ESB defends changes to pension scheme

The ESB has dismissed concerns over the representation of its pension scheme in financial accounts following the leaking of management emails.

Responding yesterday, the company said it remained fully compliant with accountancy regulations after altering its approach following dealings with unions on a €2 billion pension deficit in 2010.

After agreement had been reached, the company changed its accounting of the scheme from defined benefit to defined contribution.

It is understood that while technically a defined benefit scheme, it is not a balance of cost scheme and so does not carry the complete liability. In this regard, a source indicated, it is entitled to account for itself as defined contribution.

In effect, this removes liabilities from its balance sheet thereby buoying the company's financial status and aiding it in borrowing billions from the markets. The matter is part of pending High Court proceedings in which details of the accountancy practice are likely to emerge.

It could in theory be investigated by the Pensions Board under the Pensions Act, although a spokesman said it could not comment on individual schemes.

The emails aired on RTÉ's This Week programme yesterday appeared to show management discussing that it had not informed auditors KPMG that the group of unions (GOU) disagreed with their accountancy approach. Quoting a "senior manager", one reportedly said the company needed evidence to show KPMG that the unions were not "at odds" with them.

“As you know, the GOU were always at odds with what [was] stated in the accounts in prior years as we always said the scheme was not a typical balance of costs scheme,” it said.

Formal agreement
It is also alleged that the firm would not "countenance" approaching the GOU to seek a formal agreement, as was apparently requested by KPMG.

The manager added: "Should Brendan [Brendan Ogle – secretary of the ESB GOU] decide he does not agree with the wording and send something to us in writing, it would unavoidably force us to change the accounting treatment and all that entails".

An ESB spokeswoman said the company was obliged only to keep the GOU fully briefed on any changes to accountancy practices, which it was, and did not require its approval.

KPMG said it didn’t comment on individual client cases. Mr Ogle could not be reached for comment.