Speaking after the Budget in October, the Minister for Social Protection Heather Humphreys said the Government had a “big focus on supporting older people – people who have worked hard all their lives”.
The Government had provided a €12 increase per week in the State pension. “I don’t want any older person afraid to turn on their heating,” Ms Humphreys said.
Yet those representing staff who worked for the State transport companies maintain that hundreds of retired workers are already “effectively living in poverty”, as their pensions have been frozen for more than 15 years.
The pensioners’ group says hundreds of former CIÉ workers are struggling to survive because they have not received an increase to their pensions since 2008 and are not entitled to State benefits.
The CIÉ group, which comprises Irish Rail, Dublin Bus and Bus Éireann, operates two pension schemes – one known as the 1951 scheme and another known as the regular wages scheme.
The company maintains that the schemes are the only ones in the semi-State sector that are in deficit while remaining open to new members.
However, official correspondence shows that the board is worried at the impact of a growing workforce and unchanged retirement benefits on the projected pension liabilities for the group.
Some informed sources maintained that the CIÉ group currently has a turnover of about €1.6 billion and pension liabilities of about €2.7 billion. However there are projections that in ten years, the liabilities could reach €4 billion.
CIÉ chairman Aidan Murphy told Minister for Transport Eamon Ryan in September that the schemes had a deficit amounting to €371 million at the end of last year.
The pensioners’ group says hundreds of former CIÉ workers are struggling to survive because they have not received an increase to their pensions since 2008 and are not entitled to State benefits
“The pension deficit continues to be a big concern for the CIÉ group”, he said.
The CIÉ board is also worried that actuarial calculations suggest the employer contribution in the future could “increase significantly to levels that are unaffordable to the group”.
Earlier this year, Murphy’s predecessor Fiona Ross warned Ryan that pensions remained “a critical challenge”.
She said the big issue with the pension schemes was the size of liabilities that was “too big compared to the economic value of the Group”.
“Unless action is taken an investment or market shock may require unaffordable remedial action necessitating benefit cuts due to the requirements of the Pensions Act or because benefits promised are too expensive to pay”.
Far from potential benefit cuts, retired personnel and trade unions are pressing for increases, arguing that the real value of pensions have been eroded as prices have risen in recent years.
Retired transport staff and their representatives have staged protests and have lobbied politicians to put pressure on Ryan about the pension freeze. The Department of Transport said in October that it had received roughly 160 Freedom of Information requests about the pension issue.
Ryan has told the Dáil that an increase for pensioners would only be possible when the schemes were capable of sustaining such increases.
The CIÉ Salaried Pensioners Association, which represents some 2,200 of the group’s former employees, says several hundred of those now have incomes that fall short even of the State non-contributory pension of €266, with none of the additional automatic entitlements or some allowances provided by the Government.
Those worst affected, says the association’s secretary, Bernie Tierney, are predominantly older members, many of them women. A significant number of them, she says, are effectively living in poverty, having seen already modest pensions devalued over the course of the last 16 years, particularly more recently as fuel prices spiked and other cost increases caused inflation to jump up.
Far from potential benefit cuts, retired personnel and trade unions are pressing for increases, arguing that the real value of pensions have been eroded as prices have risen in recent years
“The expectation was that you would get an increase every year because that’s what always happened, but then that changed, and people have been left in a situation where their lives now are a lot harder than when they were working. Some of them can’t afford to heat their homes properly, but then they can’t afford to go out either,”she says.
Murphy told the Minister in September that the CIÉ board was “acutely aware of the challenge for pensioners . . . Unfortunately, the fragile funding positions of the schemes and the large FRS balance sheet deficit are significant obstacles to addressing this”.
“The board is also mindful of the need to provide public transport services as efficiently as possible, to deliver value for money for the Exchequer and to ensure the financial sustainability of the Group.”
The pensioner group says those most acutely affected started work with the company before 1995 and paid only Class D PRSI contributions, something that left them without the entitlement to the State pension.
Ms Tierney says that while the consumer price index had increased by about 21 per cent since 2008, the State pension had gone up by 24 per cent and staff pay, to which the pensions were previously linked, had risen by 30 per cent since 2016. Still, the Class D pensions have remained entirely unchanged.
The 1951 scheme is effectively for managerial and clerical staff. It is a defined-benefit arrangement, based on 40 years’ service, and the pension payment involves 50 per cent of final salary and a lump sum of one and a half years’ pay.
The regular wages scheme is based on 30 years of service, and provides for 20 per cent of final salary. In addition, there is a lump sum of 125 per cent of final salary.
At present, the employer makes a contribution of €245 for every €100 from staff in the regular wages scheme, and €340 for every €100 in the 1951 scheme.
The employer pension costs last year amounted to €67 million. With growing staff numbers, this is expected to increase to €75 million this year.
