Is the dispute at ESB about workers earning an average of €65,000 per year threatening to turn off the power for thousands of pensioners at the height of the winter because their gold-plated pensions are not 100% guaranteed?
Or is it about a company, reputedly on course to take in €620m in profits next year, refusing to prop up a pension scheme which, if wound up, would see workers receiving a pension of just €13 per week after 30 years of service? Unsurprisingly the two sides in the dispute have very different perspectives.
The ESB pension scheme has been in difficulty for a number of years, but stringent measures agreed in 2010 appeared to offer a viable solution to the €2bn deficit.
At that point the 4,000 workers, according to the energy company’s group of unions, agreed to replace the “final salary” nature of the scheme with career averaging; agreed a lengthy pay pause and a pension freeze amongst other measures. In fact, according to the group’s secretary, Brendan Ogle, the members have taken a 30% cut on their capitalised pension benefits.
For its part, the company did make a significant cash injection of more than €500m at that point.
The root of the current dispute lies in what happened next.
The union group claims that in 2011, management “unilaterally” breached the agreement and began describing, and treating, what was a defined benefit scheme as a defined contribution scheme. That, it said, transferred all liability for any risk to entitlements from the company onto the employees, particularly in the event of a wind-up of the scheme.
At the same time, the group of unions claims the company has insisted it will put no more money into the scheme which is now €1.6bn in deficit. Yet it has agreed to pay a dividend of more than €70m to the State in recent months and is expected to fork out a further €400m following the sale of assets.
However, as far as the company is concerned, the pension scheme for its employees remains defined benefit — it is only for accounting purposes that it treats the scheme as defined contribution.
It said under the pension accounting standard IAS19, it had to decide between accounting for the scheme as defined benefit — which would have meant placing the full amount of any deficit on its balance sheet — or accounting for it as a defined contribution scheme.
As far as it was concerned the scheme it had in place was not and never had been “balance of cost” scheme, ie one in which the employer is liable to meet the full cost of any deficit which may arise.
Therefore it had decided to account for it as defined contribution.
“The accounting treatment of the scheme has no bearing on the registration of the scheme as a defined benefit scheme with the Pensions Board; it remains registered as a defined benefit scheme today,” ESB management has said.
Management also pointed out that, like most other defined benefit schemes, its scheme did not meet the minimum funding standard (MFS) required at the end of 2011 meaning it could not secure the required benefits in the event of a wind-up — something which it insists it does not envisage happening.
Therefore it said the scheme trustees, with the agreement of management, had submitted a funding plan to the Pensions Board which was approved in Oct 2012.
It said that funding plan aims to resolve the MFS requirements by the end of 2018 and that plan is on track.
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