# AerLingus Pension and legal action



## MarkLynch (28 May 2014)

Hello All,

My Uncle has been asking me for advice on his AerLingus pension. He is in some kind of society where they are looking to put together some kind of challenge and are asking for an initial 2000€ to fund it.

Now I don't think there are any issues with the guys running this scheme, my uncle know some of them and tell me they are all above board. So my question is where can I learn what has actually happened with the pension fund he is going to dig out the correspondence he has received from the trustees, but I would like to be able to validate this. And most importantly what do people think the chances of the 2000€ being money well spent are?

See below for original message:
Any other information to make an informed decision?

Deferred members should be aware that their pensions are extremely 

valuable. Depending on your promised pension it could be more valuable 

than your home.

There are two options available to Deferred Members of the IASS. Take the 

legal route or accept the proposals put forward by the Trustees of the IASS. 

The choice is up to the members. 

You should have received a letter recently from the Trustees detailing the 

cuts you will receive to your pension. It is in your interest to study this 

document carefully. You will lose between 45% and 60% of your pension.

If you are due a pension of Euro 20,000 you will lose €10,000 a year for the 

rest of your life from age 65. Check out the Sunday Business Post dated 

May 18th, the actuary has based future payments on males living to 91 and 

females living to 92. This would mean you will lose €260,000 on a €20,000 

pension or €390,000 if your pension is €30,000. Should anything happen to 

you your family will receive 25% of your pension (half your 50%).

The choice for deferred members of the IASS is to accept a huge haircut to 

their pensions (a loss of approximately €390,000 on a €30,000 pension) or 

invest €2,000 and give yourself a chance. We may or may not be successful 

in pursuing the legal route, there are no guarantees, no promises, 

however we can guarantee your pension will be decimated if you do 

nothing. Would you accept eviction from your home? You will be evicted 

from your pension if you remain passive. 

The future of your pension is in your hands, decide what you want to do. 

We have an excellent legal team on our side led by Michael Cush, regarded 

by many as the best senior counsel in Ireland. As it currently stands the 

nine members of the Deferred Committee will be liable for all costs, we 

will only proceed with legal action if we receive enough funds to cover our 

liability at each stage of the process that we are engaged in. 

How will the money be receipted?

There are three payment options.

A….If you have online banking set up from your account you can lodge the 

money to the IASS Deferred account that way by setting it up as a payment 

from your account. If doing this then ensure your name and staff number 

are included in the payment details.

B…..If paying by cheque/bank draft it should be made payable to IASS 

Deferred, again detailing name and staff number. The lodgment slip receipt 

will have a section that will be retained by the person lodging the money. 

This can be scanned and sent to one of the committee as an extra record of 

the lodgement. This has already been done by many of the deferred when 

lodging.

C…..A Bank Giro (Credit Transfer) may be done from Bank of Ireland 

branches only. In this case forward the receipt or a scanned copy detailing 

the payee name and staff number to a committee member.

Below are all the account details necessary for lodgments.

Account Name: IASS Deferred

Bank: Bank of Ireland, Coolock, Dublin 5

Account No: 67264940

Bank sort code: 90 04 71

IBAN: IE75BOFI90047167264940

BIC: BOFIIE2D.

Who will be administering the fund?

The Deferred Committee will be administering the fund. As a committee, 

for banking purposes we are an unincorporated body. The account is a 

current account in the name of IASS Deferred Pension Committee.

The Committee includes representatives from each of the companies (DAA 

A/L SRT). The signing arrangements are a minimum of 2 signatures from the 

designated authorities on the committee.

In compliance with the Anti-Terrorism EU Third Directive, and the PEP 

(Politically Exposed Person), AML (anti-money laundering) requirements we 

will exercise due diligence to ensure that the money coming in to the 

account is from a bona fide source and the money dispersed is via itemized 

invoices from two designated signatories of the account. 

Our solicitors are also required to hold AML documentation (copies of 

passport and utility bills) from the committee to fulfill similar requirements 

from their side.

At what intervals will updates be forwarded to us?

