IRELAND - The National Irish Bank's (NIB) plans to introduce a hybrid pension scheme from August 1 2008 have been accepted by members of the Irish Bank Officials Association (IBOA) trade union.
Larry Broderick, general secretary of IBOA, said the proposal for the hybrid scheme, recommended by Kevin Foley, independent chairman of the Labour Relations Commission (LRC), had been accepted by "a majority decision".
He said the introduction of the hybrid scheme was a "significant outcome" and confirmed the trade union would be requesting "an early meeting" with NIB to discuss the implementation of the new scheme.
Under the terms of Foley's recommendation, issued in May, the NIB will close its existing defined benefit (DB) scheme - valued at €270m according to Pension Funds Online - to new entrants on August 1 2008, although existing pensioners and employees will remain unaffected by the change. (See earlier IPE article: NIB to launch hybrid pension scheme)
The hybrid scheme consists of two parts: a core mandatory contribution pension scheme - the DB section - which is called the cash balance account or 'retirement capital Account' (RCA), and an investment account that will represent the defined contribution (DC) section of the scheme.
All new employees will be automatically enrolled into the new scheme, and will be required to contribute 5% of salary to the cash balance account, while the NIB will "guarantee the value of credits allotted, of 10% of salary, plus inflation, up to retirement".
In the second part of the scheme, meanwhile, the NIB will contribute 10% of salary to the investment account, and will undertake to match any employee contributions at a rate of 1% for every ½% paid by employees, up to a maximum of 2% from the NIB.
As a result, the NIB claimed the actuarial assumptions for the scheme suggest if an employee joins the fund at age 20 and stays until they are 65, they should receive a pension valued at 64% of final salary.
The dispute over the pension scheme and the decision to refer outstanding issues to the LRC, followed Danske Bank's acquisition of NIB in 2005, and its subsequent review of the NIB pension system, as it was the only part pf the group to have an open DB scheme and most other sections of the group operate DC schemes.
However, the trade union agreed to ballot members with the recommendation to accept the proposals, as it was a "significant improvement" on the original plan by NIB to introduce a normal DC scheme.
Broderick said: "The new hybrid arrangement is in line with developments generally in the industry. There are clear protections for existing staff in relation to the DB scheme, and offers significant additional benefits in terms of increased annual leave for 2009 and Permanent Health Insurance funded by the Bank."
The decision to introduce a hybrid scheme, follows a similar move by other Irish banks including the Bank of Ireland, which agreed a deal to introduce the hybrid 'LifeBalance' scheme in October 2007. (See earlier IPE article: Bank of Ireland secures LifeBalance deal)
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