Tuesday, 28 April 2009
Dáil Eireann Debate
This motion is put forward to permit the committee to alter the provisions of the Social Welfare Bill 2009 in regard to amending the Pensions Act 1990, provide that the Minister for Finance may make a scheme known as the pensions insolvency payment scheme, amend the National Treasury Management Agency Act 1990, amend the Financial Emergency Measure in the Public Interest Act 2009 and change the Title of the Bill to take account of these provisions.
Members are aware that defined benefit, DB, pension schemes are experiencing problems. It is important that they be given every possible assistance by the Government. Moreover, such measures must be introduced as quickly as possible to ensure that those companies in gravest difficulty can benefit from the proposed changes. I appreciate that this legislation is being brought forward at short notice and that the measures contained therein are difficult and complex. The reality is that insolvent companies with pension funds are winding up as we speak. The aim of the legislation is to provide some additional protection to the workers concerned. It was hoped that these measures would be ready at the time of publication of the Bill but the changes being proposed took considerable time to prepare. However, notwithstanding the delay, I am satisfied these changes are urgent and necessary and I would appreciate the co-operation of the House.
The proposed amendments to the Bill will build on the short-term measures already introduced to assist pension schemes and will support the trustees of these schemes in meeting current challenges, while also providing greater flexibility to schemes and regulatory support to assist the affordability and viability of defined benefit pension schemes. In short, I propose amending the Pensions Act to change the order in which liabilities are calculated on the wind-up of a defined benefit pension scheme. I am also proposing an amendment to allow greater flexibility for schemes to restructure benefits in the event of underfunding. The legislation also provides for a strengthening of the role of the Pensions Board in its pursuit of employers who fail to remit pension contributions that were deducted from the wages and salaries of its employees. Furthermore, I am announcing the introduction of a pensions insolvency payments scheme whereby if a defined benefit scheme is in deficit and the sponsoring employer becomes insolvent, the trustees of the scheme may apply to the Minister for Finance to purchase pension payments for its retired members at a lower cost than that available on the open market.
The Government has been working since the publication of the Green Paper on pensions to bring forward proposals to assist the pensions industry. With the recent economic downturn and the huge losses in equities markets in the past 18 months, it was important to put together a package of measures to underpin pensions provision in Ireland. The Government’s initiative began in December with the announcement of several short-term measures aimed at reducing the pressure on underfunded defined benefit schemes by allowing greater flexibility and time to recover funding positions. These measures included the granting of additional time for the preparation of funding proposals; an undertaking that the Pensions Board would deal as flexibly as possible with applications for approval of funding plans, allow longer periods for recovery plans in appropriate circumstances and allow the term of a replacement recovery plan to be extended beyond the end date of the original plan; the taking into account of voluntary employer guarantees in approving recovery plans; and that the Pensions Board would reject recovery plans that fail to demonstrate an appropriate investment approach.
In acknowledging the likelihood that some defined benefit schemes will wind up due to the current economic situation, the measures I am announcing today are a timely next step in our response to the crisis. Furthermore, I expect to follow this in the near future by announcing details of the Government’s national pensions framework, which will include a response on the issue of the sustainability of the pensions industry. While I am not yet in a position to advise the House of what will be included in the framework, I can identify the key issues it should address.
Much of this is familiar to Deputies but it is worth stating again some of the many issues that face us in preparing a sustainable pensions policy. The population aged 65 and over will increase by 59% by 2021 and by a further 142% by 2061. There will be a relatively rapid and severe decline in the pensioner support ratio, that is, the ratio of people of working age to those over pension age, from approximately 6:1 at present to less than 2:1 in 2061. In the years ahead, the State faces an additional bill for pensions which amounts to some €8 billion in today’s terms. The pension coverage rate for people at work has been hovering between 50% and 55% despite vastly improved awareness of pension issues and the need for people to provide for their retirement. Even where people are contributing to pension schemes, those contributions may not be adequate to meet their expectations in retirement.
These figures indicate the scale of the challenge ahead but they tell us little about the tangible human impact of pension problems on ordinary people. People should be confident and secure about their retirement expectations. They should not arrive at pension age only to find that their incomes are well below what was promised to them. Our system must provide surety so that we all can look forward to retirement, confident that our pensions are safe.
The Government is very conscious of the difficulties the global financial crisis is causing for Irish pension funds and the challenge this is presenting for the trustees of pension schemes. It is estimated that in excess of 90% of defined benefit schemes are currently in deficit, with estimates suggesting a shortfall of up to €30 billion. The Government is very much aware of the threat the current financial environment is presenting for some defined benefit schemes where the employer becomes insolvent leading to a wind-up of the scheme. The amendments I am introducing today are the next logical step in the Government’s approach to pensions provision. These amendments will help to support the job of the trustees in addressing the challenges they face at this time.
