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Friday Newspaper Review - - Irish Business News - - April 26, 2013
By Finfacts Team
Apr 26, 2013 - 10:28 AM
The Irish Independent reports the State faces having
to find up to €200m to compensate Waterford Crystal workers for the loss of
their pension benefits.
The warning of the massive cost to taxpayers came after the European Court of
Justice found in favour of the Waterford Crystal workers who took a case against
the State for the loss of their pensions when the company collapsed. Now it is
feared the controversial levy imposed on private pensions in 2011 – and due to
end next year – will be extended indefinitely to fund a new compensation scheme
for companies that become bankrupt with under-funded pensions plans.
And there were calls for the Government to act now to ensure other workers do
not lose their retirement incomes in collapsing schemes. There are almost
200,000 workers in defined benefit plans, but most do not have enough funds to
pay the pensions promised.
Judges found that under EU law, the State had an obligation to protect the
pension entitlements of workers when a company becomes insolvent.
Already-retired workers got their pensions when the crystal company went bust in
2009. But those under the age of 65 were left with between 18pc and 28pc of the
pension benefits they had expected to get when they retired.
Some 1,500 workers were members of the Waterford Crystal pension scheme.
They had a defined benefit scheme, which means they were promised two-thirds of
their final salary once they had worked for 40 years.
Former Waterford Crystal worker Tommy Hogan had yet to retire when the company
collapsed in 2009. When he did retire he ended up with €100 a week from the
pension scheme, even though he had been promised €400, the Unite union said.
The European case was taken by Unite under the 2008 EU Insolvency Directive,
with the union arguing that the Government was obliged to protect employees as
both the company and its pension fund were insolvent.
The solicitor for the workers who took the case to Luxembourg, Gerry Byrne of
Byrne Wallace in Dublin, estimated that the State will end up having to pay out
around €200m to make good the pension losses.
The full liability in the schemes is more than €300m, but workers have got some
of the money.
Mr Byrne said the State had ignored the EU requirement to have protection
schemes in place for workers, initially since 1980.
The High Court will now have to decide the exact amount of money to be given to
the Waterford Crystal workers.
Mr Byrne said the workers in sister company Wedgwood in the UK ended up with
90pc of their pension expectations.
A spokesman for Social Protection Minister Joan Burton said she was studying the
Experts said the judgment had no direct implications for defined benefit schemes
where the sponsor company was still trading, even if the pension fund was in
But Jerry Moriarty, of the Irish Association of Pension Funds, which represents
scheme trustees, said there was a need now for a scheme to protect workers when
an employer was insolvent and the fund was in deficit, as required by EU law.
And he called on Ms Burton to change other pension rules, because at the moment,
when a scheme winds up, pensioners get their full entitlements but workers yet
to retire lose out heavily.
Earlier this week, the Organisation for Economic Co-operation and Development
(OECD) criticised the fact that employers can "walk away" from their pension
scheme deficits with no financial consequences.
Defined benefit schemes promise to pay a set level of pension, depending on the
years of service. But the promises have become impossible to keep because people
are living longer and investment returns have been too low.
Eight out of 10 defined benefit plans are in deficit, while pensioners have
first call on the assets in schemes.
Sean O'Donovan at consultancy group Mercer said the Government may now have to
introduce another levy on private sector schemes to fund a compensation plan
when both employers and schemes collapse.
He said the State may copy what happens in other countries where a deficit in a
company pension scheme becomes a debt on the employer.
"It is also conceivable that the State may look to introduce legislation
retrospectively to prevent solvent employers from putting their insolvent
schemes into wind-up before any legislation was passed," he said.
Workers at SR Technics, the former aircraft maintenance group at Dublin Airport,
lost out when their employers closed the operations. It was not clear yesterday
if the State will now also have to compensate those workers for the loss of
their pension benefits on foot of the European Court judgment.
Insurance giant Aviva and PTSB this week announced the closure of their defined
benefit schemes. Benefits are being reduced or schemes are shutting at AIB,
Independent News and Media, the publisher of this newspaper, and Grafton.
Retailer Arnotts told the trustees of its defined benefit pension scheme that it
will cease making contributions to the plan.
