IRELAND – Ireland's Labour Court has tentatively backed proposals by Aer Lingus to launch a new defined contribution (DC) pension fund in place of the existing, underfunded Irish Airlines Superannuation Scheme (IASS).

The interim recommendations – which followed discussions between the country's flag carrier and the ICTU Group of Unions, facilitated by the Labour Relations Commission – saw the Labour Court agree that the new DC scheme should go ahead, backing union proposals for it to target certain replacement ratios based on an employees salary.

It said the targeted final pensionable pay was only indicative, to be used as a basis of the new scheme's design, and that the airline and unions should aim to reach an agreement by the end of January or see outstanding matters referred back to the court.

Additionally, a technical group was asked to agree details of the new fund.

In its recommendation, the court said: "These discussions should have regard to the overall level of investment necessary in order to attain these targets and the mode by which a staff contribution can be made by way of savings in payroll costs."

The group of unions gained support for suggestions that, instead of coordinating the scheme with the state pension – which they argued would "disproportionately impact on those on lower levels of pensionable pay" according to the court – future payments would be weighted based on levels of pensionable pay.

It therefore recommended that any worker earning less than €30,000 should have a scheme design targeting 84-89% of pensionable pay, with a target of 73-80% for those earning €30,000-60,000.

Workers earning more than €60,000 would see the scheme design target 66-70% of pensionable pay.

Commenting on the interim ruling, Impact union national secretary for the services and enterprise division Matt Staunton said: "We greatly welcome the fact the Labour Court has issued a recommendation that recommends higher levels of pension coverage than Aer Lingus was proposing."

IASS has a deficit of €750m according to the most recent figures, but the airline has repeatedly said it has "no obligation" to fund the deficit above and beyond its fixed employer contributions.

The airline's largest shareholder, rival Ryanair, has threatened to sue the company if it attempts to increase contributions to fund the shortfall, resulting in recent proposals to open DC funds for workers.