Irish Life is latest company closing staff's defined benefit pensions

The move comes – somewhat ironically – from Ireland's largest pension provider...

Irish Life is set to close its current staff pension scheme, prompting fears that traditional defined benefit plans will now disappear from the private sector.

The Irish Independent reports that unions at the State's largest pension provider want the law urgently changed in a bid to stop some 1,200 staff being affected.

Irish Life's decision comes despite the scheme having a €150 million surplus, a rare occurrence for a private sector scheme.

A briefing document from the Unite trade union states:

"The scheme has assets of €1bn, comfortably meets the minimum funding standard, and had a surplus of €150m at the last actuarial valuation."

The minimum funding standard sets out the benefits a scheme is obliged to provide should it be wound up, as well as the minimum assets it must hold.

A defined-benefit plan sees the employer paying a specified lump sum to the employee upon retirement, based a predetermined formula that takes into account earnings, tenure and age. They are seen as gold-plated pensions that will give you a guaranteed pay-out.

In contrast, defined-contribution pensions see the employee's contributions invested, with the proceeds used to buy a pension. It is seen as far more unstable and has the worker taking all of the risk.

The number of defined-benefit schemes has halved to just over 700 in recent years, while the number of active members has fallen by one third to approximately 100,000.

Aer Lingus, daa, Intel and Pzifer are among the companies closing their schemes, while Independent News & Media (INM) faced protests when it announced such a shutdown in December.

The scheme Irish Life is ending provides a pension of two-thirds of employees' salary at retirement at age 65, for those with 40 years' service.

The Unite note, written by Joe Conroy, states that staff will be moved to a defined contribution scheme:

 "For future service benefits, the employees are forced to take all the risk, while the company takes none."

They would have to put up to 40% of their earnings into the scheme to match the returns they could have previously expected.

Irish Life, which has one million customers in the country, announced last month that it made a profit of €170m in 2016.

The company has said that it is not in a position to comment as its currently involved in an extensive consultation process with staff.