Benefit cuts knock €2bn off companies' pension plan hole of €24bn
COMPANIES quoted on the Irish Stock Exchange have managed to cut their balance sheet liabilities by more than €2bn by slashing the accrued pension benefits of their workers, a report from LCP Ireland shows.
Defined benefit pension liabilities of the top 30 publicly quoted Irish companies and 11 semi-state companies stood at €24bn in 2010 company accounts, according to a new report published by LCP Ireland.
But companies have also begun to implement amendments to benefits (including significant benefit reductions on defined benefit scheme members), according to the report.
About half of the companies analysed had recognised a reduction in their pension liabilities following amendments to pension benefits during 2010.
Bank of Ireland implemented a number of amendments to benefits resulting in an overall reduction in the pension liability of €733m. Many other firms implemented amendments to pension benefits resulting in significant improvements to balance sheets.
ESB reduced a disclosed deficit of €2.2bn to a residual liability of €897m following an agreement on pension amendments with the ESB Group of Unions and a change in the accounting treatment from defined benefit to defined contribution.
The LCP report also found that the market capitalisation of the top three Irish banks -- AIB, Bank of Ireland and Irish Life and Permanent -- is so dwarfed by pension liabilities that it will inevitably be a significant factor for any planned corporate transactions such as mergers, take-overs, acquisitions and planned growth. AIB's pension liabilities at 31 December, 2010, were more than 12 times the value of the bank.
Conor Daly, partner at LCP Ireland, said: "The report shows that the scale of pension liabilities is a significant challenge for many of Ireland's top companies. An increasing number of companies are seeking to share the burden of meeting these liabilities with the membership through benefit reductions."