Bank of Ireland is set to reduce its pension deficit by up to €400 million, thus securing the future of its defined pension scheme and paving the way for a stronger capital position.
Following the completion of discussions, which first began some seven months ago, between the Irish Bank Officials Association (IBOA), and facilitated by the Labour Relations Commission, the bank's pension deficit, which stood at €1.15 billion as of the end of December 2012, is set to fall as a result of adjustments in benefits. The solution agreed upon is said to be a "shared" one, in that the bank will reduce the deficit as a result of various measures, and members of the bank's pension scheme will need to agree to cuts in their benefits.
While there will be no change in benefits already accrued, there will be a change in how potential future salary increases will qualify for a pension, according to a communication distributed to staff and seen by The Irish Times. The first 1 per cent of any salary increase will be on a defined contribution (DC) basis, rather than a DB basis, while any increase between 1 and 4 per cent will be on a DB basis, and any increase above that cap will revert to the DC scheme.
Retired staff will also be impacted, and the first 1 per cent of any increase they might be entitled to, due to inflation for example, will not be payable.
The bank’s hybrid scheme, Lifebalance, is due to close and new entrants into the bank will be eligible for a DC scheme. For employees up to the age of 44, the employer contribution will be 12.5 per cent, rising to 20 per cent for those aged 45 and over. The employee contribution will be 2.5 per cent for both age categories.
The pension scheme is unique in that it requires approval of every member to make a change. If approval is granted, the changes will come from early next year. The IBOA said the agreement will ensure the continuation of the DB scheme for future accrual and protects most of the benefits secured by it in 2010. It is expected to recommend the agreement to members.
