Lazard scraps final salary pensions

Employees at Lazard, the investment banking group, could be hit by reduced pension benefits as part of a $100m (€77m) compensation and benefits cost-cutting plan.

Under the plan, Lazard will switch its pension scheme from defined benefit, which guarantees a portion of salary, to defined contribution, which is based on stock market returns.

Volatile markets can severely decrease the pension benefits employees receive from defined contribution schemes.

A former senior investment chief with Lazard Asset Management said the change in pensions structure would make investment professionals think hard before they joined the group.

The announcement was made in an amended initial public offering filing with the US Securities and Exchange Commission last Friday.

According to the filing, Lazard will also end guaranteed payments to the founders of Lazard Asset Management, its $78.5bn fund management arm, as part of a plan to cut compensation costs to 57.5% of operating revenue.

The SEC filing states: "The contractual payments to the founders of Lazard Asset Management have...expired and will not be repeated."

Co-founder Norman Eig said at the end of last year that he would retire from the group, while fellow co-founder Herbert Gullquist retired in 2003 after 21 years with the company.

Separately, the cost-cutting exercise means some of the 130 managing directors in Lazard's financial advisory business will lose guaranteed payments.

The amended IPO filing for Lazard's planned $850m IPO said the bank was under investigation by two US financial watchdogs over giving and receiving "gifts and entertainment involving a mutual fund company."

The filing said Lazard had received a subpoena from the SEC seeking information concerning the gifts as well as a letter from the National Association of Securities Dealers, the US brokerage regulator, on the same subject.

Lazard declined to comment.