Bank of Ireland rejects criticism of pension scheme for new employees

Bank of Ireland today (Monday 25th September) rejected the latest IBOA criticism of its pension arrangements for new staff from 1st October saying that new employees will have a very attractive pension prospect at retirement under the new arrangements.

The Bank also described the IBOA criticism as misleading saying that new employees who contribute the full top-up amount under the new scheme will have the prospect of a 66.7% pension after 45 years service in addition to index linking and the State pension. Existing employees will not be impacted and will retain their existing pension scheme.

The new scheme comprises elements of a defined benefit and a defined contribution scheme:

It comprises a 'Retirement Capital Account and an optional 'Personal Investment Account'. Under the scheme the Bank and the employee contribute to a fund (employee contribution is 2.5%), the Bank protects the fund against investment underperformance and, at retirement, the employee uses the fund to purchase retirement benefits. In this way, the employee gets security around the value of their fund at retirement. The second or optional element of the scheme is a 'Personal Investment Account', which is a matching defined contribution scheme, with the Bank matching employee contributions of up to 3%.

The new scheme is designed to support the Bank's objective of attracting and retaining high-calibre employees and minimising the excessive volatility currently experienced in defined benefit schemes. It also follows a well-established trend away from traditional defined benefit schemes with many businesses in Ireland and abroad reviewing their pension and investment strategies to address serious challenges notably improved mortality, falling long-term bond yields, and new accounting regulations.

Ends

25 September 2006

Contact:

Dan Loughrey,
Head of Group Corporate Communications
Bank of Ireland