The Irish Independent also reports that three staff
at the National Treasury Management Agency (NTMA) earning more than Taoiseach
Enda Kenny have failed to take a salary cut this year despite a Government
Finance Minister Michael Noonan said 13 of the 522 employees at the NTMA,
which manages the national debt, earn more than €200,000.
In December 2011, the minister asked those earning more than €200,000 to
consider at least a 15pc cut, or to bring their salary down to €200,000 if 15pc
brought it below that mark.
Fifteen were eligible last year and all accepted the request, and 13 were
eligible this year. Ten of the 13 continued with the lower salary this time
The state's toxic loans agency NAMA and the National Development Finance
Agency (NDFA) fall under the NTMA umbrella.
Ten staff – including the NTMA, NDFA and NAMA chief executives – took up the
minister's request this year. Three did not. Neither the NTMA or Department of
Finance would comment further.
NAMA boss Brendan McDonagh earned €454,483 in 2011, while the head of the
NTMA John Corrigan received a basic salary of €490,000 the same year. NDFA head
Brian Murphy received a basic salary of €330,000 in 2011.
The NTMA is responsible for managing the national debt and dealing with the
international money markets – a key role as the country prepares to exit the
IMF/EU bailout later this year.
Last month Ireland returned to the bond markets after investors offered to
lend a staggering €12bn to the Government for 10 years, the latest step in the
country's return to financing itself on the markets
In a response to a parliamentary question from Sinn Fein's Pearse Doherty, Mr
Noonan said all relevant NTMA employees agreed to waive the percentage of their
salary during 2012 – but this year three failed to agree.
Four of those earning at least €200,000 in 2012 worked for NAMA, with one
earning between €400,001 and €500,000 with four others earning between €300,000
In response to a separate parliamentary question from Independent TD Finian
McGrath, Mr Noonan said a further 10 employees earn between €201,000 and
€300,000; with 32 earning between €150,001 and €200,000.
Mr Kenny currently receives an annual salary of €200,000 while his
ministerial colleagues in Cabinet receive €169,275.
The figures show that of the 32 earning between €150,000 and
€200,000 in the NTMA, 18 work in NAMA and of the 105 earning between
€100,000 and €150,000, 71 are with NAMA.
Mr Noonan has already told the NTMA that its staff should expect to
be covered in any follow-on arrangement to Croke Park and will face pay
Under the now rejected Croke Park II deal, pay cuts were to be
imposed for public servants earning more than €65,000.
A source said last night: "I presume if they have a contract that
money is set so might be difficult to alter."
The Irish Times reports that
An Post has recorded an after-tax loss of €39.4 million in 2012, due mainly to
its sizeable pension deficit.
A group operating loss of €17.5 million, the first in almost 10 years, also
contributed to the decline, along with a continued drop in traditional mail.
More positively, An Post reported strong performances in subsidiary companies
including One Direct and the Gift Voucher Shop, resulting in revenue of €111
million, up from €80 million in 2011.
“We continue to deal with declining core mail volumes, increased electronic
substitution and significant uncertainty in the general business environment,”
said An Post chief executive Donal Connell.
“Our experience reflects the ongoing difficulties being faced by our business
customers across almost all sectors. The trading environment continues to be
After-tax losses in 2011 amounted to just €347,000.
An Post’s results were hit by the imposition of
an FRS 17 accounting charge due to a pension deficit of €285 million.
The company continues to meet trustees and unions since the scheme ceased to be
fully funded in 2007 and said a plan was being finalised that “includes changes
which will enable the scheme to meet the requirements of the minimum funding
Mr Connell said its universal service obligation – the Monday to Friday “pick-up
and deliver” service – cost an “unsustainable” €60 million in 2012. An Post has
also pointed to regulatory delays in securing approval for an increase in the
price of the standard stamp as contributing to declining revenue.
Staffing levels continue to be reduced. Numbers were paired back by 349 last
year, bringing the reduction to 1,284 since 2009 and helping it towards the
target of 2,600 “full-time equivalents” by the end of 2016.
An ongoing “change” programme has delivered savings of €100 million in
annualised operating costs. Four sub-post offices were closed last year.
