Telecom Eireann staff pension fund increase will cost €64m says Vodafone

High Court reporters

Vodafone Ireland says it will cost some €64 million to fund increases sought by certain members of the company pension fund who were originally part of Telecom Eireann superannuation scheme.

The company is asking the Commercial Court to determine how a rule of the Vodafone Ireland Pension Plan (VIPP) should be interpreted.

Vodafone is the successor to Eircell which had formerly been part of Eircom, which was itself formerly Telecom Eireann until the Government privatised the company.

As part of the demerger of Eircell from Eircom in 2001 a number of Eircom employees transferred to Vodafone and their benefits also transferred.

The pension schemes of former Eircom members transferred to the VIPP as a category in itself alongside separate categories for former Eircell (now Vodafone) employees, their spouse's and children's and former members of the Cable and Wireless employee benefit scheme.

A dispute arose in 2009 between the company and the VIPP trustees as to whether increases for the former Eircom members were subject to the company's discretion or whether they were entitled, under the relevant rule, to "pay parity" increases.

A deal was worked out in 2012 which Vodafone says meant that increases for benefits to pensionable service after 2012 would be at the discretion of the company.

However, this led to a complaint in 2018 by a former trustee and deferred member of the VIPP who said he was entitled to guaranteed increases and not limited to the deal of 2012.

That complaint ultimately went back to the Financial Services and Pensions Ombudsman who is still considering it.

Vodafone says there are 11 other similar claims.

The outcome of the court's interpretation of the relevant rule has the potential to affect the pensions of 127 other former Eircom members of the scheme and the transfer payments of 42 active and deferred members, it says.

Vodaone argues the proper interpretation of the rule is that the increases are and remain subject to the discretion of the company. There was never any agreement to grant guaranteed increases or pay parity increases, it says.

In an affidavit seeking entry of the case to the Commercial Court, James Magill, Vodafone director of operations and transformation says the company has obtained actuarial advice which says if the pay parity increases were to apply, it would increase the liabilities of the pension scheme, up to December last year, by some €64m.

The case was admitted on Monday to the Commercial Court, on consent between Vodafone and the VIPP trustees, by Mr Justice Denis McDonald.

It comes back in January.