UK - Planned changes by Ulster Bank and its parent company Royal Bank of Scotland (RBS) to its defined benefit (DB) schemes, such as capping pensionable salary at 2% or the rate of inflation, have met with resistance from trade unions.

The Irish Bank Officials Association (IBOA) has claimed the decision by Ulster Bank to close its existing DB scheme from 1 November 2009 and replace it with a defined contribution (DC) arrangement is "totally unacceptable" and claimed the pension changes and pay freeze suggested "Ulster Bank staff are being discriminated against in comparison to other staff in the RBS Group".

Ulster Bank said in "light of the current economic situation and to control the cost and future liabilities to the group" it will close the DB scheme from November and will also cap employees annual increase in pensionable salary at 2%, or the rate of inflation, whichever is lower.

Larry Broderick, general secretary of IBOA, said the union completely rejected the proposals that were "neither discussed or agreed with the union" and are in breach of the Ulster Bank/IBOA Relationship Agreement.

He added the union now intends to arrange a ballot of all members to ask members to reject the Bank's "outrageous proposals", but said IBOA in the meantime plans to request that all issues in relation to pay and pensions are dealt with an independent conciliator, Kieran Mulvey, who is scheduled to meet both Ulster Bank and IBOA on 2 September 2009.

The changes to the Ulster Bank pension fund follow an announcement by RBS Group yesterday in which it said there would be a series of proposed changes to the main UK final salary pension schemes, which closed to new members in 2006.

RBS said it is not closing the schemes to future accrual, but to limit the risks and costs associated with the pension it intends to cap the pensionable salary to the same level as Ulster Bank, and will also reduce the lump sum payable on early retirement for members opting to take an immediate undiscounted pension.

The bank, which is partly owned by the UK taxpayer, said it had initiated a consultation process with the trade union Unite, which is expected to be completed before the end of November.

Neil Roden, head of human resources at RBS, said: "The rising cost of pension provision is an issue for RBS and for all companies at this time. Only one third of our staff are members of the UK DB scheme. This is an expensive scheme for our shareholders to fund and a generous one in comparison to the market.

"The reforms we are consulting on seek to strike a balance between reducing the costs and future liabilities of the scheme to the group, with doing what we can to protect the welfare of existing staff and scheme members. It is a pragmatic and necessary course of action and not a decision the Board have taken lightly."

However, Unite claimed the changes were a "body blow" to tens of thousands of staff as the pension cap would erode workers' pensions over time.

Rob MacGregor, Unite national officer, said: "Unite will support its members in any action they choose to take to defend their pensions. The union will be meeting again with RBS and we expect there to be meaningful negotiations over these changes."

RBS has already been at the centre of an earlier controversy after it was revealed its former chief executive Fred Goodwin was originally awarded an annual pension of £703,000 (€798,641) before he agreed to a voluntary reduction although the move to cap pensionable salary is also being consulted on by ITV. (See earlier IPE article: Goodwin pension cut avoids legal uncertainty and ITV consults on DB changes as deficit predicted to worsen)

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