The trustees of the joint Aer Lingus-Dublin Airport Authority pension fund are expected to inform the employers and trade unions today that members’ benefits might have to be reduced as a result of the Pensions Board’s decision in July to reject proposals aimed at plugging a €780 million deficit in the scheme.
Informed sources said the reduction in benefits could amount to 15 per cent or more for those staff still working at Aer Lingus and the DAA and for deferred members of the Irish Aviation Superannuation Scheme. This is the latest twist in a saga that dates back almost three years and could lead to renewed tensions between the unions and Aer Lingus and the DAA.
Investment risk
The pensions board wrote to the trustees on July 15th stating that the proposals submitted to resolve the issues around the scheme would "not be an acceptable basis for a funding proposal".
The level of investment risk assumed in the proposals was beyond the tolerances of the Pensions Board.
In May, the Labour Court recommended a deal involving payments from both companies totalling almost €200 million and freezing existing benefits.The Labour Court plan involved Aer Lingus paying €110 million in relation to active members of the scheme and €30 million for deferred members, that is those who have left but not reached retirement.
Deferred members
The DAA would pay close to €60 million for active and deferred members.
Members’ benefits accrued up to this point would be frozen and covered through the purchase of long-term bonds. Staff would then move to a defined contribution scheme, freeing both companies of any future liabilities for retirement plan deficits.
Neither Aer Lingus, which is a publicly quoted company, nor the DAA, which is State- owned, would comment yesterday. However, it is understood that both companies will resist any attempt to secure more funding from them to resolve this issue.
If that proves to be the case, the trustees would have to find some creative solutions to avoid cutting members’ benefits. To complicate matters further, it is understood that the liabilities of the scheme increased over the summer months.
A reduction in benefits could force the unions to take industrial action, which they have threatened to do in the past year or so.