We have asked people to lodge money within the next ten banking days. At 

that stage the committee will have to assess the situation.

What liabilities are we leaving ourselves open to by contributing?

The Committee members have been advised by our legal team that it is 

the Committee members that are liable for costs at every stage of the legal 

process. We have had preliminary meetings with our solicitor and following 

on from that with our solicitor and counsel, junior and senior. These have 

been productive and informative. When they report back to us it will be up 

to the group and the funding in place as to how the case is advanced.

What can all Deferred Members do as well?

Bombard your local Political Representatives, you and your family should 

vote for those helpful to your cause. And remind them that General 

Elections are down the road also. 

Advise your deferred colleagues that the train has left the station and is fast 

approaching its destination. Put Euro 2,000 into the fund.

Deferred IASS Members Committee


----------



## Dr.Debt (28 May 2014)

The labour court has already been through this and arising from this process, I understand that Aer Lingus is willing to fund up to 110 million euro of its 750 million pension deficit. I understand the DAA is willing to do proportionately similar.

I cant see any point in members chipping another 2000 euro into the black hole , for legal fees, to fight this. Personally I think its a lost cause. Realistically,where would the extra money come from.

If its not resolved in the medium term and no funding proposal emerges, it seems that the pensions authority may wind up the scheme altogether. If that happens, members pension will be slashed further.


----------



## Steven Barrett (29 May 2014)

You might want to take the bank details off the internet or that fund might disappear pretty quick. 

It is a very difficult situation for the members to be in.

What is the solution that they are looking for? To have their pension benefits completely restored? Who is going to pay for that?

DB schemes in Ireland are in a black hole. The cost of getting them solvent again is massive and most companies don't have the spare cash to put into the schemes.

I know it is a very emotive subject for your uncle but before I put €2,000 in, I would want to know what they want to get from this and the likelihood of getting a result. SC's aren't cheap and charge in 6 minute work units. 


Steven
www.bluewaterfp.ie


----------



## Deiseblue (29 May 2014)

If I was in your Uncle's position I would be tempted to part fund the cost of legal action.

I believe that such action allied to the fact that an increasingly disenchanted work force can , will & indeed have caused damage not only to the airline but to the country as well may force Aer Lingus to dip into their massive cash reserves ( hovering around 900 million/1 billion euros ) in an effort to sort matters out.

Thankfully Mr. Mueller has further fuelled controversy when his own bonus/pension top up package caused some outrage , even the Government utilising it's large shareholding voted against this package.

Perhaps the expenditure of €2000 is a gamble worth taking , litigation will at the very least tie matters up for a considerable time.


----------



## T McGibney (29 May 2014)

The tragedy is that the defined benefit scheme model guarantees the rights of retired staff at the expense of serving staff. As with other Ponzi schemes, it is clearly unsustainable except in the utopia where employee numbers keep rising and rising forever.


----------



## Purple (29 May 2014)

Deiseblue said:


> I believe that such action allied to the fact that an increasingly disenchanted work force can , will & indeed have caused damage not only to the airline but to the country as well may force Aer Lingus to dip into their massive cash reserves ( hovering around 900 million/1 billion euros ) in an effort to sort matters out.


That's their gross cash reserves. They have serious debts as but the net cash position is still strong at just under €500 million. They are in a capital intensive business though, with a 575 costing around €60-70 million and an A320 around the same.


----------



## Sunny (29 May 2014)

T McGibney said:


> The tragedy is that the defined benefit scheme model guarantees the rights of retired staff at the expense of serving staff. As with other Ponzi schemes, it is clearly unsustainable except in the utopia where employee numbers keep rising and rising forever.


 
Not any more. The law has been changed and even retired members are looking at 10 -20% cut in pensions in the case of Aer Lingus.


----------



## Purple (29 May 2014)

Sunny said:


> Not any more. The law has been changed and even retired members are looking at 10 -20% cut in pensions in the case of Aer Lingus.



If all retired members agreed to a 10% cut then the problem would be solved for all of them.
The same applies to the ESB.
Solidarity, comrades?


