ESB staff challenge pensions in court
They are also concerned at the ESB’s “wrongful insistence” that it is now a “defined contribution” rather than a “defined benefit” scheme, which means what a person receives on retirement is no longer guaranteed.
Mr Justice Peter Kelly said he was sure the pensioners were “worried sick”. This deficit amounted to “probably one of the largest holes” he had seen in the many pensions that had come before the court in the last few months.
He granted an application by Brian O’Moore, for Brian Baitson, William Flavin, Owen Kilmurray, and Margaret O’Connor, who began working with the ESB on various dates since 1978, to have the case fast-tracked in the Commercial Court.
In an affidavit on behalf of the four, Mr Baitson, a network technician, said they were obliged to become members of the defined benefit scheme when they joined the ESB.
He said they had been advised the scheme faces a €1.5bn deficit as measured against the Pension Board’s current minimum funding standard.
Notwithstanding this deficit, the company board AGM last June passed a resolution clearing the way for payment of a €78.4m dividend to its shareholders, that is the Government. It is also understood that it is proposed to pay a special dividend of up to €400m, to be declared by 2014, Mr Baitson said.
The majority of members of the scheme were in the pre-1995 lower rate of PRSI contributions, which means they do not have an entitlement to the State pension, Mr Baitson said.
On three occasions since the late 1980s, funding deficits, including €2bn in 2010, were identified in the scheme and addressed following consultation and negotiation with the ESB group of unions.
Even though the scheme continues to be of defined benefit nature, the ESB has wrongfully and in breach of contract purported to redesignate it as defined contribution, he said. The company sought to rely on this wrongful characterisation of the scheme and its (company’s) obligations in relation to the deficit to the detriment of the scheme’s funding, he said.
In its 2010 annual report, the ESB said there is no legal or constructive obligation on the company to fund a deficit beyond current commitments and that the scheme should be accounted for as a defined contribution scheme, Mr Baitson said. The most recent annual report also refers to it as defined contribution, which, he said, is wholly inaccurate.
In light of the scheme’s deficit, Mr Baitson contended that the payment of the €78.4m dividend and proposed €400m special dividend is unlawful and a breach of duty by the board of ESB.
