Index-linked pension schemes can be negotiated for private sector workers under Partnership 2000, according to the Labour Court. The court was adjudicating on a claim by trade unions at Independent Newspapers Ltd, and the ruling could have wide-ranging implications across the private sector.
The Dublin Print Group of Unions submitted a claim on May 28th, 1997, seeking indexation of pensions, the introduction of profit-sharing and/or an employee share option scheme. The company says the claim would add almost £40 million to its pensions bill in the first five years of operation and an extra £750,000 for every year thereafter.
The claim was made on behalf of 650 staff, 318 pensioners and 47 deferred pensioners who will become eligible for pensions at 65. The present defined benefit scheme was introduced in 1959 and is not integrated with the State's old-age pension scheme.
The issue of indexation was referred to the Labour Court by the unions, after both sides failed to make progress in local talks and at the Labour Relations Commission. The unions argued that Independent Newspapers was out of line with most other schemes. They claimed that 41 per cent of employers had in-built indexation and 44 per cent of the remainder gave adjustments in pensions at the discretion of pension fund trustees.
Independent Newspapers management had a separate pension, which the unions believed was superior to that of ordinary employees. The union group told the court the company was highly profitable and it was not unreasonable to seek pensions for long-serving employees that gave an annual increases equivalent to 5 per cent, or the rise in the cost of living, whichever was the lower.
The company only contributed 8.1 per cent of salary to employees' pensions, compared with between 12 and 15 per cent in the majority of companies. Employees contributed 5 per cent. In contrast, senior managers on a basic salary of £150,000 had pension contributions of 20 per cent from the company, plus bonus and share options.
The company said the union group's claim was not appropriate under clause four of Partnership 2000. This is the clause that covers pensions and sick pay schemes. The company argued its scheme was "the most generous and favourable" in its sector.
The cost of the unions' claim would be prohibitive, amounting to £30.988 million in the first five years and a further £750,000 a year thereafter.
If the claim was admissible under Partnership 2000 the unions should have used chapter nine of Partnership 2000 and clause seven, which deal with partnership in the workplace, rather than refer the case to the Labour Court.
The court said it believed there was merit in the claim for improved pensions by the unions. However, it agreed with the company that it would best be pursued through the partnership provisions of Partnership 2000.