Forrester to lead review of BoI pension plan
Bank of Ireland chief executive Richie Boucher has enlisted the former head of the group's life division to spearhead a review of its defined pension scheme, which is under water to the tune of €1.5bn.
"This deficit is creating a significant risk to the security of pension benefits now and in the future," Mr Boucher said, in an email to bank staff this week.
"This is a complex issue, with no single solution, and involves a wide and diverse range of stakeholders," he added.
Staff members of the scheme -- which was closed to new entrants in late 2007 -- were left with little doubt that they would have to up their contributions, which are now at 2.5pc of annual salaries, to address the issue of the deficit.
Mr Boucher said that Brian Forrester, the former head of Bank of Ireland Life, would be charged with coming up with solutions for the bank to "be able to continue to offer sustainable pension benefits" to members.
The move comes as rival Allied Irish Banks presses ahead with a plan to get members of its defined benefit plan to contribute 4pc of their salaries from April to the scheme, which is €1.26bn in deficit.
A ballot on the issue of contributions is expected over the coming months.
Staff who joined AIB before 1998 are part of the scheme and have not had to make contributions up until now.
The bank hopes to increase contributions to 5pc from next year.
Addressing the pension shortfalls and the size of the banks' respective market values are key issues for potential investors as both look to tap shareholders for capital over the coming months.
The issues have become all the more pressing in light of recent proposals from the influential Basel Committee on banking supervision that bank deficits should be deducted from banks' all-important core equity capital.
Pension schemes around the globe were hit severely by falling investment market returns in recent years, while pension costs continued to ratchet higher.
Mr Boucher highlighted that the group's so-called LifeBalance hybrid pension plan, introduced in 2007, would not be affected by the review of the defined pension scheme.