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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. 39
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