Last week the Labour Relations Commission (LRC) recommended that AIB introduce a hybrid pension scheme, combining elements of definedcontribution and defined-benefit pensions, for its Irish staff.

AIB shut its defined-benefit scheme, which offered guaranteed benefits, to new staff in 1997, replacing it with a defined-contribution scheme, where the bank made guaranteed pension contributions instead.

Many other organisations have done the same thing over the past decade but may not have realised the full implications of the move at the time, according to John O'Connell, managing director of Trident Benefit Consulting.

"Very people have retired from defined-contribution pensions. In previous decades there was only defined-benefit ones so if there are flaws with defined-contribution schemes, they won't be apparent for a long period of time, " he said.

O'Connell said employers often tended to take a shortterm view of pensions. "Businesspeople tend to talk about what effect the pension scheme will have on profits whereas the right scheme can help companies like AIB retain talented staff, which is a longterm benefit, " he said.

He said adopting the wrong pension scheme could have long-term reputational implications for the business.

"There's also a selfish reason for companies to provide pensions: they don't want people in their late 60s picketing them for pensions or working because they are forced to work, " he said.

Munro O'Dwyer, director of the pensions solutions group at PriceWaterhouseCoopers said, however, that the recommendation was unlikely to lead to a shift away from defined-contribution pensions.

"They're attractive from a company's point of view because there are no balance sheet implications and they can provide good pension benefits if they are well costed and the contributions are appropriate.

"Two implications of the LRC decision are most evident. First, people will begin to appreciate that people on defined-benefit and definedcontribution schemes get different levels of return on retirement. Second, definedcontribution presents HR challenges with regard to people who are near retirement but have insufficient pensions provision and don't want to leave work, " he said.

Meanwhile, a spokesman for the Irish Bank Officials Association (IBOA) said it hoped that the recommendation would strengthen its position in its pension talks with Bank of Ireland, which is attempting to close its defined-benefit scheme to new entrants.

However, a Bank of Ireland spokesman said its situation was different to AIB's and that the LRC recommendation would have little impact on the talks.