Wednesday, 13 February 2002
Seanad Eireann Debate
Mr. Manning: I welcome the Minister to the House and ask for the indulgence of the Cathaoirleach to allow me to make a few comments which will, I hope, put the rest of the debate in context. This Bill was introduced on the first day of the last session. There has been a very long interval between the end of Second Stage debate and production of the amendments, which has caused a degree of frustration on this side of the House.
I realise the Bill has genuine all-party support. It is very much in the national interest and I am aware there has been a wide degree of consultation between the Minister's Department and the various professional bodies. The annoyance on this side of the House arose because the Bill was published without being fully ready and since then the Department has been catching up on sections and changing sections in consultation. I have no problem with consultation but it took a great deal of pressure from us to finally get the amendments and we have not had sufficient time for people who are non-experts to go through all the amendments. I want to be fully supportive of the Bill, however, and to co-operate in its speedy passage through the House.
I understand further major changes will be made on Report Stage, and the Minister will agree with me that bringing in major changes for the first time on Report Stage is not good parliamentary practice. I realise we are coming to the end of this Parliament and that those on all sides of the House would like to see this Bill on the Statute Book before the end of the Parliament. I will not be difficult today so as far as I possibly can I will help the Minister to get the Bill through the House. It will not be our fault, therefore, if it does not appear on the Statute Book before the end of the session.
Mr. O'Toole: The Minister will be aware that I caused a vote on a number of occasions because of the tardiness of the Bill coming through the House. More than most I recognise that the legislation is complex and I confirm that the levels of consultation on it are almost unprecedented. I compliment and thank the Minister and his officials on that because what has come forward has an enormous level of agreement at all levels.  I am strongly of the view that this legislation should be enacted in the course of this Parliament and I do not intend to slow down the process in any way during the course of the day.
I have reservations about one or two issues which have been raised with the Minister in consultation with the Irish Congress of Trade Unions and others, but I wish to see the legislation go through the House as quickly as possible. I am concerned also about major changes on Report Stage, not just because of the practical difficulties but in case it raises new issues. However, I am supportive of getting the legislation through the House as quickly as possible.
Minister for Social, Community and Family Affairs (Mr. D. Ahern): I thank the Senators for their remarks. A commitment was made in the Programme for Prosperity and Fairness to publish this legislation within a certain timescale and while I was not part of the negotiations, I had some input in relation to it and we know now that the forecast for that timescale was probably too optimistic. This is probably one of the most complex legislative measures to come before this Dáil or previous Dálaí. I appreciate the difficulties Deputies experienced in terms of the amendments and I thank them for their forbearance. Some people will say the legislation was not totally ready but it was published in that way because the social partners put extreme pressure on us to show cause in relation to the commitments made in the PPF. We then undertook to release the Bill in various tranches. I am not blaming the parliamentary counsel's office but there was other urgent legislation that tended to take precedence from time to time.
The Government has always put a high priority on this legislation, however, and I thank the Deputies for their comments about getting it passed prior to the election on the basis that it has all-party agreement. It is unfortunate that some amendments will be brought forward on Report Stage. Many of those arose from further consultation that took place. When I published the original draft of the Bill I stated publicly on many occasions to all the partners involved that we would be willing to take on board representations for amendments to the Bill. It was stated that representations would be dealt with in an open manner and about 500 such representations were made as a result of the process. We endeavoured to explain as much as possible to the various groups that contacted us. I thank Senators for their sentiments.
Mr. D. Ahern: This amendment proposes to insert the words “the relevant custodian account of” to make clear that payments under a personal retirement savings account contract are made to the relevant custodian account of the PRSA provider and not directly to the PRSA provider.
Mr. D. Ahern: The amendment is necessary to make clear that payments will be made to the custodian account rather than directly to the PRSA provider. I am trying to ensure that there is clear water between the PRSA contract and the service provider.
Mr. D. Ahern: The vast majority of these amendments relate to the euro changeover. The original Bill gave amounts in pounds and euro, whereas these amendments propose to give amounts in euro only. The exception is amendment No. 21, which constitutes a policy change in relation to PRSA contributions. The amendment will increase the minimum contribution to a PRSA from €6 to €10.
Mr. O'Toole: I wonder why it is necessary to make these amendments as I thought that enabling legislation was in place to change all pound references to euro automatically. The amendments are unnecessary if, as I understand it, they propose to change all pound references exactly to their euro equivalent. It is possible that I have missed the point, but the House needs to be informed. As £5 million is the same as €6.35 million, why are these amendments necessary?
Mr. D. Ahern: These amendments are made to clarify the types of assets which must be held by a custodian. They also clarify the items, such as insurance policies, for which there is no such specific requirement, given the existing prudential requirements of entities that operate in those areas. The amendments are relatively technical.
In page 9, line 57, to delete “to a PRSA provider by virtue of a” and in page 10, lines 1 and 2, to delete “PRSA contract and deposited by the PRSA provider with” and substitute “under a PRSA contract to”.
Mr. Ross: The House should be given an explanation for these amendments. The Minister is just telling us what they do. What is the thinking behind them? I do not understand them and we are going through them quickly. Perhaps we can have the reason this is being done.
Mr. D. Ahern: This amendment refers to the issue of a custodian account and the desire to ensure that there is a separation between the PRSA and other business in which the company  is involved. This is an attempt to ensure that, in effect, they are two separate identities within the one company. The emphasis in this legislation is to try to set up a new system of pensions apart from existing systems. If, in the case of a service provider, there was a connection between the two, there could be an attempt to offset losses on one side against the other. That is the reason the legislation attempts to keep clear blue water between the two identities within a company.
In page 10, line 48, after “Part” to insert “(but such delegation shall, in the case of an undertaking referred to in paragraph (c) of this definition, be restricted to activities comprising the effecting and carrying out of life assurances policies)”.
Mr. D. Ahern: This amendment makes clear that the activities of an insurance undertaking in respect of PRSAs are limited to insurance business in line with existing legislation covering life companies.
Mr. D. Ahern: I will not go through the entire section of the existing legislation, but it refers to the types of businesses regarding PRSAs. The amendment seeks to clarify that insurance business is separate from the existing position regarding PRSAs. The purpose of the amendment is to ensure that PRSAs will be separate from insurance business.
Mr. D. Ahern: This amendment will delete the definition of permanent incapacity as it is no longer required on foot of other proposed amendments which will mean that certain events will be handled in tax legislation. On Report Stage I will introduce amendments regarding the tax treatment of PRSAs. Senators have been circulated with the main elements of the taxation changes we are making to give PRSAs the same tax treatment as existing pensions. This amendment deletes the definition of permanent incapacity as it is dealt with in changes which we will introduce later.
Mr. Ross: I do not understand what the Minister is talking about. He says he is deleting the definition of permanent incapacity in the context of amendments he will introduce later. Will he give us the details of the later amendments which necessitate the deletion of this definition? Otherwise we are blindly removing the definition.
Mr. D. Ahern: As I said, when the Bill was first published we circulated a document about the tax treatment of PRSAs. It was originally intended to make changes in the Finance Acts with regard to PRSAs, but it was then agreed that we would introduce the amendments in this Bill. We will do that on Report Stage. In the original Bill there were references to such things as permanent incapacity, which we need to remove as we will be dealing with them later. I apologise for introducing these amendments, but we circulated what was in effect an explanatory memorandum of the proposed tax changes.
Mr. Ross: I still do not understand. Will the Minister tell us why we are taking this out and what are the amendments on Report Stage which will necessitate its removal? If he does not we will not know why it is being removed. Does the Minister see my point? He is asking us to take this out blindly on the assurance that on Report Stage there will be amendments which are at present unknown to us.
Mr. Ross: On a point of order, a Chathaoirligh, is it normal for us to take lines out of a Bill conditional upon something about which we know  nothing? I would have no problem with it if we knew what the Report Stage amendments would say, but we are being asked to take them out without knowing this.
Mr. Ross: Do you see the point I am making, a Chathaoirligh? Of course it is a matter for the Minister, but it would be very useful if we were given the reasons for the removal of these lines before they are removed. What are these measures, to be introduced on Report Stage, which necessitate this? We do not know what they are. Let us have a look at those amendments before we take this out. Presumably we could take it out on Report Stage.
Mr. D. Ahern: I do not, other than to say that later in the Bill we will be removing other sections which relate to the treatment of PRSAs for tax purposes. We are doing that on the basis that we will be dealing with it comprehensively when we bring forward the amendments relating to tax treatment on Report Stage.
Mr. D. Ahern: As I said before the Senator came in, I appreciate that we have dealt with this legislation in different stages and some Senators may have found fault with the large time lag between Second and Committee Stages. However, we agreed with the offices of the House that we would do that to allow for the unprecedented consultation that has taken place. We did it on the basis that we would also give the Senators an opportunity to hear the views expressed by the various interests in this area. I accept there are difficulties and that many of the changes will have to be accepted at face value. However, there is nothing surreptitious about this. It is merely a technical amendment to clear up items which are rendered irrelevant by what we plan to do later.
Mr. Ross: I do not want to labour the point, but the Minister is assuming that what he plans to do later will actually happen. He is assuming that the House will pass the amendments he plans for Report Stage.
Mr. Ross: It is. We are being asked, however, to make what could be a very important deletion. We are doing it blind on the assurance of the Minister and on the assumption that the later amendments come through. It could have been done better, perhaps on Report Stage because they are dependent on each other. It is bad procedure. I know I will not win this point but it should be a marker of bad procedure.
Mr. D. Ahern: No, section 2 in this Act is saying that the principal Act is the Pensions Act, 1990. What we are doing is inserting new sections into the principal Act and those are sections 91 to 125. That is where I get the reference to sections 101 and 102.
Mr. D. Ahern: This is a technical amendment which will delete subsection (5). This is done because the reporting obligations of PRSA providers imposed by section 99 will apply equally to holders of licences or entities which are authorised by competent authorities of other member states.
Mr. Manning: This is, as the Minister says, confusing legislation. As this is the section of the Bill dealing with the approval of PRSA products, is this the appropriate time to ask a question? I understood that under the original proposal signed by the social partners there would simply be two types of pensions, occupational and PRSA pensions. Are there types of pensions envisaged other than those two? I have heard suggestions that there may be three or four types of pensions. Is it the case that no other types of pensions are envisaged?
Mr. D. Ahern: This is another technical amendment which will delete subsection (9) in this section. This is done because the approval requirements of PRSA products provided by section 100 should apply equally to products which are provided by holders of licences and entities authorised by competent authorities of other member states.
Mr. D. Ahern: This amendment will correct an incorrect reference. The reference to paragraph “(k)” of the Investment Intermediaries Act, 1995, will be replaced by reference to paragraph “(m)” of that Act. For that reason, the new paragraph being inserted into the Investment Intermediaries  Act, 1995, will be styled “(n)”, that is rather than “(kk)”.
Mr. D. Ahern: These are technical amendments in relation to the security of contributions. These amendments will clarify that all payments under PRSA contracts must go directly to the PRSA account of the PRSA provider. It is similar to the first type of amendment we had to ensure that all payments go to the custodian account.
(a) the amount of the contributor's PRSA assets with that PRSA provider, at the time of a request by the contributor for or offer by the provider, does not exceed €650 or such other amount as the Minister may, by regulations, specify; and
in which case, if the PRSA provider complies with the condition referred to in subsection (2), he may refund the contributor's PRSA assets to him and, in the case of an offer by the PRSA provider of a payment, without the contributor's consent.”.
Mr. D. Ahern: This is a simplifying technical amendment in relation to the payment of PRSA assets. This amendment deletes subsections (1) and (2) in section 109 as it is proposed that these issues should be dealt with in the Tax Consolidation Acts, amendments to which I will be proposing through this Bill on Report Stage. There is no proposed change in policy and PRSA assets will become available at the age of 60 or in the event of death or permanent incapacity. The amendment also clarifies that the contributor can request the payment of PRSA assets or that these can be offered by the PRSA provider where the particular circumstances outlined are met.
Mr. D. Ahern: This is a technical amendment in relation to the regulations on charges or commissions. This amendment will have the effect that the Minister may, rather than shall, make regulations requiring a PRSA provider to make full disclosure of charges or commissions in respect of his or her PRSA activities. These regulations would not extend to charges or commissions under standard PRSAs which are already covered by the maximum charges, that is, 5% of contributions and 1% of asset value. It is considered best to await market developments before making regulations.
