Pat Rabbitte (Dublin South West, Labour) | Oireachtas source

I am grateful to you, Sir. I understand the issues concerning the ESB pension scheme, which has some 13,700 members, need to be handled sensitively and carefully. I am pleased to provide what information I can, which was provided to my Department by the ESB.

In late 2008, the trustees of the ESB superannuation scheme brought forward the tri-annual valuation of the scheme by one year to assess the financial health of the scheme. The actuarial valuation to 31 December 2008 showed an ongoing valuation deficit of €1.9 billion and a minimum funding standard deficit of €1.8 billion. As required by the scheme rules, the ESB and the ESB group of unions formed a working group to assess how best to address the reported deficit and to protect as far as feasible the interest of the ESB and the current members of the scheme. The ESB reached an agreement with staff in 2010 to resolve the pension deficit. That agreement closed the scheme to new entrants, it broke the link between salaries and future pension increases and introduced a solvency test for future pension increases. The measures adopted under that agreement have, I understand, had a positive effect, resulting in the scheme actuary recently reporting that the scheme is now in balance on an on-going actuarial basis.

Aside from the on-going actuarial position, the Pensions Board also requires the ESB scheme to assess whether it could meet a certain prescribed standard, known as the minimum funding standard, MFS. This effectively tests whether the scheme could meet all its current obligations if it were wound up immediately, in other words, if everyone retired from the company on Friday. Neither the Government nor the ESB envisages the winding up of the scheme or everyone retiring on Friday but, regardless, the scheme is currently still required to meet the requirements of the minimum funding standard.

I understand that the scheme actuary reported at the end of 2011 that the ESB scheme, like many others, did not at that time satisfy the MFS requirements. I assume this is the deficit to which Senator Whelan is referring in his question. I understand that the Pensions Board does not require the MFS deficit to be addressed immediately but does require that a plan be developed to address it over a reasonable time. I am informed that the trustees of the ESB scheme, with the agreement of ESB, submitted a funding plan to the Pensions Board, which was approved in October 2012. I am also informed that this plan aims to eliminate the deficit by 2018 and that this plan remains on track.

In common with other companies where the Irish Government is the principal shareholder, the scheme is governed by legislation and supplementary regulations. I understand that, in the event of a deficit arising in the scheme, the regulations require that the relevant parties meet to agree a mechanism to address the deficit. I understand that in August 2013 solicitors on behalf of a small number of members of the ESB scheme served a plenary summons on solicitors for the ESB and therefore the issue is subject to judicial proceedings.

Finally, with regard to the manner in which the ESB accounts for the scheme in its financial statements, my Department has been assured by the ESB that, having taken expert legal and financial advice, the company is entirely satisfied that the current accounting treatment for the scheme is correct and in accordance with applicable laws and international accounting standards. I trust that this provides some clarity to the Senator.