# ESB pension



## WizardDr (9 Dec 2013)

My understanding is that the ESB Pension Scheme(s) were set up min 1946.

The legislation (I am told) is that any shortfall in funding was to be made up by the Company AND the employees by agreement.

This does not appear to me to be a DB Scheme on the basis that the employer is not on the hook for the deficit unless and until the Employer agrees. That payment could be 0% to 100% or anywhere in between.

Is it not the case that whatever this creature is - its not DB.

Who advised Mr Ogle?

Any views?


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## Conan (9 Dec 2013)

I am no supporter of Mr Ogle, but:
-if it looks like a DB scheme
-if it walks like a DB scheme 
-if it quacks like a DB scheme
well it is a DB scheme. 
For 60 + years all sides understood it to be a DB scheme and it was funded as such (apparently). So why did the ESB suddenly change it to DC in the Company Accounts some two years ago?
It may only be one letter of a difference but Pension Board rules require a DB scheme to be properly funded or at least have a plan to get there. Obviously if the scheme became underfunded then both sides will have to sit down and resolve the issue. But that means the Company also are on the hook, unless they decide to wind up the scheme (highly unlikely for a State Company).


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## ajapale (9 Dec 2013)

Conan said:


> I am no supporter of Mr Ogle, but:
> -if it looks like a DB scheme
> -if it walks like a DB scheme
> -if it quacks like a DB scheme
> ...



Very well put Conan!

*Model Employee Superannuation Scheme for State Bodies *is the document set out by the Civil Service for the commercial semi-state superannuation schemes. They are all funded schemes db in contrast to the public/civil service schemes which are unfunded.



> P18/035/79
> To each Personnel Officer
> Model Employee Superannuation Scheme for State-sponsored Bodies Introduction
> 
> ...


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## WizardDr (11 Dec 2013)

Actually how could it be a DB scheme if there has to be 'agreement' between the parties to fund the deficit.

So Conan read the post again. I am not interested in what people actually thought it was as opposed to what it is.


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## Gerry Canning (11 Dec 2013)

WizardDr.

It is a Defined Benefit Scheme.
If it is not, a lot of State Type Pensions that have evolved over time would also not be Defined Benefit Schemes. If something is De Facto understood as DB over a very long period , I do not see any Judge deciding otherwise.

There has been a lot of (noise) over the ESB scheme , can I put this to people.

A Guard or Nurse or Teacher is told by Employer Mr Government that their DB 50% final income pension is now a Defined Contribution from 2018 , but do not worry it will be fully funded by Mr Government after 2018.
Would Mr Guard, Mr Nurse , Mr Teacher accept Mr Governments word ? 
I think not.


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## Sunny (11 Dec 2013)

From what I understand the ESB scheme is no different to the scheme in Aer Lingus and the DAA. The same language about employer AND employees having to engage to sort out deficits is included. Aer Lingus aren't for turning in their insistence that they have no further liabilities after what they are proposing to put in now which more than likely isn't enough to save the scheme. And indeed Ryanair have threatened to sue over this contribution. Just like Aer Lingus say they will sue SIPTU if they take industrial action on the matter

Aer Lingus and DAA workers signed up in the same good faith as the ESB workers so what's the difference? Who is going to save them?

Oh well, the ESB shouldn't worry. The taxpayer will continue to pick up the bill.....


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## Gerry Canning (11 Dec 2013)

Sunny; 

If Aer Lingus and Daa workers signed up {in good faith} then they must be protected.
Think about it, You work for + years and part of your employment is your pension.
Then your employer changes the Rules ?
On Esb it ain,t the taxpayer , it is part of our electricty cost but is also part of what was freely agreed.


What I am saying is it is VERY DANGEROUS to allow any Employer leeway over Pensions.
  History says employers will hang the employee if it suits them in the future.eg Aer Lingus /Daa ,

So is any pension safe?


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## TRS30 (11 Dec 2013)

Gerry Canning said:


> So is any pension safe?



I know my defined contribution one is not!


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## Gerry Canning (11 Dec 2013)

TRS30; 

Defined Contribution Pensions !
1. Government are raiding them.
2. You need to have a bigger fund than ever to get a reasonable return.
3. They are as safe as the Market {God help us!}

a. With luck the Market will improve.
b.  With luck @ retirement fund will buy good pension.
c.  With luck I will live to benefit.
....................
What I am clear on as a Defined Contribution fund holder is ,this, 
 ANYONE on a Defined Benefit Pension would be BONKERS not to defend it to the bitter end! 
.