Mr. D. Ahern: This amendment relates to statements of reasonable projection which are laid out in the legislation. The amendment will require PRSA providers to provide PRSA contributors with a printed paper copy of the statement of reasonable projection once a year. While statements may be given electronically in certain circumstances, this will ensure that the contributor gets a printed copy which is to his or her benefit.
Mr. D. Ahern: It is a forecast of what return the pension will give over a period. Each provider will have to provide a reasonable projection under the legislation, although it will not be sacrosanct with regard to what ultimately might be the position.
Mr. Ross: What is the value of these statements of reasonable projection? They are based on certain assumptions which are, to say the least, questionable. What is the point of giving status in law to these statements?
Mr. D. Ahern: The legislation will require that a statement of reasonable projection will have to be provided by actuaries, but that each contributor will also be entitled to a statement of the value of the assets they have at a particular time. This is looking into the future but the PRSA provider will also be obliged to provide a statement of the value of the assets that the person has in the pension.
Mr. Ross: The Minister should expand on this. When statements of reasonable projection, which are off the top of the head forecasts, are embodied in legislation, are they binding on anybody? Do they have any value in relation to the actuary? If statements of reasonable projection had been made three weeks ago, they would not  look like statements of reasonable projection today, given the value of many assets. They are usually based on certain assumptions, one of which is that the value of assets goes up. I have never seen a statement of reasonable projection which does not assume that the value of assets of this sort, particularly pension assets, will rise in the long term.
Is there any point giving status to these statements when they do not seem to be of any value? Will the Minister tell us on what assumptions these statements will be based? Are we leaving them in the hands of actuaries whose accuracy at predicting the future is no better than mine, the Minister's or a man walking up a wall? What is the point of these things, what is their value and why are they being enshrined in legislation in this way?
I suspect that they are in many cases misleading. They give the impression that something is about to happen because they come from people who aspire to a science that does not exist, but they cannot reasonably bind anybody. In other words, these statements are meaningless because they are not binding on anybody in any sense. What is their value if they are not binding?
Ms Leonard: Unlike Senator Ross, I do not come from a financial background. However, this measure will give additional information to an individual with no direct knowledge of the PRSA and who would previously have handed over anything related to pensions to others. If those with pensions get regular information in lay man's terms and readable language, they will be better informed. That is what this amendment is about and I support it.
Mr. D. Ahern: The amendment puts in place something that is not there at the moment in relation to reasonable projection. It is for the information of the contributor so that the contributor can see whether the amount of money they are putting into a pension will be sufficient to sustain them when they retire. They will be able to build on their contributions if that is required. I accept that the measure is not binding but it is a benefit to the contributor.
I refer Senator Ross to section 114, which I am proposing to insert as one of the group of sections I mentioned earlier. That section relates to general disclosure and says that a PRSA provider will give a statement of account in relation to a number of issues, including the total contributions credited to the contributor, a statement of account differentiating between the contributions paid by the employee and those paid by his or her employer and a statement of account in relation to the value of the PRSA on the date of publication of the statement, etc. There are significant disclosure obligations laid out in the legislation but this is an added look to the future measure for a contributor. It is a help rather than a hindrance for the contributor.
Mr. Ross: I am not clear about the point of this measure. I am in total agreement with the Minister about the benefits of transparency and of a valuation and facts being issued to a contributor any time he or she may want them. However, these statements of reasonable projection are dependent on the value of underlying assets. Is that not what we are talking about? One cannot make a reasonable projection unless one assumes that certain underlying assets will be worth something in the future. To put this in plain language, this relates to an estimate of the value of those assets in the future and the income that will come from them. That is what I am assuming although it is not clear from what the Minister said.
The Minister may correct me if I am wrong but there is a real danger that these statements of reasonable projection, enshrined in law and with credible sounding names or titles, will be utterly misleading and wrong. Far from giving facts, they may actually tell someone that they will get something in the future. That could be very misleading and I want to know the underlying assumptions made by the Minister in relation to this and what is seen as acceptable in terms of underlying assumptions and if those assumptions are wrong. It may not be deliberately misleading, but it will be misleading nonetheless.
We are talking about people who, as Senator Leonard rightly said, are not familiar with the movement of assets and financial dealings of this sort and people who will clutch at straws when they are told that they can expect something in the future. They will take such statements as gospel although the statements are just anybody's guess. If statements of reasonable projection had been made three weeks ago, they would be so wide of the mark now that people would claim they had been misled.
Perhaps the Minister will reassure me because making statements about the value of underlying assets is not an exact science; it is very dangerous. The Irish Stock Exchange is down 22% this year, but no one would have made a statement of reasonable projection forecasting that position. Every expert forecast that the assets would increase. Last year, the same market was down 5.7%. Any statement of reasonable projection would have suggested these assets would go up in that time, but they decreased by 25%. What will be done for the PRSA holder who is told a reasonable projection is a rise of 10% to 15%, but there is a fall of 25%? That is a difference of 40%. That is not a reasonable projection; it is haywire. How can these statements be of any value if they can be so wrong?
Mr. D. Ahern: These are not in place at present. Most people are not conversant in this area so it will be of benefit to those investing money in a pension because they will be able to listen to what the experts are saying.
Mr. D. Ahern: A statement will be given on an annual basis so any divergence in the market could be well targeted from year to year. This will help people to see how they are performing, if they need to make further contributions to their pension, if they need to transfer it elsewhere or to make other arrangements because it is not making the desired return. It is not an exact science and never will be, but people will be more fully informed of how a pension is performing if a statement is given from year to year. Someone examining the topic over a longer period will have a better view of how the asset is performing.
Mr. D. Ahern: —say if things perform the way people anticipate. That is not to say that events will not happen that could cause a downturn. I cannot understand why the Senator is being negative about giving more information to individuals so they can make their own decisions on their own contributions. If a statement of reasonable projection is given over a couple of years and it is obvious to the person that all these reasonable projections have not performed in the way forecast, then it would be up to him to change from that pension and make alternative arrangements. That is better than my experience of dealing with pensioners who put money aside, did not think about it until they retired and then found there was not enough money. Is it not better that they are given a year by year indication of how things are going so they will be able to make alternative arrangements or additional contributions?
Mr. Ross: The Minister is correct. It is better that they should be aware of the state of their funds and assets and if they should make further contributions. That is not the argument – perhaps the Minister is missing the point. That is the past. A person can look at it and say he has done badly and should put more money in, or that he has done well and does not need to put so much  in, but the Minister has not provided evidence that these forecasters are any better than someone taking a random guess. He is giving these forecasters great status. “Actuaries” is a grand word. None of us has actuarial qualifications so we think they have some kind of mystique. There is no mystique. The evidence is the opposite.
Pension fund managers are consistently underperforming the market. It is absurd to give them this status. The Minister said “if the experts forecast. . .”, but there are no experts in this market except self-appointed experts who fool everyone, including, unfortunately, the Minister, that somehow they have an expertise in a science which enables them to outperform anyone else. In effect we are giving status to underperformers.
Will the Minister help me by producing evidence that this expertise has, does and will assist people with their investments, that these people outperform the markets or have something to offer pensioners? Pension funds in Ireland fell over the past two years through bad investment. The forecasters said they would be up at the beginning of the year. Are these the people we are putting in charge of making forecasts in the new PRSA? Could I have the evidence that shows there is any benefit from giving these people any status of this sort?
Ms Leonard: The forecasters are often wrong but if a person sees the results on annual basis, a pattern will quickly materialise. It is the same with economists. Four economists in a room could not agree, but the man in the street can weigh up and, if necessary, transfer his PRSA after a couple of years. An amateur would see quickly if managers are not managing properly.
Mr. D. Ahern: The Senator has a jaundiced view of actuaries and experts. I have some experience of dealing with actuaries and, generally, their forecasts are conservative. No one can foresee the future. We are trying to be of assistance to the consumer by giving some indication of what people who deal daily in this area have as regards their future. Obviously, the consumer does not have a clue and it is preferable for us to do something like this rather than leave it out. To delete it would mean in effect that, other than the normal disclosure, people would not get any indication of what they have in their pension fund.
As regards life policies, I like to see that what is being suggested will be the outcome. Sometimes it is the case that the outturn will not be as good as predicted, but these indications are not binding and are there only for the assistance of the consumer. It is better to have them included than not. This was specifically sought by the var ious interests in the national pensions policy initiative, including the social partners, who asked for this type of disclosure. I was fully in favour of those proposals.
Mr. Manning: I have great sympathy with the point being made by Senator Ross. There is a mystique surrounding many fund managers whose activities could do with far greater scrutiny that at present, given their performance. Wearing his other hat, Senator Ross may be able to help us achieve that. The Minister is living in the real world, however, and must deal with what is there.
I welcome greater openness but I would be happier if a group of fund managers engaged J.P. McManus or Dermot Desmond to advise them on future investments. Comparing the results of what they invested with what some of the fund managers invested I would feel more confident, if not quite as secure.
Mr. Ross: There is a warning on many advertisements for pension funds which states that “past performance is no guide to future return”. Basically, that is saying one cannot tell anything from history in terms of fund management, and that is correct. I suppose one cannot foretell anything from history when one looks at it in an absolute sense. It is important to examine this science and ask questions in the light of recent events. The past few weeks have not been exceptional; such things have happened before.
There have been two particularly dramatic events on the Irish Stock Exchange. One was the complete collapse of the price of Elan, and the other was a mini collapse last week in the price of AIB, with which everyone is familiar. I will not go into the virtues of Elan as a stock but, for reasons which are not to their credit, it is my understanding that every single pension fund manger, bar one, was heavily into Elan. As a result of that everybody's pension fund has suffered – some considerably more than others. When one asks fund managers informally why these pension funds were in that particular stock, they say that Elan is the biggest company on the Irish Stock Exchange and therefore they have to invest in it to a greater extent. The reason is that they prefer to track the stock market and the Stock Exchange rather than make what they might consider bold, decisive, value investments. As a result we have a group of 16 or 17 so-called experts, in the Minister's word, running what are very close to tracker bonds. In other words, they are tracking the index by putting in pension money according to the weightings of those stocks. It is not absolutely true in the case of Elan because as a more recent development it has taken a while to get there.
The same would be exactly true of Allied Irish Banks, although I suggest that every single managed pension fund would have been in AIB because they would go for a stock not on what they considered its merits but because it is  weighty and big. Roughly speaking, they all do it in about the same proportions; there is a variation but it is small. One can see the result in the performances of pension fund managers which are extraordinarily close over both short and long periods. The reason is that they all invest roughly the same amount of money in approximately the same stocks. There is no great skill or expertise in that. When things went wrong last week, people's pensions suffered to the extent of approximately 2%, which in pension terms is a big hit.
It is an inappropriate time for the Minister to talk with reverence about experts because pension funds have been over-invested in the wrong stocks at the wrong time. If there was any expertise involved, those people would not be in those stocks. I do not have that expertise and I am not sure if anyone does, but to suggest they do so is misleading. The evidence, which the Minister refuses to produce because there is none, suggests exactly the opposite – that these people invest for all the wrong reasons and not because of what they consider to be the merits of the stock. They invest primarily because a quarterly table is published showing who is top and who is bottom. Over a long period they still come in with devastatingly or spectacularly similar results because they are all doing the same thing at the same time, not in the interests of pensioners but in their own interests. Nobody dares to step out of line and take a risk in case they do not track the Irish Stock Exchange index, the ISEC. They measure themselves against that or, even worse, against themselves.
I will conclude with a minor example which is not facetious, although it may be funny. In the newspaper for which I work we conduct an experiment every year to see how fund mangers do against a monkey, that is, someone taking a random selection of assets.
Mr. Ross: I am trying to illustrate an important point and the story illustrates it very well. Every year we ask someone to take a completely random look at the stock market and to pick six stocks and we also ask a complete amateur to do it. Then we pit them against four so-called experts. As far as I know, one expert in one year  out of the last six has never beaten the monkey. Last year a punter – a reader who wrote in – was first, the monkey was second and the four experts came in third, fourth, fifth and sixth. This year, the punter and the monkey are so far ahead that I reckon they cannot be caught. Where were the experts? Every one of them was in Elan.
Mr. Ross: The Minister should be allowed to come back. If these so-called forecasters continue investing people's pensions in this way, we will get into a lot of trouble with pensions. We are also giving elevated status to forecasters when the evidence proves that they should have exactly the opposite status.
