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Friday 17 January 2020

Bank chiefs still getting top-up cash for pensions

Michael Brennan

THE State's two largest banks are continuing to give pension cash top-ups to senior executives despite the efforts of Finance Minister Brian Lenihan.

This is also in spite of the fact that the practice was condemned as "unacceptable" by the expert body set up by the Government to control banking pay in the seven covered institutions.

Executives benefiting from the top-ups include AIB managing director Colm Doherty and three senior directors in Bank of Ireland, the Irish Independent has learnt.

They are understood to have accumulated pension pots worth in excess of €5m but are now opting to get their pension payments in "cash allowances" to avoid a punitive rate of tax.

Mr Lenihan said he had specifically informed the affected institutions that this payment of cash allowances should stop immediately.

But he was told by AIB and Bank of Ireland that they had "pre-existing contracts" in place that they could not break.

The Covered Institution Remuneration Oversight Committee (CIROC), which was set up by Mr Lenihan after the introduction of the €440bn state banking guarantee, has also criticised the practice.

CIROC said pension schemes should reflect public policy and tax law.

"It is unacceptable that arrangements should be put in place which would be inconsistent with the intent of the relevant legislation," it added.

The new revelations come after Bank of Ireland chief executive Richie Boucher was forced to give up his €1.5m pension top-up in the wake of public outrage and union anger.

He also agreed to give up his pension cash allowance of €220,000 as part of his chief executive's remuneration package.

Labour TD Roisin Shortall made queries and discovered two further financial institutions that were continuing the practice of paying cash allowances instead of direct pension contributions.

But the Department of Finance refused to disclose the names of the institutions involved.

Both AIB and Bank of Ireland have now confirmed they were the institutions in question after being contacted by the Irish Independent.

It has also emerged that:

  • Mr Doherty is getting an annual salary of €500,000 and a cash allowance of about €148,000 instead of a contribution to his pension fund. He is set to announce in the group's forthcoming annual report that he has withdrawn from the AIB Group pension scheme. It is understood this is because he had reached the €5m pension cap -- beyond which punitive taxation rates would apply.
  • Denis Donovan, chief executive of the Bank of Ireland Capital Markets division, is getting an annual salary of €594,000 and a cash allowance payment of €245,000 instead of a pension fund contribution.
  • Bank of Ireland chief financial officer John O'Donovan is receiving an annual salary of €495,000 and a cash allowance payment of €152,000 instead of a pension fund contribution.
  • Des Crowley, chief executive officer of Bank of Ireland Retail division, is getting an annual salary of €498,000 and a cash allowance payment of €72,000 instead of a pension fund contribution.
  • All three of the Bank of Ireland executives are also receiving a car allowance payment of €28,000 each.

AIB said Mr Doherty had made an agreement with the bank's board to receive a cash allowance instead in 2008, when he was head of AIB Capital Markets.

"The agreement, which received all appropriate approvals and was exercised in 2009, means that Mr Doherty receives annual non-pensionable payments which are equivalent to the pension contributions the bank would have made to the group scheme on his behalf," it said.

An AIB spokeswoman confirmed that Mr Doherty was still entitled to his defined benefit pension scheme at the bank -- which is estimated to be worth in excess of €5m.


She also admitted that it was likely he would have to pay less tax under the new arrangement put in place by the bank.

"Certainly yes, there is the potential nine or 10 years down the line that there'll be a potential tax advantage. That's a fact," she said.

A Bank of Ireland spokeswoman confirmed that three of its senior executives -- Mr Crowley, Mr Donovan and Mr O'Donovan -- were getting cash allowances instead of direct pension contributions.

"However, they have all voluntarily moved to a reduced pension cash allowance based on a revised methodology, as well as voluntarily reducing their base salaries," she said.

Mr Crowley took the largest reduction, with his cash allowance going from €280,000 to €72,000.

Mr Donovan's cash allowance was cut from €451,000 to €245,000, while Mr O'Donovan's cash allowance was reduced from €352,000 to €152,000.

The Government protects AIB, Bank of Ireland and five other banks with the state banking guarantee.

And it has also invested a total of €7bn of taxpayers' money in AIB and Bank of Ireland.

The National Asset Management Agency has, so far, paid AIB €1.8bn for toxic property loans originally valued at €3.3bn (a 43pc writedown), while it has paid Bank of Ireland €1.26bn for toxic property loans originally valued at €1.93bn (a 35pc writedown).

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