Irish union calls for cap on pensionable pay in wind-up
IRELAND - Union representatives for one of Ireland’s largest pension funds have called for “basic fairness and justice” in the country’s wind-up order, estimating that if the main scheme for electricity supplier ESB were forced to close, it would leave actives with only 5% of accrued benefits.
In a detailed submission to the Department of Social Protection, the ESB Group of Unions suggested that, in the instance of a wind-up of their defined benefit (DB) fund, pensionable pay should be capped at €80,000.
At present, pensions in payment receive absolute priority regardless of size, resulting in the estimated 5% payment to actives in the ESB scheme if it were to wind up.
A multi-employer fund covering employees of Dublin Airport and Aer Lingus recently estimated that actives would be left with 4% of accrued benefits once pensions in payment had been secured.
Speaking to IPE, ESB Group of Unions secretary Brendan Ogle said the ESB General Employees Superannuation Scheme had an ongoing actuarial deficit of €72m, compared with a €1.7bn deficit under Ireland’s revised minimum funding standard (MFS).
In the union submission to the department, Ogle noted that the new obligations were “entirely state-driven” - as opposed to market-driven - and that the regulations had been amended at a time of low interest rates and bond yields.
The submission said: “The new obligations make it significantly more difficult for trustees to fulfil their statutory and fiduciary duties to their pension fund members at a time when they need more support and relief given the economic crisis in Ireland and abroad.”
Ogle went on to criticise the ability granted the Pensions Board to wind up underfunded schemes and especially the ESB fund, as the company was 95% state owned.
The submission also noted that ESB employees who joined the scheme up until the early 1990s were exempt from receiving a state pension, leaving them without retirement income in case of scheme wind-up.
“We respectfully submit that it is unrealistic to expect workers in ESB to allow their scheme to be undermined in this fashion,” the union said.
Addressing the unlikely event of the ESB superannuation fund being forced to wind up, the union suggested that all members should first be guaranteed benefits in line with the state pension.
It also said it was neither “tenable nor sustainable” to allow high earners to benefit from benefit payments in the six-figure range upon wind-up, instead saying that, in such an instance, it should be allowed to cap benefits at a pensionable salary of €80,000.
The government is currently consulting on changes to the wind-up priority, with Mercer expected to hand minister for social protection Joan Burton a report in the autumn.
The closed-door consultation, attended by 6-8 stakeholders, laid out six wind-up priority options, according to Ogle.
“All of the options were a variation of the same,” he said, noting that one possibility would even include maintaining the status quo.
The ESB Group of Unions added in its submission that another way of approaching wind-up would be to meet as much as 60% of benefits for pensions in payment, then 60% for actives, once a minimum state pension benefit had been guaranteed.
“That is one of the five options [under discussion in the review], but it doesn’t have a cap as directed by the department, and it doesn’t have a minimum benefit either,” Ogle said.
“The other four options are a variation on that - 70%, 65% - so, playing around with percentages,” he added. “None of the options address to us the fundamental issues that we try to address.”
Ogle warned that a third of its members would be left with no benefit whatsoever were the ESB fund to wind up under current regulation.