DAA's €55m pension offer puts Aer Lingus under pressure

WORKERS AT the State-owned Dublin Airport Authority (DAA) could receive pension payments on retirement of 78 per cent of their final salary under an improved proposal presented to trade unions.

These pensions would be among the best offered in the State to any worker, although the proposal would result in a reduction in benefits for certain grades of DAA staff.

The move is likely to put the DAA at odds with Aer Lingus, which is seeking to hold the maximum payout in the jointly operated scheme at 66.7 per cent of final salary.

The DAA’s latest proposals are aimed at resolving the €748 million deficit in the Irish Airlines (General Employees) Superannuation Scheme (IASS) pension scheme operated jointly with Aer Lingus and SR Technics.

Talks with unions have been going on for some time at the Labour Relations Commission, with unions recently threatening strike action if the DAA and Aer Lingus did not engage meaningfully in drafting a solution to the problem.

On Monday, in a surprise move, the DAA offered to pay €55 million into the pension pots of workers, up from €32 million previously.

This is outside of increasing pension contributions by up to €4 million a year and unquantified costs of making shift and other composite pay pensionable.

At present, the IASS pays a two-thirds pension to workers, including their State pension entitlement.

Someone with 40 years of service earning €60,000 a year could expect to receive €40,000. Of this, €28,000 would be paid by the scheme with just under €12,000 coming from the State pension.

However, an anomaly in the rules of the scheme means those with full service who leave before their normal retirement date – age 65 until recently – can also draw down the State pension. This boosts their annual pension to about €52,000 a year, or almost 87 per cent of final salary.

The DAA’s proposal is aimed at buying out this anomaly.

This would give the worker a €6,600 top-up on the €40,000 that they might normally expect to receive. This equates to 78 per cent of their final salary.

Civil servants normally get a pension of 50 per cent of final salary, while defined benefit private sector schemes target two-thirds or less of final salary. The percentage would differ for workers depending on their pay. The unions were targeting an 80 to 85 per cent pension from the DAA in their talks.

For future service, a defined contribution scheme will involve the DAA contributing between 5 and 10 per cent of a worker’s pay, depending on the level of contribution made by the employee. The minimum combined contribution will be 10 per cent and the maximum 19 per cent.

In a memo issued on Monday, Impact official Matt Staunton said the proposal was “certainly worth considering”.

The DAA’s proposal could strain relations with Aer Lingus, which wants to stick to the two-thirds final salary pension, including the State pension. This DAA offer would increase the pressure on Aer Lingus to match its generous terms.

Aer Lingus has offered €115 million over four years to resolve the pension issue but is seeking cost-saving measures in return.

These are thought to amount to about €35 million over four years as the airline seeks to further trim its overheads and improve its competitiveness.

If the DAA terms were applied to Aer Lingus, it is understood the cost to the airline could be more than €200 million, making it difficult to gain the approval of shareholders.

Ryanair, which owns 29.8 per cent of Aer Lingus, has threatened litigation if any pension top-up is offered to staff.

Aer Lingus has 2,745 active and 3,900 deferred members of the IASS scheme, while DAA has 1,900 active and 910 deferred. About 4,700 former employees of both companies are already drawing down pensions from the scheme.

The DAA declined to comment last night.