The actual figure is €990 million but what’s €10 million between friends (like an employer and the workers whose future is reliant on their employers promise. With friends like these……)
While the 2015 financial results published for Bank of Ireland may lighten the mood for shareholders and chief executive Richie Boucher, reports have illustrated significant further losses for Bank of Ireland’s pension scheme members.
Figures reveal further blows to the Defined Benefit Pension Scheme with its persistent deficit increasing by a further €250 million since the start of January 2016. Although the bank’s Chief Financial Officer reassured analysts that this increase was ‘probably less than people anticipated’, the volatile start to 2016’s Global Stock Market has now pushed the overall deficit to €990 million since the 31st of December 2015.
Despite the general consensus from Bank officials being that generation of organic capital may be sufficient to combat this ‘short-term’ volatility, the obvious risks to pension scheme members who are not quite of retirement age and who decide to leave their benefits in a scheme with a persistent deficit may be unavoidable.
Deferred members should consider the risk that may not have the commitment (or capability) to fully fund the scheme. They should also think about how far they are away from the retirement age and how many of their past colleagues will get to retirement before they do.
So what options do the Bank of Ireland deferred members have?
Leave the preserved pension in the BOI DB scheme: the main risk is that the member will not get the full pension promised.
This can be done a number of ways …
- A scheme reduction for current members and deferred members.
- A scheme wind up before the member reaches the retirement age. In this case, pensioners in payment take priority. In some extreme cases, there may be no funds left to provide transfer values for deferred members.
- A scheme wind up after the member reaches the retirement age. In this case, the member will get a pension but it will be reduced from the amount promised.
An alternative option is to look at the proposed transfer value give with the annual statement. There is only one true value of the pension scheme. It is either the transfer value being offered or the future promise of a pension. The transfer value will very roughly represent what the member would get now if the scheme was wound up.
The preserved pension is an IOU from the Trustees to the member. It is a promise backed by anticipated future employer contributions, promising a future benefit subject to many risks. If the financial commitment to the scheme is in doubt, the question may be when to take the transfer rather than if.
If you are concerned about your pension scheme benefits or would like to review your options at retirement, contact us today on +353 1 6815293 or email us at email@example.com