Worries over CIÉ pension scheme as group trims losses despite end of Covid supports

“Hard decisions” will have to be made over the coming months about the future of one of Córas Iompair Éireann’s (CIÉ's) employee pension schemes if reforms that have been agreed with the group’s trade unions are not pushed through, the State-owned transport company’s chief executive has said.

The group operates two pension schemes, one for frontline staff and another, set up in 1951, for employees with 40 years’ service. A defined benefit arrangement, the so-called 1951 scheme involves 50 per cent of final salary and a lump sum of one and a half years’ pay.

The latter scheme has, however, been a subject of controversy in recent years. A Labour Court recommendation that member benefit reductions should be achieved by increasing the pension age was accepted by CIÉ unions in 2021 in a ballot by 54 per cent to 46 per cent, but the group said in its latest annual report, published on Friday, that the changes are yet to be implemented.

[ Attempts to deal with CIÉ pension scheme dispute rebuffed, court told ]

“It is disappointing that the committee of the 1951 scheme continues to resist changes to the scheme, notwithstanding the ballot result and scale of the problem,” the group said in the report. Failure to implement the Labour Court recommendation “in a timely fashion will result in otherwise avoidable decisions by the CIÉ board to close the scheme to new entrants and future accrual”.

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Speaking to The Irish Times, CIÉ chief executive Lorcan O’Connor said he is unwilling to put a hard deadline on the process. However, he said: “I think it is difficult to see how it could be left any longer.”

Mr O’Connor said it is bizarre that “a handful of people” on the committee of the 1951 scheme could hold up changes that have been agreed with members. “Certainly, in the next few months, hard choices will have to be made” about the scheme’s future, he said.

CIÉ reported an overall pension deficit of some €396.5 million last year, down from €853 million in 2021. The group said the imputed financial cost of carrying the large deficit was stable at €112 million, “reflecting the high cost of providing defined benefit pension benefit”.

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Mr O’Connor also said in the report that the slow pace of progress in resolving the issue was casting a “cloud” over the group’s future along with a host of other challenges, including labour shortages and inflation.

Losses at the State-owned transport company narrowed last year despite the removal of Government Covid-19 supports and a sharp rise in operating costs associated with new services.

The company – which operates the Iarnród Éireann, Bus Éireann and Dublin Bus networks – generated revenues of €1.49 billion, up 15 per cent from €1.2 billion in 2021.

On Friday, CIÉ said the increase was driven by a rise in passenger and commercial revenue to €656 million in 2022 from €449 million, and an increase in public service obligation income of €59 million.

Across its networks, CIÉ carried a combined 246.7 million passengers last year, up from just 144.9 million in 2021 when travel remained subdued due to Covid restrictions.

Revenues from school transport services increased by €34 million due to an “unprecedented” 20 per cent increase in the number of pupils availing of the service after the Government waived school transport fees for the year, CIÉ said.

The sale of a development site at Spencer Dock for €26 million after tax also helped the bottom line, pushing the group into a net €31 million surplus on its commercial activities. The surplus was achieved despite a €71 million decline in Government funding as pandemic-era supports were unwound.

[ The Irish Times view on pension reform at CIÉ: little public sympathy ]

Mr O’Connor said that 2022 “represented a year of recovery” from the pandemic shock. “Steady passenger growth throughout the year saw us exceeding pre-pandemic passenger numbers by the end of the year. Ireland’s recovery in public transport usage has been one of the fastest experienced around the world.”

Meanwhile, the group’s operating costs increased from about €1.33 billion to more than €1.5 billion in the year, mostly due to the provision of additional services throughout the year.

While the group operates a fuel hedging system to protect it from volatile energy prices, CIÉ highlighted a “steady increase in the forward contract rates” in the year. The group’s fuel costs increased by €15 million in the year to €95 million.

The group employed more than 11,200 people last year, up from 10,825 in 2021. Staffing costs increased in line with the expansion in headcount, jumping by more than €50 million to €779.9 million in 2022.