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Adding a few shillings to the bank pension

Read more about: Economy, Unemployment, Waterford     Print This Post

Brian Cowen to Enda Kenny today  –

[Irish Times] “Contrary to how this is being portrayed, this is a payment into an overall fund that provides for the pensions of most Bank of Ireland staff. If it wasn’t made, the fund would be short-resourced to meet its obligations to all Bank of Ireland pensioners and staff who retire in the future,” the Taoiseach said.  “It’s a payment which was being paid to the bank staff pension fund in order to sustain agreed pension of the chief executive [Richie Boucher], a pension which is based on his salary and which is now controlled by Government under the Covered Institutions Remunerations Oversight Committee.  “The payment is into the pension fund, because unlike public service pensions, obviously it must be pre-funded.”

Note: The National Pensions Reserve Fund was founded to pre-fund public service pensions after 2025.  But now it’s in a worse position to do that, because it was raided for the preference share funding for Bank of Ireland and AIB, capital which allowed those banks to stay in business and continue to fund their pensions.

By contrast, Waterford Crystal, which received no NPRF infusion, will leave its workers with about one-third of their promised pensions — which is a lot less than EU Directives were supposed to mean for insolvent companies.

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21 Responses to “Adding a few shillings to the bank pension”

  1. # Comment by Betty Apr 21st, 2010 16:04

    I wonder how long will it be before we have the revolution—the people who destroyed our economy—politicians, bankers,regulators, central bank—-have secured obscene pensions for themselves ( they would put african dictators, imelda marcos, caucascau et al to shame).The longer the delay for the revolution the more violent and bloodier it will be.

  2. # Comment by EWI Apr 21st, 2010 18:04

    Today’s news from Bizarro FF World:

    [...] Speaking in the Dáil this afternoon, Deputy O’Keeffe said there was nothing worse than financial over-regulation, which he claimed brought about mischief and blackguarding [...]

    You couldn’t satirise it.

  3. # Comment by Des Groome Apr 21st, 2010 19:04

    To be fair to FF – many of the back bench are just as incensed by this pension fund flagrancy as the general public and their outrage is not just electorally motivated.

  4. # Comment by EddieL Apr 21st, 2010 21:04

    The money still flows only one way – from the bottom to the top. Hands up all those who still believe that all this was in the planning and execution stages for a long time. Maybe Des will put up his hand as he believes that backbenchers are incensed by what is going on. As far as I can see the only time backbenchers were incensed was when there was a possibility that lower-paid civil servants wages might not be cut.

  5. # Comment by P O'Neill Apr 21st, 2010 22:04

    Note that Sean Fleming and Ned O’Keeffe seem to have completely obviousopposing views about Patrick Neary.

    And did Cowen know that the pension payment for Boucher was in case in wanted retirement at 55?

  6. # Comment by Betty Apr 21st, 2010 22:04

    9pm news—Boucher mightn’t retire at 55 so he is foregoing the arrangement but if Boucher takes retirement at 60 what pension does he get????Will the 1.5 million be slipped in then.
    P. re Fleming and O’Keefe- do you mean opposing views?

  7. # Comment by Veronica Apr 22nd, 2010 00:04

    P,

    The ‘shameless’ appear to have been shamed into letting this one pass – for the moment anyway. Listening to Kieran Mulvey on the radio news at one today, and hearing his understandable frustration, one can’t help wondering where these people think that flaunting their ill-deserved and ill-gotten gains in the face of the public in this way is going to get them.

    They’re like cats who, despite their reduction to domesticity and dependence and the propensity of their owners to kick them, have never quite gotten over the fact that they were once worshipped in Egypt.

    I’m not sure, though, how you’ve arrived at the relationship between the BOI pension fund arrangements for their senior executives and the National Pensions Reserve Fund. As it was originally conceived – and I was a member of the Pensions Board that made the recommendation for its establishment – the NPRF was supposed to create a fund to support social welfare pensions. This was based on demographic analysis plus likely economic growth and the numbers of persons already providing for a private pension in their retirement years. When all the sums were done, it was obvious that without some form of an NPRF, there was a likelihood of a severe shortage in funds to pay adequate old age pensions from Exchequer resources without imposing punitive taxation on the workforce of the future. The Pensions Board did not consider the public sector pensions dimension, since this was being examined by a separate body which had yet to make its recommendations to Government. However, the then Minister for Finance, Charlie Mc Creevy, included provision for public sector pensions (which, as you know are paid directly from the Exchequer) within the fund he set up in the 2000 Act.

