Saturday 25 May 2019

AIB beats pension crisis after €1.1bn loans bailout

Pedestrians pass a branch of the Allied Irish Bank (AIB) in Dublin, Ireland
Pedestrians pass a branch of the Allied Irish Bank (AIB) in Dublin, Ireland
Charlie Weston

Charlie Weston

State broadcaster RTE and taxpayer-rescued AIB Bank have emerged as having the best-funded pension schemes.

AIB was allowed to move €1.1bn off its balance sheet to shore up its pension two years ago.

This has meant the deficit in its defined benefit pension scheme, which amounted to €763m at the end of 2011, has now all but disappeared.

A new report from pensions advisers LCP found that the bank's scheme is now 98pc funded - its assets are almost equal to its liabilities.

The details on the pension came as AIB boss David Duffy is set to tell an Oireachtas Committee today that there were 942 AIB staff members on remuneration packages of over €100,000 out of a workforce of 12,648 at the end of last year.

The health of the AIB pension is in contrast to situation at most other large companies and public bodies where deficits have ballooned.

The combined deficits in the pension funds of publicly quoted and semi-state companies has doubled to more than €8.5bn this year.

LCP looked at the financial health of 16 of the largest Irish-quoted companies and 13 semi-state or State-controlled companies with defined benefit schemes.

These schemes are disappearing in the private sector as they are hugely expensive to fund. They promise two-thirds of salary at retirement for those with full service. A tax-free lump sum can also be taken, but that reduces the annual pension.

Two years ago AIB controversially got Government permission to move €1.1bn off its balance sheet to close the deficit in its pension fund.

It effectively moved loan assets that had been earmarked for disposal to its pension fund.

The bank argued at the time that the transaction "enables the early retirement programme to proceed, which in turn will deliver essential reductions to AIB's cost base".

Senior managers, who were in charge when the bank came close to collapse, have since retired on generous pensions.

Reacting to the revelations that AIB's pension scheme is now almost fully funded, Fianna Fail finance spokesman Michael McGrath said senior managers who ran the bank into the ground have escaped with big pensions.

"There has been a gross inequality in how different pension schemes have been managed in this country. "Many pension scheme members are facing cuts to entitlements as profitable companies have been allowed to walk away from pension deficits. On the other hand, in the case of AIB, very senior management who were at the helm when the bank was run in to the ground have had their pension underpinned by a massive transfer of assets in to the scheme."

The bank was got more than €21bn in a taxpayer rescue to stop it having to be wound up.

LCP found that the hole in county's biggest pension schemes has more than doubled in cash terms this year.

Deficits went from €4bn last year to €8.5bn this year in the 29 defined benefit schemes.

The surge in the deficits is despite a strong rise in global stock markets.

RTE's scheme is fully funded - it has enough assets to meet its pension liabilities. It was 101pc funded.

LCP said a number of companies closed their defined benefit schemes since 2012.

Bank of Ireland had the largest cash deficit at the end of 2013 at €841m, although that figure is lower than the 2012 figure of €1.075bn.

Smurfit Kappa, Diageo, CIE and CRH also have big deficits.

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