AIB has paid €93m to 2,600 mortgage account holders denied a tracker rate

No increase for pensioners of the bank in spite of five-year moratorium expiring

AIB chief executive Bernard Byrne has apologised to customers for failures relating to tracker mortgages. Photograph Nick Bradshaw

AIB chief executive Bernard Byrne has apologised to customers for failures relating to tracker mortgages. Photograph Nick Bradshaw

 

AIB has so far paid out €93 million to the holders of 2,600 mortgage accounts who were denied a tracker interest rate in recent years, the bank’s chief financial officer Mark Bourke has confirmed.

The bank also said that another 400 mortgage accounts have been identified as having been denied the correct tracker rate, and these customers were in the process of being placed on the correct rate, after which the bank would look at financial redress.

AIB last year set aside €190 million to cover the costs of its tracker review programme, which forms part of an industry-wide examination ordered by the Central Bank of Ireland in December 2015. It has engaged KPMG to assist with the process.

In his review in the annual report, AIB chief executive Bernard Byrne said its loan book examination found that, in some instances, the bank was not “sufficiently clear” with customers or failed to honour contractual commitments in connection with the tracker rate.

“On behalf of the bank I apologise to customers for these failures which should not have happened and which we are now putting right,” Mr Byrne said.

Pensioners

Separately, AIB’s annual report states that pensioners in its main defined benefit scheme will once again receive no increase in their payments this year.

This is in spite of the bank having posted a profit of €1.7 billion last year and having proposed to pay a dividend of €250 million out of surplus capital to shareholders.

In 2012, the board instigated a five-year moratorium on increases to pensions in the DB scheme, which has since expired.

Mr Byrne said the bank has put a formal annual review process in place to consider what discretionary increases should be applied each year.

“For 2017, this remains at zero and this will be reviewed again by the board in 2018 and then again every year thereafter,” he said.

AIB’s DB scheme had some 3,913 pensioners and 12,823 deferred members at the end of last year.

An analysis by the bank shows that a 0.5 per cent increase in payments to pensioners would result in a €12 million impact on the scheme’s liabilities with a 1 per cent increase costing €23 million.

The total contributions for 2017 to all the DB schemes operated by the AIB group, including its EBS subsidiary, are estimated at €64 million.

AIB closed last year with a surplus of €8 million in its DB schemes, compared with a deficit of €146 million a year earlier.

All of the group’s staff transferred to defined contribution schemes from January 1st 2014.