Mr. D. Ahern: I am not making a political point but one of the hallmarks of what the Government has done over the last number of years in relation to pensions has been to try to give back to the ordinary person some independence and some ability to move their own money about in whatever way they see fit. That is the right way to go. It has been the case over the years that people's money has often been caught up in funds and non-accessible areas. From a taxation point of view and with a desire to implement an easier regime for people to handle, I would have thought Senator Ross would have been more complimentary. Like everything in life, even with expert advice, it is up to the consumer to decide finally on whether they wish to accept that advice.
I refer the Senator to section 116 which outlines what should be in the statement of reasonable value. Subsection (3) specifically refers to the health warning about which he is asking. It states: “The statement shall advise a potential or actual contributor of the importance of making adequate financial provision for retirement and  of obtaining the appropriate financial advice in that respect.” Subsection (2) states: “. . . shall contain such warnings as are prescribed for the benefit of a potential or actual contributor to a PRSA.” The legislation is providing for a health warning in so far as it is possible.
Occasionally over the years I have read the Senator's articles in different newspapers. I compliment him because they are generally written in plainspeak which the average person can understand. I do not profess to have any particular expertise but, in relation to the investment of funds generally, the well-known old maxim of not putting all one's eggs in one basket applies equally in the higher echelons of investment. While there may have been some exposure in recent times in relation to the issues to which the Senator referred, I understand the position is that they operate on the principle of spreading the load over a number of funds and geographically throughout the world so that difficulties in one area of the world would not be replicated in another area. It is a question of swings and roundabouts.
Mr. D. Ahern: This all tends to be an inexact science. The amendment is intended to benefit consumers and not to hoodwink them. It will give the consumer some idea of how his or her pension is tracking over time.
Mr. D. Ahern: These amendments will insert the word “and” after paragraph (a) which is necessary due to the proposed deletion of paragraph (b) in section 112(2). On reflection it was considered that paragraph (b) was confusing and unnecessary given the other provisions and the fact that it is proposed that the Minister can make regulations generally in this area.
“(5) The Minister may by regulations  require a PRSA provider to provide a Statement of Reasonable Projection to a contributor on the happening of a specified event (not being an event referred to in subsection (2)).”.
Mr. D. Ahern: This amendment will allow the Minister to have the power by regulations to specify other events on the occurrence of which a statement of reasonable projection must be furnished. The position would be reviewed in the light of experience.
Mr. D. Ahern: It could perhaps arise in relation to issues to do with the stock market. My advice is that if there was a downturn in the economy and if there were any significant events in any of the stock markets around the world, some power could be vested in the Minister to make regulations to specify the other events. That will leave it open in the future if it was felt that something should be included in the statement of projection.
Mr. D. Ahern: On page 31, subsection (6) provides that a PRSA provider “may not impose a charge, not exceeding such amount as shall be prescribed, in respect of the furnishing by it of a  Statement of Reasonable Projection under subsection (1)(b).” The substitution of the word “may” for “shall” will give more freedom to act.
Mr. D. Ahern: The purpose of the amendment is to provide more discretion on the introduction of regulations. We may not be in a position to introduce them in the immediate future. The word “shall” would require us to introduce them immediately, whereas the word “may” gives us more scope in that regard.
Mr. D. Ahern: These amendments will ensure that the power granted to the Minister to make regulations applies to the certificate referred to in subsection (1)(a) and the statement referred to in subsection (1)(b) of that section.
In page 32, line 15, after “subsection”, to insert “which shall include a requirement that the person preparing such certificate or statement has such professional indemnity insurance as shall be specified in the regulations”.
Mr. D. Ahern: This technical amendment relates to disclosure before a transfer from a scheme to a PRSA. The amendment provides that regulations under subsection (4) will include a requirement that a person preparing the certificate and the statement referred to in subsection (1) has an appropriate level of professional indemnity insurance. There have been discussions about transfers from occupational pension schemes to PRSAs and it is important that a per son who transfers should have a certain level of protection.
PRSAs are being introduced as a pension vehicle to increase pension coverage. A large movement of people from good occupational pension schemes to PRSAs would be an unintended and undesirable outcome. I will monitor this area closely and will return to it on Report Stage in relation to the tax proposals of PRSAs. The amendment would ensure that only suitable people would be able to provide the relevant certificate and statement. I have not decided on a specific figure for the level of professional indemnity insurance but I hope it will be high.
Mr. D. Ahern: Amendments Nos. 41, 42 and 43 will replace the word “furnished” with the word “given”. Amendment No. 44 is a technical amendment to ensure that the report is furnished to the contributors. It is intended that, if possible, this can be furnished electronically to a contributor. Amendment No. 45 will delete subsection (5), as it is no longer necessary, given the other amendments. It will be possible in certain cases to supply information electronically and I propose to clarify this by a definition of the word “furnish” to be introduced on Report Stage. The intention in this regard is to ensure that the consumer is protected by receiving all the necessary information and reports from the PRSA provider but at the lowest possible cost.
Mr. D. Ahern: This amendment will increase the maximum period between statements of account from three months to six months on foot of views I have received that three months is too onerous and will add to costs and that six months will not lessen the position of the contributor, given the proposal in amendment No. 40 that these statements must be in printed form.
In page 34, line 16, to delete “products;” and substitute “products and such register shall be open for inspection by any member of the public at all reasonable times on payment of such fee as the Board may determine; and”.
Mr. D. Ahern: This amendment will require the register of PRSA providers and PRSA products to be open to public inspection. It is not intended that any fee should be onerous to the person. The wording is modelled on section 17 of the Insurance Intermediaries Act, 1995.
Mr. D. Ahern: These are technical amendments regarding the obligation of employers to provide access to, and to pay and remit, contributions. This amendment inserts the word “excluded” to make it clear that the employer's obligations under section 121 of the principal Act only extend to employees who are excluded from membership of a scheme, as provided for under section 121(1). These obligations are to provide access to a standard PRSA, to deduct contributions to a standard PRSA, to remit the contributions in respect of the standard PRSA, to notify an employee who is excluded from access to a PRSA, to allow the PRSA providers access to excluded employees for the purpose of concluding standard PRSA contracts and to provide reasonable paid leave to make arrangement regarding standard PRSAs.
Mr. D. Ahern: This amendment is similar to previous amendments. It makes it clear that money deducted by an employer must be paid to the relevant custodian account and not directly through the PRSA provider.
Mr. D. Ahern: Amendment No. 54 will extend the time in which a PRSA provider must remit contributions in respect of a PRSA into a custodian account from 15 to 21 days following the end of the month in which the deduction was made. I am proposing this amendment given the strong representations I received that a 15 day limit was not always possible and inoperable in certain cases, for example, where umbrella schemes which cover a large number of schemes are in operation.
Amendment No. 55 will extend the time in which PRSA providers must deduct pay deductions from employees' salaries in respect of PRSA into the custodian account from 15 to 21 days following the end of the month in which the  deduction was made. Section 38 places a statutory requirement on employers to remit employee pension contributions within a specified period within 15 days of the end of the month in which the deductions were made where employee contributions are concerned and to give a monthly statement of the deductions to the employees and the trustees.
Amendment No. 96 extends the time limit for employers to remit the pension contributions deducted from their employees from 15 days following the end of the month in which the deduction was made to 21 days from the end of the month in which the deduction was made. It is in line with the earlier amendment regarding PRSAs.
(b) in any other case, an employee of the employer who is not eligible for membership of any scheme operated by the employer and who, if he remains an employee, will not under the rules of any scheme operated by the employer become eligible for membership within 6 months from the date of commencement of employment with the employer;
Mr. D. Ahern: This is a technical amendment regarding the obligation of employers to provide access to PRSAs for excluded employees. This amendment will introduce the definition of “excluded employee” to clarify the position. There is no change in policy. All employees who are not already covered by an occupational pension scheme have to be given access to a standard PRSA by their employers.
Mr. D. Ahern: These are technical amendments in relation to the additional voluntary contribution requirements and access to a standard PRSA. They make it clear that an employer is only obligated to provide access to a standard PRSA where the employer does not provide an occupational pension scheme which permits payment of voluntary contributions and in such cases is obligated to provide access to PRSAs by members who are affected by that restriction. The amendments are technical and seek to clarify the intention. They will also make it clear that employees referred to in section 121(1) and (2)  are excluded employees. This section sets out the employer's obligation to provide access to PRSAs.
I do not understand why a person would be told what is in their best interest rather than being able to make up their own minds on the effect of paragraph (b). Is there an indication that people may move their money out of schemes and spend it, as is possible, under the schemes introduced by the Minister for Finance rather than go into a PRSA, leaving a gap to be filled? I am confused about the purpose of that paragraph. Perhaps the Minister could explain section 113 in full.
. . . a PRSA provider shall not accept the transferof funds from a scheme to the PRSA which that PRSA provider operates unless it has previously ensured that there has been furnished by it, or an intermediary on its behalf, to the person wishing to make such a transfer–
Its purpose is to give the person all the advice necessary for him or her to make the decision to transfer. They can still transfer but there would be a fear in this area. We discussed the matter generally in the Department and with the various interests, particularly the social partners. There was a view that there could be a huge move from good occupational pensions into PRSAs which might not necessarily provide all the benefits that the original occupational pension scheme would deliver to people. Its purpose is to inform people of the difference, perhaps, between where they are coming from and to where they are going. It is for no other reason.
Mr. D. Ahern: Yes. I thank Senators for their forbearance. I intend to bring forward a significant number of amendments to section 3 on Report Stage. These are on foot of a proposed change in the licensing and regulation of the PRSA provider. The Bill, as published, envisaged that this would be undertaken by the Pensions Board. Following further consultation with my colleagues, the Tánaiste and Minister for Enterprise, Trade and Employment and the Minister for Finance, I propose that the PRSA provider would be regulated by the Central Bank under the Investment Intermediaries Act or exempt from this in the case of life companies which are regulated by the Department of Enterprise, Trade and Employment. I am satisfied that this will not in any way lessen the protection for the consumer, the PRSA contributor, and while it will involve a large number of amendments on Report Stage, it will simplify the legislation.
I will set out in detail what is proposed on Report Stage as this is still under discussion with the relevant Departments. The proposals will mean that some of the existing provisions regarding licensing of PRSA providers under this Bill would become redundant. The PRSA product will continue to be regulated by the Pensions Board. There will also be consequential proposals for amendments regarding the PRSA provider in other sections of the Bill to which I will refer as these are debated.
Mr. D. Ahern: This is a technical amendment to the functions of the pensions ombudsman. This section allows the ombudsman to investigate any dispute of fact or law which arises in relation to an act done by a person responsible for the management of the scheme or PRSA. It will extend the provision to cover acts done on behalf of a person responsible for the management of a scheme or PRSA.
(ii) 3 years from the earlier of the following 2 dates, namely, the date on which the person making the complaint or reference first became aware of the said act and the date on which that person ought to have become aware of that act, or”.
Mr. D. Ahern: Government amendments Nos. 69 and 72 relate to the time limit for bringing complaints to the ombudsman prior to the establishment date of the office. The amendment is a significant improvement and will extend the time limit for bringing complaints to the pensions ombudsman from three to six years from the date on which the action occurred. It will also extend the scope of the time limit by introducing a reference to the date on which the claimant became aware or ought to have become aware of the action.
It will increase the time limit for bringing complaints to the ombudsman prior to the establishment date of the office from three to six years. These improvements will be of considerable benefit to the members of pensions schemes and are proposed on foot of considerable submissions made to me.
Mr. Manning: The four amendments relate to the same issue. The establishment of the office of an insurance ombudsman is one of the more important aspects of the Bill. The Irish experience of the Ombudsman in all the areas in which he has operated has been very successful. There is now a general belief that the Ombudsman can be trusted and will ensure there is fair play. One of the more important features of the Ombudsman in recent years has been his willingness to be proactive in investigating cases.
As public representatives, we have all, I am sure, come across cases of people with a real sense of grievance about how their pension matters were handled. Very often the non-resolution of these problems has led to people going to their graves with a sense of bitterness and leaving behind an embittered family because they bore a terrible sense of injustice in their final years. If anything can be done to rectify this, it should be done. It is possible that such persons have no case and nothing can be done for them, but at least they would receive a fair and final hearing.