The Irish Times also reports that
the Government has “big choices” to make on the future of RTÉ, director-general
Noel Curran has said, as he signalled the broadcaster’s desire to collect a
greater proportion of its funding from public sources.
RTÉ’s deficit for 2012 will exceed €60 million, mostly due to the cost of
restructuring the organisation, Mr Curran told The Irish Times.
Commercial income is understood to have fallen €14 million or about 8 per cent
last year, with the advertising market remaining subdued in 2013. This has put
pressure on RTÉ’s financial recovery as it seeks to break even this year.
“We’re not getting any licence fee increase, so we’re being eaten. Public
funding is being eroded by inflation every year. We lost €10 million [in public
funding] in the budget at the end of 2010 and our commercial income is also in a
very difficult market,” he said.
Mr Curran added that the broadcaster was “prepared to countenance things that we
have never countenanced before” and hinted this might include a reduction in
commercial activities. “We are happy to see the balance of commercial and public
funding alter. But we need some security.”
His comments coincide with the Broadcasting Authority of Ireland’s review of
public service broadcasting in Ireland. The authority will outline its
recommendations on the future of media funding to Minister for Communications
Pat Rabbitte as early as next week.
Mr Rabbitte has already announced plans to replace the licence fee, which is
tied to television ownership, with a universal household broadcasting charge and
indicated that a more efficient collection mechanism could generate a higher
level of income without the need to increase the rate.
Mr Curran said there was “massive evasion” of the €160 licence fee and placed
the rate for 2012 at under 17 per cent.
RTÉ has told the BAI it will “open up” its Montrose campus in Dublin to other
companies, including digital technology firms and media production partners,
while any additional funds raised from the proposed new charge will be shared
with independent content producers, Mr Curran said. In exchange for a higher
level of public funding, the statutory minimum amount RTÉ must spend on
programmes commissioned from the independent sector could be raised, he
Last year’s deficit
Most of the 2012 deficit relates to a restructuring charge incurred as a result
of payouts to 270 employees who left RTÉ last year. The deficit is higher than
the Minister’s previous estimate of €57 million because more employees than
expected availed of the redundancy package. Some 370 employees have left RTÉ
over the course of 2011 and 2012.
The board of RTÉ gave initial consideration to its 2012 accounts at a meeting
last Friday. Mr Curran said the figures, due to be published in the summer,
showed “a massive turnaround” in its finances. “It is our goal to break even
this year and that still remains our goal. It just depends where the commercial
market goes. If the market plunges, then obviously we will have to sit back and
Commercial revenue at RTÉ has fallen about 38 per cent since 2007, with the
largest component – TV advertising – falling about 45 per cent.
The Irish Examiner reports that
the Paris-based drinks giant — which also owns leading spirits brands like
Beefeater, Absolut, Mumm, Malibu and The Glenlivet — yesterday reported net
sales of €6.65bn for the nine months to the end of March.
In all, Pernod Ricard’s top 14 premium brands grew combined net sales by 5%,
year-on-year, during the period. Scotch whisky brand, The Glenlivet led the
list, with 21% sales growth; but Jameson and Martell Cognac were joint second
highest growers, each seeing 16% year-on-year growth for the nine months.
In the first half of the French group’s financial year — which runs to the end
of June — Jameson’s net global sales grew by 13%, year-on-year. At that stage,
in December, Jameson was only the third bestselling brand for the group.
Jameson is now in its 24th consecutive year of sales growth and is experiencing
double-digit percentage growth in 41 markets, worldwide.
Irish Distillers — Pernod Ricard’s operation here — said back in February that
the brand should reach its next identified sales milestone of five million cases
by next year. The last calendar year saw it pass the four million cases
Pernod chief executive Pierre Pringuet called the group showing a demonstration
in “good resilience” in the face of a less favourable economic environment.
“Our growth is still based on the same drivers; our policy of premiumisation and
innovation, the strategic brands and strong presence in emerging markets and the
US. Confident in the strength of this model, we confirm our guidance of organic
growth in profit from recurring operations of close to 6% growth for the full
financial year,” he added.
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