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25 September 2013
ALL PARTY BRIEFING
MOTION ON ASSETS/OWNERSHIP
This Conference mandates the GOU/affiliates to formulate a policy and
enable a ballot of Union members in ESB for industrial action – up to
and including strike action (full withdrawal of labour) - in the event of
steps being taken to implement any further sale, disposal, transfer or
divestment of assets.
Liberty Hall
21 September 2013
DETAILED PRESENTATION
Details of your scheme
Accounting standards
Wind Up & Wind Up Priority
2010 Pension Agreement
Change in Accounts
Dividend Demands & Funding Crisis
Trade Union Strategy
DB v DC SCHEMES
In a defined benefit scheme, benefits are defined and contributions and investments must be adjusted to provide these defined benefits
In a defined contribution scheme, the contributions are defined, and whatever return these contributions generate becomes your pension
YOU ARE IN A DB SCHEME
You are in a MANDATORY defined benefit scheme
These defined benefits are based on salary and service
Under the CARE proposal, the scheme remains a defined benefit scheme
‘Joe’ the ESB man
Pensionable salary of €60k per year
30 years service
Annual accrued pension of €22,500 to date
Lump Sum benefit of €67,500 to date
Joe has accrued a pension pot to provide this benefit of:
€630,000
METHODS OF MEASURING GROUP DB SCHEMES
There are 3 types of measurement system for DB schemes, all operating in parallel and all with their own implications. These are :
Minimum Funding Standard (MFS)
IAS 19(International Accounting Standard)
Ongoing Valuation
DEFICIT/SURPLUS???
MFS - deficit of €1.6bn with only 5 years of plan left and risk reserve funding required then (will add at least €0.5bn to liabilities)
IAS 19 - deficit minimum of €2.07bn - this is hidden from accounts by calling scheme ‘DC’
Ongoing – neutral based on ambitious 6.25% return and ‘employer covenant’ that has been withdrawn regarding deficit resolution
RISK ? WHO HAS IT?
Clearly this scheme is carrying significant risk by each of these measurements
When we go on further we will assess on who, or where, this risk is now borne…….
SO CAN MY SCHEME BE WOUND UP?
Under the rules it cannot be
But under the law as introduced in the Pensions Act 2012, wind up has now become a real concern based on the funding situation and the withdrawn covenant regarding deficit resolution
WIND UP PRIORITY‘Joe’ the ESB man
PRE ‘WIND UP’
Salary of €60k PA
30 years service
Pension ‘pot’ €630,000
Annual pension €22,500
Lump Sum €67,500
POST ANY ‘WIND UP’
Salary of €60k PA
30 years service
3% benefit only after pensioners liabilities
Pension of €675 PA
€13 a week
COMMUNICATIONS
Detailed documentation, and communication on this and all pension related issues is available to members(and will continue to be) at ……………..
www.esbgou.ie/latestnews
2010 PENSION AGREEMENT
‘Under the CARE proposal the scheme remains a defined benefit
scheme’
Page 3
Proposals between ESB and the Group of Unions representing staff on the issues of Pension Review and related matters 2010
CHANGE TO ACCOUNTS NEW WORDING……
‘ESB does not intend to make further payments to the Scheme to address future deficits, no matter what the circumstance, other than regular employer fixed rate contributions, as specified in the current Scheme Regulations, of up to 16.4% of pensionable salary’
CHANGE IN ACCOUNTS
2009 Annual Report & Accounts (Page 107)
These accounts confirm the scheme as a DB scheme and print a liability in the
company accounts at €1.957bn.
CHANGE IN ACCOUNTS
2010 Annual Report & Accounts (Page 71)
‘Following the approval of a comprehensive agreement with staff to address the actuarial deficit arising on this
scheme, the extent of the employers and of the members obligation in respect of the scheme were
clarified. Accordingly, from October 2010 the scheme is
accounted for as a Defined Contribution scheme.’
GOVT. DEMANDS
‘Normal’ dividend of €78.4m for 2013
‘Special’ dividend for €400m from sale of non-strategic assets
‘Special’ dividend for €65m as a result of bailout going ‘off track’
‘Normal’ dividend for 2014 to be 30% of profits (estimated to be over €500m next year)
Other Demands……..
€80m pension levy(which ESB refuse to pay or contribute towards)
Meet MFS or be ‘wound up’
Fund ‘risk reserves’ from 2018 (ESB accounts will not allow them to fund any of this)
TRADE UNION STRATEGY
‘Three legged stool’ approach
1. Legal Strategy
2. Political Strategy
3. Industrial Strategy
LEGAL CHALLENGE
Brian Baitson – TEEU – Dublin
Billy Flavin – Unite – Newcastlewest
Owen Kilmurray – SIPTU - Dublin
Margaret O’Connor – ESU – Tralee
SO….WHO HAS THE RISK….?
Based on the Annual Report ESB has absolved itself of all risk for the scheme’s deficits
The Government will not accept, to date, any risk whatsoever for this scheme
The retired staff, based on the wind up priority, have secure pensions and carry no risk
YOU THE ACTIVE MEMBERS HAVE BEEN LEFT CARRYING THE ENTIRE RISK - ALONE
SCHEME DEMOGRAPHIC - 2018
Including…….
Padraig McManusJohn ShineBrid Horan
John Campionand
most of EDT
Under 55+
8,000 Retirees Secure PensionsNo riskNo contributions
3,000 Serving Staff‘No guarantees’Continuing contributionsUncertain benefitsThe entire risk
MANAGEMENT BRIEFINGS TO SM1 & SM2 IN LAST FEW WEEKS
EDT confirmed that ESB would not put another cent into the scheme ‘no matter what the circumstance’
EDT view is that company financial strength is sacrosanct
EDT confirmed they have no agreement with GoU for change in accounts
EDT confirmed they have no agreement with Trustees for change in accounts
EDT confirm, that in a deficit situation, staff are on their own
EDT BUZZWORDS
Change to accounts would have ‘consequences’
ANSWER - The 2010 change already has had the consequence of shifting all of the pension risk on to (fewer and fewer) active members
Every day that continues, the risk grows and the burden on active members grows
EDT BUZZWORDS…
In pensions there are ‘no guarantees’
ANSWER – Based on accounting fiction the ESB has guaranteed profits, the government have guaranteed dividends, the retired staff have guaranteed pensions, NIE staff have an absolutely guaranteed ESB pension but..
ESB’S OWN SKILLED AND LOYAL WORKERS ONLY GUARANTEE IS UNSUSTAINABLE RISK WITH ALMOST
CERTAIN DISASTER FOR THEIR PENSIONS
LINES OF ARGUMENT ARE NOW CLEAR..
3 years of ESB double speak has ended
ESB have been ‘smoked out’ and their real position on abandonment of staff pension has been exposed and is now admitted to…..
ESB have washed their hands of responsibility – any responsibility – for deficit resolution
The staff are on their own………………
MOTION
That this Conference instruct affiliates to ballot their members for Industrial Action, up to and including Strike Action, until ESB revert to recognising the main staff pension scheme as a Defined Benefit pension scheme and until ESB accept their liability for funding current and any future deficits in accordance with the employees terms and conditions of employment and accrued pension entitlements.