committed amount in the case of the pension capital
system, and to the credit amount reached plus an imputed
amount until the age of 62 in the case of the Daimler Pensions
Plan. If a Board of Management member passes away after
retiring for reason of age, in the case of payment of twelve
annual installments, the heirs are entitled to the remaining
present value. In the case of a pension with benefits for surviving
dependents, the spouse/registered partner or dependent
children is/are entitled to 60% of the discounted terminal value
(pension capital), or the spouse/registered partner is entitled
to 60% of the actual pension (Daimler Pensions Plan).
Departing Board of Management members with pension
agreements modified as of the beginning of 2006 receive, for
the period between the end of the last contract period and
reaching the age of 60, payments in the amounts of the pension
commitments granted as described in the previous section.
Departing Board of Management members are also provided with
a company car, in some cases for a defined period. These
payments are made until the age of 60, possibly reduced due
to other sources of income, and are subject to annual per-
centage increases described above in the explanation of these
pension agreements.