Analog Devices to pump €190m into workers' pension scheme
More than 1,000 workers at a major US multinational are to have millions of euro pumped into their pension fund.
The workers at Analog Devices are set to get the boost as the company converts from a defined benefit scheme into defined contribution funds.
The 1,100 workers based in Cork and Limerick are set to see €190m invested into their retirement funds, the Irish Independent has learned.
Analog Devices is a semiconductor manufacturer which has invested €120m in its research and development and manufacturing facility in Limerick in the last five years.
The pensions move is in a bid to reduce financial uncertainty for workers and the company.
Most companies are closing defined benefit schemes, which promise a set pension depending on final salary and years of services, as they are too expensive to fund and too risky.
They instead set up defined contribution schemes, where what workers get in retirement depends on the amount of money invested, how the fund performs and the length of time it is invested.
Pension consultants Mercer said the Analog move was one of the most generous conversions of a defined benefit plan into a new scheme that it has seen in this country. Analog Devices said that the decision would mean similar projected retirement benefits for the workers.
The vice president at Analog, Leo McHugh, said the huge investment in the pension was being made because this country was critical to the company's long-term global strategy.
He said that the current defined benefit scheme is secure and at the last valuation was 125pc of the Pension Authority's funding standard.
But the massive cost and heavy regulations around defined benefit schemes make them high risk for both sponsoring companies and their staff. The new arrangement has been agreed with the Analog pension fund's trustees.
"We've designed this transaction so that all benefits accrued for past service and a substantial portion of prospective future service will be paid to members of the defined benefit plan now.
"Reducing the volatility and uncertainty is important to everyone and we expect this will become a model of best practice," Mr McHugh said.
Companies have been closing defined benefit schemes in their droves. In the last 14 years a total of 1,355 defined benefit schemes have been shut down. And at many of the 750 that remain workers have had their benefits cut, have had to make higher contributions, or both.