€17m to plug colleges’ pension holes

Taxpayers plugged a €17m hole in the pension funds of University College Dublin and Trinity College Dublin last year.

Another €15m is set aside by the Department of Education to pay for pension deficits in some of the five older universities this year, but these are likely to be just the beginning of much larger long-term liabilities.

The previous government allowed the State take responsibility from 2009 for any shortfalls in pension schemes for the five older universities, after they transferred funds worth almost €1.4bn from their closed schemes to the National Pension Reserve Fund.

The assets amounted at the time to €1.367bn, ranging from €58.5m in the NUI Maynooth (now Maynooth University) fund to just over €500m held by the UCD fund.

However, it was estimated those schemes would eventually have to pay all pension scheme members just under €2.2bn, leaving a total likely long-term shortfall of over €800m. The Government had decided to meet any future deficits that could not be met from ongoing contributions collected from staff in the universities, in return for the transfer.

The biggest projected shortfall at the time of transfers, between December 2009 and March 2010, was the €316m at TCD, where the estimated liabilities were €595m. At UCD, €590m was the liability facing its pension scheme, but it held €501m in fund assets.

The pension scheme liabilities at Maynooth in 2009 were €138.4m.

Since the passing of the act in June 2009, all pension payments and retirement lump-sums continue to be paid by the colleges from a running pension account of subsequent employee and other contributions.

But the first call on the government guarantee to meet any shortfalls was made last year, when it paid just under €17.3m to UCD and TCD for their costs.

The department’s 2013 accounts published last month said the money was used from savings of around €67m on teacher pensions.

But the department told the Irish Examiner it has set aside a further €15m this year to meet further deficits in some of the five universities’ pensions. Both UCD’s and TCD’s pension accounts were in deficit at the end of September 2013, to the tune of €16.1m and €7.8m, respectively, according to department figures.

The cash position of the three other universities’ pension accounts was as follows a year ago:

-University College Cork: €2.5m

-NUI Galway: €3.6m

-Maynooth: €8.4m.

The schemes had closed to new members in 2005, with all new employees in the five colleges since then instead joining what the department describe as pay-as-you-go schemes.

Concerns raised in 2009 about liability for funds

By Niall Murray

The move to take over the assets and liabilities by the State was explained in 2009 by then finance minister Brian Lenihan as necessary to comply with a European directive.

It required that all funded pension schemes in the public service must meet minimum funding standards, or else be guaranteed by the State.

There would have been significant implications for the universities’ finances if they had to be able to give assurances of meeting all the long-term liabilities of their pensioners from their core annual budgets.

The pre-2005 schemes have around 3,800 members who are in receipt of pensions, but that number will continue to grow as more contributing members retire. With no new members joining those schemes since 2005, the individual pension funds are likely to face increasing pressure and to rely more heavily on the State to meet the shortfalls into the future.

At the time, the legislation was rushed through the Oireachtas in 2009 — it was introduced in the Dáil on June 23 and passed by the Seanad for President McAleese’s signature by June 25 — some current and recent cabinet ministers were highly critical of the pension plan, which was included in a wider bill relating to various other financial issues.

They raised particular concerns about the levels of liabilities for which taxpayers were being expected to take long-term responsibility. As well as the five universities, the same act similarly transferred funds held in pension accounts of state bodies such as Fás, Bord Bia, the Arts Council, and Fáilte Ireland.

In the Dáil, for example, Fine Gael’s finance spokesperson — now jobs minister — Richard Bruton questioned how the liabilities had accrued in the various pension funds, claiming that proper due diligence should be done before taking on the debts.

“Are the practices in these pension funds sound? Are there some crazy practices going on? We ought to have that sort of information before us before walking in to shoulder all these commitments.”

Mr Lenihan assured him that a full actuarial assessment was made at the Department of Finance on the various securities and interests that will be transferred.

Tánaiste Joan Burton, Labour’s finance spokesperson at the time, said what the minister was doing may be worthwhile and would delight staff in the various universities and public bodies, but TDs must ask how this point was reached.

“Who was asleep on the job such that pension liabilities were allowed to become so under-funded? It is absolutely stunning.”