People have been left in a situation where their lives now are a lot harder than when they were working
The actuarial valuation report for the 1951 scheme, dated September 30th, says that the employer contribution as a percentage of pensionable salary – relative to an average employee rate of circa 6.9 per cent – represented a multiple of 3.4. It said this translated into a contribution rate of 23.3 per cent of basic payroll.
It says that the contribution rate required to meet the future service benefits is an employer multiple of 2.89 times member contributions – 19.7 per cent of pensionable salaries annually. However, it says there is also a past service deficit of €229.1 million. It says combined future service rate and past service deficit adjustment would involve an employer multiple of 4.2 – or 28.7 per cent.
The report says it was advised by the board “that this level is unaffordable”.
In May 2021, trade union members in the CIÉ companies voted to accept reforms put forward by the Labour Court. These proposed a new minimum age of retirement of 63 for those under the age of 60.
CIÉ chairman Aidan Murphy told Minister for Transport Eamon Ryan in September that the schemes had a deficit amounting to €371 million at the end of last year
Those wishing to retire before 63 could do so, however, by paying a contribution from their lump sum. Their pension in such circumstances would not be discounted. The scheme would remain open to new entrants, but pensions would be based on career average earnings.
However, implementation of the changes was delayed as a result of a legal case brought by the committee of the 1951 scheme, over its rules regarding funding and solvency.
Judgment in the case was delivered in April this year, and in the intervening three years, staff continued to be employed on the previous pension terms. The company also believed the ruling had implications for the affordability of the schemes.
On October 2nd, the company told the group of trade unions that the solvency obligation rule in the 1951 scheme (and in the regular wages scheme) was now “more onerous” on both the company and employees.
It said following the ruling that the statutory funding standard must now be met “at all times”, and must also include future benefits.
It added: “The judgment also confirms that solvency is unequivocally a shared burden with employees. The statutory funding standard measures the ability of the scheme to pay accrued benefits at a point in time ‘were the fund to be wound up’. While previously funding on an ‘ongoing basis’, the long-term sustainability of the scheme was paramount, the judgment now means that both the company and staff must maintain the scheme in a position to be wound up. To assert that the scheme is ‘fully funded’ means essentially that the scheme meets the minimum financial criteria to be wound up and does not meet the obligations for future accruals.”
Official correspondence shows that the board is worried at the impact of a growing workforce and unchanged retirement benefits on the projected pension liabilities for the group
The company maintained that “in essence, the extremely expensive Court case has clearly demonstrated that spending millions in schemes’ funds was an exercise in futility”. It said the process had delayed for years the implementation of the most modest of changes.
The company letter followed a lengthy board discussion on September 11th at which it considered several options for reform of pension arrangements but subsequently decided to commence talks on the issues with trade unions.
Among the proposals considered in the now-withdrawn options paper was to close the defined benefit pension scheme to new entrants, to establish a single defined contribution arrangement for new employees, to identify other changes to manage costs, and to defer negotiations on future pay talks until “necessary pension changes are implemented” or that pay rises should be made non-pensionable.
Unions told members last week that they did not agree with the company proposals: “Whilst CIÉ has its agenda, the trade union group remains resolute in ensuring that sustainable increases for pensions in payment will be top of our agenda.”
’When inflation was very high, our pensions didn’t keep up with it’
Retired staff in other State-owned firms maintain their living standards have been eroded as a result of measures taken to control costs in their company pension funds.
Members of An Post pensioners group will protest in Cork on Friday to publicise their call for a review of measures adopted more than a decade ago to address funding shortfalls in their scheme, something they say has been successfully achieved in no small part because of their sacrifice.
Paul Moreland, chair of Post Office Pensioners United, says more than 7,000 An Post pensioners lost ground on State pension recipients and current staff at the company over the course of a 10-year agreement intended to address a pension fund deficit.
“The way it worked was, there are three options for calculating increases and whichever of them produced the lowest result, that’s what we got,” he said. “If inflation was zero, then we got nothing, but through the years there when inflation was very high, our pensions didn’t keep up with it: the most we could get of an increase was 2 per cent”.
More recently, the pensioners did get a higher increase as part of a wider agreement between management and the main union at the company, the CWU, but Mr Moreland remains critical and says he has written to new An Post chairman Kieran Mulvey seeking a review of the situation.
Mr Mulvey recently told an Oireachtas committee the company pension scheme was “in rude good health and has an €500 million surplus”. He committed to looking at the concerns raised by pensioners.
In the case of the ESB, there are about 9,000 retired members of the defined benefit scheme. This closed to new members in 2010 when, according to Tony Collins, retired chair of the ESB Retired Staff Association, existing pensioners had an agreement between management and unions representing then current staff imposed on them without consultation.
He says the people his group represents have lost out as a result, with a previous link to staff salary increases abandoned and increases for pensioners running at only slightly over half those for serving staff, about 14 per cent compared to about 25 per cent, in the years since.
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