Insolvency invariably leads to the wind-up of the pension scheme. This means that some, if not many, pension scheme members who have yet to retire will face a shortfall in their pension. This is of particular concern for those close to retirement who have few options in terms of making alternative provision for their future. For this reason, I am bringing forward an amendment to enable the Minister for Finance to provide for a pensions insolvency payment scheme, PIPS. Currently, if a defined benefit scheme is in deficit and the sponsoring employer becomes insolvent, the trustees must first provide pensions for the retired members of the scheme, usually by purchasing annuities. Whatever is left is apportioned among the active and deferred members of the scheme. The more expensive the annuities, the less money available for those yet to retire. Annuities provided on the open market are priced to include certain costs such as commissions and expenses as well as a profit margin. Crucially, annuity providers must hold reserves to back up their annuity commitments, a cost which can add significantly to the final annuity price.
The PIPS will provide an alternative for trustees of defined benefit schemes in deficit with an insolvent employer. In simple terms, trustees of participating schemes would pay to the Exchequer the amount necessary to cover the cost of providing pensions to retired members. With commissions, expenses, and the cost of capital distilled from the equation, the PIPS should be able to provide these payments at less expense to the trustees. This should then free up additional money to go towards the pensions of those yet to retire.
It is important to be clear on this issue. The PIPS is not a bail out of pension schemes in deficit and has been carefully designed to ensure that it will be cost neutral from an Exchequer point of view. We must be careful that our attempt to assist those in need is not misrepresented. Many people will want to know the bottom line on this and the difference it will make to their pension. The simple answer is that it depends on the scheme in question. Each scheme involved will have to be actuarially assessed and the costs and savings will depend on the age profile of the scheme, the prevailing interest rate and other relevant factors. The intention is that this technical calculation will be carried out by the National Treasury Management Agency so as to make the PIPS cost neutral to the Exchequer. The PIPS will operate on a pilot basis and will be reviewed within three years of its establishment. The amendment I am introducing today will set out the necessary enabling provisions to allow the Minister for Finance to introduce the scheme and to provide for the detailed arrangements to be set out in regulations, in which I will have a consultative role. The PIPS can commence once those regulations are in place.
As I have said, employer insolvency may invariably lead to the wind-up of the pension scheme. In the event of such a wind-up, the Pensions Act stipulates the order in which the resources of the scheme must be disbursed. It gives priority to the liabilities accruing to pensioners before it distributes the remaining assets to those who are still in employment and those former employees who have not yet retired. The calculation of the liabilities includes provision for post-retirement increases in the third of schemes that provide for such increases.
With increases in pension costs, the liability for post-retirement increases can be substantial, and in a situation where a severely underfunded scheme is wound up, the allocation of assets for pensioners in payment can significantly reduce the assets available for other scheme members. In this regard and in order to achieve a greater equity in the distribution of scheme assets on wind-up of the scheme, I am bringing forward an amendment to reorder the wind-up priorities by moving the provision for post-retirement increase to a lower priority. This change will not impact on the current pension payment to pensioners but it will enhance the level of resources available to other scheme members. Once the basic pension entitlements of all scheme members are covered, the distribution of scheme assets for post-retirement increases will then be applied. This is an important change in the priority order and will, without impacting on the pensions of those already retired, improve the situation of other scheme members.
It is desirable to ensure that pension legislation supports the viability of current pension schemes and that nothing in current legislation could be considered restrictive in the ongoing maintenance and sustainability of a pension scheme. In this regard, I am bringing forward an amendment to the scope of the Pensions Act in respect of the existing provision in the Act for the restructuring of a pension scheme. Current legislation provides for the restructuring of a defined benefit pension scheme but only to the extent that it affects the benefits of those currently employed by the employer sponsoring the scheme. This restructuring does not extend to the accrued benefits of scheme members who are no longer employed in the company or to post-retirement increases in benefits. This limitation in restructuring a scheme could give the trustee no option but to wind up the scheme.
The proposed amendment to the Pension Act will broaden the scope of a scheme restructuring to include those currently in employment, those who have ceased employment with the current employer and the provision of post-retirement increases for all scheme members including pensioners. It must be stressed that this change will not impact on the pension currently in payment to pensioners. The purpose of this amendment is to help trustees secure the viability of the pension scheme by extending the elements of the scheme which may be considered in any restructuring of a scheme. This will help the trustees to maintain the ongoing viability of the pension scheme and hopefully avoid the scenario of a scheme wind-up. It is important to point out that the measures I have outlined will retain the current priority given to pensions in payment which means that employees who have retired, and those who have reached normal retirement age, will not see any diminution of their entitlement to a pension.
