ESB WORKERS will today formally agree to a pay freeze as part of a deal aimed at tackling the State-owned energy company’s €2 billion pension shortfall.
Following a review by actuaries at the end of 2008, it emerged that the ESB’s pension scheme had a €1.957 billion deficit, which meant that, even allowing for future contributions and investment income, it fell almost €2 billion short of its total projected liabilities.
The company subsequently began talks with representatives of its group of unions in an effort to address the crisis.
Both sides recently reached an agreement on a solution which attracted 70 per cent support in a ballot of workers. Unions and management will formally sign off on the deal today.
The agreement calls for a pay freeze at the State company for three years. Similarly, the 7,000 or so former ESB workers receiving pensions from the scheme will not get any increase to their payments during that time.
Up to this point pensioners got increases in line with those paid to workers at the State company. After the three-year freeze, any hike in benefits will be tied to inflation.
The ESB will pay an extra €591 million into the scheme over a period of years on top of the regular contributions made by the company and employees.
According to Brendan Ogle, secretary of the group of unions, there is no question of an ongoing increase in contributions as between company and staff contributions about 24 per cent of its wage bill already goes towards maintaining the scheme.
The rules for calculating the final benefit will also change from January 1st, 2012. From then it will be based on career average earnings rather than final salary, which will cut the amount paid to those who retire from that point on.
Mr Ogle said the deal meant that “everyone involved has to take a certain amount of pain” including the company, pensioners and workers.
The long-term target return from the fund will be cut over 10 years from 7 per cent a year to 6.25 per cent a year to limit its exposure to higher-risk investments.
According to a document detailing the agreement, the scheme earned €260 million more than the targets set by its managers in 2009 and continued to perform well in the early months of this year.
However, the document states that this “bounce” in the level of returns on its assets resulted from a strong recovery in markets in the immediate period after the crash in late 2008. It says this cannot be relied on in the long term.
The ESB gave its workers a 3.5 per cent wage increase in late 2008. The payment was part of a previously agreed national pay deal between the Government and the social partners.
A number of State companies, including Bord Gáis, have since agreed to increase pay to their staff.
