AIB's defined benefit pension scheme is set to close to future accrual at the end of December following a recommendation today from the Labour Court.

It is to be replaced by a defined contribution scheme featuring employer payments ranging from a minimum of 10 per cent to a maximum of 18 per cent depending on the age and contribution level of the members concerned.

In addition, the Labour Court has said the working week for all staff should be extended to 37 hours a week by April 1st, 2014.

It has also recommended a once-off payment equating to 4 per cent of salary for members of the Irish Bank Officials Association working for AIB in the Republic below manager grade.

This effectively deals with legacy pay issues but could bring an end to automatic increments at the bank, according to informed sources. The date of the suggested payment is to be agreed by AIB and the IBOA.

The IBOA represents about 60 per cent of AIB’s staf and it now remains to be seen if the bank will apply this increase to employees with other unions or those not represented by a union.

On future pay, the court has recommended that annual reviews be held, beginning in January 2014. These should have regard to a number of matters, including cost of living, the bank’s financial performance, market movement, performance management and other “relevant considerations”.

The Labour Court has copperfastened the voluntary nature of staff reductions at AIB until February 28th 2015. The terms for voluntary severance agreed in 2012 are to remain available up until that time.

The bank is currently in the process of reducing its headcount by 2,500 by the end of 2014 through voluntary redundancies and early retirements

In addition, any outsourcing proposals will have to be discussed with IBOA while the union will continue to be recognised as the sole negotiating body for clerical and management staff in AIB.

Commenting on the Labour Court recommendations, Larry Broderick, chief executive of the IBOA, said: "We will consider the recommendations in detail and await the response of AIB and the bank's stakeholders before coming to any conclusion on them. At this stage it is our intention to begin to ballot our members in AIB Group on the recommendations before the end of this month."

It is understood that the IBOA hopes to conclude its ballot of members by mid August.

AIB said it was “considering these recommendations and would engage with staff over the coming period”.