The underfunded Irish Airlines Superannuation Scheme (IASS) aims to return 4.5% per annum over the next 25 years to address its deficit, according to the latest draft funding agreement.
In a note to the Irish Stock Exchange, the fund’s main sponsor – national flag carrier Aer Lingus – said that while the draft had yet to be submitted to the Pensions Board, it nonetheless expected the proposed scheme restructuring to be completed by the end of the year.
Under the terms of the latest proposal, the IASS general employees scheme would cut current pensions in payment in accordance with the revised priority order – resulting in 90% of benefits to €60,000 a year and 80% for all benefits above.
Active and deferred members would see their accrued benefits cut by 20%, while all three would no longer be entitled to indexation increases.
According to the statement, the IASS trustee would also implement a liability-driven investment strategy, as previously announced.
However, the new draft lowered the required annual return by 0.5 percentage points, to 4.5% a year over the 25 years of the funding proposal.
Aer Lingus said it stood by its previous proposal to fund a new defined contribution arrangement with €110m to compensate the scheme’s active members but added that it would “reassess the matter” once it had examined the draft proposal in detail.
In a statement, it said: “The draft funding proposal summarised in the recent letter from the IASS Trustee has not yet been submitted to the Pensions Board, and it remains the responsibility of the IASS Trustee to do this.
“The Company therefore expects the IASS Trustee to move forward with the submission of this draft funding proposal as soon as is practicable on the basis that it represents a viable solution which would result in a better outcome for the affected parties than the forced winding up of the Scheme.
“Gaining the Pensions Board’s approval for the draft funding proposal is a crucial preliminary step that must be completed before the other key steps can be taken.”
The Pensions Board last year appeared to reject a draft proposal that would have seen the IASS take up to 70 years to meet the regulator’s funding standard.
A 25-year period would still be significantly longer than granted to other schemes, which are expected to comply within a decade of submitting their proposals.
Funding proposals were due to be submitted to the Board nearly eight months ago, at the end of June last year.