----------



## Steven Barrett (29 May 2014)

Purple said:


> If all retired members agreed to a 10% cut then the problem would be solved for all of them.
> The same applies to the ESB.
> Solidarity, comrades?



That's when you find out your standing on your own. I'll support you as long as it doesn't cost me anything


----------



## Sunny (29 May 2014)

SBarrett said:


> That's when you find out your standing on your own. I'll support you as long as it doesn't cost me anything



Or maybe because its not true. Retired members taking 10% cut doesn't solve the problem. Existing members would still be looking at even a larger cut in their pension entitlements. And deferred members would be looking at a larger cut again. They are all in the same boat so it's not a case of one group against another.


----------



## ashambles (30 May 2014)

While I understand people wanting to do what they can to maintain an expected pension, I'm not impressed by the content of the mail. 

The first thing that jumped out was they don't give an overall amount they need for the legal action. 

According to http://www.irishtimes.com/business/...scheme-members-warn-of-legal-action-1.1745135 there are 5186 deferred members. So are they looking for over 10,000,000 euro? That's a pretty fancy legal team.

My guess is that in a nod to high fares airlines the group have decided that if they get maybe 5% of the members to pay 2k each it's a better plan than getting 90%+ to pay 150 euro. No way would I hand over 2k without knowing how much they need.

If I was a member of this scheme my biggest gripe would be with the trustees, my understanding is the fund was fully funded around 2007, but when the stock market tanked they lost their nerve and locked in their losses by switching into low risk assets. 

Had they done nothing the fund would be in surplus now. The trustees have lost around 1B euro by making a beginners investment mistake. This deficit is their fault alone.

While trustees could agree an overall strategy I see no value in trustees making tactical fund decisions, the problems are worsened if those trustees have an expectation that any blunders they make will be repaired by the tax payer or from Aer Lingus cash reserves. 

(Also there's no reason I think to hide the bank a/c number, charities regularly give out bank numbers. Maybe it'll even allow a sympathetic poster like Deiseblue to throw a few grand to their comrades)


----------



## MarkLynch (30 May 2014)

well if some brave trustees did not cut and run the market could never bounce back...


----------



## Steven Barrett (30 May 2014)

ashambles said:


> If I was a member of this scheme my biggest gripe would be with the trustees, my understanding is the fund was fully funded around 2007, but when the stock market tanked they lost their nerve and locked in their losses by switching into low risk assets.



Under pension legislation, if a scheme is fully funded, they have to stop contributing to the scheme. This is extremely short sighted as it is obvious that scheme assets will fluctuate over time and there should be some kind of allowance to keep a reserve. 

Irish trustees take the most risk in Europe. And then you read your post saying these particular trustees panicked along with the rest of the herd and sold at a massive loss. I presume with a pension fund of that size, there were professionals involved who are supposed to know what they are talking about? 


Steven
www.bluewaterfp.ie


----------



## Purple (31 May 2014)

Sunny said:


> Or maybe because its not true. Retired members taking 10% cut doesn't solve the problem. Existing members would still be looking at even a larger cut in their pension entitlements. And deferred members would be looking at a larger cut again. They are all in the same boat so it's not a case of one group against another.



Can you give the figures Sunny? 
I got that information from a retired Aer Lingus employee who was involved in the pensions area.


----------



## Deiseblue (1 Jun 2014)

ashambles said:


> While I understand people wanting to do what they can to maintain an expected pension, I'm not impressed by the content of the mail.
> 
> The first thing that jumped out was they don't give an overall amount they need for the legal action.
> 
> ...



The bit in brackets referring to me appears to be rather snide & unwarranted.

I must admit to being slightly taken aback as personal asides are practically  unknown on this site.


----------



## RainyDay (1 Jun 2014)

ashambles said:


> If I was a member of this scheme my biggest gripe would be with the trustees, my understanding is the fund was fully funded around 2007, but when the stock market tanked they lost their nerve and locked in their losses by switching into low risk assets.
> 
> Had they done nothing the fund would be in surplus now. The trustees have lost around 1B euro by making a beginners investment mistake. This deficit is their fault alone.


