There is “no question” of Ireland’s credit union sector being destabilised because of a ballooning deficit in the industry’s pension scheme, the Irish League of Credit Unions (ILCU) has insisted.

In a statement, the ILCU, which oversees the scheme, has hit back at reports in the Irish national media that a reported €78m deficit in the Irish League of Credit Union’s Defined Benefit Pension Scheme will destabilise the sector.

According to the Irish Independent, the deficit has increased from €6m in 2017 to €78m this year due to the impact of low-interest rates on the scheme. The paper has seen a confidential memo from pension advisers to the ILCU, which stated that the shortfall will have to be made up by individual credit unions that are members of the league.

The paper said that some credit union executives are annoyed they were given no forewarning about the state of the pension scheme, and there are fears this will lead to mass resignations of individual credit unions from the ILCU.

The ILCU slammed the reports as “completely out of context” and said the pension scheme is a separate legal entity to credit unions so there is no risk to the sector. “The scheme is managed by trustees and pension scheme funds are legally separate to members’ funds,” it stated.

Instead, it said that it had identified that the cost of financing pensions was increasing and commissioned an independent review of the scheme. The purpose of the review was to ensure that there is sustainable pension scheme funding arrangements in place to protect benefits that have already been accrued.

The recommendation of the independent review was to close the current DB scheme going forward. “During the review, the league considered the impact on each individual credit union, and we have also been proactively engaging with the Central Bank about the decision,” it said.

“The Irish League of Credit Unions is not unique in moving from a DB scheme to a defined contribution (DC) scheme. In the past decade, there have been significant reductions in the number of defined benefit schemes in Ireland. Almost half of employers who still provide defined benefit schemes have made the decision to cease to future accrual.

“The Irish League of Credit Unions has engaged fully with all participating credit unions and will be providing support and assistance over the coming weeks as they migrate to a new DC scheme.”

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