IRELAND - Bank of Ireland (BoI) has proposed to contribute around €800m (US$1.06bn) to its defined benefit scheme and to implement a number of measures in a bid to tackle its €1.6bn pension deficit.
The bank has also said it would put a temporary freeze on any salary increases qualifying as pensionable salary from April 2010 to April 2012.
In addition, from April 2012 pension increases would be linked to the consumer price index (CPI) rather than salary, to a maximum of 4%. And there would be no pension increases for future retirees for three years from their date of retirement - after which pension increases will be linked to the CPI, to a maximum of 4%.
BoI workers will be balloted on these changes starting from next week until the end of April. The changes need to be agreed by the scheme members in order to be effective.
The proposals are the result of 10 weeks of negotiations between trade union Irish Bank Officials' Association (IBOA), independent mediator Mark Connaughton and BoI, represented by Brian Forrester, the former head of Bank of Ireland Life.
IBOA secretary general Larry Broderick said in a statement: "We have welcomed the mediator's recommendation on changes to the Bank Staff Pension Fund on the basis that it offers an equitable solution to a very difficult problem in which all of the stakeholders share the burden of addressing the deficit in the fund."
He added: "While our discussions on the other issues which include job security and remuneration have yet to conclude, the mediator, Mark Connaughton, has made a positive contribution to the process by framing a recommendation on pensions which addresses the key concerns of staff."
Last week, the BoI announced in its preliminary results for the nine months up to December 31 its defined benefit scheme hit record negative levels at the end of 2009, when it reached €1.6bn. (Global Pensions, April 1, 2010)
The deficit has worsened since March 2007 when it stood at €795m due to increased longevity of pensioners, lower interest rates, historically high wage inflation and subdued investment returns.
A number of pension schemes have been prompted to lock in gains with a move into bonds after the estimated deficit across FTSE 100 DB pension schemes improved by £36bn, over the 12 months ending 30 June last year, JLT Employment Benefits found.
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