Deputies will agree that it is crucially important that any moneys deducted from an employee for pension purposes are remitted to the trustees of the pension scheme. Difficulties are currently being experienced by the Pensions Regulator in bringing successful prosecutions against employers who fail to remit employee contributions to the trustees of a pension scheme. This is due mainly to the standard of proof required based on oral evidence, often required to be given by an employee of the employer in question. In practice, it is understandable that such employees may be unwilling to testify against their employer, for fear of the impact on their future careers. In response to this situation, I am bringing forward an amendment to the Pensions Act to strengthen the role of the Pensions Regulator in this regard by establishing a separate offence for such a breach of the Act and by enhancing the admissibility of documentary evidence.
While the main focus of the amendments I am bringing forward are to do with supporting the work of the trustees in situations which threaten the future of a pension scheme, it is important to ensure that the legislation is strong where an employer fails to remit pension contributions to the trustees of a scheme. I must acknowledge that the vast majority of employers comply with this requirement. We must, however, ensure that those who fail to comply are pursued.
Finally, I introduce an amendment to provide a court with the power to relieve a trustee from liability for a breach of trust. This proposal is aimed at protecting trustees who have acted honestly and reasonably in the performance of their duties.
The amendments I am presenting to the House this evening are aimed at supporting workers in defined benefit schemes and assisting trustees in securing the future of pension schemes. I am also aware that there are many other challenges facing pension policy and provision in Ireland. These include issues such as pensions coverage and the adequacy and sustainability of our pensions system generally, all of which were set out and discussed in the Green Paper on pensions.
A good, robust pensions system is costly no matter how it is organised. The challenge faced by the Government is to strike the appropriate balance between those involved, including employers, people in employment and the State. Our objective must be a pension system which will deliver an adequate retirement income for all which is at the same time affordable and sustainable for the State and those who sponsor and provide occupational pensions systems. Discussions with my Government colleagues on the final framework are ongoing, and I expect that the framework will be published in the near future.
For now, I move to alter the provisions of the Social Welfare Bill 2009. I appreciate that this is a difficult and complex issue but the measure is designed to give extra rights to workers in companies which are insolvent or about to become insolvent and whose pension funds are in deficit.
Deputy Olwyn Enright: This is the first time I have participated in a second debate on Second Stage of a Bill. The Fine Gael Party and I object in the strongest possible terms to the way the Government is ordering the business of the House and bringing legislation before it.
The Minister says she appreciates the complexity of the legislation. This gives no recognition to the fact that advisers from her own Department and the Department Finance have drawn up this legislation on her behalf. It was presented to Deputy Shortall and me at 10 o’clock this morning. A briefing was offered yesterday but the amendments were not ready then. Had I taken up the offer of the briefing, which I could not because I was in my constituency, the measure would not have been ready for consideration. If Members are to do the job for which we are elected and paid, we must have an opportunity to consult and engage with people to gain their views on what we are doing and to get expert opinion on legislation.
This legislation is complex, both in what is put before us and in what is left out. I have not had sufficient opportunity to speak to experts in this area and to decide whether or not Fine Gael and I should be for or against the proposal. There is merit in some of what the Minister is suggesting and I have difficulty with other aspects of it. Opposition parties are being asked to vote on the proposals tonight. We will be condemned at some future date for refusing to co-operate with necessary legislation but we are not given time to make informed decisions. This is serious legislation with profound implications for workers and for those who are already retired. The implications are even more profound for those workers not covered by the measure. It should not be decided by gut instinct, but it will go through on a nod and a wink.
I did not know until I came to the House this afternoon that this Second Stage debate was to be held. My party Whip was informed of it only this afternoon. This is not the right way to do business and will not lead to good legislation.
I have lost count of the times I heard the Minister and her predecessors, Deputy Cullen and the late Deputy Séamus Brennan, promise a proper pensions policy. I have heard all three of them, in countless interviews on “Morning Ireland”, saying it was on the way. We have had 12 years of Fianna Fáil led Government in which difficulties in our pensions structure have built up, although I accept that the difficulties have been more extreme in recent years. We have had 12 years of inaction in this regard. I attended the Minister’s press conference when the Green Paper on pensions was published in October 2007. From what was said on that occasion, we expected to see progress. Today, we are told we will see progress shortly. How soon is shortly? When will we see an overall, comprehensive pensions policy? That is what people need.
Piecemeal action is the least effective way to do things. I accept the present urgency in dealing with the companies covered by this measure but it is a pity the Taoiseach did not answer the question posed to him today. Is there a specific problem which demands that this measure be rushed through tonight?
Deputy Olwyn Enright: There is an inherent contradiction in rushing this business. The Minister said the Minister for Finance will be required to make regulations. Will he make those regulations on Thursday or Friday when the measure has been passed by the Seanad or will we wait even further? While he and his Department are making those regulations, surely Members could have been given a few days to consider the measure. I would not have objected to coming back on Friday to deal with this matter properly, following consultation with experts and having made an informed decision.
