The recent dispute involving Bank of Ireland (BOI [1]) concerns the bank’s move to introduce a so-called ‘hybrid’ pensions scheme for new employees from 1 October 2006, while still retaining the longstanding defined benefit (DB) scheme for existing employees. The new scheme is regarded as a ‘mix’ of the traditional DB scheme and the increasingly common defined contribution (DC) scheme.[1] http://www.bankofireland.ie/
The current impasse concerning the pensions dispute between Bank of Ireland and the Irish Bank Officials Association represents an important challenge for the Labour Court. In particular, the court has been faced with the task of finding a creative way to deal with this difficult dispute and hence to rescue a key element of the new ‘Towards 2016’ social partnership agreement.
Background
The recent dispute involving Bank of Ireland (BOI) concerns the bank’s move to introduce a so-called ‘hybrid’ pensions scheme for new employees from 1 October 2006, while still retaining the longstanding defined benefit (DB) scheme for existing employees. The new scheme is regarded as a ‘mix’ of the traditional DB scheme and the increasingly common defined contribution (DC) scheme.
The pensions dispute has already caused a serious division in the social partners’ own dispute resolution organisation, the National Implementation Body (NIB), which is a key element of the social partnership system. Under [Towards 2016 – Ten-year framework social partnership agreement 2006–2015 (2.86Mb PDF)](http://www.taoiseach.gov.ie/attached_files/Pdf files/Towards2016PartnershipAgreement.pdf), the NIB was assigned an enhanced role in helping to resolve pension disputes. However, in this instance, it has fallen to the Labour Court to resolve the row, having been asked by the NIB to hear the case.
Taoiseach’s intervention
The significance of this dispute in the context of the social partnership system and the formal industrial relations process was highlighted by the intervention of the Taoiseach (Irish Prime Minister), Bertie Ahern. Mr Ahern commented that he did not feel that ‘very profitable companies’ could argue that pensions issues were affecting their viability. While he did not mention the BOI by name, there was little doubt that the bank, whose half-yearly profits of €852 million (up by 27%) were announced a week later, was one of the companies he was referring to. On the same day that the Taoiseach made his comments, 9 November 2006, BOI and the Irish Business Officials Association (IBOA) made their formal submission to the Labour Court.
Reaction of social partners
After the case was referred to the Labour Court by the NIB, Labour Court Chair, Kevin Duffy, asked both sides to maintain the ‘status quo’ and desist from doing anything that would exacerbate the dispute. As a result, IBOA abandoned a plan to hold a strike ballot. BOI said that it respected the court’s request, but that for contractual reasons it could do nothing to alter the fact that it had already implemented the new scheme from 1 October. IBOA refuted this argument, while the Irish Congress of Trade Unions (ICTU) claimed that the bank had breached the ‘Towards 2016’ partnership agreement.
However, the Irish Business and Employers Confederation (IBEC) backed the bank’s interpretation of the Labour Court’s request and its stated reasons for altering the pensions scheme. In response to the comments made by the Taoiseach, IBEC Director, Brendan McGinty, commented that employees and employers ‘in a number of business sectors’ know that the pensions environment has ‘changed utterly’ in recent years. As a result, he added, many pensions schemes in the private sector must be reformed if they are to remain viable.
Main arguments
IBOA claimed that there was ‘no justification’ for BOI, which reported profits of €1.5 billion for 2006, to introduce the new scheme. The decision to do so ‘while negotiations are in progress’ constituted a ‘breach of existing negotiation procedures’, IBOA insisted.
IBOA stated that an independent evaluation of the new scheme, by accountants Farrell Grant Sparks (FGS), establishes that it does not provide the same benefits. In addition, new employees will have to make higher pension contributions than existing staff members. The association added that BOI’s traditional staff pensions scheme had not encountered any funding difficulties. It pointed out that the Allied Irish Bank (AIB), Ireland’s largest bank, ‘are in negotiations with IBOA, arising from an Independent Tribunal, aimed at moving away from defined contribution schemes for new staff’.
In its submission, BOI contended that there were many examples of companies that had failed to address their pensions issue in a timely manner, in turn ‘resulting in drastic remedial measures’. The bank added that most large corporations, including financial services companies such as AIB, Irish Life and Permanent, Anglo Irish Bank, Barclays, Citigroup, Lloyds TSB, Royal Bank of Scotland and Credit Suisse had closed their DB schemes. At the same time, BOI argued that failure to address the new (FRS 17) accounting rules challenge ‘could result in a threat to the group’s ability to support the pension entitlements of existing staff’.
Commentary
It would represent a sea change if a Labour Court recommendation were actually rejected by BOI, which is a key member of IBEC and which has a tradition of accepting voluntary findings issued by the court. Nevertheless, it is noteworthy that the informal ‘rules of engagement’ under which IBEC members – but not necessarily trade unions – accept such recommendations, have been undermined by some major companies in recent years.
Brian Sheehan, IRN Publishing
Eurofound recommends citing this publication in the following way.
Eurofound (2007), Labour Court to rule in bank dispute over pensions, article.
