The Pensions Authority has warned it could wind up the current pension scheme for managers and other grades in the CIÉ group of transport companies, or reduce benefits, unless steps are taken within the next few weeks to address a financial deficit of about €550 million.
In a letter marked “confidential” to the trustees and the pensions committee of CIÉ’s 1951 superannuation scheme on Tuesday, the Pensions Authority said the scheme was not compliant with legislation governing pensions.
The Irish Times reported last week that the 1951 pension scheme, which has about 2,200 members and more than 2,250 pensioners, had an estimated deficit of about €550 million.
Members of the scheme are currently balloting on Labour Court proposals aimed at dealing with the deficit.
In the letter, the Pensions Regulator, Brendan Kennedy, said the authority had sought in January 2020 a positive actuarial funding certificate (AFC) and a positive funding standard reserve certificate (FSRC), or a valid funding proposal.
“The authority has not received any of these and the scheme continues to be non-compliant with the Act. In accordance with the Act and the regulations, the authority is considering making a direction under section 50 or section 50B of the Act to reduce benefits under the scheme or to wind up the scheme.
“The authority requires you to provide to the authority the information listed in the attached schedule within eight weeks of this notice, ie by 22 June, 2021.
“You should note that failure to furnish the required information in full within the time specified is a breach of the Act and a criminal offence for which you may be prosecuted.”
The letter said the Pensions Authority would not proceed with the section 50/section 50b process if the trustees submitted any of the following within the next eight weeks: a positive AFC and a positive FSRC; a valid funding proposal; or an acceptable application by the trustees under section 50 of the Act.
Alternatively, it could submit a valid funding proposal, accompanied by any of the following: an acceptable application by the trustees under section 49(3b) of the Act; an acceptable application by the trustees under section 50 of the Act; or an acceptable application by the trustees under section 50 of the Act combined with an acceptable application under section 49(3b) of the Act.
The Pensions Authority said it had never made any unilateral direction regarding the reduction of benefits of a scheme under section 50 of the legislation.
It said there had been one instance where it had issued a direction regarding the winding-up of a scheme under the legislation.
The 1951 scheme at CIÉ is a defined-benefit arrangement and, based on 40 years’ service, the pension payment involves 50 per cent final salary and a lump sum of 1½ years’ pay. Members can retire at 60, although they can continue to accrue service up to age 66. The actual average age of retirement is 63.5 years.
At present the employer contributes about 28 per cent and the employee about 8 per cent.
Under the Labour Court proposals, the new minimum age of retirement for those under age 60 at present would be 63 years.
Those wishing to retire prior to 63 could do so, however, by paying a contribution from their lump sum. Their pension in such circumstances would not be discounted.
The scheme would remain open to new entrants but pensions would be based on career average earnings.
The CIÉ group would contribute a minimum of €320 million over the 10-year funding proposal.
CIÉ said on Thursday on foot of queries from The Irish Times that it was “ in receipt of correspondence from the Pensions Authority”.
“In the first instance, the company awaits the outcome of a trade union ballot on proposals recommended by the Labour Court, and accepted by the company, which will be concluded next week.”