NATIONAL IRISH Bank (NIB) has closed its defined-benefit pension scheme and transferred the members to a new “hybrid” scheme. More than 400 staff will pay higher contributions from their salary to the new pension plan as a result.
The bank shut the defined-benefit pension scheme to new staff since 2008. However, existing staff who are members of the defined-benefit scheme will also now shift to the new scheme.
NIB said pension entitlements earned to date in the defined-benefit scheme would be fully protected and it would continue to fund the liabilities of the scheme in full into the future. NIB staff union, the IBOA, said it was “shocked and disappointed” by the move. “This change has not been agreed with the union, which has been engaged with the bank on this issue,” the union said in a statement. It said it met a mediator on the issue on Monday and did not believe the process of engagement was over.
“However, it appears from the unilateral announcement today that the bank has decided that the process of mediation on this matter is now over almost before it began.”
NIB said the risks and costs in operating the scheme had “escalated to unsustainable levels”. It said it had “consulted widely” with pension experts, considered changes made by other organisations and engaged extensively with the IBOA over 11 months.
“Short-term measures are not a solution,” said NIB deputy chief executive Kevin Gallen.
“Retaining the defined-benefit scheme would have resulted in biting into the pension benefits already earned and wouldn’t have tackled the core long-term problems in the scheme,” Mr Gallen said.
NIB’s defined-benefit scheme has 1,500 members. However, the changes do not affect those who have already retired.
Under the hybrid pension plan, staff contributions will increase from 2.5 per cent to 5 per cent of salary. The bank will contribute at least 15 per cent of the value of staff salaries to the scheme. It will also pay staff a once-off cash lump sum of 5 per cent of salary in December, which it said equated to the first two years of additional contributions.
In a statement, NIB said its parent company, the Danish financial institution Danske Bank, remained “firmly committed to the Irish market” and was taking this action on its pension scheme to ensure its business in Ireland remained “viable”.
Defined-benefit pension schemes are usually the most advantageous type of pension scheme for employees. However, due to a combination of higher life expectancy and unfavourable movements on investment markets, the cost of funding the schemes has increased.
More than three-quarters of defined-benefit pension schemes are now in deficit.