I welcome the measures contained in the Minister's amendments, which would extend the time period available. We should not be too rigorously bound by a time limit. All we ask is that people are given access to the ombudsman and get fair play at the end of the process. The Minister has, I think, conceded the principle that three years was too short. I very much welcome that move. There may be people – I have a case in point – who, if they were given a hearing and regardless of the way the verdict went, would have their sense of injustice and anxiety resolved. I refer to a group which made submissions to the Minister. I am sure he or his officials are very familiar with the case, namely, the members of the Commissioners of Irish Lights.
I declare an interest. For six years I was a commissioner of Irish Lights. In public life there is no more pleasurable board of which to be a member. In those days we made an annual tour of the coast, there was a very good lunch every Friday in Pembroke Street and all the commissioners were called “Sir”. It was a very nice experience for those commissioners unused to this kind of treatment. I got to know the organisation very well and hold it and its officials, on whose behalf I am talking today, in very high regard.
The basic facts of the case are that a small number of retired officials are in dispute with regard to the correct application of pensions. As the pension increases in question date back to 1994, they are outside the scope of the Minister's proposal. The officials had already retired prior to April 1994, the point at which a pay increase was granted to the grade in the Civil Service by which their salaries were determined. The nub of the matter is that this pro rata increase was not passed on to their pensions. They have tried hard to resolve the issue. They tried to take it to the Labour Court but, because they are not deemed to be workers within the meaning of the Act, the court did not intervene.
The Commissioners of Irish Lights have refused to meet their case. The anomaly is that Irish Lights is active in Northern Ireland and Britain and if the officials concerned had been employed in those jurisdictions, they would have access to the pensions ombudsman. Trinity House, as Irish Lights is known, would be under obligation in this respect. As I understand it, the organisation will not meet the group and its position is that the officials must accept the commissioners' interpretation of the case.
I have been joined in this case by Senator Cosgrave who has been very active in talking to the group. At this stage, an issue needs to be resolved about which I do not know the rights or wrongs. It would be a terrible shame, however, if people who feel they have a genuine grievance which they wish to take to the ombudsman and who are willing to accept his word as the final say on the matter are not allowed to do so because of a time technicality.
I have great sympathy with the Minister on this matter. I realise that when an ombudsman begins, he or she will have a great deal of work to do going back over six years and there is a danger that the office will be flooded. On the other hand, a right is a right and, as such, a right to be heard should supersede any cut-off point we establish with regard to when a matter can be addressed.
It upsets us all to see people who have given good service with such a strong sense of injustice.  Unless they go to court, which is very expensive, they cannot get the matter resolved. They and retired people generally cannot afford to go to court and should not have that burden placed on them. All they ask is that the ombudsman examines the matter. I do not ask the Minister to provide an answer to this problem today, but I ask him to look at the matter. Will he try to find some way to meet this case, either by way of a time extension or extra powers given to the ombudsman so that he or she, at his or her discretion, can re-examine the matter? I will not push the issue today but I would like the Minister to consider it and come back on Report Stage with a view on it.
Mr. D. Ahern: I thank Senator Manning for his sentiments in relation to this case. Those of us in public life have come across some awful cases from time to time and, as Minister, I have great sympathy for a number of the groups who have raised with me or my officials issues concerning their pensions. Senator Ross and I had differences in relation to statements of reasonable projection but, to be honest, much of what comes across to me in terms of elderly people who are in dispute with a company in their last years of employment, although in effect they are actually in dispute with the trustees of the pension set up under the company, is that they did not understand that. I remember a case in point where I specifically asked these very old gentlemen to give me a copy of the document under which the pension was set up, in relation to an issue with which they had a query, and one did not have to be a lawyer to understand it. If they or somebody else had read it at the time – they might not have realised the consequences decades ahead – it would have been obvious, and clearly written in the trust document, that the point with which they found issue was clearly part of the contract they signed when they became members of the scheme. They have that grievance, therefore, but they cannot air it and I do not believe the pensions ombudsman would be able to sort out their particular difficulties. I make that case because people need to be fully informed and the more they are informed, the less likely they are to have recourse to the pensions ombudsman.
The proposal relating to a pensions ombudsman came partly from the national pensions policy initiative but also as a result of looking at the experience particularly in the United Kingdom. We decided to follow, to a certain extent, the practice in the UK legislation, which refers to three years, although there is scope to go back even further. We decided on three years but as a result of representations we will go back to six years which will satisfy many of the people involved in this area who have raised queries.
I will ask my officials to talk to Senator Manning about the specific case he has raised and of which I am aware, but we have gone as far as we can in this legislation. I will undertake to examine the Irish Lights issue between now and Report  Stage in the context of this matter but we have to have some consistency because the Statute of Limitations exists in relation to legal actions in that respect. There is a precedent in regard to the public service ombudsman but it does not help us in that there is no retrospection for the public service ombudsman. From that point of view, therefore, we are gaining a great deal in this legislation. Some people will be of the view that we should start the process from today or whenever the Bill is passed and that the pension ombudsman would work from that point on, but in all sympathy to people who have raised queries about certain difficulties we have to have some retrospection.
Senator Manning referred to the possibility of the ombudsman's office being flooded with issues, and that may very well be the case. We felt that if we were to leave it open-ended, the office would not be able to deal with issues arising from the passing of the Bill onwards because it would be so inundated with queries, of which there are many, from people in pension schemes set up in, say, 1940. Many of the documents may not be available and some of the people involved may no longer be with us so we have to stop the retrospection from some date and go forward. Between now and Report Stage, however, we will examine the issue and I can make some officials available to Senator Manning to discuss the issue of Irish Lights, but I am constrained in relation to accepting his amendments and I propose our amendments in this respect.
Mr. Manning: I disagree with very little, if anything, of what the Minister said. I realise that to go back six years is a significant improvement, but we are dealing with people as well as with dates and times and if there is a way in which people can be satisfied they will get a hearing, regardless of whether it goes against them, at least their minds can be put at ease and their last years will not be blighted by the bitterness and worry that can become almost obsessional. I am not saying that is the case with these people but we all know somebody who believes that an injustice has been done or that they have no right of redress. I am happy to withdraw my amendments with the right to re-enter them on Report Stage and to talk to the Minister about this specific case to see if it can be addressed.
“(5) If it appears to the Pensions Ombudsman that a person has failed to comply with a requirement made of him pursuant to the exercise by the Ombudsman of his powers under subsection (1) or (2), the Pensions Ombudsman may apply to the Circuit Court for an order under subsection (6).
(6) Subject to subsection (7), if, on an application under subsection (5), the Circuit Court is satisfied as to the failure of the person concerned to comply with the requirement in question, the Circuit Court may make an order requiring that person to comply with the requirement.
Mr. D. Ahern: This amendment concerns the powers of the pensions ombudsman in relation to investigations. The amendment covers circumstances where a person has failed to comply with the requirement made by the pensions ombudsman. It will allow the ombudsman to apply to the Circuit Court which may then make an order requiring that person to comply with the requirement. If the Circuit Court is of the opinion, however, that the reference refers to information for which that person is entitled to claim legal professional privilege, the Circuit Court shall set aside that requirement.
Mr. D. Ahern: It was on foot of representations on difficulties that might arise in relation to people being forced to make information available which may be covered under legal privilege, so it was to give some scope to the Circuit Court. The amendment states that if the Circuit Court is of the opinion that the requirement refers to information which is privileged, obviously the Circuit Court will be able to set aside the requirement in the legislation but it would be for the Circuit Court to decide in that respect.
Mr. D. Ahern: Amendments Nos. 77 and 78 extend the right to comment on allegations contained in a complaint or dispute to any persons whose interests, in the opinion of the ombudsman, might be adversely affected by the determination in the case.
Mr. D. Ahern: This amendment will correct a grammatical error by replacing the word “its” with the word “his”, as the reference is to the pensions ombudsman. I wish to make clear to Senators that the reference to the masculine “his”, here and elsewhere in the Bill reflects the fact that the original Pensions Act, 1990, was drafted in the masculine. It is conventional to continue the practice in subsequent related legislation rather than using “his or her”. It should not be construed that the use of the word “his” indicates the gender of the person that will be appointed to the office of pensions ombudsman.
Mr. Manning: I would welcome an opportunity to discuss any changes that may be proposed in relation to the office of the pensions ombudsman, the creation of which I welcome. The Minister mentioned in passing that the office is largely modelled on the ombudsman system in the British pensions industry.
Mr. Manning: I would like to give the Minister an opportunity to discuss the new office, which is one of the most radical proposals in this Bill. What are the strengths of the British system which led to it being chosen as a model? This is one of the more interesting parts of the Bill and there is considerable public interest in the pensions ombudsman. I do not want to pin down the Minister, but I would like to know the thinking behind the model that was chosen.
Mr. D. Ahern: As I said earlier, our decision was based largely on the experiences of the pensions ombudsman in the United Kingdom. Many of the recommendations in this respect emanate from the national pensions policy initiative. The offices of ombudsman that have been created in this country have worked extremely well and while some of us may have queries, the creation of such an office to make determinations on pension disputes is long overdue. I cannot make the case more clearly than that. Does Senator Manning want me to discuss other areas?
Mr. Manning: I am concerned by the proposal in section 4 of this Bill, which will become section 133 of the 1990 Act, to provide that the ombudsman will need “the prior approval of the Minister” to engage consultants or advisers. Does this not create a conflict with the independence of the pensions ombudsman? Without wishing to be partisan, I refer the Minister to the difficulties faced by the former Ombudsman, Michael Mills, when he incurred the displeasure of the former Taoiseach, Charles Haughey, in the late 1980s. Instead of merely attacking the office, Mr. Haughey froze the resources available to the Ombudsman, a decision which was later reversed by the Oireachtas when Members saw what happened when the office was not properly staffed or resourced. I am worried that the pensions ombudsman may face difficulties such as those encountered in the insurance industry when the ombudsman incurred the displeasure of certain interests. She was not replaced, but she encountered great pressure.
The Minister should assure the House that an ombudsman who is making decisions which are unpopular with powerful sections of the pensions industry, which may, in turn, put pressure on the Minister of the day, will not be treated unfairly. Equally, the Minister may feel that the pensions ombudsman's decisions are harmful to the public purse. I ask that the provision in section 133 relating to the prior approval of the Minister not be used to damage the independence of the ombudsman.
Mr. D. Ahern: I understand the point the Senator has made. Officials from the Pensions Board, which needs the consent of the Minister to engage consultants, meet departmental officials to work out a budget for consultancy and outside expertise, a budget which is adhered to, generally speaking. I assure the Senator that this provision is not intended to hamstring the pensions ombudsman and that a similar provision is made in other legislation in which the office of an ombudsman has been created. I will examine this section before Report Stage as I would not like it to be seen as a restriction of the role of the pensions ombudsman. As the person ultimately responsible for funding the administration of the pensions ombudsman, the Minister for Social, Community and Family Affairs, with the Secretary General of that Department, will have to  account for the distribution of funds at the Committee of Public Accounts. The provision referred to by the Senator is intended to ensure that outside expertise is not employed endlessly and without restriction. The ombudsman is independent of the Minister, but funding for the office of the ombudsman will be provided by the Exchequer.
Mr. Manning: Those who negotiate with various Departments often feel that they are not dealing with a single Department, as the hand of the Department of Finance is always evident. I accept the Minister's argument in relation to the independence of the ombudsman and I suspect that the hiring of consultants will not be central to the role of the ombudsman. The pensions ombudsman will have to say that certain practice is right or wrong, following investigation. The hiring of consultants may be important at times and I am worried that we cannot strengthen the role of the ombudsman in that regard. It may be that the Department of Finance will call the final shots on this matter.
Mr. D. Ahern: The experience of other ombudsmen has not been that any other dead hand prevented them from carrying out their duties. I would hazard a guess that they would not delay in making public the fact that they were being prevented in such a manner.
Government amendment No. 83:
In page 60, line 8, to delete “benefits” and substitute “benefit”.
Mr. D. Ahern: This amendment arises from a typographical error in the Bill as published. It proposes to delete the word “benefits” and substitute “benefit” in the definition of a contributory scheme.
Amendment agreed to.
Government amendment No. 84:
In page 60, line 14, to delete “immediate retirement” and substitute “long service”.
Mr. D. Ahern: Section 13 inserts new definitions into the Pensions Act, 1990, regarding the requirement for a minimum value of a contributory retirement benefit. Amendment No. 84 removes the phrase “immediate retirement benefit” and replaces it with “long service benefit” in the definition of ordinary retirement benefit as the phrase “immediate retirement benefit” is already a defined term in the Pensions Act.