I do not oppose the Government for the sake of doing so. I am happy to agree with Government measures and to say so if that is appropriate. I do not like speaking on the hoof. I like to make informed contributions. However, I will be obliged to debate this measure later this evening while not knowing all I should know about it. That will be a dereliction of my duty, through no fault of my own.
I hope the Minister will consider these reservations, although it is clear that she and her party have not done so. Had they done so, we would not be having this debate but would be discussing the Social Welfare Bill as originally presented.
I have a concern regarding the timing of this evening’s business and the fact that these amendments will be taken at the very end of the three and a half hour debate on Committee Stage. I am concerned that we may not even reach them or discuss them individually. It will be a disgrace if we do not discuss these amendments and pass legislation of this importance with no effective debate and with no contributions from other members of Fine Gael, the Labour Party or Sinn Féin. I accept and agree with the changes in the order of priority to protect existing employees. However, I refer to certain exclusions. The Minister has included companies which are insolvent as well as their pension schemes and companies which are winding up.
My colleague, Deputy James Reilly and my party leader, Deputy Enda Kenny received an e-mail this evening from staff in SR Technics. Those concerned and the wider public are only now becoming aware of the proposals. As responsible citizens, they are concerned that legislation is being rushed through and they have heard rumours. It is unacceptable that such people, who have been through the mill in recent weeks, are relying on rumours to the effect that SR Technics will not be eligible for the scheme. I thank the Minister’s officials for this morning’s briefing, which was helpful even if it was arranged at the last minute. The staff in SR Technics are concerned that they will not be included in the scheme. There are many other examples of those not included, such as those from Bord na Móna, the ESB and so on. I would have preferred an opportunity to tease out in greater detail the reasons for the exclusions and whether there could be a possibility of tabling amendments such that such companies could be included. They are not included on the basis of the Minister’s current decision on the matter but we should have had the opportunity to tease out the matter in greater detail.
I have concerns regarding the overall approach of the Minister in terms of post-retirement increases. I agree with it, but concerns remain related to the consequences of a period of high inflation which we do not have currently, but which will arise again. If inflation increases rapidly there is an effect in terms of people’s pensions and there may be difficulties in this regard. We have seen how the dramatic increase in costs in recent years presents difficulties.
I will raise the matter if I have the opportunity on Committee Stage but I have concerns related to the overall policy and to why the Minister did not consider a cap on the priority of pensions for existing and deferred workers. Let us consider the situation of the pension of a bank chief executive in the region of €250,000. It is not beyond the bounds of possibility that it could be a good deal more but if such a bank were to wind up that chief executive would receive his pension. A teller in the same bank might be in receipt of a pension of €15,000 or €20,000. Given the Bill in its current form if the pension scheme of such a bank was de-funded by 50% the chief executive would receive €125,000 but the teller would receive a pension of only €7,500. The equity of such issues should have been considered in the legislation and should have been discussed by Members. Such situations are very unfair and powers should have been given to the trustees or, at least, to the Pensions Board, to examine the higher end of the scale in cases involving the winding up of a company.
I am also concerned about restructuring. What would constitute a substantial deficit and how will this matter be decided? I refer to the reduction in benefit. Will this apply on a pro rata basis only? The Minister could have legislated for such provisions under the restructuring section such that it would take place on the basis of a proportion of a person’s income. I trust the Minister has considered the matter but when she did so, did any legal impediment arise in respect of proceeding in this way? Was the decision to proceed on a pro rata basis rather than on proportional income one of principle, policy or legality?
I accept the measures in respect of trustees making decisions in good faith. I am trying to include everything in case we do not reach these matters later on. It is important such measures are included but we must examine the differentiation between types of trustees. It is possible for a board of trustees of a pension fund to have an ordinary person appointed to it from the company. Usually, an associated trade union would have an appointee on the board of trustees also. Such people are likely to be regular employees of the company not expert in the whole areas of trustee law, investments and related matters. Usually, there would also be someone on such a board who is a professional trustee and works in that capacity for a living. Do the courts have the power to differentiate between the two such types? A professional person would be making informed decisions whereas an ordinary trustee — I use that term although such people may not wish for me to do so — would come from a different perspective and rely on expert information. It is possible to have a professional trustee who is honest and acting in good faith but who is negligent. I wish to ensure the court has the power to differentiate between such cases because negligence is not a issue which the courts should have the power to brush away because actions were taken in good faith. There have been examples in recent times where such changes have taken place for the right reasons.
I refer to payroll evidence. From a legal perspective I am unsure if an employee’s name could still be given to a company. I imagine there could be difficulties if it were not given to such a company upon request. To some extent that could have the same effect as an employee appearing on a witness stand. Such a case would be less intimidating for the employee but the Minister indicated the possibility of an employer punishing an employee and if a name is on a payroll slip this difficulty would remain. Through discovery, the name would have to be given but I am unsure. Will the Minister clarify the matter?
