LCR22297

1.Changes to 1951 Pension Scheme.

BACKGROUND:

2.The 1951 Pension Scheme faces funding challenges and the parties have been unable to agree a resolution. An earlier proposal made by the Workplace Relations Commission to resolve the matter was rejected by the Trade Union side. Labour Court hearings took place on 20 October and 9 November 2020.






RECOMMENDATION:

The Court has devoted extensive time over two hearings to its investigation of this trade dispute. At the conclusion of its final hearing the Court invited the parties to take the time to clarify certain technical and other aspects of the positions which formed the basis for their oral and written submissions to the Court. The parties have subsequently provided the Court with clarity on these matters and have jointly provided the Court with revised proposals encompassing key elements of this dispute.

The matter before the Court relates to the funding challenges facing the 1951 Pension Scheme (the 1951 Scheme). The challenges facing that scheme are grave and both parties accept that achievement of a resolution of the funding issues surrounding the scheme is essential. Both parties also accept that the time available for the achievement of that resolution is almost spent.

The parties have engaged over a period of years under the chairmanship of the Conciliation Service of the Workplace Relations Commission (WRC) in an effort to agree the steps necessary to secure the future of the 1951 scheme. At the conclusion of that process the Director of Conciliation, Mediation, Facilitation and Advisory Services of the WRC put forward proposals for resolution of the dispute. She recorded that all parties to the dispute accepted that those proposals were ‘the optimum that could be achieved through an onerous and difficult negotiating process’.

The proposals which emerged from that long and difficult negotiating process were rejected in a ballot vote of the membership of the Trade Unions.

The Labour Court has been unable to identify any basis for a conclusion that differs from the assessment of the parties as recorded by the Director of Conciliation Mediation, Facilitation and Advisory Services of the WRC. Specifically, the Court has been unable to advance beyond the proposition that all the resources which could be accessed to address the funding challenge faced by the scheme had been secured as the means to support the proposal put forward by the WRC.

In those circumstances, the Court has devoted extensive time and effort in order to achieve a full understanding as regards the options available for initiatives and scheme changes which could be employed to address the issues faced by the scheme while remaining within the funding envelope available.

That exploration was undertaken in order that the Court could give comprehensive and careful consideration to the written and oral submissions of the parties such that the Court’s Recommendation for the resolution of the within trade dispute would most closely reflect the priorities of the Trade Unions and the funding envelope available to address the issues facing the scheme.

The Court therefore puts forward the following Recommendation for resolution in full of the parties’ trade dispute. The Court is satisfied that its Recommendation falls within the same cost envelope as had been achieved in the development of the proposals for settlement put forward by the WRC and that it represents appropriate adaptation of practical aspects of that proposal.

Having regard to the gravity of the situation surrounding the scheme and the short time available for achievement of resolution, the Court strongly encourages early decision making as regards the terms of this Recommendation.

Recommendation

Retirement Age

• •A Realignment of the Scheme minimum retirement age to 63 years to be achieved by way of a section 50 application to the Pensions Authority. The Court understands that this will enable the scheme to satisfy its legal requirements through this application and an accompanying funding proposal.

  •The scheme’s normal retirement age to change to age 63.

  •Access to an earlier retirement age to be available to a Scheme member.

  •A scheme member will apply to the Board of Trustees (see governance below) and will be able to retire on the following basis:

  • • a.A levy is payable on retirement before age 63 with undiscounted benefits;

      b.No levy payable by members who retire at age 63+.

      c.A levy of 1.4% of (net) pensionable salary per annum for the years 2021 – 2030 inclusive will apply for members who wish to retire at age 60. This accumulated levy will be paid at the point of retirement by deduction from the retirement lump sum (Gratuity). Tax relief within the normal limits is available on such a deduction.

      d.A reduced levy of 0.93% / 0.47% of (net) pensionable salary per annum for the years 2021 – 2030 inclusive will apply for members who wish to retire at age 61 / 62 respectively.

      e.Levy is applied from 1^stJanuary 2021 to earlier of the members 60^thbirthdayOR10 years (subject to review)

      f.The levy is pro-rated for those who retire between birthdays.

