Pensions a new battlefield in industrial relations
Poor investment returns and tougher regulation have contributed to pressure on workers’ pension scheme
ESB workers hold a meeting to voice concerns about their pensions. Photograph: The Irish Times
Pensions have become the latest industrial relations battlefield. Shortly before Christmas, strikes over company retirement plans threatened the ESB, Aer Lingus and Marks and Spencer. At around the same time, members of a scheme operated by multinational Element Six, in Shannon, were suing its trustees in the High Court for breach of duty.
More recently, Labour Relations Commission (LRC) chief executive Kieran Mulvey called in this newspaper for a pensions summit that would tie down the mechanism that companies whose retirement plans are in difficulty would use to address those problems.
He pointed out that the commission had dealt with 40 pension-related disputes over the last two years and said the problem was close to the top of collective bargaining agendas.
The schemes at the centre of these disputes are defined-benefit ones, where the pension is tied to the employee’s final salary and the employer is liable for any shortfall in the fund. About 800 companies in the Republic operate such retirement plans, and the Pensions Board – the regulator – was recently reported as saying that half of them are in deficit.
Several factors have come together to create this situation: the poor investment returns of the past decade, and more particularly the last five years; and tougher regulation, which takes a conservative view of schemes’ liabilities and requires them to put more assets into low- risk-low-return investments.
Along with this, the number of pensioners receiving payments from such schemes is increasing, while the number of those paying into them is falling. This is partly a result of people living longer, but it is also attributable to the fact that many employers have cut their workforces.
While unions play a central role in disputes involving pension schemes they are not, strictly speaking, parties to them. The relationship is between the trustees, who oversee how the scheme is invested, the members (current and deferred pensioners and employees) and the company that is sponsoring the fund and therefore liable for any deficit.
Last year, while the ESB group of unions went through the industrial relations process, four of its workers took legal action against the company in a bid to prevent it from making dividend payments to the State while it had a €1.6 billion shortfall in its pension pot.
The union group was careful to make it clear that while it supported this action it was not a party to it. However, it was the unions that made the running in the dispute with the company, and the workers agreed not to continue with the action once the LRC brokered the deal that averted the strike in December.
The unions are directly involved in these disputes because it is their position that employers should make adequate provision for workers once they retire. In essence, they regard pensions as part of their members’ pay and conditions.