    There was much debate within the Pensions Board about ‘ringfencing’ any such fund against a raid by rapacious governments of the future in the event of some economic catastrophe or some other perceived priority need. (Needless to say, it was hard to imagine a catastrophe of the dimensions we have experienced over the past two years at that point of the boom in the late-1990s, but we did try!) To a certain extent, Section 20 of the 2000 Act went some way towards trying to forestall future government raids and keeping the fund intact against any drawdown until 2025.

    I’m happy, in some ways, that when the full extremity of Ireland’s difficulties became apparent that the NPRF was there as a ‘rainy day’ fund. What has personally dismayed me, though, over the past two years is how many times over the NPRF has been theoretically ‘spent’, particularly in respect of proposals for so-called job creation, or ‘economic stimulus’ initiatives of one kind or another, that sound good in theory but do not bear critical scrutiny in respect of any likely return on investment, either short or long term. Politicians appear to have forgotten why the fund was created in the first place.

    That said, I’m happier that the NPRF would be invested in banks’ recapitalisation, which in the long term offers the prospect of a profitable return to the taxpayer, than on a plethora of ill-considered and politically populist government-funded schemes of ‘job creation’. We had enough of that money-wasting stuff and nonsense in the 1980s without repeating the same mistakes all over again.

    By the way, apparently some 75% of ‘defined benefit pensions schemes’ are now underfunded and in significant jeopardy. These were always viewed as the ‘gold star’ pensions, with ‘defined contribution’ schemes the poor relation.

    I agree with Betty – at some point in the future money will be slipped into the BOI senior executives fund to meet their current fund shortfall. In the normal course of events, should we be unduly concerned about this? Maybe not; in point of fact in the long run it may be a good thing for BOI to get their pension fund in order. The case of the Waterford glass workers is not related: it is about Ireland’s transposition of the EU Insolvency Directive.

    The real problem with the BOI is their blatant insensitivity to public opinion and their ham-fisted attempt to push through the top-up to allow their CEO to retire on full pension at age 55 at a time when the rest of the working world in Ireland are being asked to put their hands in their pockets to pay for the sins of these ‘fat cats’. A good kicking is definitely in order.

  8. # Comment by P O'Neill Apr 22nd, 2010 01:04

    I basically agree Veronica but the point I was trying to make that an insolvent B of I — and that was on the cards during the worst days of the financial meltdown — would not have been able to pay anyone’s pension, and money from the public pension fund helped keep them afloat. To protect their own pensions. Yet workers unlucky enough to be with an insolvent company that is not a bank don’t get any such protection.

  9. # Comment by Veronica Apr 22nd, 2010 08:04

    P,

    Banks get bailed out because societies and economies can’t function without them. The motivation in recapitalising them has nothing to do with salaries or pensions paid to bank workers. For instance, when I had my own small business the bank paid out on a variety of standing orders from my company accounts: the rent, the monthly wage cheques, ESB bills, rates and taxes etc. plus a small overdraft provision for whenever we ran into a temporary cash flow problem. So when I think about it, I imagine what would have happened if I woke up one morning and all my accounts – personal as well as business – were frozen because overnight the bank had failed.

    Apart from the fact that I wouldn’t have had access to money from no longer functioning ATMs to buy as much as a pint of milk, nobody else would get paid what I owed them either, including the people who worked with me, suppliers (mostly other small businesses like myself), the revenue and so on. And my situation would have been replicated thousands of times over throughout our society. Which is why governments step in as the lender of last resort when major financial institutions are faced with a liquidity or a solvency issue that could bring down the entire financial system – they don’t have a choice.

