Retiring AIB execs to avoid tax on pensions
Published 11/12/2010 | 05:00
UP TO 40 AIB executives left the company on early retirement shortly before this week's Budget.
The executives may have benefited by retiring before last Tuesday's Budget which immediately reduced the maximum lump sum which can be taken tax free on retirement to €200,000.
Most of those who retired are understood to have been middle management in the bank.
The move comes in the wake of revelations that senior AIB executives were awarded bonuses averaging €180,000 last year, despite the bank's record losses and a massive taxpayer bailout.
A spokesman for the bank yesterday confirmed the raft of retirements, but said they did not represent "any additional cost to the bank".
He added that those who took early retirement did so on a "reduced pension" because they left the company early.
The Budget changed the rules on lump sums -- capping them at €200,000.
They were previously set at a maximum of 18 months' salary after 40 years pensionable service. This means that anyone earning more than €130,000 a year was in line for a maximum lump sum of more than €200,000. For example, a executive on €400,000 with full service would receive €600,000 tax free.
The high level of executive departures from the bank comes ahead of a massive restructuring of AIB which will result in a large number of redundancies early next year.
In a memo to staff last week, executive chairman David Hodgkinson said he hoped to announce a restructuring plan within the first quarter of 2011.
He said the "new smaller structure" will mean that the bank will need less people overall than it has at present.
"We aim to deal with this as sensitively, as fairly and as early as we can -- probably in the first quarter of 2011 and I will let you know the precise timing as soon as possible," he told the bank staff in an email.
Despite its impending nationalisation, the bank has been relying on natural attrition to reduce its headcount by 600 over the last year.
Meanwhile, Finance Minister Brian Lenihan has again come under pressure to introduce a punitive tax on the AIB bank bonuses.
The minister's announcement of a 90pc tax on future bonuses did not satisfy opposition demands.
Labour Party TD Joe Costello said Mr Lenihan should bring in an emergency law.
"The minister's response is typical. It is like Saint Augustine, it will happen but not yet. It will happen in the future," he said.
Mr Lenihan repeated his position that the bonuses were being taxed at the highest existing rate of income tax and it wasn't possible to impose the 90pc rate because of a court decision.
"The most crucial issue is that these bonuses are fully subject to income taxation and any attempt to single out a group of income taxpayers for penal treatment in a retrospective way would, of course, be entirely impossible," he said.
Mr Costello said the bonuses were due to be paid out to the executives by December 17.
"So this is the only opportunity for members of this House to take a stand on behalf of the Irish people and to say that we who were elected to represent the people will stand with the people and not tolerate this smash and grab.
"It is not too late for the minister to do the right thing," he said.
Fine Gael last night described the vote as a "Fianna Fail flip- flop" and "pure political tokenism".
The party's frontbench spokesman Leo Varadkar said the debate was designed to "placate Fianna Fail backbenchers who threaten Brian Cowen's political security".
He added: "It's not the serious, full debate we should have on an issue of such importance. Moreover, it sends out all the wrong signals to international markets and international agencies who don't know whether the Government is coming or going."