LCR15221

SUBJECT:
1. Claim for improvements In pension benefits.


BACKGROUND:

2. Grassland Fertilizer Limited is a wholly owned subsidiary of the Greencore Group. The Company is involved in the operation of 3 fertilizer plants, located at Cork, Limerick and Slane. It employs 71 people.

The dispute before the Court concerns the Unions' claim on behalf of 40 workers for improvements in pension benefits under Clause 4 of the Programme for Competitiveness and Work (PCW).

The Company operates two pension schemes, i.e., Works Pension Scheme (31 employees) and Staff Pension Scheme (9 employees). The Staff Pension Scheme, first introduced in 1968, was extended to all staff in 1976. The Works Pension Scheme commenced in 1979. Both schemes are defined benefit schemes and are contributory.

The Union is seeking the following improvements:-

(1) Indexation of benefit.
(2) Removal of integration of State Pension Scheme.
(3) Increase of 50% in pensionable pay to reflect gross earnings.
(4) Introduction of Spouses' Pension on members' death in service.
(5) Removal of actuarial deduction from pensions paid before normal retirement date.




Following local level discussions the matter was referred to the Labour Relations Commission. Conciliation conferences took place on 1st February, 1996 and 10th April, 1996. At the conciliation conference on 1st February the Company asked the Unions to prioritise their claim and requested an adjournment to consider costings of the various issues.

At the resumed conciliation conference the Company rejected the claim on the basis that its schemes are not out of line with other schemes in the Greencore Group or with comparable employment generally. As no agreement was reached the dispute was referred to the Labour Court on 28th April, 1996 under Section 26(1) of the Industrial Relations Act, 1990. A Labour Court hearing took place on 27th May, 1996.



INDEXATION OF BENEFIT:

Unions' Arguments:

3. 1. The Labour Court has looked favourably on claims for pension improvements where schemes have been in existence for a number of years and where companies are profitable.

2. Grassland Fertilizers Limited is a profitable company and management have not opposed the claim on the basis of cost.

3. The majority of workers in Greencore have indexation of pensions through a combination of automatic adjustment or trustees' discretion.


Company's Arguments:

4. 1. Within the Company's schemes there are no provisions for any increasing of pensions during the course of payment. Published pension benefits surveys indicate that only a minority of schemes provide for pension increases on a guaranteed basis. The existing practice at Grassland Fertilizers conforms with 60% of schemes surveyed by the Irish Association of Pension Funds in 1994.

2. Within the Greencore Group of eighteen schemes, the majority, fifteen, have no provision for augmentation of pensions in payment. The Company acknowledges the existing practice in three schemes within the Greencore Group where pensions are increased periodically on a discretionary basis. These schemes do not guarantee automatic increases.

3. Both Works and Staff Pension Schemes offer members the benefits of contributing personally to additional voluntary contribution plans in order to enhance their pension benefits.



REMOVAL OF INTEGRATION OF STATE PENSION SCHEME

Unions' Arguments:

5. 1. The workers are seeking that the integration of their occupational pensions with the State Pension Scheme should cease. They contribute 5% to the scheme which is not index linked, therefore, while the cost of the contribution to the scheme increases the deduction of one and one-half times the Social Welfare Pension disproportionately reduces the value of the occupational pensions. The Social Welfare Pension is an entitlement for which the workers contribute by way of PRSI contributions.

2. It is the Unions' understanding that the non-integration of pension schemes is on the increase. In the period 1991 to 1994 there has been a decrease in the number of integrated schemes by approximately 3%.


Company's Arguments:

6. 1. In both of the Company's pension schemes integration is of the order of one and a half times the State Single Persons Retirement Pension. This practice operates in the majority of occupational pension schemes.

2. The Irish Association of Pension Funds Survey carried out in 1994 shows that 75% of its members surveyed operate integrated schemes.

3. The Company pays between 9% and 12.2% PRSI employer contribution towards the provision of the State Retirement Pensions.



INCREASE OF 50% IN PENSIONABLE PAY TO REFLECT GROSS EARNINGS

Unions' Arguments:

7. 1. The restrictive definition of pensionable pay fails to recognise other payments such as overtime, bonus, commission, and shift pay which have become an integral part of the workers' income package. These payments with the exception of overtime are paid during periods of annual leave. In the circumstances it is unreasonable to exclude these payments for pension purposes.

2. The workers' basic salary is approximately £11,000 per annum. As the gross annual earnings are £30,000 per annum, some 63% of average earnings are ignored. The difference between average earnings and pensionable pay is £24,850 or 83%. This gap is unacceptable and indicates that this scheme is out of line and requires improvement.

3. The Union has indicated that it is prepared to discuss funding improvements to these schemes.


Company's Arguments:

8. 1. The Company's schemes define pensionable pay as basic annual pay and exclude all other elements of emolument. This practice operates nationally in the majority of pension schemes.



2. The Irish Association of Pension Funds Survey of 1994 states that 75% of schemes surveyed calculate pensionable pay on basic pay only.



INTRODUCTION OF SPOUSES' PENSION ON MEMBERS ' DEATH IN SERVICE

Unions' Arguments:

9. 1. The provision of death in service pensions for spouses and dependants is a basic entitlement and is well established in both the Public and Private Sectors.

2. In the Private Sector, spouses' pensions are provided for in the vast majority of cases. In the period 1991 to 1994 the provision of death in service pensions for spouses and dependants increased from 62% to 74%.


Company's Arguments:

10. 1. The Company has provided adequately in the area of mortality benefit on the death of a member in service. In 1994, at conciliation, the Company agreed to the harmonisation of mortality death-in-service benefits. From January, 1996 a married person is covered for a mortality benefit of 5 times basic annual salary and a single person has cover for 3 times annual basic salary. The cost of this improvement is borne in full by the Company. The Company rejects the claim for the introduction of spouses' pension on the death of members in service.



REMOVAL OF ACTUARIAL DEDUCTION FROM PENSIONS PAID BEFORE NORMAL RETIREMENT DATE

Unions' Arguments:

11. 1. Many companies provide for early retirements at 55 or 60 years of age without actuarial deductions.

2. The deduction of 6% for each year of early retirement seriously erodes an already meagre pension.


Company's Arguments:

12. 1. The Company rejects the claim for the removal of the actuarial reduction of pension applicable to early retirement pensions on the grounds that the majority of schemes surveyed in 1994 by the Irish Association of Pension Funds found that 80% of schemes operate actuarial reductions in cases of early retirement.

2. Following the introduction of pensions legislation in 1994, the Company's actuaries adjusted the early retirement factors to the benefit of members of both schemes. The cost involved is borne by the Company.





RECOMMENDATION:

Having examined the submissions from the parties the Court has concluded that the claims made do not come within the scope of Clause 4 of the PCW and accordingly are rejected at this time.

The Court is of the view that there is merit in some of the claims and accordingly recommends that the parties enter into further negotiations with a view to resolving some of the items which could then be implemented post-PCW. In this respect the Court prioritises the question of spouses' pensions, the difference between total earnings and pensionable salary and the absence of any discretion for the trustees in regard to the amount of pensions.



Signed on behalf of the Labour Court



Evelyn Owens
28th June, 1996______________________
F.B./D.T.Chairman



NOTE

Enquiries concerning this Recommendation should be addressed to Fran Brennan, Court Secretary.