RTE RETIRED STAFF ASSOCIATION
August 14th 2022
The members of the RTÉ Retired Staff Association (RTERSA) were pleased to note the decision by your Department and DPER not “to approve the proposal to transfer all the operational expenses incurred by the scheme from RTÉ to the scheme itself bearing in mind the need to protect the sustainability of the scheme”
We are aware that RTE are planning to appeal this decision with the support of the scheme Trustees, although that support is not unanimous.
The observations by NewEra to your department identified some risks to the sustainability of the scheme in making such an adjustment to the regulations.
In June 2020 NewEra noted “the amending regulation may not lead to a reduction in costs to RTÉ should a deficit emerge in the scheme in the future…. The projected cost of €500,000 per annum may increase over time as new governance and IORP 2 requirements materialise…… given the level of investment risk held within the scheme, the position on all bases will have deteriorated significantly as a result of investment market fluctuations over the past number of months. If a re-measurement was performed today, the surpluses quoted would be materially reduced and the scheme may be in deficit in some cases. The fallout from the above if a deficit were to emerge as of January 1, 2021, is that there is a definite possibility of a recommended increase in the contribution rate at the end of 2020. The costs of administration will be included in the recommendation and RTÉ would pay for expenses implicitly rather than explicitly. There may also be a need for a funding proposal if the scheme is in deficit on the funding standard at the end of 2020 and this will also lead to increased contributions, inclusive of scheme expenses….. So although there may be a saving that will contribute to the overall headline target savings of €60 m. for the period 2020 to 2022 relating to RTÉ’s strategic initiatives as referenced in the proposal, the saving may not materialise in practice in future years.”
Officials in your department at the same time made the following observation; “The RTÉ proposal referenced a scheme surplus of €42.5 million at the 1st of January 2019. …. The January 2020 actuarial valuation confirms an equivalent surplus of €55 million.”
The important point to focus on following on these observations is that the cost to the scheme of €40M (NewEra’s estimate as opposed to RTÉ’s estimate – the true capital value of the expenses may be closer to €40 million than €20 million) is very close to the scheme surpluses in 2019 and 2020. We are all aware of the turbulence in markets and worldwide inflation and potential economic recessions.
We note also that you were advised by officials in your Department in June 2020 as follows; “RTÉ also provides the services of the Registered Administrator (RA) and related staff costs through RTÉ’s Pension and Finance team at no cost to the scheme. These services will not be included within the scope of the proposed rule change and RTÉ will continue to provide the RA service at no charge for the Scheme”. This advice was based on RTÉ’’s original letter of application. The wording of the proposed rule change does not prevent RTÉ from transferring these costs to the scheme and given the present state of RTE’s finances, and contrary to undertakings given, it is likely that there will be plans to do just that.
How could any Trustee, public servant or Minister countenance approving a proposal to potentially wipe out the surplus of an occupational pension fund to shore up a deficit in the operating costs of a state sponsored body? We are all aware from past experience of how quickly asset values can fall. The obligation of the trustees and all stakeholders is to use the scheme’s assets to pay benefits and maintain the historic linking of pension increases to increases in public service pensions.
In August 2020, NewEra challenged the affordability of future cost of living pension increases, as follows – “ if allowance was made for annual increases at 2% per annum we estimate that this would push the scheme into a deficit position on the funding standard basis and would lead to unexpected large increase in required contributions to the scheme. While there is a surplus on an ongoing basis, there is also a high level of investment risk in the scheme. The high level of investment risk is likely to lead to future volatility in the scheme funding level and a relatively high possibility of future deficits and increase future recommended contributions.”
We do not share this pessimistic evaluation and there is strong actuarial evidence that the scheme can afford to award basic minimum cost of living increases of 2% per annum each year into the future. The Ongoing Actuarial Valuation at the 1st of January 2022 shows that future pension increases of 2% per annum are fully provided for. Additionally, if there are movements in asset values in the future these proposed increases can be adjusted as appropriate. However, while there are any doubts regarding the ability to maintain the traditional linkage with public service pension increases – (which has never been broken in the last 60+ years) any proposal to impose RTE’s core payroll and other expenses on the lifetime pension savings of RTE pensioners will be strongly resisted.
The RTÉ pension is normally the only source of income for RTÉ pensioners as RTÉ employees were not allowed to pay a full PRSI stamp to qualify for the contributory old age pension. Yes, RTÉ pensioners have just recently been granted a pension increase of just 2%, the first increase since 2008. The contributory state pension increased by 11% in the same period.
This problem has arisen, in part, because successive Governments have not addressed the long standing issue of how best to fund the National Broadcaster in a digital world. Pensioners are appalled that RTÉ would seek to deplete the surplus in the RTÉ scheme in these very uncertain times and we are certain that such an approach is not in keeping with policies of the Green Party.
At our recent AGM there was universal opposition to this proposal to use pensioners lifetime pension savings to bail out RTE’s financial difficulties. Some 300 scheme members have written to the Trustees opposing this measure. On behalf of our members, (we represent almost 1200 retired staff), I am requesting you not to agree with RTE’s appeal to proceed with this indefensible proposal. I can assure you that this representative body will use all avenues to prevent this proposal proceeding. Please bring the content of this letter to the attention of the Minister for Public Expenditure and reform.
Stephanie Fitzpatrick (Chair RTÉRSA)
Information previously provided to your Department on this issue
The Chief Financial Officer of RTÉ wrote to the Government in February 2020 as follows;
“The Board of RTÉ has approved a proposal for an amending regulation to the regulations of the RTÉ Superannuation Scheme which requires the scheme to cover certain of its own administration expenses which to date has been paid by RTÉ………….You are already aware of RTÉ’s own financial challenges and will know that as part of RTE’s strategy 2020–2024, RTÉ is seeking to deliver cost reductions of €60 million over the next three years 2020–2022. In this context €500,000 per annum is the material amount. On the other hand, the scheme reported a surplus of €42.5 million at the 1st of January 2019 and to which €500,000 cost per annum is a less material amount”.
The proposed rule change to transfer funds from the scheme to the employer for the purpose of relieving the employer of expenses which they have incurred under the rules of the scheme since its inception in 1960 is contrary to trust law. The Trust Deed (1984) clearly states that “no amendment of this deed or of the rules should be made if it would result in the payment or transfer of any monies from the scheme to the principal employer or any associated employer.”
In common with other Semi-State defined benefit schemes, these costs have been borne by RTÉ since the foundation of the scheme by statute in 1960. These administration costs are a core operational cost of RTÉ.
In advising the Minister, NewEra (a division of the National Treasury Management Agency, NTMA) estimated that these costs are likely to rise significantly in the future and that this proposal, if implemented, would over time deplete the scheme’s assets by approximately €40m.
Many retired staff members are sympathetic to RTÉ’s financial difficulties. However, the funding of the core operational costs of the State’s Public Service Broadcaster is the function of the Government rather than the lifetime pension savings of retired employees.