ESB told it cannot keep raising retirement benefit to match pay

ACTUARIAL CONSULTANTS reviewing the ESB’s pension fund have warned the State company that it cannot continue to increase retirement benefits in line with workers’ pay.

The scheme’s trustees called in Mercers last December, although the fund was not due to be reviewed for another year. The company’s group of unions and management are in talks on the pension scheme’s future after they reported last month that it was €1.957 billion in the red.

ESB pensions are indexed to pay in the company, which means that payments to retired staff increase in line with its pay.

The pensions are indexed despite the fact the scheme’s terms do not require this. The practice has been agreed between the scheme’s trustees, the company and the superannuation committee. The actuaries who last month reported the deficit have recommended ending the practice.

According to their calculations, the fund can only meet 67 per cent of its projected liabilities. The shortfall is largely down to the collapse in global investment markets.

Along with tackling the deficit and preserving indexation, the unions want a number of changes to the scheme to ensure it reflects extra “non-superannuated” payments that are not included when it comes to calculating retiring workers’ benefits.

Brendan Ogle, an official with the union Unite, said the pension was originally designed to give workers 50 per cent of their salaries on retirement.

However, he explained that extra payments negotiated for staff are not necessarily included, and therefore their pensions do not come to 50 per cent of their salaries. “We’re trying to underpin and improve the scheme for all members.”

However, he rejected reports that an end to indexation could result in industrial action. “Industrial action would only become a live issue if the company was to refuse to do something that it has already agreed to do.”

Mr Ogle added that the group of unions was “amazed” when the trustees asked the actuaries to carry out a review a year early, particularly as stock markets had just endured their worst 12 months since the second World War.

One of the trustees, former ESB board member Joe Le Cumbre, recently said a threat to indexation or other benefits could give rise to industrial action.

The ESB said yesterday unions and management began talks on the issue this week, and were working on finding a solution.