    Under the terms and conditions of State aid for financial institutions, restrictions have been imposed on remuneration of top officials. To what extent this affects private pension schemes within the institutions themselves and any rights by the government of the day to interfere with how those schemes are administrated outside of normal pension regulation – or should do – is what I understand the political argument this week to have been about. But whatever the letter of the law, BOI’s attempted sleight of hand to bump up the personal pension fund of their CEO has rightly infuriated everyone. I don’t know about you P, but it seems to me that the more irredeemably arrogant and stupid you are, the more you reckon you should get rewarded in this country.

    My argument is that Waterford Glass is a different issue and it’s simplistic to conflate the two. It’s a matter of opinion whether BOI were technically insolvent or not; but they were never declared insolvent and neither was their pension scheme as far as I know. The Waterford Glass workers are suing the government over how Ireland transposed the EU Insolvency Directive, which they claim has left them at a personal disadvantage. Sure, it will be an interesting case for the courts to adjudicate on, but it has nothing to do with the BOI issue unless you believe that governments should go round bailing out the pension funds of every company in the country if and when they actually become insolvent. They can’t.

  10. # Comment by Betty Apr 22nd, 2010 10:04

    Boucher was just unlucky that his pension issue surfaced in the middle of trying to sell the Croke Park deal. The other pay and pension issues—-pay to higher civil servants, Neary, Roddy Molloy, other bankers, retiring elected representatives, judges, et al,et al were just brazened out—-it’s the law–they have legitimate expectations–blah,blah,blah.
    BTW off subject–is the Planning tribunal still sitting, did another judge follow Flood, who was Haughey in front of, was Bertie Moriarty ???Were Dunlop, Burke and Lawlor(RIP) planning???At least none of us will ever forget or confuse Gogarty, he was brill.

  11. # Comment by Veronica Apr 22nd, 2010 17:04

    Ah yes, old James Gogarty was ‘brill’ all right! Except that his evidence to Mr. Justice Flood and his Tribunal was a bit wonky and now that its treatment by Flood has been filleted by the Supreme Court, that Tribunal’s conclusions are thrown into doubt as well. As Mr. Justice Hardiman observed yesterday on an appeal brought by a wealthy company, JMSE, against Flood’s findings: “It is chilling to reflect that a poorer person, treated in the same fashion by the tribunal, could not have afforded to seek this vindication.”

    On your BTW – Flood became Mahon; Haughey appeared initially before the McCracken Tribunal in 1997 and later gave evidence to the Moriarty Tribunal on three different periods between July 2000 and February 2001. Moriarty’s first report was published in 2006. Publication of his final report, which is mainly concerned with the granting of the second mobile licence to ESAT, is delayed. Bertie Ahern gave evidence to the Mahon Tribunal, as did Dunlop, Burke and Lawlor, as its brief was to examine planning matters. Tribunals have turned out a right dog’s dinner.

  12. # Comment by P O'Neill Apr 22nd, 2010 18:04

    On that dog’s dinner, Colm Keena’s piece today strikes me as (1) devastating and (2) extremely carefully written. There might be “oul’ talk” as they say that can’t go in print. Yet.

  13. # Comment by EWI Apr 23rd, 2010 10:04

    Banks get bailed out because societies and economies can’t function without them. The motivation in recapitalising them has nothing to do with salaries or pensions paid to bank workers. For instance, when I had my own small business the bank paid out on a variety of standing orders from my company accounts: the rent, the monthly wage cheques, ESB bills, rates and taxes etc. plus a small overdraft provision for whenever we ran into a temporary cash flow problem. So when I think about it, I imagine what would have happened if I woke up one morning and all my accounts – personal as well as business – were frozen because overnight the bank had failed.

    Well, everyone – not just SMEs! – needs to lodge and withdraw money, have standing orders etc. Yet strangely enough, the nationalised Northern Rock in the UK (to give a fairly recent example) somehow continued doing these things, and Quinn Insurance continues paying out on policies even though it’s in examinership.

    So the TINA justification by FF types for the bailout makes no sense, and leads to reasonable suspicion of less pristine motives at work here.