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## TRS30 (11 Dec 2013)

I live with luck while others live with certainty! 

I am angry because our current government want to socialise every debt in this country even to the extent of robbing defined contribution pension funds to pay under funded defined benefit rather then make them take a reduction in benefit.


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## Gerry Canning (11 Dec 2013)

TRS 30; 

Yup , it is a mess , those of us in defined contribution are being stolen from.
I still do NOT wish to see reduction in Defined Benefit unless and until Management prove that their reasoning has the ring of equity.
Our past {government} have already socialised the big Bank Debt and the new {government} grasp at sneaky things like pension funds.
Of ALL things, pension funds must retain certainty not have us wondering , which git will put their grubby little finger in ?
It is wrong. 

(gripe over for now!)


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## Bonaparte (11 Dec 2013)

I think it is a Defined Benefit scheme since the definition is based upon what the basis for pension payment is. See below from Irish Life website

_*Defined benefit schemes*
In a defined benefit scheme, the pension you are entitled to at retirement is defined in some way by reference to your earnings and your length of service. So you know in advance what your pension will be. For example, half of your final salary if you have 40 years service or that it will be a certain amount each week.

*Defined contribution scheme*
In a defined contribution scheme, the pension you receive at retirement is dependant on the value of the fund you have accumulated to that point, subject to limits. The contribution is fixed by agreement with your employer. So depending on the scheme in place, you may agree to pay a certain percentage of your salary into your pension, and your employer may agree to contribute a certain amount, but the benefits are not fixed in advance.
_
In all fairness even though I am not a fan of Mr. Ogle or indeed his politics in this instance he and the staff are correct. Basically the company have been playing games with terms in the Accounts to try to make their Balance Sheet look more attractive. It is also worth noting that the deficit is really notional as it appeared as a result of the Government changing the rules.

There has been some mention here of the Government dipping their fingers into DC pension funds, If I'm not mistaken DB funds have also been hit. This is actually a very serious matter which I think should be resisted by thoseof us who choose to pay into pensions


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## TRS30 (12 Dec 2013)

Gerry Canning said:


> TRS 30;
> 
> Yup , it is a mess , those of us in defined contribution are being stolen from.
> I still do NOT wish to see reduction in Defined Benefit unless and until Management prove that their reasoning has the ring of equity.
> ...



Wait till they start dipping into the capital of our savings to pay for the next bailout.


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## TRS30 (12 Dec 2013)

Bonaparte said:


> ....... If I'm not mistaken DB funds have also been hit. This is actually a very serious matter which I think should be resisted by those of us who choose to pay into pensions



If you are talking about the pension levy then it does not impact on DB schemes members as their benefits are protected.


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## Purple (12 Dec 2013)

Is the big game here to keep the pension liability on the ESB's books so that it less attractive for sale? The last thing that the Unions want is for the ESB to be privatised. I agree with them on that; the state has a very bad record when it comes to selling state companies.


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## Sunny (12 Dec 2013)

TRS30 said:


> If you are talking about the pension levy then it does not impact on DB schemes members as their benefits are protected.


 
Yes it does. It is just up to the scheme as to how apply the levy


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## TRS30 (12 Dec 2013)

Sunny said:


> Yes it does. It is just up to the scheme as to how apply the levy



So the final amount that a member of DB scheme will be entitled to will be reduced by the amount of levy paid, factoring in compounding etc?


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## Sunny (12 Dec 2013)

The pension levy is payable on defined benefit pension schemes. The scheme has to fund this. Whether the employer pays it or the employee pays through reduced benefits or increased contributions is up to the scheme and trustees. I have seen schemes where the employer just picks up the tab to save hassle but I have seen schemes where the employer is not in a position to contribute and benefits have been cut. If memory serves me right, RTE is one such scheme.


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## TRS30 (12 Dec 2013)

Sunny said:


> The pension levy is payable on defined benefit pension schemes. The scheme has to fund this. Whether the employer pays it or the employee pays through reduced benefits or increased contributions is up to the scheme and trustees. I have seen schemes where the employer just picks up the tab to save hassle but I have seen schemes where the employer is not in a position to contribute and benefits have been cut. If memory serves me right, RTE is one such scheme.



Thanks; good to know. 

