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Pension Provisions

Dáil Éireann Debate, Wednesday - 7 November 2012

Wednesday, 7 November 2012

Questions (57)

Michael McGrath

Question:

57. Deputy Michael McGrath asked the Minister for Finance if he will provide detailed information on the €1.1 billion of gross loan assets transferred to the Allied Irish bank defined benefit pension scheme in August 2012 including details of the nature of the assets concerned and details of any impairment provision made against such assets. [49039/12]

View answer

Written answers

AIB confirmed in August 2012 that it agreed the transfer of €1.1 billion nominal of Irish loan assets to the AIB pension fund. I am informed by the Bank that the transfer of assets to the pension fund was undertaken to facilitate the early retirement component of the voluntary severance program of the bank. If the transfer of assets had not taken place, the early retirement component of the voluntary severance could not have proceeded as it would have required a cash contribution from the bank. It has been suggested by some that this transaction was designed to fund the grotesque pensions of former chief executives of the bank. This is not consistent with the facts and is a deliberate misrepresentation of the position. Given the need for cost savings in the bank, the alternative to the approach adopted by the bank would have been compulsory redundancy and retirement for serving staff. If this approach had been adopted, the former senior executives would continue to have been paid their massive pensions. The voluntary severance scheme in the bank overall is expected to result in annual savings to AIB in excess of €200 million which is a critical component of AIB's return to viability. Additionally, as part of its continuing strategy to meet non-core deleveraging targets as part of PLAR 2011, this transaction facilitated the deleveraging of a substantial non-core portfolio and was executed at a substantial discount to par value. AIB has informed me that it is not disclosing the discount level, but it was in line with the levels assumed as part of the PCAR exercise in 2011. The transaction was completed on an arm’s length basis with both the bank and the pension trustees conducting independent valuations of the assets. This transaction was approved by the Board and the Bank's deleveraging committee which includes non-voting observers from the Department of Finance and the Central Bank. The bank also consulted with the Pensions Board as part of the process.

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