Trustees for the underfunded Irish Airlines Superannuation Scheme (IASS) have been granted up to 25 years to address the deficit, according to one of the fund’s main sponsors.
In a statement to the Irish Stock Exchange, Aer Lingus said the Pensions Board had “communicated to the IASS trustee” that it expected the fund to comply with the minimum funding standard within 25 years, following initial discussions that saw a request for a 70-year recovery period reportedly rejected by the regulator’s chief executive Brendan Kennedy.
However, the 25-year window seemingly granted to the IASS is significantly longer than the deadline for other Irish defined benefit schemes, which need to comply with the reinstated MFS and new 10% risk reserve by 2023.
The statement by Aer Lingus added that the 25-year deadline had “imposed constraints” on the trustees, resulting in benefit cuts of 11-25% and higher return assumptions of 5% per annum for its recovery plan to address the current €769m deficit.
Offering details of the fund’s proposed investment strategy, the statement added: “The IASS trustee has proposed a cessation of IASS benefit accrual and a liability-driven investment strategy underpinned by investment in a fixed income portfolio targeting a yield of 5% per annum.”
The Irish flag carrier also said it would “continue to engage in discussions with the IASS trustee regarding the proposed investment portfolio and benefit reductions”.
However, it stressed: “It remains the responsibility of the IASS trustee to submit an appropriate proposal to the Pensions Board to address the funding difficulties in the scheme.
“The company, therefore, expects the IASS trustee to move forward with the submission of this proposal as soon as is practicable.”
Aer Lingus said agreement with the Board represented a “crucial preliminary step” prior to “other key steps”, a reference to its need to approach shareholders with a proposal to set up a new defined contribution (DC) fund for workers affected by the IASS benefit cuts.
The airline’s statement comes days after union IMPACT condemned the suggested benefit cuts after both companies involved in the multi-employer IASS and employee representatives were briefed on the trustee’s latest proposals.
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