Mr Fingleton’s Pension of €27.6 m explained

The Public Accounts Committee have published a [broken link removed] on this today.

Liabilities
When the pension fund was transferred from the Irish Nationwide in January 2007, the assets and liabilities transferred amounted to €27.6 m

The liabilities were so high because
His basic salary was very high
He had 33 years' service
On 8 Dec 1997, the trustee amended the definition of final salary to include “bonus payments averaged over the three previous years”.This increased the final liability by €12.4m
In 2005, the board agreed to ncrease spouse’s benefit from 2/3rds pension to 100% (cost €2m)




Assets
The taxpayer had a narrow escape
Fingleton chose to transfer the pension in January 2007 into his own private pension fund. Had he not done this, the value of the assets would have fallen dramatically while the pension liability to Fingleton would have risen to €33m

Fingleton managed the assets himself. The investment strategy while very successful, was totally inappropriate and exposed the Society to huge risk from which it had a very narrow escape.

The assets had fallen to €4m by 2009
The fund was heavily invested in bank shares – AIB, Bank of Ireland and Anglo.
If these had been kept by Fingleton, the fund would have been worth €4m in 2009 and a lot less now. (This may explain why he forgot to mention his pension fund when he was required to disclose his assets to the court recently)

Other points
The fund was so well funded, that the Society made no contribution since 2001.
The board commissioned an indepenent report into the investment strategy of the fund and found that it was too risky with almost all its investments in bank shares.

Only saw this now. This highlights a few glaring loopholes: -

• It is entirely inappropriate that a member of a DB scheme should be permitted to manage or even influence the investments of the scheme. If I set up a self-administered scheme for myself and I make bad investment decisions, I get a smaller pension as a result. That's my own risk. In this instance Fingleton could make investment decisions, safe in the knowledge that if he got it wrong, the Society would have a liability to compensate him for his own mistakes. As Brendan said, in this instance the Society had a lucky escape. But legislators should make sure it couldn't happen again.
• If it was wrong for any member of DB scheme to control their own investments, it's twice as wrong (!) for this to be permitted where the Society that stands liable to pick up the tab was a mutual, owned by its members, as distinct from a private company.

I hope these lessons have been learned.

Just saw this now meself.

The board members that approved those changes re bonus payments and survivor's pension have a lot to answer for.