Amendment agreed to.
Section 13, as amended, agreed to.
Question proposed: “That section 14 stand part of the Bill.”
Mr. Walsh: The Minister will correct me if my point does not arise under this section. My understanding is that someone who has a PRSA can utilise it without purchasing annuities when he or she retires. However, if the person dies prior to retirement age the fund must be used to purchase annuities. In other words, the spouse or inheritor of the fund does not have the same option as the original contributor. I am not sure whether this is the relevant section under which to raise this point, but the Minister might advise me in that regard.
Mr. D. Ahern: I am not sure if this is the relevant section, but if someone dies his or her PRSA goes to his or her estate. I do not know if that is the Senator's point – I do not think it is. This issue does not arise under this section. My officials will determine the relevant section and we will deal with the Senator's point at that stage.
As 1 January 2000 has elapsed it will be necessary to amend the measure to set a date as early as possible following enactment of the Bill. I propose to bring forward such a date on Report Stage. This issue is under consideration.
Question put and agreed to.
Government amendment No. 85:
In page 60, line 45, to delete “1991',” and substitute “1991';”.
Mr. D. Ahern: This is a technical amendment which corrects an error in punctuation. It arises from a typographical error in the Bill as published and proposes to replace a comma with a semicolon.
Amendment agreed to.
Government amendment No. 86:
In page 61, to delete lines 1 to 5 and substitute the following:
“(e) by the substitution in subsection (7)–
(i)for ‘another scheme' of ‘another occupational pension scheme';
(ii)for ‘that scheme' of ‘that occupational pension scheme'; and
(iii)for ‘in addition to' of ‘as part of'; and
(f) by the substitution in the proviso to subsection (7)–
(i) for ‘other scheme', in each place where those words occur, of ‘other occupational pension scheme'; and
(ii) for ‘the commencement of this Part', in each place where those words occur, of ‘1 January 1991'.”
Mr. D. Ahern: This is a technical change to substitute the meaning of “scheme” regarding preserved benefit. Section 15, which deals with a defined benefit scheme, provides for the extension of the preservation requirements to include pre-1991 service where the member leaves service after 1 January 2002 with an entitlement to preserved benefit with the new vesting rule. This is a technical amendment which addresses the unintended outcome whereby it could be argued that there was a double benefit for early leavers.
Section 29(1) of the Pensions Act, 1990, defines “scheme” as the defined benefit scheme for the purpose of that section so that section 29(7) only provides preserved benefit in respect of transfers from other defined benefit schemes. Amendment No. 86 changes the reference to “scheme” in section 29(7) to occupational pension scheme. The effect of this amendment is to ensure that the preserved benefit will apply to transfers from occupational benefit schemes.
Amendment No. 86 proposes to correct an inconsistency in existing legislation. Section 29(2) of the Pensions Act, 1990, decrees that the preserved benefit is to be provided in respect of long service benefit. Extra retirement benefit secured by a transfer payment is a long service benefit and, under this section, could give rise to a preserved benefit. However, section 29(7) stipulates that where a transfer has secured extra retirement benefit, a further benefit was to be provided to early leavers in addition to the preserved benefit under section 29(2). This arguably implies a double provision of benefit for early leavers or, more seriously, that the benefit provided to an early leaver in respect of a transfer payment was not a preserved benefit, as defined.
Amendment agreed to.
Question proposed: “That section 15, as amended, stand part of the Bill.”
Mr. Manning: I wish to make a slightly extraneous point. The manner in which we are dealing with this Bill highlights the difficulty in processing complicated legislation through a House such as this. This legislation should be handled by a committee with back-up facilities where Members have access to expertise. However, I accept that we are dealing with it.
When passed, the Bill should be accompanied by an explanatory document which clearly sets out the changes for those involved. This is complicated, technical legislation and we are not giving it the required scrutiny. This may be the wrong moment at which to make this point, but the Bill will need careful explanation when passed.
Mr. D. Ahern: I agree with the Senator's point. I have tabled 120 amendments to the Bill and there are not too many amendments from Senators. The Bill involves a number of net issues such as the Ombudsman, the time and so on. There are also minor technical amendments. Before Report Stage we may be able to provide some facility for Senators who are interested in participating in a small briefing by my officials so that at least the Opposition side of the House will understand the reason for the amendments. Many of these amendments are technical, but simple, while others are technical and difficult to understand. We can arrange a consultation with Pensions Board personnel if necessary. Documents explaining any changes in advance of Report Stage could be put on our website or the Pensions Board website.
Question put and agreed to.
Government amendment No. 87:
In page 61, line 26, to delete “and”.
Mr. D. Ahern: Amendment No. 87 is necessary because of the proposed insertion of a new paragraph (c). It is a drafting amendment.
Amendment agreed to.
Government amendment No. 88:
In page 61, to delete lines 27 to 30 and substitute the following:
“(c) by the substitution in subsection (6)–
(i) for ‘another scheme' of ‘another occupational pension scheme'; and
(ii) for ‘that scheme' of ‘that occupational pension scheme'; and
(d) by the substitution in the proviso to subsection (6)–
(i) for ‘that scheme' of ‘that occupational pension scheme';
(ii) for ‘the commencement of this Part' of ‘1 January 1991'; and
(iii) for ‘such commencement' of ‘that date'.”.
Mr. D. Ahern: This is a technical change to substitute the meaning of “scheme” in relation to preserved benefit. It is similar to the second-last amendment. Section 16 provides, in relation to defined contribution schemes, for the extension of preservation requirements to include pre-1991 service where the member leaves service after 1 January 2002 with an entitlement to preserved benefit with a new vesting rule. This is the same amendment for defined contribution schemes that I proposed under section 15. The effect of this amendment is to ensure that the preserved benefit will apply in transfers from any occupational pension scheme.
Amendment agreed to.
Question proposed: “That section 16, as amended, stand part of the Bill.”
Mr. Walsh: I compliment the Minister on the last amendment, which is particularly useful. It ensures that people who have given long service in occupational employment will have the benefit of having their pensions preserved. There appears to have been a weakness in the previous system in that regard.
Mr. D. Ahern: It was targeted by the pensions policy initiative and was always intended to be dealt with in the Bill. I thank the Senator for his remarks.
Question put and agreed to.
Section 17 agreed to.
Government amendment No. 89:
In page 62, line 21, to delete “2007” and substitute “2002”.
Mr. D. Ahern: This amendment relates to the commencement date for the re-valuation of preserved benefits. Section 18 provides for the application of different re-valuation requirements to elements of preserved benefit in respect of pre- and post-1991 service. This proposed amendment is a policy change to amend the commencement date for re-valuation of preserved benefit from 1 January 2007 to 2002. However, this is a holding date and I will revisit this and other dates on Report Stage with a view to fixing a date, following enactment of this Bill, as the appropriate date from which proposals should be effective.
The effect of this is that the re-valuation of pre-1991 benefits will be introduced immediately, but the funding obligation will remain as it currently stands. This will be of benefit to members of pen sion schemes who leave. In effect, the re-valuation obligation will be introduced immediately and, as for any other obligation, will be recognised immediately in the current funding standard. However, the existing period of ten years before all obligations are required to become fully funded will remain unaltered. Under section 33 of the principal Act, a member of a defined benefit scheme who leaves service with a preserved benefit in respect of post-1991 service is normally entitled to re-valuation of that benefit from 1996 or, if later, the year in which the member left service.
Amendment agreed to.
Section 18, as amended, agreed to.
Question proposed: “That section 19 stand part of the Bill.”
Mr. Walsh: I concur with what Senator Manning has said. The Minister has rightly offered us the opportunity of discussing this outside the Chamber. The offer should be taken up so that when we come to Report Stage we will all be more clued in to the different sections.
I understand that the transfer amount is decided by the Society of Actuaries in Ireland. There are different methods of approaching these valuations, resulting in substantial differences in the valuations obtained. This is an area that should be investigated in order to decide on a more definite approach to valuing the transfer amounts.
Mr. D. Ahern: Paragraph (a) provides that the trustees select a date for calculation which is not more than three months before or three months after the date of receipt. It provides for the Minister's being allowed to prescribe that transfer values be calculated in accordance with professional guidance issued by the Society of Actuaries in Ireland and specified by the Minister, or with any other applicable guidance specified. The section allows for the adjustment of transfer values to reflect the funding condition of the scheme making the transfer and allows for adherence to the society's guidelines for the calculation.
I will be introducing tax arrangements for PRSAs so it will be necessary to propose an amendment to this section on Report Stage regarding transfers from occupational pension schemes to PRSAs.
Mr. Walsh: In cases where the valuation is more difficult, such as defined benefit schemes, there have been instances where valuations have fluctuated enormously. I have seen differences of more than 100% in valuations and in many instances the trustees may involve people closely associated with the relevant company who may  have an interest in ensuring that the transfer value is kept to a minimum. This is in order to ensure adequate funding for the future. Often the interest of the member whose fund is being transferred is not fully protected. This should be looked into, particularly when present annuity rates, which are unprecedentedly low, are taken into account. There should not be any difference between valuations. It should be much more definitive. I am not sure how this can be achieved but the variances I have heard of do not reflect the thrust of this Bill, which is to protect people and protect their pensions.
Mr. D. Ahern: I accept what the Senator says. This section relates to the transfer of payments from occupational pension schemes to PRSAs. There is provision for the member of the occupational scheme to direct trustees about transfer amounts. I accept what the Minister says about variation of valuations but that is not necessarily within the scope of this legislation. However, we can keep an eye on it. If the Minister provides any specific instances they could be taken into consideration or we could give our view on them.
Question put and agreed to.
Question proposed: “That section 20 stand part of the Bill.”
Mr. D. Ahern: I will introduce an amendment to this section on Report Stage to update the reference to 1 January 2002 which I mentioned earlier.
Question put and agreed to.
Sections 21 and 22 agreed to.
Question proposed: “That section 23 stand part of the Bill.”
Mr. D. Ahern: I will introduce an amendment on Report Stage regarding the implementation of the EU Council Directive 98/49/EC, known as the mobility directive, the aim of which is to protect the rights of members of supplementary pension schemes who move from one member state to another. Pension law in Ireland is already in substantial compliance with this directive and only marginal amendments are required.
Question put and agreed to.
Sections 24 and 25 agreed to.
Sitting suspended at 1.30 p.m. and resumed at 2.30 p.m. SECTION 26.
Government amendment No. 90:
In page 66, to delete lines 22 to 41 and substitute the following:
“‘(3) If an annual report prepared under subsection (1) of section 55–
(a) does not contain the statement by an actuary required under subsection (3) or (4) of that section, as appropriate, or
(b) contains the statement by an actuary required under that subsection (3) but the actuary does not state therein that he is reasonably satisfied that, if he were to prepare under section 42 an actuarial funding certificate having an effective date of the last day of the period to which the annual report relates, he would certify that the scheme satisfies the funding standard provided for in section 44, or
(c) contains the statement by an actuary required under that subsection (4) but the actuary does not state therein that he is reasonably satisfied that the scheme will satisfy the funding standard at the effective date of the next actuarial funding certificate,
then, in each case, the trustees of the scheme shall submit an actuarial funding certificate to the Board within twelve months of the last day of the period to which the annual report relates and such a certificate shall have an effective date not earlier than the last day of the period to which the annual report relates.'”.
Mr. D. Ahern: This amendment relates to the actuarial funding certificate. Section 26 provides a mechanism to identify schemes whose funding is likely to fall below the minimum funding standard in three and a half year intervals and it provides for corrective action in such cases. The amendment provides that where the actuary states that the funding will be satisfied at the effective date, no further action is required, and where he does not make this statement or makes a negative statement, a revised funding certificate and funding proposal should be submitted. This is a reasonable approach given the cost considerations.
This change also causes a consequential related change to section 34 of the Bill which amends section 55 of the Pensions Act, 1990, and deals with the additional information which the actuary provides in the annual report regarding the funding position of the scheme, which I propose next.
Amendment agreed to.
Section 26, as amended, agreed to.
Sections 27 to 33, inclusive, agreed to.
 SECTION 34.
Government amendment No. 91:
In page 71, line 23, after “shall”, to insert “, unless subsection (4) applies to it,”.
Mr. D. Ahern: This is an amendment to modify the requirement in relation to the actuarial funding certificate. Section 34 deals with the additional information which the actuary provides in the annual report regarding the funding position of the scheme. This amendment clarifies that where the actuary states that the funding standard will be satisfied at the next effective date, no further action is required.
