FULL RECOMMENDATION
INDUSTRIAL RELATIONS ACTS, 1946 TO 2004 SECTION 26(1), INDUSTRIAL RELATIONS ACT, 1990 PARTIES : IRISH LIFE AND PERMANENT GROUP (PERMANENT TSB, IRISH LIFE ASSURANCE) - AND - AMICUS AMALGAMATED TRANSPORT AND GENERAL WORKERS' UNION MANDATE SERVICES INDUSTRIAL PROFESSIONAL TECHNICAL UNION DIVISION : Chairman: Ms Jenkinson Employer Member: Mr Doherty Worker Member: Mr O'Neill |
1. Dispute concerning Group Defined Benefit / Defined Contribution Pension Schemes.
BACKGROUND:
2. The Employers propose to close the Defined Benefit Scheme (DB) in place within the Group of Companies and to introduce a PRSA based Defined Contribution Scheme for new entrants with effect from 1st January, 2005. Management stated that the proposal would not impact on the members of the existing DB Scheme. The Unions are totally opposed to the proposals and are seeking the retention of the DB Scheme for both existing employees and new entrants. The dispute was referred to the Labour Relations Commission. A Conciliation Conference was held but agreement was not reached. The dispute was referred to the Labour Court on the 21st September, 2005 in accordance with Section 26(1) of the Industrial Relations Act, 1990. A Court hearing was held on the 24th November, 2005.
UNIONS' ARGUMENTS:
3. 1. The closure of the DB scheme would impact very negatively on existing members and expectant members, in particular in relation to higher contribution rates, risks and future deficits, widening costs between DB and DC Schemes, divided workforce, and effects on job security.
2. Other organisations have dealt with this issue through additional funding, injection of capital and increasing employer/employee contribution ratios.
3. The Groups proposals are contrary to the terms of Sections 17 to 17.7 of the Sustaining Progress Agreement.
4. The Group should await the next set of Actuarial Reports due in 2006. There is no imminent crisis in the Group's schemes and all market predictions are positive.
GROUP'S ARGUMENTS:
4. 1. The pension scheme liabilities amount to 25% of the capitalisation of the Group therefore, 25% of the current total value of the Group is taken up by liabilities to the pension scheme. Five years ago this figure was 10% of the value of the Group. If left unchecked the Group's viability is threatened by its pensions liability. The substantial increase is due to a number of factors, primarily, legislation, accounting treatment and the dramatic increase in the longevity of pensioners in recent years.
2. Most employments in the market offer DC rather than DB arrangements. Two of the Group's major competitors have DC schemes for new entrants.The Group's proposals are well in line with best practice. The rights or entitlements of such existing staff who are members of the DB Schemes are unaffected by those proposals.
3. The Group recognises that its proposals for a new DC scheme will require a process to ensure that members are kept abreast of their fund performance and a process for a regular review. As a major provider of pensions administration services and information the Group is uniquely positioned to provide such facilities to staff in the DC scheme proposed and is committed to doing so.
RECOMMENDATION:
The issue before the Court concerns the Company's proposal to close off the existing Group Defined Benefit Pension Scheme (DB) and to introduce a new Defined Contribution Pension Scheme (DC) for new employees recruited from 1st January 2005. The reasons submitted by the Company for this change related to specific unknown factors such as the projected increase in longevity, changes in legislation and accounting requirements etc., which fundamentally question the DB pension model going forward.
The Unions raised a number of objections to the Company's proposal. Their concerns centred around the impact such a proposed change would have on existing members of the DB scheme; the transfer of risks to the employee in a DC scheme and the division such a change may create in the workforce. The Unions put forward alternative suggestions for the Company to consider.
Furthermore, the Unions pointed out that some existing employees who have not yet reached the eligibility criteria for entry to the DB scheme had expectations of joining the DB scheme.
The Company gave assurances that existing staff would not be impacted by the proposed change and stated that it had no intentions of changing the current Defined Benefit Scheme for existing employees. A "letter of comfort" was issued from the Company's actuaries to this effect.
Having considered the views of the parties expressed in their oral and written submissions, the Court is of the view that in the circumstances which prevail, the DC pension model proposed has certain levels of attraction and recommends that the parties should engage in discussions on agreeing the introduction of a new DC pension model going forward. The Court recommends that these discussions should commence with immediate effect and should be completed by no later than 28th February, 2006. Furthermore, the Court recommends that the new DC pension scheme should not impact on any employee employed prior to 1st January, 2006, and recommends that all existing employees (recruited prior to 1st January, 2006) should individually be given a "letter of comfort"stating that the introduction of the new DC scheme will have no impact whatsoever on their existing Group DB scheme or their right to join the scheme when eligible to do so.
The Court so recommends.
Signed on behalf of the Labour Court
Caroline Jenkinson
5th December, 2005______________________
todDeputy Chairman
NOTE
Enquiries concerning this Recommendation should be addressed to Tom O'Dea, Court Secretary.