I am not aware of it being laid before the Houses of the Oireachtas. The Broadcasting Act 1960 requires that pension benefits and pension schemes that convey defined benefits be approved by both Ministers. A defined contribution scheme is a different vehicle. Under a defined pension scheme, people remain members until they die because the trust provides the pension to them. Under a defined contribution scheme, a different mechanism is used, which is deeply unfair but which could easily be solved, and we have made representations to the Departments of Social and Family Affairs and Finance in this regard. People who retire from such a scheme have no other possibility other than the trustees take their money, go to an insurance company and purchase an annuity. Very restrictive conditions apply to the purchase of annuities. However, that terminates their relationship with the trust.
I do not mean to be technical but under the legislation it is not at all clear that is what was envisaged or contemplated in 1960, bearing in mind the legislation was considered in the 1950s when defined contribution schemes were not even a sparkle in anybody's eye. The way the legislation was crafted did not contemplate such circumstances. It is not clear there would have been a requirement to lay the deeds before the Houses of the Oireachtas. However, the deeds have been submitted to both Ministers. To avoid doubt, it would be much better if they were approved. We are not in a position to determine whether they are legal but we would much prefer if they went through the appropriate process.
In 2002, as part of the restructuring of RTE, we lifted every stone to establish what needed to be renewed and tightened up and what we needed to get ourselves organised about. For example, as part of the strategy, we considered closing medium wave because we did have an alternative, that is, long wave, which was only launched in 2004. We put it to the side even though it would have saved us approximately €1.5 million a year at the time.
Similarly with this issue, we examined the way pension benefits were provided. We had many issues relating to employment contracts and so on while, at the same time, there was a pressing need to reduce the number employed or change the nature of what they were engaged in, by agreement. Together with the trade unions and the managers' association, we commissioned a firm of actuaries to examine the defined contribution scheme because it was becoming the major scheme. Coyle Hamilton Willis produced a report in October 2003 and RTE accepted the recommendations, which involved significant additional costs and many changes to, and a restructuring of, the scheme.
The unions came back in the middle of 2004. They had varying positions and needed to time to consider the report. They were unhappy with some parts of it and happy with others. The managers' association did not come back at that stage.
In 2005 , the unions, having considered the entire issue, lodged a claim with RTE saying they wanted us to get rid of the defined contribution scheme and confer defined pension benefits on everybody. We went through our normal industrial relations process. Ultimately, that was referred to an internal industrial relations tribunal, which ruled on 31 May 2006 that the union claim did not have merit, and it recommended that the unions should work together to improve the defined contribution scheme. The tribunal made significant recommendations in this regard, which were accepted immediately by the company. Four months later the unions held a ballot and rejected them.
We then went to another stage where we tried to bring in a facilitator between the various sides. In June 2007, the unions decided to abandon the facilitation process and we then sought other means to do it. They then requested that we would go back to the industrial relations tribunal, which we have done, and that is where the matter lies.
As part of the original facilitation, the facilitator came to the company and said our position was that we had a defined contribution scheme, which we were trying to enhance and the original IRT ruling recommended that was the right thing to do. The unions said they wanted everybody in a defined benefits scheme but their concern was that people were worried about the risk.
If one is in a defined contribution scheme, the markets go up and down and the issue of annuities causes huge difficulty, which could be addressed readily by legislation. It is unusual because this is not how it is done in Britain or elsewhere. People are very vulnerable at retirement. RTE has a big problem in regard to defined benefit liabilities. The organisation has approximately €100 million in net assets and it has approximately €1 billion in liabilities in the defined benefits scheme. With the more modern way of accounting for defined benefit schemes, they are considered in the accounting profession to be the equivalent of loans. A company, therefore, must bring it on to its balance sheet and revalue it by reference to the bond markets. Bond market rates change every day and, therefore, there is a big shift. In our case, because the liabilities are ten times greater than the assets, we get a peculiar situation. British Airways probably has a similar scenario, but there is no other company that we know of in the Republic of Ireland that has an exposure of this sort.