6,500 AIB staff affected by end of defined benefit scheme
ABOUT 6,500 AIB staff are to lose their defined benefit pension entitlements after the bank announced its intention to end its current defined benefit pension scheme.
Staff who are currently entitled to a defined benefit scheme – which has been closed to new entrants since 1997 – will switch to a defined contribution scheme by the end of the year.
In an email to staff yesterday, chief executive David Duffy said that the cost of providing a large number of staff with a defined benefit pension had become “prohibitively expensive”.
The Irish Bank Officials’ Association (IBOA) and Siptu said they would resist the changes, which won’t affect already accrued payments.
“The move on the defined benefit pension scheme would produce relatively modest cost savings for the bank – but would have a significant impact on the retirement income of many ordinary bank officials,” general secretary of the IBOA Larry Broderick said yesterday.
The termination of AIB’s defined benefit pension scheme is one of a number of changes to terms and conditions for AIB employees outlined by the bank to staff yesterday.
In total, the changes will save the bank, which is 98.9 per cent owned by the State, more than €30 million annually, bringing its total savings to more than €200 million, inclusive of the €170 million in savings expected from the bank’s redundancy programme.
Staff’s club subscription allowances are also to be discontinued.
While these allowances, which allow staff members to claim the cost of a club membership annually, were abolished for new entrants and staff retiring from the bank late last year, the bank is now abolishing the so-called club subs for all staff members.
Similarly, preferential loan and deposit rates for staff are to be abolished from September 1st, while the policy of offering company cars to employees will cease on January 1st, with employees receiving a non-pensionable allowance related to grade instead.
The bank’s most senior employees are also to take pay cuts of up to 15 per cent, Mr Duffy told staff yesterday.
It is estimated that between 600 and 700 staff members will be affected by the pay reductions.
All members of the bank’s executive committee, which comprises around 11 members of staff, including chief executive David Duffy, will take a 15 per cent reduction in total compensation effective from August 1st.
Those in executive roles will see their pay cut by up to 10 per cent, while senior management will see their pay and pension packages decrease by up to 7.5 per cent.
The bank is still in negotiations with unions about implementing a general pay freeze until the end of 2014.
A pay freeze at AIB has already been in place since 2008.
In his email to staff, chief executive David Duffy said that the bank is committed to reviewing its reward strategy as it returns to “sustainable profitability”.
“Any future upward adjustments to general pay must be based on the bank’s ability to pay,” he said.
AIB is seeking 2,500 redundancies, from its staff of more than 14,000.
Last month it announced its voluntary severance package, with staff being offered either three weeks’ pay per year of service, plus two weeks of statutory pay, or four weeks’ pay, including two weeks statutory pay.
AIB'S COST SAVING PLAN MAIN POINTS
* AIB’s defined benefit plan to be closed. All staff to switch to a defined contribution plan. Though it has been closed to new entrants since December 2007, about 6,500 people will be affected.
* Senior staff to take voluntary cuts to their total compensation of up to 15 per cent in some cases, though most will take cuts of up to 7.5 per cent and 10 per cent. It is understood that between 600 and 700 senior staff could be affected.
* For all other staff, bank is continuing in its discussions with unions to extend pay freeze in place since 2008 to 2014.
* “Club subs” are to be abolished for all staff from July 1st. Last year around a quarter of AIB staff availed of the benefit, which applies to gym membership and other clubs. The average gross refund was €560.
* From September 1st, staff will no longer be eligible for preferential staff rates on either loans or deposits.
* From January 1st, 2013, company cars to be abolished. A non-pensionable allowance will be paid instead.