Annual pension units are accrued for the members of the Board. The method of determination of the amount of the pension benefits generally corresponds to that used for other employee groups. The method is designed such that both the performance of the company and the progression of the individual Board member’s career significantly affect the pension entitlement.
The annual pension benefits accruing to Board members in a given reporting year (pension unit) are composed of a fixed and a variable component. The fixed component is calculated by multiplying the annual fixed compensation above the Social Security Contribution Ceiling by 35% (contribution factor). The resulting amount is converted into a lifelong pension payable upon retirement using actuarial factors based on an interest rate (6%), the probability of death, invalidity and mortality (Heubeck-Richttafeln 1998) and an assumed pension increase (1.5% per annum). The variable component of the pension unit depends on the return on assets (ROA) in the reporting year under consideration. The variable component of the pension unit is based on a ROA of 12% at which point the variable component is equal in value to the fixed component. Based on a ROA of 12%, there is a linear relationship between the variable component and the ROA figures between 10% and 14%. The fixed and the variable components together result in acquired pension unit for the reporting year. The sum of the pension units accumulated over the reporting years determines the respective Board member’s pension benefit. The pension benefit takes effect at the end of service upon reaching retirement age of 60 years or disability or death. Pension payments are adjusted on an annual basis, of at least 1% annually, according to the changes in the German consumer price index.
The pension units also include survivor benefits. Upon the death of an active or former member of the Board, the surviving spouse receives a survivor pension amounting to 60% of the Board member’s pension entitlement. The orphan pension amounts to 10% for each half-orphan, 33% for an orphan, 25% each for two orphans, and 20% each for three or more orphans of the pension entitlement of the deceased Board member. The survivor benefits may not exceed 75% of the Board member’s total pension entitlement. If the survivor pensions exceed the upper limit, they will be proportionately reduced.
Board members are members of the BASF Pensionskasse VVaG, as are generally all employees of BASF SE. Contributions and benefits are determined by the Statutes and general terms and conditions of the BASF Pensionskasse VVaG.
The service cost attributable to the year 2008 are as follows: Dr. Jürgen Hambrecht €333 thousand (2007: €507 thousand), Dr. h.c. Eggert Voscherau €43 thousand (2007: €108 thousand), Dr. Harald Schwager €556 thousand (2007: –), Dr. Kurt Bock €546 thousand (2007: €633 thousand), Dr. John Feldmann €571 thousand (2007: €658 thousand), Dr. Hans-Ulrich Engel €448 thousand (2007: –), Dr. Andreas Kreimeyer €558 thousand € (2007: €652 thousand), Dr. Stefan Marcinowski €559 thousand (2006: €621 thousand), Dr. Martin Brudermüller €555 thousand (2007: €638 thousand), and Peter Oakley €117 thousand (2007: €577 thousand). These amounts include the costs for the pension claims arising from the deferred contribution program.
As with the pension benefits for senior executives, in 2008 the basis for the future calculation of pension units for Board members was also adjusted. An updated interest rate of 5% (previously 6%) and an updated probability of death, invalidity and mortality (Heubeck-Richttafeln 2005G, previously Heubeck-Richttafeln 1998), are applied to pension units acquired as of January 1, 2009. For new Board members and mandate extensions beginning on January 1, 2009, a contribution factor of 32% (previously 35%) is applied. The rest of the above mentioned method of calculating pension units remains the same.