Deal confirms ESB liable for pension hole
Strike threat lifted at lunchtime yesterday
ESB group of unions secretary general Brendan Ogle (above) suggested yesterday that as a result of the LRC deal the company would have to include an extra liability of €369 million in its accounts, but added that that was a matter for the ESB and its auditors. Photograph: Alan Betson
The ESB will be responsible for any deficit in its employees’ pension pot as a result of the deal struck between the company and its unions that averted an all-out strike next week.
Staff had been threatening to strike from next Monday in a dispute over a €1.7 billion shortfall in their pension scheme for which they said the company was liable. The ESB maintained that it had no responsibility for the deficit.
A key term of the Labour Relations Commission-brokered deal that averted the strike says the ESB pension scheme is “defined benefit”, automatically implying that the company is responsible for any shortfall in the fund.
While the ESB’s annual accounts state it has no responsibility for any deficit in the scheme, and the company maintained this position throughout the dispute, it did agree a funding proposal with the Pensions Board last year that will plug the €1.7 billion gap between its assets and liabilities by 2018.
The shortfall is based on the “minimum funding standard” which Irish law applies to all defined benefit pension schemes. This calculates the assets and liabilities as if the fund were to be wound up.
ESB group of unions secretary general Brendan Ogle suggested yesterday that as a result of the LRC deal the company would have to include an extra liability of €369 million in its accounts, but added that that was a matter for the ESB and its auditors.
The LRC agreement points out that the company and its unions have negotiated agreements to deal with previous deficits. “The parties are fully agreed that should deficits arise in the scheme at any time in the future they will engage together in line with normal practice to seek agreement in relation to that matter.”
Mr Ogle said he expected a further shortfall to emerge in the future.
The LRC also says neither the workers nor the company need to adjust their contributions to the fund at this time.
An ESB spokeswoman said the group was not prepared to comment further.
Both sides agreed to the settlement on Sunday afternoon, but apparently contradictory statements issued by the company and unions briefly threatened to derail the agreement early yesterday.
The group of unions said the resolution was on the basis that the scheme was defined benefit. The ESB stated that there would be no additional liabilities on its balance sheet and that there would be no change to the accounting treatment of the scheme, that is, that it would not have to account for it as defined benefit.
The LRC agreement specifically states: “For clarity the only reference to this scheme in the company’s accounts will be to a defined benefit pension scheme.”
The ESB issued a further statement early yesterday repeating that it accepted “the LRC brokered settlement to the pensions dispute”.
The unions withdrew their all-out strike notice before lunch. Mr Ogle also confirmed yesterday morning that the threat of industrial action at the company had been lifted.