I wasn't aware it was possible to reduce the benefits of a DB scheme if it was in someone's contract.


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## Bonaparte (12 Dec 2013)

Sorry TRS80 but it does. Each scheme has to work out how to deal with the shortfall due to the pilfering of Government. By the way Benefits are not really protected, recent legislation means that despite the "Waterford" ruling the maximum protection is now €12,000 per annum


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## Steven Barrett (12 Dec 2013)

WizardDr said:


> *The legislation (I am told) is that any shortfall in funding was to be made up by the Company AND the employees by agreement.*
> 
> This does not appear to me to be a DB Scheme on the basis that the employer is not on the hook for the deficit unless and until the Employer agrees. That payment could be 0% to 100% or anywhere in between.
> 
> ...



An employer only has to pay 10% for it to be an employer scheme. They can have a DB scheme which is 90% funded by the employee if they want (I wouldn't expect it to last very long mind!). It has to be documented in the scheme rules. DB schemes are purely employer funded.




TRS30 said:


> I live with luck while others live with certainty!
> 
> I am angry because our current government want to socialise every debt in this country even to the extent of robbing defined contribution pension funds to pay under funded defined benefit rather then make them take a reduction in benefit.



There's not that much certainty around DB schemes anymore. The vast majority of them are underfunded and under current legislation, retiree's get priority, meaning current and deferred members get a fraction of their actual benefits. 

The current tax on pension schemes is nothing to do with funding DB schemes. They claim it is to pay for the jobs initiative but how they are spending that much money on it is beyond me. I suspect they are spending it on other things too. 

The new one that is being introduced in 2014 is in relation to where pension schemes and employers are insolvent. The EU ruled years ago that these employees should have at least 50% of their accrued pensions protected. The Irish government chose to ignore that so they were brought to court and lost. The level will pay for the benefits that are protected under EU law because the employer cannot pay them. Where the employer is still solvent, they are responsible for paying the benefits and will not get any money from the government.


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## peno (13 Dec 2013)

SBarrett said:


> DB schemes are purely employer funded.



That is not my understanding of what a DB scheme is.

A DB scheme is where the benefit is defined. In the vast majority of cases it means that the employee contributions are fixed and that the employer will pay the balance. However this is not a given neither is it a requirement of a DB scheme. Although it must be said that DB schemes are unworkable unless this is the case. However the wording on contributions/funding in the Trust Deed will define how this works.

It seems in the ESB case the deficit has to be agreed to be paid between the employer and employee - hence the deficit is not purely the employers.

In hindsight the rules behind this scheme were drafted at a different time when these problems where not seen.

It's may understanding that this is the issue in the Aer Lingus scheme. There is a defined benefit provided to each member however the contributions are also defined. Hence a defined contribution and defined benefit in one which is a contradiction and where all the problems come from.

Unless the rules clearly say the employer must pay the difference it is open to challenge whether the deficit is actually the employers.


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## Gerry Canning (13 Dec 2013)

to S Barrett.

From memory that EU legislation was enacted in 2005. 
The then (Government) fully knew this, ignored it, were taken to task and lost.

As you state it Means that in an insolvency situation on a Company and their pension scheme that the employees get @ least 50% or @ least k12 ..Again (from memory)d it is tapered so that those on higher pensions get less.

It is a good idea


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## Ronnieb (13 Dec 2013)

Lot of comment here. Middle Ireland being hit again, ESB pension in trouble and the company capitulate in the face of threatened strike. In the long term the tax payer is the loser through higher energy bills. I know it may be a hard pill to take but when a pension fund gets into difficulty for whatever reason the company and the members must share the burden equally and not hit the tax payer.


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## Bonaparte (13 Dec 2013)

I understand your frustration Ronnieb but these people paid into the fund in good faith and the ESB is a very profitable company so in reality the folks are entitled to their pension rights. We need to forget about the state versus non state argument when it comes to the pension discussion, the issue is very complex, for example, the ESB folks do not have an entitlement to  a contributory OAP


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## Ronnieb (13 Dec 2013)

I'm sorry but your points are contradictory. The reason the ESB employees are not entitled to state old age pension is because they do not pay the same PRSI as the rest of us. This perk has existed since the foundation of the company and is quiet a saving. Have a look a your own PRSI on your payslip and you'll we what I mean. The bottom line here is that the ESB staff are being treated with kid gloves because of their power (excuse the pun) they hold over the country


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