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Credit union row likely over plans to use bailout funds to plug holes in pension funds

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CREDIT unions are proposing to use money from a credit union bailout fund to plug a huge hole in the movement’s pension funds.

A credit union is calling for €81 million to be withdrawn from the movement’s protection scheme for troubled credit unions to plug the €94 million pension fund deficit.

The Irish League of Credit Unions annual general meeting on Sunday week will also consider a separate motion from the league board that the withdrawal from the savings fund should not exceed €30m.

Proposals to take money from the bailout fund are likely to face opposition from the 162 credit unions, which are not part of the pension system.

The AMG will also debate a no-confidence motion by a teachers’ credit union in the league board over the handling of the pension fund deficit issue.

The Irish Independent reported earlier this year that the deficit in the credit union’s pension fund had risen to €93.6 million.

The defined benefit scheme has 2,000 members and the 130 credit unions that are part of the scheme are expected to make up the massive deficit.

It has since been closed and members transferred to a new defined contribution system, but the fund’s financial gap has yet to be filled by the 130 credit unions that make it up.

The pension fund is overseen by the Irish League of Credit Unions, the main body representing credit unions on the island.

Now, at the annual general meeting in Belfast, a number of credit unions are proposing to withdraw funds from the league’s Savings Protection Fund (SPS), the league’s bailout fund for struggling credit unions.

The SPS bailout fund, owned by the Irish League of Credit Unions, is used to fund credit unions experiencing financial difficulties so savers’ money is protected. Originally set up as a saver protection fund, it has morphed into a fund to stabilize credit unions that are running out of money.

It has grown to 108 million euros as there have been few calls to bail out credit unions lately.

In addition to the SPS fund, the central bank oversees the €100,000 government deposit insurance scheme that applies to credit unions and bank savings.

However, it is questionable whether it is correct that the SPS fund, originally set up to protect members’ savings, should be used to bail out a pension fund.

Any move to use the SPS to save the pension fund must be approved by delegates at the league’s AGM on Saturday, April 24.

Cavan-based Link Credit Union is proposing to withdraw €80.9 million from the SPC fund and allocate it “pro rata to credit unions based on asset size as of September 30, 2021.”

Galway-based St Anthony’s and Claddagh Credit Union proposes an amount of 60 million euros.

And the league has proposed taking 30 million euros to plug the pension hole.

Many of the 162 credit unions in the South that are not part of the league’s pension fund are likely to oppose the SPS fund’s crackdown to address the pension deficit.

The Education Credit Union, whose members are secondary school teachers, is proposing a motion of no confidence in the league board over its “mishandling of ILCU-related matters.” [Irish League of Credit Unions] performance-oriented system”.

In a memo to the credit unions ahead of the AGM, acting league chief David Malone said the credit unions had made their “frustration and dissatisfaction clear” in recent weeks.

Many staff members who are members of the pension fund first learned of the extent of the deficit through reports in the Irish Independent.

Mr Malone said the league plans to put in place a new pensions administration structure “to provide members with consistent and transparent information about the performance and functioning of the pensions system itself,” he said.

https://www.independent.ie/business/personal-finance/credit-unions/credit-union-row-likely-over-plans-to-use-bail-out-fund-to-plug-hole-in-pension-fund-41556343.html Credit union row likely over plans to use bailout funds to plug holes in pension funds

Fry Electronics Team

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