Starting with a blank canvas back in 2003, the creation of the Bank of Ireland’s LifeBalance product was one of three components of the bank’s new integrated group pensions strategy that was developed by the group pensions department. The three components are governance, benefits and fund structures.

“The first task was to ascertain the extent of existing pensions arrangements within the group before drafting a set of principles that would drive the arrangements going forward,” says the fund. This led to the development of the Group Pension Principles, which were approved by the board in 2004 and are designed to allow the scheme to structure its pensions arrangements in such a way as to facilitate the progressive accumulation of benefits for its members.

At the heart of the set of principles lie the following key statements:

the scheme must strive to provide competitive, progressive pension benefits; this should be in a manner which minimises the volatility of pension surpluses and/or deficits, while maintaining costs at an acceptable level; to ensure consistency in pension provision across the group; and to ensure that all staff have a decent pension at retirement.

Having obtained approval for the principles and a group- wide mandate for governance of all subsidiary schemes, Bank of Ireland says the benefit framework became “the priority work stream”. This led to all potential benefits structures being reviewed and then a shortlist of options being put together that were consistent with the group’s overall business objectives and its human resources strategy. “Next stage was to consult with group business leadership teams and human resources,” the scheme says.

A final recommendation of the appropriate benefit framework the bank favoured was incorporated in the group’s overall pensions strategy and submitted to the group management for sign-off. “The governance mandate had already been communicated and implemented across the group during 2005 for the multiplicity of subsidiary schemes in existence across the group and the benefits framework implementation commenced in 2006,” the scheme says. 

So what form did the new structure take and how did members stand to benefit? The Bank of Ireland said members in the existing ‘legacy’ schemes would continue to build their benefits in these funds but they would be closed to new entrants and would become a contributing factor in the new pensions framework.

“All new employees became members of the new group scheme known as LifeBalance. LifeBalance is a hybrid Scheme, combining a generous cash balance arrangement, called the Retirement Capital Account or RCA, with a 3% matching defined contribution arrangement known as the Personal Investment Account or PIA,” explains the scheme.

In essence, the RCA is a scheme into which all new employees are enrolled automatically. UK-based workers may decide to opt out in line with UK legislation, though the Bank of Ireland is keen they stay in the scheme, as it points out that opting out “requires proactive decision-making by the employee”.

Benefits-wise, the RCA is generous and provides for a 20% credit which is applied to each employee’s base salary without being offset against state pension provision. The credit is revalued annually in line with inflation up to 4% and a discretionary investment credit which seeks to deliver an extra 2% each year.

Unlike the RCA, the PIA scheme is voluntary but again the bank is keen to encourage membership and provides strong supporting documentation in both printed and online formats. Ongoing education about the PIA and its benefits through the group’s intranet are designed to show staff how it can help them optimise their pension.

Despite following consultations one union continued to argue that the pensions arrangement was fine as it was for both existing and new employees, the bank says the staff themselves were more or less happy with the changes and the reasons they were being introduced. “For example, the consultative group in the UK quickly accepted the proposals as they potentially delivered enhanced benefits for a group of employees who had been in membership of a DC arrangement which, albeit good, would not deliver in line with the potential of LifeBalance,” the bank claims. “Union reps have now accepted that LifeBalance is a very good versatile and flexible scheme,” it adds.
Indeed, according to the bank, two quite significant events influenced their about-turn. 

Firstly, the group has acquired a number of  mature, experienced bankers since the launch of LifeBalance and they were happy with the new pensions arrangement being offered to them. “Not one baulked at the offers, even where they were coming from defined benefit environments,” the bank says.

The second significant event is the actuarial confirmation by the unions’ own advisers that LifeBalance could potentially deliver benefits which are superior to a capped defined benefit arrangement.

It is never easy to overhaul a pensions arrangement, especially where you find yourself tinkering with the established defined benefit model and the more guaranteed, usually more generous, benefits it offers.

But constructing a workable and generous defined contribution or hybrid model can be a viable replacement that removes the strain on the employer which often results in them continuing to contribute generously, albeit without the ball and chain at their feet.
This is what the Bank of Ireland’s new LifeBalance model achieves. The bank did not merely close its DB plan and buy into a DC scheme no-one understands, It has carefully and diligently developed a pensions model that suits all types of employees across the board. It has taken into account national regulations group companies may encounter overseas and developed different layers of flexible and secure savings accounts that will appeal to a diverse and growing personnel.