AIB WORKERS have agreed to take cuts of up to 20 per cent in their pensions in a bid to cut the scheme’s deficit.

Bank staff who are members of the hybrid and defined benefit schemes in Ireland and Britain have agreed to pension changes recommended by an independent mediator.

Defined benefit scheme members have agreed to a scheme under which they must contribute 4 per cent of their salaries to the scheme from April 1st this year, rising to 5 per cent from next year.

They can choose to have their final pension calculated at one seventy-fifth of their pay for every year worked from one-sixtieth, a reduction in benefits of 20 per cent.

Irish Bank Officials’ Association (IBOA) general secretary Larry Broderick said the staff involved had agreed to the deal because they recognised the serious difficulties facing the scheme.

“This has been a very tough call in the present economic circumstances, but our members have bitten the bullet. It is now up to the bank to reciprocate,” he said.

AIB reduced the bank’s pension deficit to €714 million at the end of 2009 from €1.3 billion at the end of June 2009 and from €1.1 billion a year earlier after changes in final salary benefits moved to average pay over the final five years from the final salary previously.

The change was welcomed as banks will be forced to set aside greater levels of cash to cover deficits in defined benefit pensions under the proposed Basel III rules governing the amount of capital they must set aside.

Defined benefit schemes aim to pay workers a pension calculated as a set proportion of their income once they reach retirement.

Many companies are attempting to end or dilute such schemes as falling investment markets mean that most of them are in deficit.