8.5 Discretionary pension benefits

Discretionary pension benefits are a form of variable remuneration. Where the terms of the company’s pension scheme include pension benefits that are not based on performance and are consistently granted to a category of staff, such pension benefits should not be considered discretionary, but should be considered as part of routine employment packages in line with the section of these guidelines on definitions. Discretionary pension benefits are not severance payments, even if the employee decides to retire early.

The investment firm should ensure that where a staff member leaves the investment firm or retires, discretionary pension benefits are not paid without the consideration of the economic situation of the investment firm or risks that have been taken by the staff member which can affect the investment firm in the long term.

The full amount of discretionary pension benefits must be awarded, in accordance with Article 32(3) of Directive (EU) 2019/2034 and subject to the derogation under Article 32(4) of this Directive, in instruments referred to in point (j) of this Article or, where approved by competent authorities, within the alternative arrangements under Article 32(1)(k) and:

• a. where an identified staff member leaves the investment firm before retirement, the investment firm must hold the full amount of discretionary pension benefits at least for a period of five years without the application of pro rata vesting;
• b. where identified staff member reaches retirement, a five-year retention period must be applied to the full amount paid.

Investment firms should ensure that malus and clawback arrangements are applied in the same way to discretionary pension benefits as to other components of variable remuneration.