Boucher tells BoI staff bank must plug €1bn gap in pension scheme
Published 21/02/2013 | 04:00
The chief executive of Bank of Ireland has told staff that action must be taken to plug a €1bn shortfall in its defined benefit pension scheme.
It is the second time in three years that the bank has had to move to plug a hole in the scheme.
The funding gap in the scheme has shot up from €400m in 2010 to €1bn at the end of last June, chief executive Richie Boucher told staff by email.
He said that deficit is likely to have increased further by the end of last year, once calculations are completed.
So far no proposals for tackling the bank's pension shortfall have been put forward, either in the email circulated to staff or at a meeting with unions earlier this week, the Irish Independent understands.
The first step in tackling the issue is to define what options are open to the bank and the pension scheme, Mr Boucher said.
The bank will work with staff representatives, pension trustees and other relevant stakeholders, he said.
Back in 2010, a €1.5bn deficit in the same pension scheme was tackled by scaling back benefits for members after a consensual deal was agreed between the bank and the active members of the scheme. That deficit was reduced to €400m at the end of 2011 but has surged again since, Mr Boucher said. He blamed "significant changes in the economic, pensions and regulatory environment".
That includes falling income from bond investments, tougher regulation that means pension trustees are less able to invest in risky assets that produce the best returns and new banking regulations that mean a pension deficit impacts on a bank's capital position.
Mr Boucher said it was "disappointing" to have to address the pension so soon after the 2010 restructuring.
"Our over-riding objective is to continue to try to provide sustainable pension benefits, but this cannot happen unless we take action now," he said.
Other big companies, including Independent News and Media, which owns the Irish Independent, are also grappling with big gaps in their pensions. Most defined benefit pension schemes have a shortfall between the value of their assets and the amounts they must pay to staff when they retire.
AIB sparked controversy last year when it used €1.1bn of the state-owned bank's assets to plug a hole in its pension scheme, which faced a funding crisis as a result of early redundancies.
Irish IndependentFollow @Indobusiness