Banks defend cash top-ups for pensions of senior staff
AIB and Bank of Ireland will continue to pay pension cash top-ups to their senior executives -- because the contracts were signed before the clampdown on banking pay.
The Irish Independent yesterday revealed AIB group managing director Colm Doherty and three Bank of Ireland senior executives are receiving cash allowances of between €72,000-€245,000 each instead of direct pension contributions.
They are understood to have accumulated pension pots worth in excess of €5m but are now opting to get pension payments in "cash allowances" to avoid a punitive rate of tax.
Revenue Commissioners last night confirmed that an investigation carried out into all bank executives who were receiving such cash allowances instead of pension contributions found they were all tax compliant.
The bank executives had opted not to receive direct contributions into their pension funds because they would have been hit with punitive taxes for exceeding the €5m pensions cap introduced in 2006.
Both AIB and Bank of Ireland yesterday indicated they would continue to pay the cash allowances to the senior executives, despite protests from the union representing rank-and-file bank staff. Both banks said they had nothing to add to their previous statements.
They had justified the payments on the grounds that they had been part of the contracts signed with the executives before the Government's expert group on banking pay published its report in February last year.
Finance Minister Brian Lenihan then told the banks that this payment of cash allowances should stop immediately.
But he said he has no legal power to act when executives have signed contracts which include cash allowances.
The Irish Bank Officials Association (IBOA) said the news of the pension cash allowance payments had caused shock and anger among ordinary staff who had been forced to accept cuts to these pension schemes.
"You'd want to see that applying across the board. It does seem strange that the Department of Finance would have facilitated this and agreed it," IBOA general secretary Larry Broderick said.
Both AIB and Bank of Ireland had deficits of around €1.5bn each in their defined benefit pension schemes for their staff and have introduced revised conditions as a result. Mr Broderick said what had happened was not fair -- and raised questions about the leadership of senior executives in AIB and Bank of Ireland.
"The difficulty for us is that our members are paying the ultimate price -- and we're predicting there are going to be thousands of job losses announced in AIB and Bank of Ireland this year," he said.
Labour TD Roisin Shortall said the practice of banks paying cash allowances had been condemned as "unacceptable" by the expert body set up by the Government to control banking pay in the seven covered institutions.
"At a time when the taxpayer is underwriting all of the State's banks, it is unacceptable that these guys at the top of the banks should continue to enjoy outrageously generous pension packages," she said.
She said it was nonsense for AIB and Bank of Ireland to say the pension cash allowances were part of the executives' contracts. "How many ordinary workers in pension schemes have seen their pension contracts effectively torn up and their accrued benefits reduced? It really is staggering that the minister continues to allow senior banking executives operate in a rarefied world like this," she said.
However, a spokesman for Mr Lenihan said the cash allowances were part of the bank executives' contracts.
He pointed out they were paying the full higher rate of income tax on the allowances -- and that such allowances would not be paid under any new banking contracts.