INM staff face 50% reduction in pension scheme benefits
Staff at Independent Newspapers will have their pension benefit almost halved under management proposals to address a €155 million funding shortfall.
The plan is part of a dramatic ongoing restructuring of the business over recent months. Management say its success depends on workers realising the “weakness of their legal position” and a possible alternative scenario that could see the “failure” of the group.
INM is also understood to be seeking approval from scheme trustees to purchase sovereign annuities to meet the cost of pensions, a move that would leave retired workers exposed to any future default by the State on its debt.
The company concedes it is asking members to take a “severe” cut in their entitlements. “Specifically, a 64-year-old on a salary of €60,000 will have his pension reduced from €40,000 per annum to €21,600 – a cut of 46 per cent,” they concede in a document outlining the proposals.
They acknowledge that such swingeing cuts “will be difficult to accept, particularly as active members have been contributing 9.5 per cent of the salary to the DB scheme promise”.
Getting workers and pensioners to accept the changes will require that “they understand the weakness of their legal position and that they recognise the consequences of wind-up and/or INM failure”.
Existing defined benefit pension schemes at INM’s Irish business will close to future contributions under the planned restructuring. The age at which members could draw down on the scheme will also rise to 68.
Management is reported to see its options as either “walking away” from its pension liabilities by winding up the pension scheme “with likely major industrial disruption” or secure approval from the pensions regulator under a section 50 restructuring proposal by the end of June next.
The funding shortfall of €155 million compares with a current market capitalisation for INM of about €19 million.
Management argues that tackling the shortfall will “significantly increase the value of its Irish business”.
Under the restructure, younger staff would have the option of transferring out of the scheme, but that would effectively mean accrued benefits slashed to roughly one-third of their current value.
If the scheme were wound up, it is likely that staff and those made redundant in recent years would receive little or no pension from the group.
The proposal is dependent in part on a special once-off payment of €20 million. Sources close to the company say they have yet to tie down where the money would come from, given the heavily indebted state of INM. It had been expected that a successful sale of the South African interests could release cash for such projects but the group’s lenders are reluctant to sanction the diverting of those funds.
The lenders’ stance could also undermine plans for a further round of voluntary redundancies at the newspapers. Staff were told last year that such a programme would be funded by the sale of the South African business.
INM warns that shareholders will be reluctant to invest further without a resolution of the pensions gap. However, there is also a recognition that shareholder approval of the South African deal could be jeopardised if lenders oppose using some of the proceeds to address the pension issue.
There are more than 1,000 members in the INM pension schemes. About 250 are active members – that is, still working for the business.