National Irish Bank and the finance union the IBOA have welcomed a recommendation that the bank set up a new “hybrid” pension scheme for staff who join the company after August 1st this year.
Under proposals from the Labour Relations Commission the bank will close its defined benefit pension scheme to new employees from that that date.
The IBOA general secretary Larry Broderick said the proposals were contained elements of the direct benefit and direct contribution pensions models.
"It is possible to address the legitimate funding concerns of employers without depriving their employees of the prospect of a reasonable income in retirement," he said.
Pension arrangements at the bank have been under a review agreed by the bank and the IBOA the finance staff union, since the start of the year.
Under the scheme all new staff will pay 5 per cent of their salary into the direct contribution part of the scheme – which, with tax adjustments will result in a net cost to the employee if 2.5 per cent.
The new pension scheme "aims to deliver a pension of 64 of final salary in addition to the social welfare pension at age 65" after 45 years employment. It includes a cash balance plan and an investment account plan.
It differs from the defined benefit scheme because it offers a guaranteed 66 per cent of final salary on retirement whereas the performance of the hybrid pension is subject to a number of factors and the final pension may well be lower than the 64 per cent target.
Kevin Gallen, deputy chief executive said the defined benefit pension was being closed to "avoid the erosion of benefits to current members in an increasingly uncertain and volatile pensions environment".
As part of the recommendation a permanent health insurance scheme will be established to provide income protection in the event of staff illness or disability. This will apply from February 1st next year. All staff are to be awarded an extra day's holiday.
NIB has become the third major banking group in the Republic to adopt the hybrid model for pensions.
NIB is owned by Danske Bank and has 625 staff in 65 branches and 13 business banking centres.
