25 September 2013 ALL PARTY BRIEFING. MOTION ON ASSETS/OWNERSHIP This Conference mandates the GOU/affiliates to formulate a policy and enable a ballot.

25 September 2013

ALL PARTY BRIEFING

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

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

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 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

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

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???

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Ongoing – neutral based on ambitious 6.25% return and ‘employer covenant’ that has been withdrawn regarding deficit resolution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?

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?

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as introduced in the Pensions Act 2012, wind up has now become a real concern based on the funding situation and the withdrawn covenant regarding deficit resolution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

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

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

‘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……

‘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

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 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

‘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)

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)

TRADE UNION STRATEGY

‘Three legged stool’ approach

1. Legal Strategy

2. Political Strategy

3. Industrial Strategy

LEGAL CHALLENGE

Brian Baitson – TEEU – Dublin

Billy Flavin – Unite – Newcastlewest

Owen Kilmurray – SIPTU - Dublin

Margaret O’Connor – ESU – Tralee

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

Including…….

Padraig McManusJohn ShineBrid Horan

John Campionand

most of EDT

Under 55+

8,000 Retirees Secure PensionsNo riskNo contributions

3,000 Serving Staff‘No guarantees’Continuing contributionsUncertain benefitsThe entire risk

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

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 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..

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

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.