IRELAND - British drinks company Britvic is to scrap indexation protection for all members of its defined benefit pension scheme in Ireland in an effort to reduce costs as revenues in the country declined.

According to the company's interim results to the third week of May, the company's Irish subsidiary was able to post a £2.8m (€3.4m) profit due to the agreement to remove a previous 3% indexation and introduce a €50,000 cap to the salary level eligible for pension provision.

"The past service gain recognised under IAS 19 'employee benefits' arises from the removal of the guaranteed pension indexation," the company said.

In mid-April, the company reported group-wide pension deficits of £16.7bn, down by around two-thirds from £45.1bn at the beginning of October 2011. The reduction was driven "primarily" by changes to the Britvic Ireland Defined Benefit pension plan, it said.

"As part of the changes, Britvic agreed to pay the cost of the levy on pension plan assets introduced by the Irish government in 2011," it said, referring to the four-year, 0.6% tax on pension assets - branded a "raid" on pensions by critics.

The company added: "The removal of the guaranteed pension increase results in the recognition of a past service gain of £21.3m, recognised as an exceptional item. The changes significantly improve the funding position of the BIPP."

In other news, the Irish Congress of Trade Unions has renewed calls for the country's pension funds and its National Pensions Reserve Fund (NPRF) to direct assets towards infrastructure investment.

Putting forward more detailed proposals that echo earlier calls for occupational schemes to invest in infrastructure, viewed as an alternative to the government's pensions levy, the ICTU said schemes could be incentivised if a levy rebate was offered once exposure to infrastructure exceeded the tax by a multiple - with 2.4% suggested as a threshold.

"In effect, the levy would constitute a short-term loan for the government to ensure cash flow for the jobs initiatives, whereas for pension funds, the rebate would be an incentive to invest that would add to the total value of the assets of the pension fund," the trade union umbrella organisation said in its report.

David Begg, secretary general of the ICTU, said its proposals would keep any investment "off the state's balance sheet", arguing that in the wake of François Hollande's election as French president, there had been a shift in the political agenda towards growth.

It also called for interest in infrastructure to be expanded beyond holding equity stakes in state utilities, with investment in both green and brownfield urged.

Turning its attention to the NPRF, which has seen its assets largely directed towards assisting Ireland's banks, the union was critical of the current asset allocation only allowing for 5% investment in infrastructure.

"We call for this limit to be raised and propose that half of the current value of the discretionary fund be allocated to domestic infrastructure projects."

Similar proposals were put forward by a union-backed think tank earlier this year, with SIPTU previously suggesting that a pension levy rebate should be offered if occupational pension funds allocated 5% of assets to Irish projects.
 

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