If this is true, it puts a dramatically different slant on the issue. I haven't seen this mentioned in any reports on the issue over the years. Are you sure about this?


----------



## MarkLynch (1 Jun 2014)

Thanks for everyone's comments, more heat then light but what did I expect on the internet... Anyway I will post any other details when I see my Uncle again.


----------



## elacsaplau (14 Jun 2014)

I see from the RTE website this morning that the Chief Executive has issued a letter about the pension plan.

I'm struggling to understand one point. My understanding is that pensioners are being paid from the pension plan. How can this happen, if as the company claim, it is a defined contribution as opposed to a defined benefit plan? Specifically, what regulation / legislation provides for such an approach?


----------



## Protocol (14 Jun 2014)

Any pension scheme pays existing pensioners....

For example, the Siemens pension scheme pays pensions to current pensioners, and so on.

It doesn't matter whether it's a DB or DC scheme.

The scheme/fund pays the pensions.

Who else would pay them?


----------



## LDFerguson (16 Jun 2014)

Protocol said:


> Any pension scheme pays existing pensioners....
> 
> For example, the Siemens pension scheme pays pensions to current pensioners, and so on.
> 
> ...



If I'm understanding the query correctly, it's HOW the pension scheme pays out the pensioners.  With a DC scheme, each member has a pot of money in their own name.  At retirement an annuity is bought with the member's pot and the annuity pays the pension.  

In a DB scheme, the overall fund is not divided up into individual member pots and at retirement, many DB schemes pay pensioners directly out of the overall scheme funds.  

Going by the query, the Aer Lingus scheme pays pensioners directly from the scheme assets and yet claims to be a DC scheme.


----------



## elacsaplau (16 Jun 2014)

Thanks Liam

My query is as you have said – are you able to shed any light on the regulatory / legislative basis which provides for such an approach please? I may not be alone in my confusion. I did a bit of digging this evening. In the notes to the financial statements of Aer Lingus’ annual report for the year ended 2010, it states:

*29 Pensions and other post employment beneﬁts*
_
The Group operates a number of externally funded pension schemes for the majority of its employees. The Irish Pension Schemes meet the definition of defined benefit schemes under the terms of the Pensions Act 1990. One of the Irish Pension Schemes, the Irish Airline (General Employees) Superannuation Scheme (the “Main Scheme”) is operated in conjunction with a number of other employers._

However, in the following year’s report, the note regarding pension plans had become……

*25 Defined contribution pension schemes*

_Aer Lingus participates in a number of pension schemes for its staff. The principal schemes, and the Group’s contributions to them, are set out in the table below. These are accounted for as defined contribution schemes because the rate of contribution to the schemes is fixed._

So did something happen during 2011? Was the plan re-registered with the Pensions Board during 2011? Were employees told that they were no longer in plans which met the definition of defined benefit schemes? Are these plans still registered with the Pensions Board as DB plans but described as DC plans in the company’s annual report? etc., etc.


----------



## LDFerguson (17 Jun 2014)

I've no insights into this scheme, other than what I read in the media, but it seems to be a strange cross between a DB and a DC scheme. 

From [broken link removed]



> The great majority of Aer Lingus staff (other than pilots) are members of the Irish Airlines Superannuation Scheme (“IASS”). This pension scheme is unusual for a number of reasons.
> 
> Firstly, it is a multi-employer scheme, with the principal other employers being the Dublin Airport Authority (“DAA”) and Shannon Airport Authority (“SAA”).
> 
> Secondly, the contribution rate is fixed and cannot be changed without the agreement of employer and employee. For this reason, from the employer’s perspective, it is a defined contribution scheme. However, under the trust deed and rules, the pension scheme targets benefits linked to final salary and length of service. The funding rate and investment performance is inadequate to support these target benefits and, as a result, a substantial deficit has arisen in the scheme. On 31 December 2013, this deficit was estimated by the scheme actuary to be some €715 million on the minimum funding standard basis. Mathematically, approximately 65% of the schemes liabilities are associated with current or former members of Aer Lingus staff.


----------