I refer to the issue of annuities. I have several questions on this issue which I will attempt to put. How many schemes currently qualify under the new conditions? I presume such information is available at this stage. What is the value of assets in such schemes? How will the State account for the money and what will it do upon its receipt? Where will it go? It is possible that in the coming three years there could be a significant amount of money coming in which in theory, should be used to buy annuities, but some of which will not have to be paid out for a long period? Will such money be put in the Exchequer pot, which would be of great concern? Would such money be put in the National Pensions Reserve Fund, probably the best option, to prepare for future liabilities? It is important to receive clarity on such issues.
I have concerns regarding the restrictive nature of the scheme and those excluded from the perspective of annuities. What legal advice did the Minister receive in respect of EU competition law and State aid legislation? Did the Minister receive advice from the Attorney General? Has the Attorney General examined the vulnerability of the legislation and possible challenges on grounds of unfair State subsidies? Some companies may be in that position and others may not. Some companies may be in less of a position to go against the Government at this stage in terms of the bank schemes. When will the scheme be set up?
I refer to proposed amendments to the Bill. I object in strong terms to the ruling out of order of two amendments because they could involve a potential charge on the Revenue. I was told of this only ten minutes before the Minister spoke on the Order of Business. I realise the Ceann Comhairle receives advice from the Department before amendments are ruled out of order. However, amendments Nos. 6 and 9 refer to the jobseeker’s allowance. I simply seek information and have asked the Minister to ensure sufficient courses are available to relevant people aged between 18 and 19 years and to ensure transport to such courses is available. If commitments were made by the Minister for Social and Family Affairs and the Minister for Finance in the Budget Statement concerning available alternatives then there is no potential charge to the Exchequer because such matters have already been set up and are in place. My amendments should not have been ruled out of order on that basis. I will oppose the relevant Stages of the Bill on the basis that if I cannot access the information I cannot support the legislation. It would be wrong of me to do so. I believe neither of my amendments should have been ruled out of order. At least we should know the courses such young people will attend and the arrangements in place for them.
Deputy Róisín Shortall: I put on record my complete dissatisfaction with the manner in which the Minister is dealing with this important legislation. The legislation is very complex, but we did not even have time to read it. There was a 30 minute briefing this morning, which was highly unsatisfactory. That is no reflection on the officials but there was only a window of 30 minutes this morning when Opposition spokespersons were available. That is simply not acceptable. The Minister owes the Opposition some explanation regarding why she is dealing with the legislation in this manner. It has all the signs of a rushed job. As I said earlier, we will rue the day in this House that we did this. It is complex legislation which is rushed, which has not been given adequate or appropriate consideration and undoubtedly we will be back here in the future amending what will amount to bad legislation.
The Minister has a bit of a nerve coming into the House and asking for co-operation on this legislation. We fully recognise the urgency associated with the Social Welfare Bill and we have facilitated the Minister in that regard. We would like to have had more time to discuss the various cuts which the Bill contains but we were prepared to deal with it tonight. However, we are not prepared to deal with a huge new and totally unrelated additional section dealing with pensions. For that reason the Minister will have no co-operation from the Labour Party in this or, indeed, for the foreseeable future in taking any legislation or dealing with matters in this House because she has shown utter disrespect for us by forcing this measure through the House today.
The Minister has not provided any explanation whatsoever of her reasons for doing so. We all accept there are situations where emergency legislation is required to be dealt with very quickly in a matter of hours. However, she has not provided any explanation. There are rumours around that some big scheme is about to collapse. I do not know whether there is anything in those rumours. If there is, the Minister should at least have given us an off-the-record briefing and explained the situation. If there is not some pressing reason, there is no justification for rushing this Bill through the House.
As I suggested to the Minister and the Chief Whip, this issue should have been taken as a separate pensions Bill. I had offered the co-operation of the Labour Party in the taking of such a Bill within the next fortnight. There must be some reason the Minister was not prepared to deal with it in that manner. I do not think it was bad-mindedness on the part of the Minister. She should have explained to Opposition spokespersons why she was not prepared to do that. Given her failure to do so and her disregard for the position in which we find ourselves, I can assure her that she will not have any co-operation from these benches. Having waited ten years for pension reform, she really has a nerve to come into the House and ram through proposals in the space of four hours. If we could wait ten years for these changes, why can we not wait another week or two and at least give this legislation the kind of consideration it requires?