    Sure, it will be an interesting case for the courts to adjudicate on, but it has nothing to do with the BOI issue

    Oh, really? I disagree – it seems illustrative of the observable rule that the boss class are very adept at looking after themselves, and short-changing workers. Very illustrative indeed.

  14. # Comment by Veronica Apr 23rd, 2010 13:04

    Ewi,

    if you care to read the second paragraph of my original post you will note that my point is that one ‘for instance’ is replicated throughout the economy and the entire financial system goes into meltdown, which is something no government can allow to let happen. Taking selective quotes and then twisting their meaning to suit your own perceptions ultimately does no credit to your argument.

    By the way, I’m not sure its a great idea to go off quoting Northern Rock as a positive example of anything. The “temporary public ownership” promised by the Chancellor when the Bank was nationalised in February 2008 turns out to have been more like wishful thinking on his part and the Bank remains mired in one controversy after another, including its continuing to lend out 125% mortgages under its ‘Together’ policy even after it was bailed out. At the end of 2009, the cost to the British taxpayer of banks bailouts, including NR’s nationalisation, amounted to £131bn sterling.

    Also, the case being taken by the Waterford Glass former employees is, as I understand it, against the government about the transposition into Irish law of an EU Directive. I’m not aware that pensionable employees of BOI have mounted a similar action? Have they?

  15. # Comment by Veronica Apr 23rd, 2010 13:04

    P,

    Good article by Colm Keena, all right. Maybe you’d think of doing a post about Tribunals at some stage and how it is they seem to be heading towards acquiring a reputation historically associated with witchhunts and inquisitions down through the ages? Given that the Banks Inquiry proper is supposed to start this summer, and the political hullabaloo there’s been about it already, it might be interesting?

  16. # Comment by P O\'Neill Apr 23rd, 2010 19:04

    Moriarty speaks.

  17. # Comment by Betty Apr 23rd, 2010 20:04

    Is it a case of when you’re in a hole stop digging.

  18. # Comment by EWI Apr 23rd, 2010 20:04

    if you care to read the second paragraph of my original post you will note that my point is that one ‘for instance’ is replicated throughout the economy and the entire financial system goes into meltdown, which is something no government can allow to let happen. Taking selective quotes and then twisting their meaning to suit your own perceptions ultimately does no credit to your argument.

    I’ve no idea what you’re talking about.

    By the way, I’m not sure its a great idea to go off quoting Northern Rock as a positive example of anything.

    I never claimed Northern Rock as a “positive” anything. You resorted to the favourite FF defence that There Is No Alternative, in this case specifically formulated as “OMIGOD no atms!”. I have merely pointed out that this is a very silly thing to say, and that life could indeed go on even had the boards of AIB, BoI, Anglo etc. all been pink-slipped en masse and the banks themselves nationalised on day one of their collapse.

    By the way, everyone agrees that we are on the hook for all of these chancers’ losses one way or another now, thanks to FF (with complicity from FG, who agreed with it at the time). The least that the long-suffering Irish public deserves is to see a few bankers fed to the lions.

    I’m not aware that pensionable employees of BOI have mounted a similar action? Have they?

    I fail to see your (presumed) point here.

  19. # Comment by Veronica Apr 23rd, 2010 22:04

    P & Betty,

    Whatever’s going on, it doesn’t look good, does it? Has any Tribunal memberever previously made such a statement?

  20. # Comment by EWI Apr 23rd, 2010 23:04

    On that dog’s dinner, Colm Keena’s piece today strikes me as (1) devastating and (2) extremely carefully written. There might be “oul’ talk” as they say that can’t go in print. Yet.

    On the other hand, there may very well be a campaign underway (by very well-financed unknown parties, of course) to muddy the waters ahead of the Tribunal’s findings. Anderson, it should be noted, would have had nothing to do with the substantial issue being inquired into here – the internal goings-on in Michael Lowry’s department.

    as an aside, it’s a reminder of just how small a country we are that Miriam O’Callaghan’s brother Jim is employed by O’Brien as his senior counsel at the very same Tribunal. (Perhaps she might have considered excusing herself from covering the issue in recent weeks?)

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