Switzerland's largest bank just got less attractive to work for. UBS is tightening the screws on early retirement and pension benefits, following a similar move by hometown rival Credit Suisse.
The Swiss bank disclosed new financial targets, a 2 billion Swiss franc shareholder buyback, higher dividend and pledge to keep lifting, overshadowing big changes in how it treats its soon-to-be retirees. UBS said it will make changes to its pension scheme «to support the long-term financial stability» of the fund.
In short, UBS bankers will work longer, then get less in benefits when they do retire. Though the bank didn't disclose exact details, the normal retirement age will be raised, the minimum conversion rate which dictates retiree payouts will be lowered, and employees will begin paying in sooner. The changes take effect next year and don't affect current UBS retirees.
Following Credit Suisse
UBS follows in the footsteps of hometown rival Credit Suisse, which under CEO Tidjane Thiam already moved on retirement schemes two years ago. Last year, Credit Suisse lowered the conversion rate as well as a technical interest rate. The bank also ordered its bankers to work until 65 – the normal Swiss retirement age for men – from 63 previously.
To be sure, pension schemes remain a key factor in attracting and retaining talented bankers. This may be the reason that UBS will inject 720 million francs into its pension fund, in order to cushion the blow from lowering the conversion rate on pension payouts. To do so, UBS will take a hit against its key capital ratio of 200 million over three years into account. The move won't affect its profit and loss accounts.
