Joan Burton (Dublin West, Labour) | Oireachtas source

I must return to the point I made on Second Stage, namely, that the crisis in pensions is caused by two factors. The first of these is the change in life expectancy we have seen in recent decades. When pension funds were originally set up, people did not live very long after retirement. Happily, people are now living for far longer, with most of them being far healthier in retirement. The problem for employers is that the increased longevity of the employees to whom they made promises in good faith 30 years ago - it is important to remember that many employers had very good intentions in this regard - is now giving rise to a serious issue in regard to affordability. The second factor in the pensions crisis is the larger financial crisis, which saw Irish pensions hit by a perfect storm. The schemes were in equities at the wrong time, when the equity market was collapsing - Deputy O'Dea is much more of an expert than I on the equities market - and proceeded to move into Government bonds at the wrong time. It was a perfect storm whereby a range of issues and developments went against them.

There is also the issue of FRS 17, which set much of this in motion. The point I am making in regard to the regime in the United Kingdom is that notwithstanding the legislation we have talked about, there has been a huge move - to a far greater extent than in Ireland - away from defined benefit schemes and towards defined contribution schemes. Deputy Ó Snodaigh referred to the situation at Marks & Spencer. My understand is that the company closed its defined benefit scheme to new entrants in 2004. In fact, I understand that much of the dispute with employees in that instance related to changing work practices and most of them are in a defined contribution scheme. That is the information we have from the Pensions Board, and it is not untypical.

The Deputies are proposing in these amendments that a healthy sponsor should not be allowed to close a defined benefit scheme where that scheme is 90% funded. However, in such cases, employees would effectively be almost 100% protected. I absolutely accept the intention of these amendments, but they do not actually do very much in regard to the underfunded schemes that employers are seeking to close. The amendments apply to schemes that are, according to the definition in the amendments themselves, well funded, but those schemes are not the problem. In fact, the schemes encompassed within the amendments will, by definition, be among the 50% of schemes which have met the funding standard of the Pensions Board. In short, it is not the schemes that are 90% funded which should be causing us concern.

There have been discussions recently on what might happen if everything were to collapse tomorrow, taking a risk and probability of 100% right here and now. However, pension schemes, because they are based on life expectancies and so on, do not normally anticipate 100% risk in the here and now. I understand where the Deputies are coming from with these amendments and it is a subject to which we will return. In fact, we will have no option but to come back to the issue of how defined contribution schemes are invested. That is not dealt with in this Bill but is a huge issue for younger people currently in employment. For the reasons I have set out, I do not propose to accept the amendments. I understand the Deputies' concerns and assure them that these matters are constantly up for review and discussion. As I said, there is work to be done on defined contribution schemes, which apply to a large proportion of younger workers.