Pension crisis as Irish Life scraps gold-plated fund
Largest pension provider Irish Life shuts staff scheme
The largest pension provider in the State is closing its staff pension scheme, prompting fears that traditional defined benefit plans are now set to disappear from the private sector.
Unions at Irish Life want the law altered urgently in a bid to stop the company closing its defined benefit pension for staff.
Some 1,200 staff members will be hit by the move.
It comes despite the Irish Life scheme having a €150m surplus.
It is unusual for a private sector defined benefit scheme to be in surplus.
The Irish Life scheme has 2,200 pensioners and former employees yet to reach retirement age, or deferred members.
The scheme provides a pension of two-thirds of employees' salary at retirement at age 65, for those with 40 years' service.
A briefing document, compiled by the Unite trade union, states: "The scheme has assets of €1bn, comfortably meets the minimum funding standard, and had a surplus of €150m at the last actuarial valuation."
The minimum funding standard sets out the benefits a scheme is obliged to provide should it be wound up.
It also defines the minimum assets that each scheme must hold.
Irish Life is the largest pension provider in the State, with one million customers.
It was sold to Canadian Great West Life Company in 2013 for €1.3bn, and made a profit of €170m last year.
The Unite briefing note says Irish Life staff will have future pension contributions made to a defined contribution scheme.
"For future service benefits, the employees are forced to take all the risk, while the company takes none," the note, written by Unite's Joe Conroy, says.
Staff would have to put in up to 40pc of their earnings to match the returns they could have expected in the defined benefit scheme.
He added that the union urgently wants protections built into promised new pensions legislation against companies closing defined benefit plans when the schemes are financially healthy.
Irish Life said it has had an extensive number of meetings with the union and non-union employee representative groups on its proposals and discussions are ongoing.
It said the consultation and negotiation process is confidential so it cannot make any further comment at this stage.
Irish Life is just the latest large company to shut its defined benefit scheme. Before Christmas there were protests when the publisher of this newspaper, Independent News & Media (INM), said it was shutting its defined benefit scheme.
Negotiations are continuing between trustees and INM management on the funding of the shut-down of the scheme.
Intel, Pfizer, Aer Lingus, and the Dublin Airport Authority are among companies closing defined benefit schemes.
From a peak of 1,500 defined benefit schemes a few years ago, covering 300,000 people, there are now just 715 plans with 100,000 active members.
Chief executive of the Irish Association of Pension Funds Jerry Moriarty said defined benefit pensions were now being phased out across the private sector.
He said the fact that only half of workers are making contributions to a pension, with only 35pc of private sector workers with an occupational pension, means we are heading into a crisis.
"We are going to face a crisis with more people depending on the State pension and many people will not be able to afford to retire."
He said the public sector was the only area where there was an increase in the numbers with a pension.