Pensions plan could hit a snag for Irish Distillers
proposed amount in annual contributions
Irish Distillers intends to double its annual contributions to the company's defined benefit pension scheme to €5m as part of an arrangement to address a widening gap in the scheme's funding requirement.
But plans by the company's pension trustee to eliminate an automatic 2.5pc annual increase in the pensions of up to 500 former employees could hit trouble.
The pension trustee is proposing that pension increases will now be capped at the rate of inflation, but that the first 2pc of any inflationary increase will only be awarded at the trustee's discretion. Anything less than a 3pc rate of inflation will result in no automatic annual increase being paid.
If the rate of inflation is 3pc in any one year, an automatic 1pc increase will be allocated to pensions being paid, while a 4pc inflation rate will result in an automatic increase of 2pc.
The trustee retains the discretion to award anything up to a 2pc increase in most cases.
It is believed that legal advice will be sought by pensioners in relation to the planned changes.
Pensioners have also been warned that any discretionary increases will depend primarily on the funding position of the pension scheme.
"It is therefore very unlikely that any discretionary increase will be awarded until the funding level has returned to 100pc on a statutory funding basis," notes the trustee in a letter seen by the Irish Independent.
The pension trustee is predicting that it will take eight years for a 100pc funding level to be achieved, but that even when that position is reached, any discretionary increases could still not be guaranteed.
Management at Irish Distillers, a subsidiary of French drinks group Pernod Ricard, has told the pension trustee that the company has said it is not willing to pay any additional contributions to the scheme beyond those it has already agreed.
Irish Distillers ultimately has the ability to terminate its liability to contribute, the trustee has warned.
Existing Irish Distillers employees who are members of the scheme have already agreed to increase their personal contributions, on a phased basis, to 8pc of their pensionable salaries. There are around 400 employees at the group.
The changes to the scheme will have to be approved by the Pensions Board.