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ALL PARTY BRIEFING. 25 September 2013. MOTION ON ASSETS/OWNERSHIP.

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All party briefing

ALL PARTY BRIEFING

25 September 2013


Motion on assets ownership
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
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
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 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
‘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
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
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  • Ongoing – neutral based on ambitious 6.25% return and ‘employer covenant’ that has been withdrawn regarding deficit resolution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
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
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
WIND UP PRIORITY‘Joe’ the ESB man

PRE ‘WIND UP’

  • Salary of €60k PA

  • 30 years service

  • Pension ‘pot’ €630,000

  • Annual pension €22,500

  • Lump Sum €67,500

POST ANY ‘WIND UP’

  • Salary of €60k PA

  • 30 years service

  • 3% benefit only after pensioners liabilities

  • Pension of €675 PA

  • €13 a week


Communications
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
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
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
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 accounts1
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
GOVT. DEMANDS

Other Demands……..

€80m pension levy(which 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)

  • ‘Normal’ dividend of €78.4m for 2013

  • ‘Special’ dividend for €400m 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)


Trade union strategy
TRADE UNION STRATEGY

‘Three legged stool’ approach

  • Legal Strategy

    2. Political Strategy

    3. Industrial Strategy


Legal challenge
LEGAL CHALLENGE

  • Brian Baitson – TEEU – Dublin

  • Billy Flavin – Unite – Newcastlewest

  • Owen Kilmurray – SIPTU - Dublin

  • Margaret O’Connor – ESU – Tralee


So who has the risk
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
SCHEME DEMOGRAPHIC - 2018

Including…….

Padraig McManus

John Shine

Brid Horan

John Campion

and

most of EDT

8,000Retirees

Secure Pensions

No risk

No contributions

Under 55+

3,000Serving Staff

‘No guarantees’

Continuing contributions

Uncertain benefits

The entire risk


Management briefings to sm1 sm2 in last few weeks
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 confirm, that in a deficit situation, staff are on their own


Edt buzzwords
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 buzzwords1
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
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
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.


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