IRELAND - The Irish Bank Officials Association (IBOA) has highlighted important safeguards for members of the Bank of Ireland Staff Pension scheme, after a review of the trust deed and rules revealed the scheme cannot be discontinued without the consent of at least 75% of the membership.

IBOA has advised any solution to the €1.5bn BoI deficit needs to be “equitable and shared across all stakeholders”, as part of an update on the continuing negotiations with BoI on the scheme, which has around €4.5bn of current liabilities.

The Bank, which received €3.5bn from the NPRF last year as part of a recapitalisation programme, has confirmed it is undertaking a “comprehensive review” of the DB scheme. (See earlier IPE article: Bank of Ireland reviews DB scheme over €1.5bn deficit)

IBOA and the bank have subsequently been in continued discussions.

However, in a circular to members from Gerry Hanna, senior industrial relations officer at IBOA, the union revealed advisers had examined the trust deed and rules governing the BSPF, and found they contain “certain important and helpful safeguards for members”.

In particular, it stated: “The scheme cannot be discontinued (except in certain exceptional circumstances), without the consent of at least 75% of the membership - a feature that is almost unique in Irish pension schemes.”

IBOA said the exceptional circumstances in this case would be the insolvency of the bank. But it added the reference to the protection is to allay any members’ fears of a worst-case scenario, “since effectively the scheme cannot be closed unless an overwhelming majority of the scheme members agree to do so”.

Meanwhile, the Department of Finance confirmed BoI has issued €250m worth of ordinary shares to the National Pension Reserve Fund (NPRF) in lieu of a cash payment for the coupon on the preference shares the fund received as part of the recapitalisation programme.

In a statement the government said the European Commission had requested that discretionary coupon payments on tier 1 and tier 2 capital instrument in BoI - including the NPRF’s preference shares - are not paid while it considers the bank’s restructuring plan.

However the department of finance said there is no objection to the payment of the coupon in terms of shares so the NPRF is receiving £250m of ordinary shares, which “ensures that taxpayers are remunerated in a timely fashion for their investment in the bank”.

And elsewhere, trade union officials are organising a ballot of members of the Allied Irish Bank (AIB) pension scheme, about pension recommendations of the independent mediator.

Kevin Foley, the third-party mediator, made a series of recommendations in December including one suggesting member contributions for those not already paying into the scheme should be set at 5% of pensionable pay, but phased in from 1 April 2010 at 4%. Those choosing not to make contributions will have their accrual rate reduced form 1/60th to 1/75th.

In addition, he recommended that from 1 June 2009 the final DB pensionable salary should switch to an average amount of the last five years of service, and suggested the savings from this and the additional member contributions should be used to address the funding issues.

IBOA said it has accepted the recommendations and a formal ballot of members would take place in February, supported by special informational meetings to explain the recommendations.

Figures showed in August 2009 that the pension deficit of the bank - which also received a €3.5bn cash injection from the NPRF - had increased by more than €150m to €1.26bn in the first half of 2009. (See earlier IPE article: AIB aggregate deficit exceeds €1.2bn)

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

Topics