Bringing forward this rushed legislation will not let the Minister off the hook with regard to the Robins case and I hope she does not for a moment think it will. She has bluffed her way through the implications of the Robins case when it comes to the implications for many different companies here where defined benefit schemes are in difficulties and the companies go bust. I refer in particular to Waterford Crystal. That case is proceeding apace. The Minister was given adequate warning and notice about it. As I said to her, sooner or later we are going to find ourselves before the European Court of Justice, on the basis of her failure to provide adequate pension cover for Waterford Crystal workers. She had an opportunity to do something about that. Not only was she given adequate notice about those problems and what she was supposed to have done following the Robins case, but the workers brought forward a viable proposal which the Minister could have accepted with regard to how the existing pension fund could have been dealt with and how that could have assisted for the capitalisation of a financial institution. They were given some sort of hearing from the Department of Finance. Unfortunately, for whatever reason, the Department, or certain people in the Department of Social and Family Affairs at the most senior level, did not quite follow what the proposal was, but there was a proposal put to the Minister for solving the problem at Waterford Crystal which she rejected. The Waterford Crystal people are in a difficulty and they will have to pursue the case themselves through the courts here and the European Court of Justice. One of the most regrettable aspects is that there is every likelihood that the Minister, through her inaction, will expose the Irish taxpayer to a considerable claim as a result of her failure to tackle the Waterford Crystal issue.
The most accurate way of describing what the Minister proposes is that it is like using a packet of sticking plasters on some of the aspects of our existing pension policy and pension law. These are minor changes and no excuse for not having a proper policy in place. Those minor changes will benefit some people but they have negative implications for others. In certain situations there will be pensioners who currently have the pension they understood they were entitled to and they receive their periodic cost of living increases. They left their company and were awarded a pension on certain terms and conditions. These proposals will change those terms and conditions for those pensioners.
There are a couple of issues involved. Those pensioners were given their pension on certain terms and conditions and there are big question marks over whether the Minister or anyone else has the legal authority to change those terms and conditions. We had a public debate about former Ministers and their pension entitlements and the view that a person’s pension could not be touched as it is regarded as sacrosanct. It has been ruled in the courts that a pension constitutes property and we know that property rights are very well protected in the Constitution. Why do the same arguments not apply to defined benefit pensioners who will be affected? There must be legal issues with regard to anybody’s right to interfere with a person’s existing and established pension entitlements and this is of concern to me. An issue of equity is also involved and I note that this evening Age Action has urged the Government to revise these proposals to deal with insolvent private pension funds in order to protect pensioners within those schemes who are on the lowest incomes.
The Minister had options available to her for dealing with this issue but she did not choose them. Some form of cap should have been put on pensions because we will now have a situation where people on very small pensions will lose out on the cost of living increases, yet people on very big pensions continue to enjoy those pensions. There is no equity between pensioners, given that some are on huge pensions and some on very small pensions.
I ask the Minister to clarify whether these new provisions will apply to SR Technics and Waterford Crystal. A late amendment was a rushed job and was not thought through. It is proposed in an amendment that the provisions relating to the change in priorities will apply to recently wound-up schemes and this is welcome. What is not clear is the State annuity scheme, the PIPS scheme and whether or not SR Technics will be able to avail of that scheme, as one of the conditions of the State annuity scheme as set down in the legislation is that the company must be insolvent. We know that SR Technics is not insolvent. They are seeking to walk away and leave liabilities behind them, but it is a profitable company. They are just moving to an alternative location. Will the Minister clarify whether SR Technics employees will be able to avail of the State annuity scheme? Will Waterford Crystal workers also qualify? We deserve that explanation tonight.
What happens at the end of the three-year pilot? Can the Minister withdraw from it if it is not a satisfactory scheme and does not work out as planned? What will happen then? Can these provisions be applied to existing pensioners who already have an increasing pension? While they may not lose anything in the pension there are questions over the cost of living increases. These provisions still allow companies to walk away and leave pension liabilities behind them and that is at the nub of the matter. The Minister is tinkering at the edges, as she did in December. The fundamental point that there is no legal responsibility on companies to ensure there is adequate pension provision is not dealt with. That is very regrettable.
While I welcome the State annuity scheme for insolvent companies, it should be extended to SR Technics and offered to other schemes. There are very strong arguments for having a State annuity scheme and I argued for such a scheme recently during Question Time. Why can there not be an extension to incorporate such a scheme? Why must the company be insolvent? Why are State annuities not generally available? I do not necessarily accept the arguments put forward by officials from the Minister’s Department this morning. There is an element of political decision on this. There is a very strong case for making State annuities generally available. We know the costs of the middle-men in the industry are very high and it makes a lot of sense to provide access to better value annuities that are less expensive than commercial ones.
I welcome the better regulation proposed on companies that do not pass on the pension contributions and the changes in terms of evidence. That is a good move. It probably still will not be possible to prevent a court case against the State because this does nothing about guaranteeing an over 50% provision. We will revisit that in the not too distant future.
