IRELAND - The pensions deficit of Allied Irish Banks (AIB) - one of the institutions recapitalised by the National Pension Reserve Fund (NPRF) - rose by more than €150m in the first half of 2009, to €1.26bn.

Interim results from the bank, which received €3.5bn of funding from the government via the NPRF earlier this year, showed although the total value of assets across all defined benefit (DB) schemes increased from €2.49bn to €2.57bn in the first half, the liabilities also rose from €3.6bn to €3.83bn.

The aggregate deficit across the retirement arrangements therefore increased from €1.11bn at the end of December 2008 to €1.26bn six months later, which is almost double the €713m deficit recorded in June 2008.

AIB's figures showed there was a change in assumptions regarding the discount rates for the Irish DB scheme, with the small increase from 5.8% to 5.9% resulting in an actuarial gain of €59m, although this was more than offset by increases in mortality rate assumptions that led to an actuarial loss of €98m.

For the UK scheme, meanwhile, AIB revealed the inflation rate used in the preparation of the accounts had increased by the end of June 2009 to 3.25%, up from 2.75% in December 2008, which had resulted in an actuarial loss for the scheme of £43m.

The latest update on the pension deficit follows ongoing negotiations between AIB and the Irish Bank Officials' Association (IBOA) over changes to pay and pensions, after the bank proposed introducing a mandatory 5% contribution from staff not already making payments to the DB scheme and changes to the structure of pension benefits.

The two parties have now entered a statutory 60-day consultation period in the UK to consider the proposals, following a recommendation from the Labour Relations Commission (LRC) in May to engage in comprehensive talks regarding the pensions issue, while "detailed discussions" have been continuing in relation to the Irish scheme. (See earlier IPE article: IBOA defers AIB action ahead of new talks)

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