ESB plans significant reductions in our pensions
You will probably be aware that there is a significant deficit of approx €1.9bn in the ESB pension fund. Since the pension scheme was instituted in 1942 such deficits have been addressed by a combination of changes to ongoing pension contributions made to the Fund by ESB and by serving staff. ESB have made lump sum payments over the years and have always contributed at least twice the amount that staff have contributed to address deficit situations. Up till now existing pensioners have never been expected to suffer a reduction in their expected pensions to rectify a pension fund deficit.
A key element of our pensions since the Fund was instituted in1942 and part of industrial relations agreements since 1981, has been the link between our pensions and the salaries of existing staff. Indeed an April 1986 employee handbook on pensions states that “adjustments in pensions are granted in accordance with the arrangements approved by the Government for public service pensions” and “pensions are adjusted in line with salaries of serving staff in the ESB”.
Furthermore previous fixes to the scheme to which we all contributed were agreed on the basis that benefits in existence at the time would continue. Despite the long history of pensioners benefitting from staff increases over many years and many industrial relations agreements this linkage was arbitrarily broken without notice to pensioners some years ago. Most pensioners were not aware of this break and those who were thought it was to be a temporary arrangement. This has already cost many pensioners as much as 15% in the reduced “real value’’ of their pensions.
Following recent negotiations between the unions and ESB on how the current deficit should be addressed it now appears that pensioners are being burdened with a very significant reduction to the pensions we expected for the remainder of our lives and a disproportionate contribution to addressing the current problems in the pension fund..
The proposed reduction in our expected pension terms, on top of the approx 15% unilateral reduction in “real value” already implemented, includes the following:
- An official end to pay parity with existing staff that existed since the Fund was instituted.
- A further reduction in our pension terms through a freeze on our pensions up to at least 31.12 2013. It’s worth noting that staff are only being asked to take a pay freeze until 31.12.2011
- After 31.12.2013 pensions would be indexed linked to the Consumer Price Index but capped at 4% regardless of how high inflation goes or how large the increases staff get. The risk to our pensions can be seen by looking at CPI over the years:1977 to 2008 CPI exceeded 4% in 15 years out of 22 and in the Celtic Tiger years from 1996 to 2008 6 out of 13 years. Who can forget the 10 years 1976 to 1985 when the sum of the annual % increases in CPI came to 115? If the new proposals had been applied in these years the value of your pension would have more than halved!
- Worryingly, even this possible increase from 2014 is not guaranteed and depends on the current deficit being wiped out and an additional €700m or more found to “de-risk” the Fund. A solvency test would be carried out by the actuary to determine whether an increase would be paid or not.
- It is also proposed to close off our scheme to new members thereby depriving it of contributions from new employees joining ESB.
To date the ESB Retired Staff Association, acting to represent the interests of pensioners, has, despite repeated requests for involvement, been excluded from any meaningful discussions on the agreement and pensioners are being excluded from the voting process also. This is despite the fact that pensioners comprise over 50% of members of the pension scheme. It is also quite clear that ESB wants no part in communicating the bad news to pensioners.
We have written to ESB Chief Executive, Pádraig McManus, asking him to defer planned communication of the proposed changes pending proper consultation with the Retired Staff Association. We have requested an urgent meeting with him to enable us elaborate our concerns, and meetings with the independent actuary in relation to the proposals to fix the Fund deficit. We also believe that pensioners, as the largest group in the pension scheme, should have a vote on any proposals to rectify the Fund deficit.
We do not want to cause pensioners too much worry. However in the absence of any communication from ESB, and before the die is cast on what could be very significant reductions in our expected pensions, we felt duty bound to let you know what the current state of play is. We obviously cannot accept unfair and draconian changes to our pension expectations. We will continue to make our best efforts to right these unfair proposals and will keep you informed in relation to our meetings with Pádraig McManus and the actuary and on any changes to current proposals.
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