AIB uses pension bailout to pay ex-chiefs up to €500K
STATE-owned AIB has admitted that a €1.1bn bailout of its pension scheme is helping to pay retired executives as much as €500,000 a year.
The bank's chief executive, David Duffy, confirmed that some of the €1bn of assets transferred from its balance sheet to its pension fund is helping to pay the "super-pensions" of former senior managers.
These include a €500,000 annual pension reportedly being paid to former chief executive Eugene Sheehy, who was in charge at the time of the infamous bank guarantee in 2008.
His successor, Colm Doherty, who has also left the bank, will get €300,000 a year when he turns 65.
AIB plugged a hole in its pension scheme in August by handing €1.1bn of loan assets to its pension pot.
The novel scheme to rescue the pension fund was designed to help slim down the bank by funding an early retirement scheme.
However, it has now emerged the transfer is also helping to pay the huge pensions of executives who left the bank years ago, including those in charge during the banking crisis.
AIB would have collapsed without billions of taxpayers' cash injected into the bank in two separate bailouts. The revelation that the bank's assets are now being used to fund the pensions comes as AIB closes branches around the country.
The bank shut 44 of its branches last week, with a total 67 to close during the next year.
Mr Duffy has also ruled out any "debt forgiveness" for homeowners with unsustainable mortgages.
That is despite last month's calls from the Central Bank's Fiona Muldoon and the most senior official at the Department of Finance to write off "unpayable" debts.
Executives from state-owned AIB were questioned yesterday by members of the Joint Oireachtas Committee on Finance.
Fianna Fail's Michael McGrath said AIB had committed to look at the issue of "super pensions" paid to some former executives at its annual general meeting in June.
He recalled how AIB chairman Michael Hodgkinson said he planned to examine the question of the "super pensions", including writing to people receiving the huge payouts.
Mr Duffy said those letters had not yet been sent, but are expected to be posted before the end of the year.
In the meantime, more than €1bn of loan assets from the balance sheet of the state-owned lender have been transferred to its pension fund.
AIB said the transfer was to help meet the cost of an early retirement scheme, part of the plan to cut 2,500 jobs.
But Mr Duffy conceded that the money is also going towards the super pensions of former executives.
Mr McGrath cited a €500,000 annual pension paid to Eugene Sheehy and the €300,000-a-year his successor, Colm Doherty, will be able to collect when he turns 65, which are paid out of the bailed-out pension pot.
Mr Sheehy was replaced by Mr Doherty who stepped down in November 2010 after the bank got a second bailout. He earned €3m in the 11 months he worked that year.
Yesterday, Mr Duffy said he believed AIB would return to profit by 2014.
AIB and Bank of Ireland came under sustained pressure last month, including from Ms Muldoon, who accused them of not doing enough to tackle mortgage arrears.
She and John Moran of the Department of Finance had called for more radical action than the forbearance scheme preferred by lenders, such as switching stretched borrowers to interest-only payments.
Mr Duffy yesterday defended his bank's position, saying seven out of 10 of the 33,000 AIB borrowers on interest-only are now making their payments.
The bank is losing money on standard variable rate and tracker mortgages, AIB told TDs. It means interest rates on home loans could hit 5pc to 6pc.