IRELAND – Pension liabilities at the Bank of Ireland (BoI) have increased by more than €1.3bn in the last year, resulting in a significantly increased deficit despite a 13% return on scheme assets.

The lender also confirmed that it had recovered €20m from the trustees of its Irish funds following 2011's payment of the pensions levy – a 0.6% tax on pension fund assets introduced by the current government when it came to power.

According to the bank's preliminary year-end results for 2012, the deficit within its defined benefit fund rose from €413m to €1.1bn at the end of December due to lower discount rates.

"The movement in retirement benefit obligations is primarily driven by a reduction in the discount rate from 5.3% to 3.9%," the report said. "The market value of pension scheme assets increased by 13.4% during 2012.

"The reduction in the discount rate is due to the significant fall in yields on high-quality (AA rated) corporate bonds since 31 December 2011."

The report also noted that the fall was only partially offset by a €600m increase to €5bn in scheme assets over the 12 months.

The report said pension costs had fallen by €29m year on year to €59m.

"During 2012, the trustees of the Bank of Ireland Staff Pensions Fund (BSPF) agreed to recover the 2011 and 2012 Irish levies from the relevant ROI members.

"As a result, the current year net charge of €59m reflects a recovery of €20m in respect of the 2011 pension levy."

The Irish Association of Pension Funds found a few months after the levy was introduced in May 2011 that funds were forced to pay for the levy, as companies were often unable to cover the cost.

The bank, however, had agreed with trustees that the cost of the levy would be met from scheme assets in exchange for "additional security of scheme members".

The agreement, made public in the 2012 half-yearly report, saw the BSPF agree to adjust benefits in place of €250m in contingent assets – including €42m in properties owned by the banking group.

The fund will retain ownership of the contingent assets until it is able to meet the Pensions Board's minimum funding standard, the bank said.

The bank also said it had recently made payments of €188m to the National Pensions Reserve Fund Commission.

The payments, made in late February, were for the preference stock held by the buffer scheme following a cash injection during the bank bailout.

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