Amendment agreed to.
Government amendment No. 92:
In page 71, line 26, to delete “43” and substitute “42”.
Mr. D. Ahern: This is a typographical change to correct the reference to section 43, as published in the Bill, to section 42.
Amendment agreed to.
Government amendment No. 93:
In page 71, to delete lines 30 to 49 and substitute the following:
“(4) Where in the most recent actuarial funding certificate prepared under section 42 in relation to a scheme the actuary certifies that at the effective date of that certificate the scheme does not satisfy the funding standard, and a funding proposal has been submitted by the trustees of the scheme to the Board in accordance with section 49, each annual report prepared under subsection (1) which relates to a period ending on a day which falls after the effective date of that actuarial funding certificate shall include a statement by an actuary in such form as may be prescribed as to whether he is reasonably satisfied at the last day of the period to which the annual report relates that the scheme will satisfy the funding standard at the effective date of the next actuarial funding certificate.
(5) Where an annual report prepared under subsection (1)–
(a) does not contain a statement by the actuary required under subsection (3) or (4), as appropriate, or
(b) contains the statement by an actuary required under subsection (3) but the actuary does not state therein that he is reasonably satisfied that, if he were to prepare under section 42 an actuarial funding certificate having an effective date of the last day of the period to which the annual report relates, he would certify that the  scheme satisfies the funding standard provided for in section 44, or
(c) contains the statement by an actuary required under subsection (4) but the actuary does not state therein that he is reasonably satisfied that the scheme will satisfy the funding standard at the effective date of the next actuarial funding certificate, then in each case the trustees of the scheme shall notify the Board in writing to that effect within such time limit as may be prescribed.
(6) Regulations may prescribe that an actuary, in making the statement referred to in subsection (3) or (4) shall comply with the applicable professional guidance issued by the Society of Actuaries in Ireland and specified in the regulations or with any applicable guidance issued by any other person and specified in the regulations.'.”.
Mr. D. Ahern: This amendment modifies the requirement in relation to the actuarial funding certificate. Section 34 deals with additional information which the actuary provides in the annual report. This amendment provides that where the actuary states that the funding standard cannot be satisfied at the effective date, or makes a negative statement, a revised funding certificate and funding proposal should be submitted. It is similar to an earlier amendment.
Amendment agreed to.
Section 34, as amended, agreed to.
Section 35 agreed to.
Government amendment No. 94:
In page 72, to delete lines 29 to 47, and in page 73, to delete lines 1 to 3, and substitute the following:
“(2) This section applies to a scheme to which section 56(1)(b) applies, the rules of which do not require either–
(a) indexation of pensions, or
(b) the provision of an increase, in each successive year of the period during which each pension thereunder is paid, of the amount of the pension, each such increase that is specified in the scheme being not less than 3% of the amount of the pension in payment at the time the increase falls to be made.
(3) The trustees of a scheme to which this section applies shall, at intervals not exceeding 3.5 years, cause the actuary to value the additional liability which would be imposed on the scheme by the indexation of pensions payable thereunder.
(4) The actuary of a scheme to which this section applies shall report on the additional liability and the resulting requirement for contributions which would be imposed on the scheme by the indexation of pensions as regards- –
(a) pensions then in payment under the scheme, and
(b) pensions not then in payment thereunder whose payment is anticipated.”.
Mr. D. Ahern: This is a policy change to allow schemes which are currently indexing pensions by 3% per annum on a mandatory basis to be exempted from having to index their schemes by the CPI rate or by 4%. This is in relation to the published Bill. A provision in relation to index-linking increases has been inserted. When the Bill was published, representations were made that a number of schemes already provide an indexing of pensions.
Section 36 provides for a review of occupational pension rates payable in defined benefit schemes by the trustees of the scheme for the purpose of considering index-linked increases in rates. This amendment provides that schemes which are currently providing guaranteed non-discretionary pension increases at the rate of 3% per annum have complied with the requirements of the provisions in the Bill on indexation. Such schemes would then be exempt from the requirement to go through the process outlined in this section, which I consider to be a reasonable approach. The intent of section 36 is to increase the number of schemes which provide indexation of pensions and payments and these schemes already do this.
The amendment also means that there will be no requirement to produce a report on the cost of indexation more frequently than every three and a half years, even where the scheme normally has annual valuations. It does not in any way dilute the provision but takes into account that some existing schemes have indexation. This is to force others to bring it in.
Amendment agreed to.
Question proposed: “That section 36, as amended, stand part of the Bill.”
Mr. D. Cregan: Will the ombudsman have the authority to examine the old schemes referred to by the Minister?
Mr. D. Ahern: There is a provision whereby he can look back. Originally the Bill provided for three years but, following an amendment, that was extended to six years. I indicated to Senator Manning that we would look at the specific case of Irish Lights and the difficulties there, although some difficulties go back further than six years. In the UK the legislation provides for three years.  The public service ombudsman, however, has no power of retrospection so we have gone further than that in our remit.
Mr. D. Cregan: I appreciate that, but Senator Manning is right. There are problems in some of the old schemes. Investors were not treated fairly and have lost money on their pensions. The Central Bank has the authority to ensure a broker has a proper structure. Would the ombudsman discuss that with the Central Bank?
Mr. D. Ahern: No, the ombudsman would oversee the legislation as implemented. I do not see a role for him in contacting the Central Bank for any purpose other than to get information. The ombudsman is there to adjudicate on disputes related to pensions. I am aware of the difficulties some pension schemes have caused and to a great extent it is because of the lack of information people had when entering a scheme and in the intervening period, but some of the provisions in this legislation will cure that problem.
Question put and agreed to.
Section 37 agreed to.
An Cathaoirleach: Amendments Nos. 95 and 98 are cognate and they may be taken together by agreement.
Government amendment No. 95:
In page 74, line 4, to delete “remission” and substitute “remittance”.
Mr. D. Ahern: This is a technical amendment to correct a grammatical error.
Amendment agreed to.
Government amendment No. 96:
In page 74, line 7, to delete “15” and substitute “21”.
Amendment agreed to.
Government amendment No. 97:
In page 74, line 16, to delete “15” and substitute “21”.
Amendment agreed to.
Government amendment No. 98:
In page 74, line 25, to delete “remission” and substitute “remittance”.
Amendment agreed to.
Question proposed: “That section 38, as amended, stand part of the Bill.”
Mr. Ross: I draw the attention of the Minister to something he might amend on Report Stage. I did not table an amendment because I was only alerted to it last night, but it is a serious gap in the legislation. This section introduces an obligation on the employer to remit the funds within 15 days to an administrator, trustee or manager of a defined contribution scheme.
Mr. D. Ahern: In a previous amendment we extended the timeframe to 21 days.
Mr. Ross: There has, however, been an omission. An employer may remit it to the trustee, administrator or manager but what happens if the administrator holds on to the money for more than 21 days? I will table an amendment on Report Stage putting the same obligation on the administrator to hand that money over to its final destination within that time. The Minister should accept this because it is a valuable suggestion that comes from the pensions industry. In several cases, involving very large amounts of money, the employer has remitted the money to the administrator and it has been in his possession for an extraordinary length of time, but nothing could be done. If this obligation included the administrator, the problem would be solved.
Mr. D. Ahern: We will examine that matter between now and Report Stage. It is not dealt with in this section.
Mr. D. Cregan: Could an administrator be a liquidator? Is there a right to ask a liquidator to hand over money given to him by a bankrupt company? Can we add liquidator to the definition of administrator to protect employees?
Mr. D. Ahern: There is a definition of administrator in the principal Act. We can clarify that in more detail on Report Stage.
Question put and agreed to.
Question proposed: “That section 39 stand part of the Bill.”
Mr. D. Ahern: I will table an amendment on Report Stage regarding the implementation of the mobility directive that I referred to earlier.
Question put and agreed to.
Government amendment No. 99:
In page 78, line 11, to delete “person's” and substitute “persons”.
Mr. D. Ahern: This amendment deletes the unnecessary apostrophe.
Amendment agreed to.
Government amendment No. 100:
In page 78, line 36, to delete from and including “scheme” in line 36 down to and including “done–” in line 45, and substitute “scheme,
which has the effect of augmenting the benefit of any member or members so as materially to alter the balance of interests between the members, or between the members and the employer or employers (other than an amendment or exercise made or done pursuant to section 50) which is made or done–”.
Mr. D. Ahern: This is a technical amendment to the wording of the subsection. This part of section 40 deals with the changes in scheme rules and the exercise of discretionary power to augment members' benefits to be null and void in certain circumstances. The concern has been expressed that the provision as drafted could lead to a situation where scheme members might be required to consent to rule changes that are merely procedural and to those that do not materially affect their benefits provided under the scheme. This was not the intended outcome. The effect of the amendment is that neither a rule amendment nor an exercise of discretion would be affected by the invalidity provision unless it augmented benefits or altered the balance of interests.
Amendment agreed to.
Section 40, as amended, agreed to.
Sections 41 and 42 agreed to.
An Cathaoirleach: Amendments Nos. 101 and 102 are cognate and they may be taken together by agreement.
Government amendment No. 101:
In page 81, line 2, to delete “120” and substitute “121”.
Mr. D. Ahern: On foot of the changes to which I previously referred in the licensing arrangements for PRSAs, I will bring forward technical amendments on Report Stage to Chapter 8 of this Bill, covering sections 43 to 46. Amendment No. 101 is technical, correcting a reference to section 120. It should refer to section 121.
Amendment agreed to.
Section 43, as amended, agreed to.
Government amendment No. 102:
In page 81, line 30, to delete “120” and substitute “121”.
Amendment agreed to.
Question proposed: “That section 44, as amended, stand part of the Bill.”
Mr. D. Ahern: We have changed section 3 of the Bill dealing with the licensing and regulation of PRSAs. It may be necessary to propose some technical amendments regarding the PRSA provider in sections 44, 45 and 46, which may be consequential. They are merely technical amendments.
Question put and agreed to.
Sections 45 and 46 agreed to.
Question proposed: “That section 47 stand part of the Bill.”
Mr. Ross: Section 47 deals with appointments to the board and we dealt with this matter on Second Stage. I have long had difficulties about political appointments to boards of this sort. I also have had difficulties about particular Ministers, although I am not referring to Deputy Dermot Ahern, who is an excellent and honourable Minister. I am talking about a principle because we have to legislate for bad Ministers, not good ones.
I have real difficulties with this section, not just because members of the Pensions Board will be politically appointed, as they will be, but also because of subclause (g) which states that “one shall be a representative of consumer interests”. It is absurd that only one member of the Pensions Board should represent consumer interests. It is my view – which is, I suppose, somewhat extreme on the other side – that all 15 board members should represent consumer interests because the only people who matter in the Pensions Board are the pensioners. They are the people who have to be looked after.
It appears that other groups have certain in-built rights, not least our old friends the social partners to whom the Minister has already referred with great deference, as Ministers tend to do. I see no reason why the great powers in this land should be represented on every State agency board. The Government, however, takes every opportunity to doff the cap to the trade unions and to IBEC in order to give the impression that they are taking notice of what they say. It is a bit of a game that goes on between the Government and the social partners, including the trade unions, giving the impression that they are indeed involved in some sort of mutual conversation of respect.
It has a political payback for the Government because the unions and IBEC come into line and do not cause as much trouble. In return they get recognition, which is unhealthy, because power certainly does not lie with the Seanad or the Dáil,  or as much with the Cabinet as it used to. The Cabinet is used to appointing representatives of these groups to State boards in order to keep them happy and buy them off with prestige but not much money. There is a political dividend because the Government gets their co-operation in other areas. That is a widespread principle in Irish life and applies to every State board.
Unfortunately, the result often is that we have well recognised party political names being appointed to boards, whose qualifications with regard to the appointment are limited but whose allegiance to a certain political party is well known. That has happened in the case of Aer Rianta, Aer Lingus and the VHI. All political parties do it, but on an issue such as the Pensions Board it is in some ways even more serious. If unqualified people, whose primary qualification is their allegiance to a political party, are supposedly representing pensioners then they are worse than useless on that board. In fact, they will damage it because they will do what those who appointed them wish and will look to them for approval.
