National Irish Bank is to change pension arrangements for its staff, moving employees from a defined benefit scheme to a new hybrid pension plan and increasing their contributions.
Under the new scheme, staff will see their pension payments rise from 2.5 per cent of salary to 5 per cent. The bank will contribute at least 15 per cent, and pay workers a once-off cash lump sum of 5 per cent of salary in December, equalling two years of additional contributions for employees.
NIB closed its defined benefit scheme to new staff in 2008. All staff still on the scheme will be moved to the hybrid plan on January 1st.
The bank said risks and costs in the defined benefit scheme had risen to “unsustainable” levels.
Over the past 10 years, the cost of funding defined-benefit pensions has risen as life expectancy increases and interest rates are lower. In June, Pensions Board said three-quarters of Irish defined-benefit pension schemes are in the red, with a combined deficit of about € 25 billion.
Deputy chief executive Kevin Gallen said pensions earned to date are fully protected. The bank will continue to fund the liabilities of the scheme in full into the future.
“We’ve taken a long time in reviewing our options and in consulting with IBOA,” Mr Gallen said. “Short term measures are not a solution. Retaining the Defined Benefit scheme would have resulted in biting into the pension benefits already earned and wouldn’t have tackled the core long term problems in the scheme.”
