Frequently Asked Questions Northern Bank Defined Benefit Pension Scheme 29 June 2017
FREQUENTLY ASKED QUESTIONS Northern Bank Defined Benefit Pension Scheme 1. What is the FSU s position on the closure to future accrual of the Northern Bank DB Pension Scheme? Your Union is strongly opposed to Danske Bank implementing any change to the current pension scheme. Closing the scheme to future accrual and moving to a Defined Contribution Scheme has major financial implications for active members of the scheme. Transferring any risk associated with your future pension from the bank onto individual staff members is unacceptable. This is a healthy scheme that is not in deficit. Your Union has engaged professional legal and actuarial advice to assist in the campaign to retain the Defined Benefit Scheme. 2. Is this a Done Deal? No. This is not a Done Deal. The Union has written to the Trustee who have replied and assured us that no decision has been made in respect of the Bank s proposals and that they have an open mind in relation to the outcome. They are awaiting the conclusion of the consultation process before they make any final decisions. It is vital you make your views known during this consultation process. 3. Will there be any changes to the benefits that have accrued to date? Yes. Benefits built up to September 2018 are currently linked to RPI but if the pension scheme is closed to future accrual increases will only be in line with CPI which is generally lower. 4. What is the most significant impact of the Bank s proposal to close the DB scheme? The Bank s proposals have huge implications for active members of the pension scheme. Changing from a Defined Benefit Scheme to a Defined Contribution Scheme means that any risk associated with your future pension is on you and not on the bank. As it stands, with a Defined Benefit Scheme, you are guaranteed your final pension. With a DC scheme there are no guarantees.
5. The Bank provided case studies do these give a full picture of the changes? The case studies the company have provided are misleading. They have not explained tax implications. The examples they use and the assumptions they are using on annuity rates to portray final pension are not comparing like with like. There is currently no ill health retirement option agreed in the proposed DC scheme. Death in Service is currently four times salary and in the current DC scheme it depends on age. 6. Is there anything that can be done to stop this? The final decision rests with the Trustee and they have confirmed that they currently have an open mind about the changes and no final decision will be taken until the consultation period has concluded. It is vital that you use this consultation period to let the Bank know how you feel about this proposal. You should be emailing your questions, concerns and opposition to the proposal to the Danske Bank pension consultation mailbox. Your union have been given a mandate from the membership to negotiate on your behalf. We will fight hard to keep the Defined Benefit pension. To achieve this it is important that membership is at its strongest. Talk to your colleagues who are not in the union and encourage them to join. We are stronger together, so the more members behind the campaign to keep the pension the better. This will make it more difficult for the bank to try to change it. 7. How long will the bank contribute 20% to the proposed DC Scheme? What guarantee do we have that they will sustain the 20% contribution further down the line? There is no guarantee that the 20% contribution will continue indefinitely. There are no guarantees that the bank will not come back in a few years and try to change the pension again. Even if the contribution rates are written into the Trust Deed they can still approach the Trustee in the future and look for a change.
8. If staff do not agree to these changes in the DB Scheme could there be redundancies? There is nothing to suggest that redundancies should arise as a result of keeping the DB pension scheme open. 9. How many people are affected? There are approximately 850 current active members of the Defined Benefit scheme, meaning 850 people are directly affected. 10. Is Death in Service affected? The current DB scheme provides four times salary for Death in Service. It is unlikely that the proposed DC will provide the same level of benefit. The amount payable in the current DC Scheme is dependent on age. 11. Will I still be able to avail of an Enhanced Early Retirement package? This is something that we have raised with the Bank and will continue to do so. 12. How is Ill-Health Retirement affected? There is currently no agreement on what the ill health retirement will be in the proposed DC scheme. 13. If the DB Scheme closes does this eliminate the prospect of the bank implementing other efficiency measures? There are no guarantees that the Bank will not look for efficiency measures in other areas whether the DB pension scheme remains open or closed. 14. What impact does closing the DB Scheme have on Return on Equity? We have been advised by the Bank s financial experts that closing the DB Scheme would only deliver an approximate 3% increase on return on equity. This would still leave the bank significantly short of its over-ambitious 12.5% targeted ROE budget.
15. In NI & UK how many companies still have DB Schemes? As of the last Pension Protection Fund (PPF) Index Survey 2015, there are 6,057 companies who currently have DB Pension Schemes. It is worth noting that Ulster Bank and Bank of Ireland have retained their DB Schemes despite being in deficit. 16. Can existing DC Scheme members transfer into the Master Trust Scheme? Currently this is not option. 17. What is the effect on my final pension taking into consideration that the DB pension scheme was contracted out for a number of years and what effect would this have on my State pension?. Opting out of the National Insurance contribution for a number of years will mean that if you may not have accrued the appropriate amount of National Insurance stamps you will not be entitle to the full state pension. Each individual will have to check how many years they have accrued by logging on to the website http://www.tax.service.gov.uk/ You must register on the site first before logging in. It is then very simply illustrated how many years you will need in order to be entitled to the full state pension, and how many years that you have missed. It is categorised on a year by year basis with all of your contributions listed. 18. What alternatives have the bank looked at to maintain the DB Scheme? The Bank has outlined three reasons for seeking to close the scheme risk, cost and capital required. The Bank claim that closing the scheme is the only option to address all three reasons. It appears that this is a cost saving measure and the Bank approached the Trustee with only one proposal, at this time, which is to close the scheme to future accrual. 19. What happens next? The Union has written to the Bank seeking dates to meet and talks will now begin between your union and the company. Detailed financial information pertaining to the DB pension scheme has been sought, only some have been provided to date. As soon as all information has been received our legal and actuarial experts will provide additional analysis to assist in the campaign to retain the DB Scheme.
20. Will the union be updating members as the negotiations progress? Yes. The union will provide regular updates to members as the negotiations progress through our circulars, through text messages, and through our website www.fsunion.org which will be updated with bulletins on a regular basis. Here members will find up to date news, articles, videos, Q&A s and union presentations.