Business Irish

Saturday 21 October 2017

Fingleton: how he built up his €28m pension pot

Top-ups left ex-Nationwide boss with the biggest fund in country

Emmet Oliver Deputy Business Editor

FORMER Irish Nationwide chief executive Michael Fingleton benefitted from a range of extraordinarily "generous" top-up arrangements that left him with the largest pension pot in the country at €28m, a confidential report reveals.

The detailed pay and pension arrangements made for Mr Fingleton by his own company over almost 40 years are laid bare for the first time in a report compiled by a sub-committee of Irish Nationwide Building Society.

Irish Nationwide, run by Mr Fingleton since the early 1970s, is earmarked to receive €5.4bn in taxpayers' money and lost €2.4bn last year after disastrous property lending, which took place during Mr Fingleton's reign.

The report shows a separate pension scheme was set up for Mr Fingleton in 1995 and the scheme was twice topped up with generous extras in 1997 and 2005.

It also shows that Mr Fingleton wound up his pension scheme just before the credit crunch began in 2007, preserving its value.

Mr Fingleton's pension was topped up by the trustees (effectively the directors of INBS) in 1997 when annual bonus payments over three years were included.

The second top-up came in 2005 when Mr Fingleton's wife was awarded the right to 100pc of his pension pot in the event of his death, rather than two-thirds as previously agreed, or 50pc as applies to most schemes.

This concession to Mr Fingleton added €2.2m to the cost of the pension scheme, the report claims.

"In summary Mr Fingleton's pension entitlements were generous," says the report, and were "considerably enhanced" by the changes made in 1997 and 2005.

The report -- now passed to the Public Accounts Committee -- was demanded by the Government from INBS and shows that Mr Fingleton got his controversial bonus of €1m for work in 2008 partly because there wasn't anyone obvious at the society to replace him.

"There was no succession plan to deal with his departure," the report points out. "Therefore the board needed time to put in place a succession strategy." If a successor was available, the board could have "strengthened" its position with Mr Fingleton, the report says.

Instead a range of benefits were agreed with Mr Fingleton by chairman Dr Michael Walsh, and given approval by the Irish Nationwide remuneration committee. These included:

* A 10pc increase on Mr Fingleton's 2007 salary.

* A bonus of €1m to "retain his services for one year".

* A €450,000 payment paid in part to compensate Mr Fingleton for losing fees after he left the INBS board. In all Mr Fingleton's pay, bonus, fees and benefits amounted to €2.4m.

Unusually, Mr Fingleton's pension was managed by himself and bank shares like Northern Rock, HBOS and AIB were among the largest holdings.

DEPENDENCE

It is not clear whether this dependence on bank shares would have collapsed the pension subsequently when drawn down, because often pension-holders convert their shareholdings into cash, helping protect the value even when markets slump.

The report makes it clear that if Mr Fingleton had not drawn down his pension pot from INBS in 2007 it would have left Irish Nationwide facing a major problem when the credit crisis came. So in that sense the society was lucky Mr Fingleton removed the scheme in 2007.

"It was fortunate for the society that when the wind-up of the scheme occurred the entitlements were more than matched by the value of assets," states the report. "Had the scheme not been wound up, this would have proved short-lived as equity values subsequently declined," it adds. The report also makes it clear that by administering his own pension, savings were made of about €2m.

The pension and pay arrangements of Mr Fingleton were allowed under the regulations at the time.

The pay for the chief executives of financial institutions is currently capped at €500,000.

Irish Independent

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