What, if any, consultation has taken place with representatives of older people? It is all very well for the Minister to say she is under pressure from the unions in the national talks and wants a greater spread in terms of entitlements. These have serious implications for existing pensioners. Did the Minister consult with anybody on that? There should have been adequate consultation. Was the Pensions Ombudsman consulted on these proposals?
To which pensioners will the proposals apply? How many pensioners will lose a cost of living increment? What information will be made available to pensioners on the possible impact on them? From when will the new changes apply? If a pensioner already has a cost of living increase from this year will that be clawed back? How will it work? What notice must a pension fund give a pensioner before it cancels a cost of living increase? I can see no requirement in the Bill for pension funds to write or otherwise notify or inform existing pensioners. What happens if inflation reaches 10% again? There is no provision in the Bill to deal with that for existing pensioners.
Deputy Arthur Morgan: I thank the Minister and her Department for her offer of a briefing on this legislation. I very much regret that I could not attend it at the very short notice. That is most unfortunate for all of us. In a way I welcome the fact that something is being done on this pensions issue but I am very disappointed at how little is being done and particularly at the manner in which it is being done. We have had seriously inadequate time to research and explore the implications of this proposed legislation and that has implications for its passage through this House. I acknowledge the need for a steady pension ship but I also acknowledge the need for a steady legislative process which will give us adequate time to allow us to research and debate these matters and all their implications comprehensively.
The Government’s admission that workers’ pension schemes need protecting is undoubtedly good news, but the bad news is that the proposed scheme is so limited. For example, the scheme does not acknowledge the insecurity of the market upon which pension provision relies or the fact that a significant number of workers have no pension provision at all. We need fundamental reform of the pension system and quickly.
Two years ago, in 2007, I proposed increasing and universalising the State pension which would be augmented by a social insurance earnings-related pension. This is the type of reform not addressed by the Government’s Green Paper on pensions, which sought instead to privatise pension provision. The form proposed by my party was progressive and, more importantly, equitable and sustainable. I have persistently called for the abolition of the PRSI ceiling and the standardising of tax reliefs, which currently benefit those on higher incomes. The public purse would have been better off by approximately €1 billion if tax relief on pensions were standardised. Why was this not done in this month’s emergency budget? Surely that €1 billion would have been appreciated in the coffers, although it has been claimed that the proposal before us today is cost neutral. I also called for a PRSI increase of 1% on all workers to boost the social insurance fund, which is at risk of running out. In a full year this increase and the abolition of the PRSI ceiling would have put an extra €950 million into the country’s coffers. Again, why did the Government not undertake this measure?
Two important principles need to be attached to any pension scheme, namely adequacy of financial provision for people to live out their retirement years in some level of comfort and reasonableness, and equity or fairness across the board on all these matters. Will this scheme impact on people who have recently become unemployed who had been contributing to a pension scheme but are not in a position to do so while unemployed? What is the likely impact on them? They can no longer subscribe to the pension scheme to which they had subscribed. Others made the point on the pension schemes for workers at Waterford Crystal and SR Technics. I would appreciate if any clarification could be brought to bear on whether those people will be included in this scheme.
Deputy Mary Hanafin: Again, these measures have not been introduced for any one company. It is not about any particular emergency situation that is about to arise. There are all kinds of media speculation and comments, but that is not the reason. Schemes all over the country are winding up because those companies are insolvent and we want to ensure the workers in those companies can benefit from this. That is the only motivation in bringing this forward. I appreciate that it is difficult and it is a very short time in which to do it.
A number of key questions were asked which I would like to address and I have only a few minutes to speak. Deputy Enright asked about imposing an income limit. Bearing in mind that scheme members have paid into the scheme according to their salary obviously those who pay more into it will receive only the proportion of the benefit to which they are entitled. If a scheme is in deficit those on higher salaries will take a greater overall loss of money. Most of the schemes are quite separate. The higher executives have their own scheme and the workers a separate one so a limit would not necessarily have any great impact.
What is to happen the money and what will the Department of Finance do with it? There will not be a separate fund for it. Money will be absorbed into the Exchequer but the pensions will be paid on a pay-as-you-go basis for the pensioners.
On whether an employee would be identifiable, the Pensions Board will take the case and the employee will not be implicated as the whistleblower because the Pensions Board would have the evidence to bring the case. That is allowed by this proposal.
Which companies are in and which are out? Obviously there is a process through which every company must go. Companies that need to get certification must go through a legal process. It is not for me to say who is in and who is out but there is a well-known company that is in receivership, for example, and its pension scheme is in deficit. If it goes through all the requirements for winding up obviously the measure would apply to that company.
Deputy Mary Hanafin: There is an important question to answer with regard to the post-retirement increases. In total, only a third of schemes actually guarantee post-retirement increases and because this measure applies then only to those companies that are restructuring because of their difficulties or that are winding up and are insolvent, it will apply only to a small number of that third which have guaranteed the post-retirement increases.