Pensions represent a sensitive area and if the Pensions Board comes under political control it is not in the interests of pensioners. In this instance, we have a token gesture towards consumers which is quite farcical. It is the worst of all worlds. The Bill gives to consumers only one nominal place out of 15 on the Pensions Board, which is derisory. That one place, however, is qualified by subparagraph (7A) which states:
The member of the board representing consumer interests shall be a person nominated for appointment thereto by the Minister or such organisation or organisations as the Minister considers to be representative of consumer organisations.
It is damnable that the Minister should decide who represents consumers because that person will be answerable to the Minister himself and not to consumers. People appointed to State boards must be accountable to the interests of those whom they supposedly represent. Because of the workings of the political system, a representative of the consumers will now be answerable to a political party for their actions on the Pensions Board. It is nonsense.
It is quite possible to devise a way of having someone who purely and simply represents consumers and who will be accountable to them. Why not ask the Consumers' Association of Ireland to nominate someone? Nobody represents consumers more obviously than that organisation. Why not ask one of the multiplicity of consumers' groups to become involved? It seems that the Minister and the Government are terrified of letting the Pensions Board out of political control. If the Minister was genuine about this matter he would set up a new structure – and there are other structures in existence which are, at least, at arms length from the Minister – which will not have this extraordinary system  whereby it will be Buggins' turn to sit on the board of this important body and, thus, it will change as political parties change in Government.
It is a great pity that there should be such an extraordinary sting at the end of a Bill in which there are so many good elements. The Minister referred to them earlier when he said that the legislation leaves pensions in people's hands. It is a wonderful principle and he has done a great job on it. However, there is a sting in the tail whereby the Pensions Board will be in the hands of whichever political party is in power. Even then, some sort of camouflage will be placed on top by appointing people who are in charge of consumer interests.
I would not make this point except that the record of political parties in making appointments to State boards is deplorable. Let us make no bones about it. There is absolutely no doubt, but if there is any argument about it I will start listing them and provide evidence. If the Minister says, “That was in the past but it won't happen this time,” I will list the occasions on which those words were used in this House, yet the opposite occurred. This is one of the worst cases, however, because consumer interests are being represented by a political appointee.
Mr. Quinn: I support Senator Ross on this point, but he has done such a good job that I will attempt to explain my point by telling a little story about East Berlin. When the Berlin Wall came down, the taxi drivers in East Berlin had always driven Trabants, a cheap German car, while taxi drivers in West Berlin drove Mercedes. In the following weeks, they found that the East German taxi drivers were getting no business. I know the Minister wonders where this story is leading.
Mr. Cassidy: He heard it before.
Mr. Quinn: Did he hear it before?
Mr. D. Ahern: Yes, at the Council of Europe.
Mr. Quinn: I was going to tell it for Senator Ross. I did not know that the Senator had heard it before, but I am glad he knows the answer.
Mr. Ross: It is a good story.
Mr. Quinn: The reason I tell this story is because the East German taxi drivers very quickly came to the authorities and said that they had a problem and needed a solution to it. The authorities in the city council of the now united Berlin asked them for their solution to the problem. When this had been thrown to various others – Senator Ross is perhaps the only one who has not heard it – everybody came up with different solutions. The authorities assumed that the solution from the taxi drivers would be that they should be given Mercedes cars or that the others should be forced to drive Trabants. However, the solution the East German taxi drivers suggested  was that they should be allowed charge higher rates. We all wonder why anybody would think that way, but it is amazing how few people understand the workings of the marketplace. The workings of the marketplace, free and unfettered if possible, decide how business succeeds and, therefore, how money is made and lost.
If anybody is to sit on the Pensions Board, it must be somebody who does not have a vested interest other than doing what is right for consumers who are pensioners. If there is only one representative for consumer interests and one representative for each of the social partners, as Senator Ross said, it seems that nobody should be there except those who represent the interests of consumers. They should be people who understand the benefits of the market place and who understand what will happen if anything goes wrong with these pensions.
We saw what happened in Enron, how Enron pensions were enthusiastically invested in Enron itself. We saw that happen in Ireland in the past in one case where pensioners' money was lost because it had been invested in the organisation itself. If there is to be any representation on this board, it should be solely that of the consumers. It seems derisory that one member shall be appointed to represent consumers interests and, as Senator Ross said, he or she will be appointed by the Minister. The Minister will even select the body by which those consumers are to be represented. I suggest all members of the board should represent the interests of consumers. This method would be much more likely to succeed in the long term.
Mr. D. Cregan: Some very important points have been raised by the Senators regarding who should represent consumers on the board. We must ask whether it should be a former banker, for instance, or a person with a background in the credit union movement and how that person should be defined. I ask the Minister if it would be possible to appoint a representative from the Office of the Ombudsman to the board in order to keep the Ombudsman informed of any problems that arise. Such an appointment would benefit everybody.
Mr. D. Ahern: With all due respect to Senator Cregan, I would not envisage appointing a representative of the Office of the Ombudsman to the board because the Ombudsman must be totally independent. There should be no connection between that office and the interests of another body.
I do not accept the premise that the appointment of persons to boards by political parties has been a disastrous practice. I inherited a board that was, by and large, appointed by the outgoing Government. I worked well with the board and I went as far as to re-appoint the chairperson of the board. I did that also with another board. In  the three bodies under my aegis I re-appointed people as chairpersons who were appointed by the previous Government. In my five years of dealing with the Pensions Board I have not put on my political hat.
I assure the Senator that, in relation to this board, there is no party political game-playing or looking after the interests of political parties. Just because somebody is not from one political party, as opposed to another, does not mean that they are only there to represent that political party and that they are not representative of consumer interests. In my view, a member of any political party would be more than capable of representing consumer interests than perhaps some of the nominees from some of the representative bodies. I do not accept what the Senator said in that respect.
Before this Bill was introduced, I appointed somebody who was clearly representative of consumer interests to this board. This was to show cause in relation to the amendment I introduced to specifically appoint a representative of consumer interests. At present, no organisation comes to mind from which to choose representatives of consumer interests. I would rather appoint somebody who, perhaps, is not a member of an organisation even in the area of consumer interests. I would rather appoint somebody who has a genuine consumer interest without any baggage.
The membership of the board consists of two representatives of the trade union movement, two from IBEC, one from the Irish Association of Pension Funds, one from the pension lawyers area, one from the Society of Actuaries, one from the accountancy profession, one from insurance companies, the Minister's three nominees, one from the Department of Social, Community and Family Affairs and one from the Department of Finance. It is a broad spread of representation. There must be people with expertise in the area on the board; it cannot consist of 15 people without any idea of pensions or the way in which pensions work.
While people may criticise the make up of the board and wonder why pension lawyers or accountants should be represented, the expertise of these professionals is availed of by the board in circumstances where it might otherwise have to seek that expertise elsewhere. Whatever fears, jaundiced or otherwise, someone may have in relation to political appointees, I assure Senators that it is not the case. People on the board have been card-carrying members of political parties other than my own but they were excellent representatives and contributed highly to the board. I have not packed any of the boards within my remit with card-carrying members of my party, even though I might be criticised for not doing so. If individual Senators have any suggestions as to how we can accommodate consumer interests, let them suggest names, even confidentially, to me for inclusion on the board as representatives of such interests. Ultimately, somebody must  decide. All political parties in office have been even-handed in their approach to the board.
Mr. Ross: I reject what the Minister said. He responded in the same manner as all Ministers who say they have appointed people from different political parties. The Minister has three months left in office. It is unlikely he will be in his current position thereafter. He may be the Minister for Finance when he would still be in a position to make nominations to the board.
Mr. Cassidy: The Senator will be father of the House.
Mr. Ross: We shall see. The Minister has not answered my point. This legislation will affect his successors. I should not have allowed him the opportunity to say he is purer than other Ministers in this regard because they are not pure.
The Minister and his successors will appoint people to the board as a reward for political or other work they have done. That is what State boards are for and it is one of the reasons State and semi-State bodies are in such a mess. Board meetings of Aer Rianta resemble meetings of a Fianna Fáil cumann. Board members include a member of the Fianna Fáil national executive, the party's campaign manager for Dún Laoghaire and the campaign manager and close associate of a former Taoiseach. I could go on. I will not detail the position on Aer Lingus. Everyone knows the story. Well-known friends of the Taoiseach are on the board. God knows what they know about aviation. They are board members not for incredible reasons about which we know nothing, but because of the old pal's act. We must guard against the old pal's act impacting on appointments to the Pensions Board, although it is bound to happen.
The Minister asked for suggestions on alternatives. Why does he have to make appointments concerning consumer interests? Why not allow the trustees select a nominee or why not allow the pensioners, who contribute to these pension schemes, decide by way of election? Will the Minister explain why they should not be allowed select the people on the board to represent them?
It is no good for the Minister to say that appointments to the board should cover people from professional bodies who know about pensions. Are pensioners incapable of deciding? This is typical of a Government paternalism that says because pensioners do not know who to appoint, the Government will make the appointments for them. Pensioners do not want Fianna Fáil or Fine Gael hacks on the board. They want people who will represent their interests as consumers.
The Minister may be correct that there is no consumer body that could represent pensioners. Why does he not establish a system where all the pensioners who contribute to these schemes democratically elect the people on the board? Are they so ignorant that they will not be able to do it? Is the Government proposing a benevolent  dictatorship that tells them what is good for them? These people have their own interests at heart. They are the consumers and they should elect the 15 members of the board, who should not be patsies from political parties, IBEC or the unions who are getting a pay off from the Government for work they have done elsewhere. We should democratise this process. What is wrong with that?
Mr. Cassidy: I listened attentively to Senator Ross, whose views I mostly respect. He has enhanced the deliberations of the House, especially when business matters are debated. However, in this instance, he is wrong because the vast majority of pension holders possibly do not understand where they have invested their pensions. If they did, they possibly would not make such investments. They are advised by financial advisers across a range of financial institutions.
I have never been appointed to any State board but I know that most appointments are voluntary. Those appointed give of their time and expertise voluntarily to serve the best interests of the boards to which they have been appointed. The Senator's contribution reminds me of God speaking to God; be that as it may provided he is infallible, but I do not consider that he is.
Senator Ross expressed strongly held views. However, he should know that many decent and honourable men and women have been appointed to boards by various political parties because of their expertise in their line of business. I appreciate the work they have done. On occasion, appointees to boards have misused their positions or have not served in the manner expected of them but 99% of those appointed have served honourably, loyally and well without any remuneration.
Mr. D. Ahern: I do not accept Senator Ross's comments on political appointees and I do not agree that every political appointee is a hack and should not be appointed.
Mr. Ross: I did not say that. I said some of them were, but I also said some were good.
Mr. D. Ahern: The Senator referred to patsies. I have been fortunate to be Minister for the past four and a half years and in that time I have not been pressed by members of my party for appointments to State boards. I understand the same holds true for other Ministers. I often wonder what possesses people even to want to be appointed to boards when the remuneration is minuscule.
Mr. Ross: Correct.
Mr. D. Ahern: I hope the Senator also agrees that their influence is minuscule.
Mr. Ross: That is incorrect. Ask Dermot O'Leary.
Mr. D. Ahern: Much of their work on these boards is tedious. Those appointed to the Pensions Board spend a huge amount of time sharing their knowledge about pensions and, in that regard, the Senator is doing a great disservice to current and former members of the board. The culture about which he complains may have been prevalent in the party of which he is a former member.
Mr. Ross: That is correct.
Mr. D. Ahern: In my experience, it does not prevail in my party.
Mr. Ross: The Minister cannot be serious.
Mr. D. Ahern: The vast majority of appointees to State boards of which I am aware take up their post from a sense of public duty. The Senator has privilege in the House and if he knows of instances to the contrary, he should identify them.
This is a specialised board. On the point of democratising it, it would be impractical to have to find out all the members of the thousands of pension schemes around the country. Would one have to get the vote of each of them for the purpose of democratising the Pensions Board? Given what would be involved, I am of the view that the present method is the best.
In respect of any of the nominees of the Ministers, including myself, irrespective of whatever discretion we have in terms of the Pensions Board, even if the members were card carrying members of a political party, by and large they were sufficiently experienced. There is no way a Minister would appoint a person to such a board who would not have some knowledge or interest in the area of pensions. To do so would be unfair on the person because they would have to discuss matters such as defined benefit contributions and would not have a notion what they were talking about.
In regard to the appointment of a consumer representative to the board, there is already one such person on the board who, apart from other representatives, would validly represent consumer interests. I do not accept that members representing trade unions are not representing consumer interests. A good balance has been achieved. To a certain extent the Pensions Board is getting better value for money out of representatives from some of the interests. That is my experience, having attended a few meetings of the Pensions Board during the past few years. I can put the case no more strongly. I will not convince the Senator and neither will he convince me.
