The State-owned CIÉ transport group could collapse under the weight of its pension liabilities if asset values fell in any future economic downturn, trade unions have warned members in the companies.
In a bulletin to members in Dublin Bus, Iarnród Éireann and Bus Éireann in advance of a ballot of proposed reforms, the unions maintained that without changes, pension liabilities at the group could, under some estimates, exceed €4 billion within eight years.
If agreed, some of the proposed pension reforms would need to be underpinned by legislation.
In a letter to Lorcan O’Connor, CIÉ group chief executive, Minister for Transport Darragh O’Brien said if the proposed reforms were backed in the ballots he would “support and actively progress the process for the preparation and consideration of statutory instruments” needed to bring about changes in the two pension schemes operated within the State transport companies.
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However, Mr O’Brien warned that while he was fully supportive of this process, “nothing in this letter should be construed as a guarantee by the Minister with respect to any obligation or liabilities of CIÉ and/or the CIÉ pension schemes, or as ministerial consent or confirmation of such statutory instruments”.
In a joint document for members, trade unions including the National Bus and Rail Union, Siptu, Connect, Unite and the TSSA said all defined benefit schemes had liabilities which were the valuation of the future pensions promised under their terms.
“Under the funding standard, a defined benefit scheme must have assets in excess of the liabilities with headroom to allow for potential market volatility.”
“The current level of liabilities across both schemes is circa €2.7 billion and with a projected growth in staff, this has been forecasted to surpass €4 billion by 2033.
“Therefore, in the event of a financial crash, as was the case in 2008, and if the schemes’ assets dropped by 10 per cent – 20 per cent, this could collapse the schemes and potentially collapse the group”, the report said.
Some informed sources maintained that at present the economic value of the group, based on revenue, was about €1.8 billion.
At present there are two pension schemes in CIÉ. Under the reform proposals both the regular wages scheme and what is known as the 1951 scheme would be closed to new members.
The unions said such a move would “effectively contain the liabilities to existing levels associated with existing members”.
Under the proposed reforms future staff in the transport group would be covered by what is described as a new “best in class” defined-contribution scheme where pension rates are determined by the amount in the individual’s fund on retirement.
“Where new entrants choose to contribute 7 per cent of basic salary or above, their employer will contribute 12 per cent. There is also a range of other contribution levels available to members depending on their own circumstances.”
Under the proposals, the group also agreed to provide €32 million to facilitate pension increases to those already retired and who have not had a raise in about 17 years. Such increases would range from 3 per cent to 5 per cent, depending on the date of retirement.
The unions said they had sought support from the Minister “to ensure an acknowledgment of the State’s role as the sole shareholder of CIÉ” and that the letter from Mr O’Brien had achieved this purpose.
“The Minister states in the letter that, subject to acceptance of the proposal, he will ‘support and actively progress’ the process for the implementation of the statutory instruments (legislation), which will underpin your accrued and future benefits”.
“As we would have expected, the letter contains the standard caveats regarding ‘guarantees’ that have applied to other semi-States and in previous letters of support to CIÉ. This in no way seeks to, nor does it, undermine the clearly stated support from the Minister for Transport as sole shareholder for CIÉ.”