Legal advice on competition law, EU law and all of that was sought and the Attorney General is satisfied in that regard. I was satisfied it does not raise any questions in respect of EU state aid about which the Deputy asked because it is such a confined scheme and because of the insolvent companies and the pension funds in deficit.
Deputy Mary Hanafin: We can see how well it is working. It is impossible to say at this stage how we will review a scheme when we have not even set it up. It is our intention to set it up now and see how it works. The intention behind it is to try to give some extra benefits for the workers.
|Ahern, Dermot.||Ahern, Michael.|
|Ahern, Noel.||Andrews, Barry.|
|Andrews, Chris.||Ardagh, Seán.|
|Aylward, Bobby.||Blaney, Niall.|
|Brady, Áine.||Brady, Cyprian.|
|Brady, Johnny.||Browne, John.|
|Byrne, Thomas.||Calleary, Dara.|
|Carey, Pat.||Collins, Niall.|
|Conlon, Margaret.||Connick, Seán.|
|Cowen, Brian.||Cregan, John.|
|Cuffe, Ciarán.||Cullen, Martin.|
|Curran, John.||Dempsey, Noel.|
|Devins, Jimmy.||Dooley, Timmy.|
|Fahey, Frank.||Finneran, Michael.|
|Fitzpatrick, Michael.||Fleming, Seán.|
|Flynn, Beverley.||Gallagher, Pat The Cope.|
|Gogarty, Paul.||Gormley, John.|
|Grealish, Noel.||Hanafin, Mary.|
|Harney, Mary.||Haughey, Seán.|
|Healy-Rae, Jackie.||Hoctor, Máire.|
|Kelleher, Billy.||Kelly, Peter.|
|Kenneally, Brendan.||Kennedy, Michael.|
|Killeen, Tony.||Kirk, Seamus.|
|Kitt, Michael P.||Kitt, Tom.|
|Lenihan, Brian.||Lenihan, Conor.|
|McEllistrim, Thomas.||McGrath, Mattie.|
|McGrath, Michael.||McGuinness, John.|
|Mansergh, Martin.||Martin, Micheál.|
|Moloney, John.||Moynihan, Michael.|
|Mulcahy, Michael.||Nolan, M. J.|
|Ó Cuív, Éamon.||Ó Fearghaíl, Seán.|
|O’Brien, Darragh.||O’Connor, Charlie.|
|O’Dea, Willie.||O’Flynn, Noel.|
|O’Hanlon, Rory.||O’Keeffe, Batt.|
|O’Rourke, Mary.||O’Sullivan, Christy.|
|Power, Peter.||Power, Seán.|
|Roche, Dick.||Ryan, Eamon.|
|Sargent, Trevor.||Scanlon, Eamon.|
|Smith, Brendan.||Treacy, Noel.|
|Wallace, Mary.||White, Mary Alexandra.|
|Bannon, James.||Barrett, Seán.|
|Behan, Joe.||Broughan, Thomas P.|
|Bruton, Richard.||Burke, Ulick.|
|Burton, Joan.||Byrne, Catherine.|
|Carey, Joe.||Clune, Deirdre.|
|Connaughton, Paul.||Coonan, Noel J.|
|Costello, Joe.||Coveney, Simon.|
|Crawford, Seymour.||Creed, Michael.|
|D’Arcy, Michael.||Deasy, John.|
|Deenihan, Jimmy.||Durkan, Bernard J.|
|English, Damien.||Enright, Olwyn.|
|Feighan, Frank.||Ferris, Martin.|
|Flanagan, Charles.||Flanagan, Terence.|
|Gilmore, Eamon.||Hayes, Brian.|
|Hayes, Tom.||Higgins, Michael D.|
|Hogan, Phil.||Howlin, Brendan.|
|Kehoe, Paul.||Kenny, Enda.|
|McCormack, Pádraic.||McEntee, Shane.|
|McGinley, Dinny.||McGrath, Finian.|
|McHugh, Joe.||McManus, Liz.|
|Mitchell, Olivia.||Morgan, Arthur.|
|Naughten, Denis.||Neville, Dan.|
|Noonan, Michael.||Ó Caoláin, Caoimhghín.|
|Ó Snodaigh, Aengus.||O’Donnell, Kieran.|
|O’Dowd, Fergus.||O’Keeffe, Jim.|
|O’Mahony, John.||O’Shea, Brian.|
|Penrose, Willie.||Perry, John.|
|Quinn, Ruairí.||Rabbitte, Pat.|
|Reilly, James.||Ring, Michael.|
|Shatter, Alan.||Sheahan, Tom.|
|Sheehan, P. J.||Sherlock, Seán.|
|Shortall, Róisín.||Stagg, Emmet.|
|Stanton, David.||Timmins, Billy.|
|Tuffy, Joanna.||Upton, Mary.|
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