BANK of Ireland is on a collision course with unions over claims that it offered to contribute about €600m to plug the hole in its pension fund.
The Irish Bank Officials' Association (IBOA) said in a circular to its members that Bank of Ireland, which is 15.7% owned by the taxpayer, would "take responsibility for at least 50%" of the deficit in the bank's defined-benefit pension scheme. However, a Bank of Ireland spokesman said it has not made any offer to inject money into the fund, which has a deficit of about €1.5bn. The biggest of its defined-benefit schemes, the 'bank staff pension fund', has a deficit of about €1.25bn.
A spokesman for the bank said it is consulting with employees on a number of options to reduce the deficit.
It is understood that some of the options put forward by the bank include increasing the retirement age to 68, capping pensionable pay and asking members to make higher contributions.
The IBOA said it will hold further discussions with the bank on ways to address the deficit but is against several of the options mooted because they place an unfair burden on some members of the pension schemes.
The bank met with union representatives last week and more talks are set to take place soon. As part of the talks on the pension fund, the IBOA said it has also raised a number of other issues with Bank of Ireland, including pay levels and job security.
The IBOA has carried out its own actuarial and legal review of the bank staff pension fund and says that any major changes to it must be approved by the majority of members.
The defined-benefit pension scheme was closed off to members four years ago when the bank introduced a highly-controversial hybrid fund and a defined-contribution pension fund for new employees.
Bank of Ireland is not the only institution looking to tackle its mounting pension liability. IBOA members at AIB are currently voting on whether to accept measures to cut its €1.2bn pension deficit.
Bank of Ireland, headed by Richie Boucher, would be reluctant to take on the burden of making a large direct contribution to shore up the pension fund given its capital needs as toxic loans are transferred over to Nama.
Analysts at Société Générale say the bank needs about €2.7bn in fresh capital.
Shares in Bank of Ireland plunged nearly 21% last week after it handed over the 15.7% stake to the government on Monday. The bank traded below the psychologically-important level of €1 for the first time in 10 months on Friday.
The shares ended the week at €1, giving the bank a market value of €1.18bn.