IRELAND – Allied Irish Banks has only seen a 10% reduction in its Irish pension deficit despite the transfer of a €1.1bn loan portfolio to the fund last year.
Publishing its annual report for 2012, the bank also said Ireland's Pensions Board had approved its funding proposal up to 2018, meaning scheme trustees will have already taken account of how to address both the deficit and incoming risk reserve requirements.
The Irish lender, 99.8% owned by the country's National Pensions Reserve Fund following the financial crisis, added that a programme of voluntary redundancies had seen its defined benefit (DB) obligations fall by €29m over the year.
However, despite both the transfer of €1.1bn in loan assets and the reduction in pension obligations, the Irish DB fund saw its deficit fall by only €81m to €673m over the 12 months to December.
The bank confirmed a loss of €430m stemming from the transfer of the loan portfolio to the fund.
AIB announced last summer its intention to close "prohibitively expensive" existing DB plans to new accrual, but said it had not yet decided when the closures would occur.
The bank added that, as the date remained "uncertain", it estimated that group-wide contributions to its DB funds in the UK, Ireland and other countries would come to €215m over 2013.
Across AIB Group, DB liabilities rose from €4.5bn to €5.5bn over the course of the last year.
However, the overall deficit only increased €48m in the same period due to an almost €1bn increase in assets under management – €570m of which remains within the loan portfolio.
As a result of both an increased allocation to equity and the transfer of the loan portfolio, the DB funds of the group saw their fixed income allocation fall from 62% to 46% of scheme assets over the year.
The increased group-wide deficit was the result of AIB's UK fund seeing a €69m surplus become a €30m deficit – despite the fund's discount rate assumption falling by only 20 basis points to 4.5%, less dramatic than the 1.1 percentage point drop within the Irish fund.
The UK fund also saw a less dramatic decrease on its expected return on scheme assets, down 30bps to 4.9% compared with a 1.43 percentage point adjustment to 4.49% in the Republic of Ireland's fund.
Both DB schemes also updated their mortality assumptions over the course of 2012, resulting in a nearly three-year rise in male life expectancy for Irish employees retiring today, aged 63.
The fund now expects men to live more than 25 years after retiring at 63, compared with its 22.5-year assumption applied in 2011.
Female employees in its UK scheme were now expected to live the longest, with a life expectancy of 29.6 years for any employee retiring in a decade, aged 63.
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