Irish Life to close defined benefit pension scheme despite surplus
The State's largest pension provider is closing its defined benefit scheme, despite it having a massive surplus.
The move by Irish Life is set to be hugely embarrassing for the company that trades on trying to convince people of the merits of putting a good retirement plan in place.
Irish Life is bidding to play a role in the move by the State to launch a new auto-enrolment pension scheme for thousands of workers.
It is unusual for a defined benefit scheme that is in surplus to be closed down.
Staff at the company have been told it has unilaterally decided to close its staff scheme from June 30.
Union sources said the move was likely to lead to industrial action.
The scheme has a surplus of around €200m, and assets of €1.1bn. The fund has never been in deficit, according to the Unite trade union.
Some 3,000 people are members of the scheme.
Irish Life was nationalised during the crash at a cost of €1.3bn to the taxpayer. It was then sold for the same sum to Great West Lifeco, which merged it with its existing Irish unit, Canada Life.
Since then the business has grown and has paid more than €210m in dividends to its new owners.
The regional organiser of the Unite union, Richie Browne, said Irish Life staff had been told they would be moved to a defined contribution scheme.
But union advice is that an employee will have to put between 20pc and 40pc of their salary into the new scheme to yield a comparable pension to the existing one.
The defined benefit scheme provides for two-thirds of final salary, based on 40 years' service at retirement at 65.
Mr Browne said Unite members, anticipating the company's move, had already given their officials a mandate to ballot for industrial action.
"Unite is currently engaging in consultative meetings prior to balloting," he said.
Asked why Irish Life was closing a scheme that was in surplus, Mr Browne said it was attempting to get the financial risk off its balance sheet, allowing it a larger return on its investments.
He said the decision to close the defined benefit scheme and move all members to a defined contribution one transfers all risk to the employees.
He said the union had agreed to the closure of defined benefit schemes in other firms in the past, but this was the first time members had been told a scheme that was in surplus was being shut down.
Irish Life confirmed it was ending future accrual on two defined benefit pension schemes - the Irish Life Staff Benefits Scheme and Canada Life Irish Pension Scheme.
"An updated package for those who will transfer from the two defined benefit schemes to a new defined contribution scheme has been agreed with the trustees of the two schemes. Full details will be given to those members impacted by the changes over the coming weeks by letter and through briefing sessions."
Irish Life said it made the decision to shut the two defined benefit schemes following a detailed review of the liabilities and costs of the schemes.