IBRC annual report for 2011 - Irish Bank Resolution Corporation ...

Irish Bank Resolution Corporation LimitedAnnual Report & Accounts 201111. Retirement benefitsThe Bank operates two defined benefit non-contributory pension schemes in Ireland. The assets of these schemes are held inseparate trustee-administered funds. These schemes have been closed to new members since January 1994. From January 1994to 30 June 2011 new employees located in Ireland joined a funded scheme on a defined contribution basis. There are alsofunded defined contribution pension plans covering eligible Group employees in other locations.On 1 July 2011, the Bank became the principal employer of the defined contribution and defined benefit pension schemesoperated by INBS. New eligible employees located in Ireland after 1 July 2011 may join the funded former-INBS definedcontribution scheme.On 12 October 2010 INBS delivered a notice to the trustee of the Irish Nationwide Building Society No 1 Retirement BenefitScheme (the former INBS defined benefit scheme) for the purpose of notifying the trustee of a termination of employercontributions. This notice became effective one month later on 12 November 2010. The trustee of the scheme is disputing thistermination. The Bank is taking advice on its obligations and will be seeking the views of the Shareholder in deciding itsresponse to any claim from the trustee. As INBS had no obligation to pay further contributions to the scheme from 30 June2011, no contribution liability transferred to the Bank under the INBS Transfer Order or under the Deed of Substitution ofPrincipal Employer executed to give effect to the transfer order. However, the scheme will remain in existence until the trusteesformally resolve to wind it up.Neither the Group nor the Bank operates a post-employment medical benefit scheme.Details of defined benefit schemesRetirement benefits under the Bank’s Irish defined benefit plans are calculated by reference to pensionable service andpensionable salary at normal retirement date, or date of leaving service, if earlier. The pension charge in the income statementrelating to the two defined benefit pension schemes is based on the advice of an independent actuary. An actuarial valuationfor the purposes of IAS 19 has been prepared as at 31 December 2011 by an independent actuary using the projected unitmethod. Using this method the current service cost is expected to increase as the members of closed schemes approachretirement.During the year, following an application by the trustees, the Pensions Board approved amendments to the Bank's two Irishdefined benefit schemes. These amendments, which are effective from 1 December 2011, remove the entitlement toguaranteed post retirement pension increases for all members, including existing pensioners. In future, post retirement pensionincreases will only be provided at the discretion of the trustees and the Bank. The resulting reduction in the defined benefitobligation of €13m has been recognised in the income statement as a negative past service cost.With effect from 1 September 2011 the Bank's Irish defined benefit schemes became contributory.The principal assumptions used, which are based on the advice of an independent actuary, are set out in the table below:Financial assumptions 2011 2010% p.a. % p.a.Discount rate for liabilities of the schemes 5.00 5.50Rate of increase in salaries 0.00 3.00Rate of increase in pensions 1.00 to 3.00 2.00 to 3.00Inflation rate 2.00 2.00Mortality assumptionsThe key mortality assumptions used in estimating the actuarial value of the schemes' liabilities are:2011 2010Longevity at age 60 for current pensioners (years)Males 27.9 27.9Females 29.5 29.5Longevity at age 60 for future pensioners (years)Males 30.6 30.6Females 31.7 31.763