Investor Presentaiton
Defined Benefit Pension Schemes
Bank of Ireland Group
Group IAS19 Pension Deficit
3.65%
2.45%
2.20%
€0.99bn
€0.84bn
€0.80bn
Dec 13
Dec 14
Jun 15
€0.30bn
Jun 15
IAS19 Pension Deficit EUR AA Corporate bond curve
Pro-forma Group IAS19 pension deficit following €0.5bn expected cash or other suitable assets contribution
BSPF1 estimated Surplus/ Deficit under Relevant Bases Dec 14
Minimum funding
standard
€m
Actuarial /
on-going basis
(293)
207
(612)
IAS19
(112)
475
975
Group IAS19 pension deficit of €0.8bn at Jun 15 (€0.99bn at Dec 14)
Primary drivers of the reduction in deficit were;
Group pension scheme assets returns were c.4% during the period
Euro AA Corporate Bond discount rate² increased from 2.20% to 2.45%,
partially offset by;
Long term ROI inflation rate expectation increased from 1.5% to 1.8%
IAS19 requires that rate used to discount DB pension liabilities be selected by
reference to market yields on high quality corporate bonds with a corresponding
duration. However, only a small number of such AA corporate bonds at the
c.20 years duration, and those bonds tend to be relatively illiquid
Announcement of the QE policy in Q1 2015 appeared to cause significant
volatility in the bond market. This resulted in long duration AA corporate bond
discount rates reaching an historic low of 1.4% at end Mar 15 with a resulting
increase in deficit to €1.7bn. This impact on the deficit has now been reversed
The Pension Review programmes of 2010 and 2013 resulted in significant
restructurings of scheme benefits, which were accepted by staff and unions
through individual member consent
In return for the deficit reduction achieved through these programmes,
the Group agreed to increase its support for the schemes by making
matching contributions. The remaining deficit-reducing contributions of
€550m are expected to be made between 2016 and 2020
Allowing for these future contributions, the overall Group IAS 19 deficit
would have been c.€0.30bn at June 15
In addition to the IAS19 accounting valuation, the funding position of the main
BSPF scheme is also measured under the Minimum Funding Standard basis and
the Actuarial / on-going basis. Both of these measures showed a stronger
funding position than IAS19 at Dec 14. This situation is not expected to be
materially different at June 15
Estimated deficit/ surplus at Dec 14
Pro-forma position following €500m expected
cash or other suitable assets contribution to BSPF
¹BSPF represents approx. 75% of the overall Group DB liabilities.
2Sensitivity of the IAS19 liability to a 25bps movement in the discount rate is c.€0.4bn and
sensitivity to 10bps movement in the RPI inflation assumption is c.€0.1bn.
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