241. Deputy Pearse Doherty asked the Minister for Finance the reason the group pension deficit at Allied Irish Bank increased from €763 million at the end of December 2011 to €1,457 million at 30 June 2012. (Question 52879/12 asked on 27 Nov 2012)

Minister for Finance (Deputy Michael Noonan): I propose to take Questions Nos. 241 and 242 together.

I am informed that AIB sets out information on its pension deficit in the Bank’s annual and half yearly reports and accounts. The following is a summary of that disclosure.

As set out on Note 11 - Retirement Benefits - to the condensed consolidated interim financial statements of AIB Group at 30 June 2012, AIB Group‘s pension deficit is calculated under International Accounting Standard 19 for the purpose of financial reporting. At 30 June 2012 the deficit stood at €1,457 million compared to €763 million as at 31 December 2011. The increase of €694 million in the net deficit arose following the increase in retirement benefit liabilities by €904 million to €5,466 million while the fair value of schemes assets increased by €210 million to €4,009 million.

I understand that the defined benefit pension liabilities increased by €904 million to €5,466 million during the six months to 30 June 2012 due to a number of factors including:

- Changes in demographic and financial assumptions of €595 million. In particular the discount rate used to value the scheme’s liabilities fell significantly in the period which increased sharply the value of the liabilities

- An amount of €124 million has been included in respect of past service costs for those employees expected to opt for early retirement. This represented the best estimate of the amount required to meet the additional past service costs of the early retirement scheme based on the known facts and expectations at 30 June 2012.

- Interest cost of €113 million, being the unwind of the discount on the present value of the defined benefit obligation for the half year

- Experience losses on scheme liabilities of €45 million.