Mr. Andrew Kelly:

My opening statement will deal with the issue of the IBTS pension scheme under four headings: the background to the scheme; pension-related deductions; the funding requirement; and discussions to resolve the issue.

The IBTS, formerly the Blood Transfusion Service Board, was established by a statutory instrument, SI 78/1965, to organise and administer a blood transfusion service. The pension scheme was set up under indenture, or a trust deed, in 1963. When the Blood Transfusion Service was established in 1965 to replace the National Blood Transfusion Association, one of the functions of the new body was "to take over the property (including choses-in-action), assets, rights and liabilities of the Company." This would have included the pension scheme.

The IBTS operates a defined benefit pension scheme, which is a balance of costs scheme. Under the terms of the trust deed, any increase in contribution required to be paid following an actuarial valuation to ensure that the benefits under the scheme are funded falls to be paid by the employer. Currently the employer pays 30% of payroll and the employees contribute, on average, 6.3%. The benefits under the scheme are broadly in line with other public sector models and these have been actuarially evaluated and found to be comparable.

I will now discuss the Financial Emergency Measures in the Public Interest Act 2009 and the pension-related deduction. The background to the application of the FEMPI Act 2009 is dealt with in detail in the briefing paper. The FEMPI Act was introduced at a critical point in the consultation process with employees regarding funding of the scheme where the employer was seeking an increased contribution from employees to address the funding issue.

However, it is necessary to reiterate that initially the IBTS was informed that the Act did not apply. This was subsequently changed to state that the staff in the IBTS were covered by the terms of the Act and should pay the PRD. The board sought legal advice from senior counsel, which advised that the IBTS pension scheme did not fall within the definition of a public service scheme in the Financial Emergency Measures in the Public Interest Act 2009 and, therefore, the terms of the Act did not apply. The board decided to deduct the PRD from staff but the moneys were not remitted to the Department of Health. Since April 2015, the IBTS has remitted the PRD collected from members of the single public service pension scheme and the amount in excess of €10 million in respect of all other staff. The total amount remitted to 30 June is €1.268 million. In addition, the IBTS pension scheme was deemed a private pension scheme for the purposes of the Government levy on private pension schemes. This resulted in €2.44 million being deducted from the value of the assets in the IBTS pension fund.

I refer to the funding requirement. As with a large number of defined benefit schemes, there is a deficit in the IBTS fund. The deficit from the most recent actuarial valuation on 1 May 2014 was €27.921 million. The funding requirement has increased substantially over the past decade. The following shows the increase in the employer contribution required to fund the current level of benefits: 2005, 14% equation to a value of €2.93 million; 2008, 19.5% or €5.33 million; 2011, 20.7% or €5.74 million; and 2014, 30% or €7.22 million. This is placing an unsustainable burden on the employer and it is clear that the current situation cannot continue. The IBTS has recognised this for some time and has been in negotiations with staff on changing the terms of the scheme. This level of increase is having a serious consequence on the funding of the IBTS. In the current financial year, the core business is performing well except for the increased cost of the pension contribution which has put the organisation into deficit. This is a very serious issue and needs to be addressed if the IBTS is to continue to provide a blood supply as safe as we can make it. This means continuing to be current with technological developments.

The IBTS in the period 2009 to 2014 has, like all public sector bodies, undergone significant change and has reduced its cost base significantly. This has occurred through a mixture of reductions in pay, controlling and reducing non-pay costs and reducing staff numbers. In this context, the following reductions-savings have been achieved: pay , €8.578 million or 20.85%; and non-pay, €6.2 million or 18.96%, giving a total of €14.8 million or 20.1%. At the same time, there has been a reduction in whole-time equivalents of 89.95 or 15.46%. These have been achieved at a time the income of the IBTS has reduced by €20.969 million, or 25.7%. This is primarily as a result of the reduction in the use of blood and platelets. These have reduced by 13.45% and 14.64%, respectively, in the period 2009 to 2014. Consequently, the scope for further significant reductions in spending is minimal. Therefore, the provision of pension arrangements for staff must be addressed In the context of the funding model of the IBTS.

With regard to discussions to resolve the issue, the IBTS has been engaged with staff and their representatives since 2002 on finding ways of resolving the increasing cost of funding the pension scheme. To prevent the problem becoming worse, the IBTS changed the pension scheme for new entrants after 1 May 2009. There is now broad recognition by all parties that the current situation cannot continue and that the measure taken in 2009 is not sufficient. This means there needs to be a change to the benefits for existing members of the scheme. The current series of negotiations is about finding a solution that will resolve the pension issue and secure the necessary funding for the IBTS into the future. These negotiations are being held under the auspices of the Workplace Relations Commission. The Departments of Health and Public Expenditure and Reform are involved in this process. Progress has been made and we will all continue to work together to resolve this outstanding issue. We are hopeful of a successful conclusion to these negotiations and then the proposal will have to be put to a ballot of all members of the pension scheme.