Mr. Ross: May I be allowed finish on this point? The Minister has failed to answer the point. He said he would consider suggestions but he has obviously dismissed the suggestion of giving pensioners a say on who sits on the Pensions Board. This is typical of the extraordinarily paternalistic attitude of Fianna Fáil in this little Republic of ours. It is utterly wrong that they  should not have some say in who, ultimately, looks after the regulation of their pensions and that all these people are politically appointed. At the very least they should have a majority and be seen to have a majority on the board.
To say it is impracticable to give every one of them a vote in their future and the future of their funds is absurd. There are several structures which could be set up to do that. The trustees who are elected by them could easily be the persons who then nominate or elect persons to the board. A few trustees from each pension fund could get together and nominate and elect persons to represent the pensioners of Ireland on the Pensions Board.
What we have now is a system which is directed from the top. The good and the great in the Irish Republic will decide what is good for the little people. That is typical of IBEC, ICTU, the Minister for Finance, the Minister present and the Government as a whole. That comes down through a political party.
The Minister did not answer my question about Aer Lingus. It is an irrelevant question here but the principle is the same. The board of Aer Lingus has people on it whose main qualification is that they are friends of the Taoiseach. A large number of the members of the board of Aer Rianta are card-carrying members of Fianna Fáil. That is their primary qualification.
Will the Minister reaffirm that he will seriously consider on Report Stage a different way of representing the consumer interest element on the board rather than their appointment by him and his successors?
Mr. D. Ahern: I cannot agree with the sentiments expressed by the Senator in relation to Aer Lingus or any other board. The Senator did not ask a question. He posed the example of the board of Aer Lingus. Those on the board of Aer Lingus are entitled to be on it. They are as representative of any outside interest as any other person. In that respect I do not accept what the Senator has said.
In regard to democratising the issue, we are talking about a board that does not meet often during the year but which would have the role of overseeing the executive of the permanent employees of the Pensions Board. There were 86,348 schemes as of 31 December 2000 and by all accounts there are 629,801 members of these schemes. I do not know how one can democratise that to choose a few people for the board. It would be a logistical nightmare. The Senator suggested it might be done through the trustees. My experience is that there is severe mistrust of the trustees in the implementation of the pension scheme on the part of the ordinary contributors to the scheme who have no confidence—
Mr. Ross: They elect them.
Mr. D. Ahern: Perhaps the Senator knows the trustees of the pension schemes of which he is a  member, or those in which he has an interest. I hazard a guess that if the Senator were to go out to Kildare Street and ask the first person he met if he or she was a member of a pension scheme and, if so, if they knew its trustees, he or she would answer in the negative. Neither would they be able to say how many schemes there are or who is on the Pensions Board.
I do not accept what the Senator has said. If he is saying there has been political involvement in the board, he has chosen one of the worst examples on which to base his case. The Pensions Board has not been politicised either under this Government or the previous Government.
Mr. D. Cregan: I wish to make a final point on the board and on pensions generally. It must be readily admitted that during the past ten years there has been more interest in pensions for later life. Irrespective of what Government is in office, the first incentive regarding AVCs was given to the self-employed. That is now being broadened to include the PAYE sector, while a person over 50 years of age will be allowed to contribute 30% of his total income to an AVC scheme, which is enormous. This is long overdue.
Not all boards are perfect. We cannot stand proud and say Aer Lingus boards were good. Irrespective of what Government appointed them, they were not good and have cost the taxpayer a small fortune. The question is whether they were on top of it.
I agree that the proper people should be appointed to the Pensions Board because it is important to those who have personal investments. A young person should be appointed to the board to ensure pension provisions are promoted among younger people. I welcome the incentive to put 15% of salary into AVC schemes  which is long overdue. This should ensure that more people would take out a pension.
Whom should one appoint to the board? I cannot say that those involved in pensions schemes in the past were the best people. There have been many failures in regard to pensions. The losses following the AIB crisis last week were mentioned in the Irish Independent this morning. It is imperative to ensure there is a person on the board who represents the under 40 age group. Even though I am a staunch trade unionist, I do not think they would be the best to represent that group. Whether the person is a political appointee or a young Fianna Fáil person does not matter; a person of the right calibre should be on the board.
It is also important to emphasise strongly that the Pensions Board is accountable, not only to the Minister, but also to the ombudsman. People woke up when we appointed ombudsmen in other sectors. We should probably have appointed ombudsmen for Aer Rianta, Aer Lingus and CIE. We would have been way ahead by now and would have avoided half the losses of these companies. We cannot claim that Aer Lingus or its boards, irrespective of who appointed them, have done us proud. They have not and the same applies to Aer Rianta and CIE. Let us look at the real losses of Aer Rianta, likewise CIE. The fact that I am a politician does not mean I am willing to state we did well with regard to these two companies for which millions of pounds are unaccounted. We do not want the same to happen with the Pensions Board. I know it will not and I am not suggesting otherwise.
Mr. D. Ahern: I have nothing further to add, except to point out that there are already people of relatively young age on the Pensions Board.
Nolan, M. J.
Ó Fearghail, Seán.
Ó Murchú, Labhrás.
Cregan, Denis (Dino).
Tellers: Tá, Senators Farrell and Gibbons; Níl, Senators Quinn and Ross.
Question declared carried.
Section 48 agreed to.
Government amendment No. 103:
In page 83, between lines 13 and 14, to insert the following:
“(c) preserved benefit in respect of additional long service benefit provided by a transfer of accrued rights from another scheme, and”.
Mr. D. Ahern: This is a technical amendment. Section 49 sets out the distinct elements of preserved benefit to be calculated in the case of a defined benefit scheme and the formula to be used to calculate preserved benefit in respect of both pre-1991 and post-1991 services. The amendment inserts an additional paragraph into the definition of “preserved benefit” the effect of which is that the definition is extended to include preserved benefit in respect of additional long service benefit provided by a transfer of accrued rights from another scheme.
Amendment agreed to.
Government amendment No. 104:
In page 85, line 35, after “benefit”, to insert “(excluding any such benefit which is being secured by way of additional voluntary contributions or which represents a transfer of accrued rights from another scheme)”.
Mr. D. Ahern: This is a similar amendment to the previous one. This amendment will ensure that benefits derived from AVCs will not be double counted under the definition in paragraph (4) of the Second Schedule to the principal Act as amended by section 49.
Amendment agreed to.
Section 49, as amended, agreed to.
Government amendment No. 105:
In page 86, to delete lines 27 to 40 and substitute the following:
“5.–(1) Any preserved benefit payable under a defined benefit scheme shall be revalued annually at the end of each revaluation year, by adding the appropriate amount to the amount of preserved benefit as at the last day of the previous calendar year (or as at the date of termination of relevant employment in any case where a member's relevant employment has terminated since the last day of the previous calendar year), such preserved benefit to include any previous revaluation.
(2) Except as provided for in paragraphs 6 and 7 the appropriate amount shall be calculated in accordance with the formula–
P × R
P is the amount of preserved benefit as at the last day of the previous calendar year (or as at the date of termination of relevant employment in any case where a member's relevant employment has terminated since the last day of the previous calendar year), and”.
Mr. D. Ahern: This is a technical amendment to do with the calculation of revaluation of preserved benefits. I propose to take these three related amendments together. Section 50 confines the anti-franking provision to persons who leave service before 1 January 2002. For persons leaving service after 1 January 2002, all benefits will be preserved and cannot be reduced. Under the existing section, revaluation would no longer apply to the partial year from a member's date of leaving to the end of the calendar year. This reduces the value of the preserved benefit to the member.
This amendment arose because an amendment was inadvertently dropped when amendments were introduced in the 1996 Act. This amendment restores the original intended amendment and it will increase the member's preserved benefit arising from his or her leaving before the end of a calendar year.
Acting Chairman (Mr. Dardis): Is the Minister taking amendments Nos. 105, 106 and 107 together?
Mr. D. Ahern: Yes.
Amendment agreed to.
Government amendment No. 106:
In page 87, line 1, to delete “percentage.” and substitute the following:
Provided that in any case where a member's relevant employment has terminated since the last day of the previous calendar year R is X/twelfths of the revaluation percentage where X is the number of complete months from the date on which the member's relevant employment terminated to the end of the revaluation year.”.
Amendment agreed to.
Government amendment No. 107:
In page 87, to delete lines 30 to 40 and substitute the following:
“(2) Any preserved benefit provided  under a scheme to which subparagraph (1) applies shall be revalued in accordance with paragraph 5, provided that where the trustees of a scheme consider that by revaluing a preserved benefit in such a manner that a member whose service in relevant employment has terminated would be treated more favourably than a member who remains in reckonable service in relation to the period of reckonable service to which the preserved benefit applies, they may revalue the preserved benefit on such other basis and such other dates as they consider just and equitable.”.
Amendment agreed to.
Section 50, as amended, agreed to.
Section 51 agreed to.
Government amendment No. 108:
In page 89, line 34, to delete “preserved” and substitute “contributory retirement”.
Mr. D. Ahern: Section 52 reflects the changes to the treatment of pre-1991 service and provides for the funding of the new preserved benefits. This amendment removes an inconsistency in the Bill as published, by replacing the reference to “preserved” benefit in the first part of paragraph 5(b) with a reference to “contributory retirement” benefit, as used in paragraph 5(a).
Amendment agreed to.
Section 52, as amended, agreed to.
Sections 53 and 54 agreed to.
Government amendment No. 109:
In page 90, to delete lines 27 to 38, and substitute the following:
“(1) Section 5(1) of the Ombudsman Act, 1980, is amended by–
(a) the deletion of ‘or' after paragraph (f),
(b) the substitution in paragraph (g) for ‘this Act;' of ‘this Act, or', and
(c) the insertion of the following paragraph after paragraph (g):
‘(gg) if the action falls within a category of complaint or dispute to which paragraph (a), (b) or (c) of subsection (2) of section 131 of the Pensions Act, 1990, applies (and is not excluded from the jurisdiction of the Pensions Ombudsman by virtue of regulations under paragraph (b) or (c) of subsection (6) of the said section  131), being an action that could otherwise be investigated by the Ombudsman under this Act;'.”.
Mr. D. Ahern: This drafting amendment does not change the intent of the section, which is to ensure the non-application of the Ombudsman Act, 1980, to matters covered by the pensions ombudsman.
Amendment agreed to.
Question proposed: “That section 55, as amended, stand part of the Bill.”
Mr. D. Cregan: It is obvious that anybody interested in pension matters can put a question to the pensions ombudsman, but can pension companies make such a query?
Mr. D. Ahern: It is open to anybody to do so. I would like to signal that the Government intends to make amendments to Part 4 of the Bill on Report Stage, to update references to dates and PRSA providers, to redraft parts of various sections and to make a number of specific additional proposals. It is proposed to make amendments to section 8 in relation to sectionalised schemes. I will bring forward an amendment to section 8 to give the Minister power, with the consent of the Minister for Finance and the approval of the Minister for Enterprise, Trade and Employment, to make regulations in relation to matters covered by the Protection of Employees (Part-Time Work) Act, 2001. It is intended that such regulations will be made as soon as possible after the enactment of this Bill.
Similarly, I intend on Report Stage to bring forward an amendment to Part 4, after section 8 and before section 9, to address proposed pension schemes for the North-South bodies under the Good Friday Agreement. This new section will give the Minister the power to make regulations to exempt these schemes from any of or all the requirements of the Pensions Act, as it is envisaged that they will be administered in the North. The legislation will provide for a pension scheme for the bodies, with the approval of the Minister for Finance, the Minister for Finance and Personnel in the North and the North-South Ministerial Council. We understand that it will be a statutory, dual approved, unfunded scheme, which would not be set up under trust. Benefit levels and contribution rates, which will be based on those in the Northern Ireland civil service scheme, were approved by both Ministers and the council. The pensions table under the scheme will be financed by the Exchequer from voted moneys and by the Northern Ireland Assembly. The scheme will have members in both jurisdictions, but it is envisaged that it will be administered in Northern Ireland.
Question put and agreed to.
Section 56 agreed to.
Title agreed to.
Bill reported with amendments.
Report Stage ordered for Thursday, 28 February 2002.
Sitting suspended at 3.55 p.m. and resumed at 6 p.m.
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