Pensioners earning an average of €16,000 a year face a cut in their payments under new proposals designed to resolve a long-running row over the insolvent retirement fund operated by Dublin Airport Authority (DAA) and Aer Lingus.
In the first initiative of its kind, the trustees of the Irish Airlines Superannuation Scheme propose using new legislation to claw back benefits paid from the fund to pensioners in an effort to plug its €780 million shortfall and end a dispute that threatens to close the Republic's main airports.
If the proposal is implemented, retired workers already drawing pensions from the fund will have those payments cut. Anyone receiving more than €12,000 a year faces a 10 per cent cut on any sum above that amount; those on €60,000 a year and over face a 20 per cent reduction.
Final salary
The scheme supports about 4,000 pensioners, who receive an average of €16,000 each. Only seven receive pensions of more than €60,000. The IASS scheme pays pensioners two thirds of their final salary.
The Social Welfare and Pensions (No 2) Act, 2013, which allows retirement fund trustees to cut benefits to pensioners where the scheme is in trouble, came into force last year.
This is the first time anyone has attempted to implement it. A letter from the IASS trustees circulated to the DAA, Aer Lingus and trade unions proposes cutting pensions by the maximum allowed under the law.
It also proposes a 20 per cent cut on benefits built up by staff currently contributing to the scheme – active members – and by those who have left the two companies but have yet to retire – deferred members.
However, the trustees, chaired by Brian Duncan, say they do not propose increasing the pension age under the scheme, or forcing beneficiaries to take a large lump sum up front, which would reduce their pension payments.
Strike threat
While the proposal has to win the approval of the Pensions Board, companies and workers, and even then may not be implemented until the end of the year, it is thought it could help avert a strike that threatens to ground Aer Lingus and shut Cork, Dublin and Shannon airports early next month.
Siptu members at the airline and the three airports this week voted for industrial action, including strike, over the pensions issue. Sources suggested yesterday that the trustees’ move would at least bring the relevant parties back to the negotiating table, postponing the strike.
The trustees’ letter acknowledges the strike vote and points out that other unions are considering their position. “There is considerable pressure to move forward as quickly as possible”, it says.
The overall solution involves moving active members to a defined contribution pension plan not tied to salary.
The DAA yesterday said it was disappointed the process would result in a reduction of accrued pension benefits of 20 per cent for employees who were IASS members.
However, it acknowledged that confirmation of the trustees’ proposal could facilitate a fair and balanced resolution.
