The finance minister Michael Noonan was asked if the €1.1bn contribution to the AIB pension fund in August 2012 was exclusively for the redundancy programme. And the answer appears to be (a) the sum actually handed over to the pension fund was less than €1.1bn which represented the book value of the loans and (2) it seems it was 100% for the redundancy programme

“Deputy Pearse Doherty:To ask the Minister for Finance further to Parliamentary Question No. 205 of 13 November 2012, if he will confirm if 100% of the transfer of €1.1 billion to the Allied Irish Bank pension fund was required to fund the bank’s early retirement and voluntary severance programme; and if not, the quantum required to fund a pre-existing deficit..

Minister for Finance, Michael Noonan: AIB has informed me that the transfer of the €1.1bn portfolio of loan assets was made using arm’s length valuations by two independent external parties and was agreed by both the Trustee and the Board of the Bank. There was a very significant discount applied to the nominal value of the €1.1bn loan assets. AIB has not publicly disclosed the discount applied to the loan portfolio on commercial grounds. The full value of the discounted loan portfolio was required to facilitate the early retirement programme.

The transfer of these assets to the pension fund was needed in order to facilitate the early retirement component of the voluntary severance program of the bank. The early retirement scheme created a Minimum Funding Standard deficit in the pension fund which was bridged by the transfer of the assets. Had the transfer of assets 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. The voluntary severance scheme in the bank overall is expected to result in annual savings to AIB in excess of €200m which is a critical component of AIB’s return to viability.

This transaction was approved by the Board of the bank’s deleveraging committee which includes non-voting observers from the department of Finance and the Central Bank”

This doesn’t seem to be true. There was an existing (large) deficit. The text below would suggest the hole created by early retirements is a small fraction of 1.1bn

From Page 84 of AIBs 2012 interim report

11 Retirement benefits
The Group’s accounting policy for retirement benefit obligations and the demographic and financial assumptions are set out on page
235 and in note 12 respectively to the consolidated financial statements of the Annual Financial Report 2011.
The Group’s pension deficit as at 30 June 2012 was € 1,457 million (31 December 2011: € 763 million). The net recognised
deficit comprised retirement benefit liabilities of € 5,466 million (31 December 2011: € 4,562 million) and assets of € 4,009 million
(31 December 2011: € 3,799 million).
Arising from the specific terms of the voluntary severance programme which includes an early retirement scheme announced on
21 May 2012 (note 32), AIB has provided € 124 million (31 December 2011: Nil) in respect of past service costs for those employees
expected to opt for early retirement. This provision, which is included within pension scheme liabilities, represents the best estimate of
the amount required to meet the additional past service costs of the early retirement scheme, based on currently known facts and
expectations. In addition, the curtailment gain/loss arising from the voluntary severance programme has been estimated to be Nil at
30 June 2012, based on known facts and expectations at this date.
The Group announced a Pay and Benefits review on 14 June 2012. The impacts of the proposed changes in this review have not
been recognised as these changes had not occurred by 30 June 2012 and were still subject to discussions with relevant parties. The
main proposed changes include the closing of defined benefit schemes to future accrual and certain salary reductions.

But this is the response in respect of AIB, so I don’t think there were previous year’s deficit resulting from the loss in share value.

http://oireachtasdebates.oireachtas.ie/debates%20authoring/debateswebpack.nsf/takes/dail2012111300063?opendocument
“I have received the following disclosure from the financial institutions of top-ups made to company pension schemes in the years requested:

AIB/EBS

2008 2009 2010 2011 2012 to date
Allied Irish Banks (including EBS) €3.5m €2m €4m €3m €1,101m*

<

* The 2012 figure for AIB includes one off exceptional contributions made in 2012 as a result of the early retirement program which is required in order to reduce the cost base of the bank by over €200m per year.

AIB (including EBS) during the period in question made contributions to its pension schemes in accordance with agreed actuarial funding plans and as required by regulation. Contributions in excess of these were made to address a combination of unscheduled early retirements including ill health related circumstances and the exercise of contractual early retirement rights.

Separately the Deputy will be aware that AIB has agreed the transfer of €1.1 billion nominal of loan assets to the AIB pension fund earlier in 2012. The purpose of this was to address the deficit created in AIB’s pension fund by the early retirement and voluntary redundancy scheme that will see about 2,500 staff leave their jobs.

This transfer was not intended to reduce an existing deficit in the scheme but rather to address the deficit that would arise as a result of the staff departures that would occur as a result of the early retirement and voluntary redundancy scheme."

However this doesn’t tell us how much was included in the calculation. In fact I’ve wasted a bit of time seeing if pension deficits were mentioned by the CB on PCAR documents. Although I can’t claim an exhaustive review, I didn’t see anything on pensions which is surprising as 1.1bn is a substantial proportion of AIB’s recap. I’ve also browsed AIB’s reports to see mention on this staff bonanza. http://www.aibgroup.com/servlet/ContentServer?pagename=AIB_Investor_Relations/Miscellaneous/ir_article_printer&c=AIB_Article&cid=1096576948103&channel=IRFP

It seems that only post recap (well 2011), that there’s a suggest that the AIB group would address the Pension Deficit over the next 15yrs. Surprisingly it doesn’t seem to get addressed in the 2010 reports; the year of the recap. You’d kinda think money earmarked for staff pensions would be mentioned that year.

It may be that AIB staff are using a ‘public sector’ model to run the business for their own benefit. Front-loading the pension contribution raises all sorts of questions.

Like some others, I find the answer was as insulting as it was intended.
In a nutshell;
They handed over the money to the banks €64 billion without even one restriction as to how it would be spent.
Either the board of bank did not inform the government or Central Bank of a huge pension deficit that they were aware of , or the board of the bank was completely unaware of the size of the pension fund deficit at the time of the PCAR. Either way these are serious issues.

If the board of the bank knew of the pension fund deficit and had already decided to put the money into the fund, had informed the Central Bank and the government , but the government then decided to say nothing less it raise public hackles, then this government colluded both before and after the event in diverting scarce taxpayers resources to priming the pension funds of well off bankers.

Either way this was an appalling decision and an even more appalling insult to the Dail.
The decision is proof positive that this government’s priorities are to feather the nests of the financial and other elites in Ireland. They are succeeding very well in that agenda, if at nothing else.
When push comes to shove they don’t give a rat’s a*s about ordinary people.

I gave up after the first read through. It reminds of a squid shooting ink out of its arse in order to escape.

Using taxpayers’ money to fill the hole in a private pension fund is not appropriate. The fund’s deficit could have been addressed in a number of ways – reducing future benefits, closing off the pension fund, higher contributions. The scale of the taxpayer gift is very high per eligible employee.

And this answer illustrates total contempt of the Dail. Shame on you, Minister Noonan. Shame on you.