ALL PARTY BRIEFING
25 September 2013
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withdrawn regarding deficit resolution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withdrawn covenant regarding deficit resolution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’
POST ANY ‘WIND UP’
 Salary of €60k PA
 Salary of €60k PA
 30 years service
 30 years service
 Pension ‘pot’ €630,000
 3% benefit only after
 Annual pension €22,500
 Lump Sum €67,500
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
Other Demands……..
 ‘Special’ dividend for €400m
 €80m pension levy(which
for 2013
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)
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 McManus
John Shine
Brid Horan
John Campion
and
most of EDT
8,000 Retirees
Secure Pensions
No risk
No contributions
3,000 Serving Staff
Under
55+
‘No guarantees’
Continuing contributions
Uncertain benefits
The 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 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.