A PROPOSAL has been put to the National Treasury Management Agency that could involve it helping to plug the deficit in a pension scheme jointly operated by Aer Lingus, the Dublin Airport Authority and SR Technics in return for taking over the scheme’s assets.
This, in turn, could remove a significant obstacle in the Government’s plan to sell its 25 per cent stake in Aer Lingus.
The Irish Aviation Superannuation Scheme has a pension deficit of about €722 million.
Its trustees and employer groups have been looking at ways of plugging the deficit in the scheme for some time. A proposal put before the Labour Relations Commission would involve freezing the scheme with no additional contributions to be made.
The fund’s assets of about €1.3 billion would transfer to the National Treasury Management Agency, which manages Ireland’s national debt.
In return, a bond portfolio would be issued, including some bonds maturing over decades.
The Irish Timeshas learned that about 90 per cent of the scheme's assets are held in cash with the balance in property.
Any such move by the treasury agency would be in the context of its move to issue sovereign annuities. Announced in budget 2011, sovereign annuities are designed to help pension funds boost their solvency by investing more heavily in high-yielding Irish government debt.
None of the parties involved could be reached for comment last night. Sources indicated that talks on this proposal were at an early stage and it is understood other models are also being considered.
Last year, Aer Lingus acknowledged the pension issue could result in industrial unrest.
Aer Lingus has previously insisted it has no liability to the scheme as it made a once-off €100 million contribution at the time of its IPO and now operates a defined contribution scheme for workers.
However, as a significant number of its staff are members of the scheme, it has acknowledged this could lead to industrial unrest.
Ryanair, Aer Lingus’s biggest shareholder, has threatened to take legal action if the airline moves to contribute funds to plug the deficit in the scheme.
It is not clear how much money would be provided by Aer Lingus, the Dublin Airport Authority and SR Technics, which quit Ireland when it closed its aircraft maintenance facility in Dublin, to help close the pension deficit.