Former AIB chief agrees to reduced pension of €250,000

Former AIB chief Eugene Sheehy last night bowed to pressure and agreed to a pension reduction after Taoiseach Enda Kenny said the lender’s former managers had a “moral responsibility” to reduce their retirement payments over the failure of the bank.

Mr Sheehy will take a cut in his annual pension to €250,000 from between €300,000 and €325,000, he said in a statement released to The Irish Times.

“I fully appreciate the ongoing difficulties facing the bank and the economy, and this is a personal decision on my part,” said the former chief, who left the bank in 2009 after it was bailed out by the State.

The Government has since pumped nearly €21 billion into AIB and almost fully nationalised it to cover losses due to the property crash.

Mr Sheehy made his decision to forgo about a fifth of his annual pension after Mr Kenny said former AIB executives should respond to a request from the bank to reduce pensions voluntarily.

Collapse

Mr Kenny told the Dáil that banker pensions of more than €500,000 – a figure cited at an Oireachtas finance committee hearing last week – were “truly extraordinary”.

AIB chief executive David Duffy said the bank was targeting former senior figures who ran it in the lead-up to its nationalisation to take pension reductions. He called on the executives to consider the difficulties current AIB employees were facing as a consequence of the bank’s collapse.

The bank is reducing its workforce by 2,500, or one in five, through redundancy and early retirement.

AIB started writing to more than 15 former directors and top executives this week asking them to hand over part of their pensions given that the bank had to be bailed out.

Mr Duffy said AIB had no legal power to take pension money, but was asking for the reduction in pensions “out of moral suasion”.

He said that he didn’t want to act “as a judge and jury” on how much they should forgo or to “dictate” the amount. It was up to them.

Mr Duffy said AIB had spoken to one former executive to encourage a reduction: “We are drawing a line saying, ‘look, you were in a senior position, the bank failed and a lot of people are suffering the consequences, you should consider what is appropriate in your circumstances’.”

Crisis

This is thought to be Mr Sheehy, who had said as the banking crisis deepened in 2008 that AIB would “rather die” than raise capital.

Mr Duffy has not ruled out writing to more executives who had “significant influence” within the bank. He is targeting former executives not based on the size of their pensions but on the responsibilities they had held.

The bank was criticised at the Oireachtas committee for the delay in seeking pension cuts from former executives.

Chairman of AIB David Hodgkinson told shareholders at the bank’s agm in June that it would write to former managers seeking pension cuts before the end of the year.

New figures also reveal that AIB made a loss of €300 million transferring the first €700 million of loans with a face value of €1.1 billion moved from the bank into the pension fund to cover the cost of staff who leave under early retirement.

Updated half-year accounts published recently show that AIB moved loans from the bank which had been earmarked for disposal to reduce the deficit by €400 million in the first tranche of transfers.

The remaining loans have also been moved to the fund, but the bank has not yet disclosed the loss on these.