    
    
    Application to Retire Pre-63yrs
  •A Sub-committee of the Trustees to be established to exclusively facilitate applications from Scheme members to retire pre-63yrs.
  
  •Scheme members will notify the Trustees Sub-Committee that they wish to avail of Retirement pre 63yrs.
  
  •The Sub-committee will have sole discretion in ‘signing-off’ on earlier retirement
  
  •The Sub-committee will consist of Four Members of the Trustees Board, of which two will be from the Elected members and two from the Board appointed members.
  
  •The Chairperson of the Sub-committee to be selected from the Elected members.

• •Pensionable Salary: Career average design (with indexation in line with statutory revaluation)

  •Retirement age in line with prevailing State Pension Age

  •Applicable to existing employees aged 60+ to join the Scheme on an opt-in basis with extended age-based member contribution scale

  •Existing class A structure i.e. co-ordinated with 2T State, existing accrual rates and member contribution (extended)

  •Member contributions as is, extended as above

  •Employer Contributions, as is

  •Pension accrual as is, subject to a maximum of 40/80ths and/or capital value of Revenue SFT (€2m)

  •Gratuity- as is

  •Spouses- 50% of accrued and 50% of potential

  •Death-In-Service- as is

  •No refunds

  •Post retirement pension increases – discretionary basis as is

• 
  1.CIE has committed to maintaining the current contribution multiples as per the Statutory instruments and also contribute an additional €1.4m annual Levy to establish a special purpose fund for Retirement pre-63 years.

  2.CIE has committed to aminimumtotal contribution over the 10-year funding proposal of €320m

  3.Pensioners – no change to earlier commitment (WRC) to allocate €1m towards a special payment to pensioners.

  4.Notional service purchase to continue until 01^stJanuary 2024.

  5.29B transfers (post 2013) will be supported through an underpin such that the combined 1951 and RWS benefits (taking into account any member benefit and contribution differentials) will be no worse off than had the member been promoted in the RWS scheme (new benefit structure)

  6.Pensionable pay increases – any pensionable pay increases above the lower of CPI/1.75% to be subject to an “on track review” per WRC.

  
  
  

Maintenance of Funding Proposal - Liability Containment
Any further changes in benefit-liability, exclusive of normal pay awards, shall be subject to Trustee, Scheme Actuary and TUG approval mindful of maintaining the Funding Proposal on-track status along with the applicable subsidiary company and TUG agreement on any future service costs.

Contributions

The members' contribution shall remain as per the current Statutory Instrument. Board will maintain the current contributions multiples also as per the statutory instrument.
CIE will contribute an additional €1.4m annual levy which will act as the supporting mechanism for those members that choose to retire between 60 and 63.

CIE has committed to an overall minimum contribution level of €320m for the duration of the funding proposal (10 years)

Governance

The Court was advised that there had been a high level of commentary surrounding the complexity of the roles and responsibilities of the various stakeholders across the 1951 Scheme. It is undoubtedly true that general pension governance practices have evolved since the enactment of the original legislation, which govern the Scheme. The Court has been asked to address the matter of Governance in its Recommendation and does so as follows:

Course of Action

The CIE Board, Trustees and Committees' roles, as currently constituted, would cease.

Accordingly, the Scheme should adopt the following Governance structure.

1.A new Board of Trustees for the 1951 Scheme to be constructed as follows:

• •Four independent CIE Board appointed members (per current practice).
  •Four active member elected members (per current practice).
  •The Chairman to be elected by the Board of Trustees from amongst the CIE Board appointed members (per current practice).
  •The collective constituent Trustee Board members will adopt the provisions of IORPS Il balancing the right level of lay members and professional skill sets.

• • •The duties of Scheme Trustees as defined by common law and the Pensions Authority/EU directives from time to time
    •Administration of the Scheme, including appointment of Secretary to the Scheme.
    •Investment strategy, following consultation with the CIE Board
    •Appointment of Scheme Actuary, who shall report to the Board of Trustees.
    •The appointment of professional advisors, including investment advisors, who shall report to the Board of Trustees.
  
  From time to time, an independent report shall be commissioned by the Board of Trustees as to industry best practice regarding governance.

	Signed on behalf of the Labour Court
	Kevin Foley
TH	______________________
23 November 2020	Chairman