Leo Varadkar (Dublin West, Fine Gael) | Oireachtas source

I am inserting a new section.

It is correct that those provisions did not provide for the consent of employees, but I remind Deputies that in the scenario we were discussing - a possible forced wind-up of the scheme by the Pensions Authority - employee consent would also not have been appropriate at that point. In any event, the provisions contained in subsections (3) to (10) of section 32A are now deleted from the revised new section 34 which I have tabled.

Before discussing the revised section, it would be helpful to remind Deputies of the current situation regarding the IAS scheme and how the proposals in this section are intended to assist the parties in implementing whatever solutions are agreed by them to the serious deficit in the scheme. As I said on Second Stage, the provisions of section 34 do not anticipate or pre-empt whatever solution is arrived at by the parties. This could even include a continuation of the current IAS scheme if somehow the massive deficit in the scheme were to disappear and the IAS fund were to find itself in a healthy surplus again as soon as this Bill is enacted. Almost everybody now accepts that this is not a realistic outcome, but the Bill does not preclude it.

The central problem with the existing section 32 in the 1998 Act is that it only provides for that particular outcome. In short, it provides that any separate pension scheme that the DAA may establish for IAS scheme members must have the same pension benefits and that the terms and conditions relating to those benefits must be no less favourable than those currently applicable within the IAS scheme. In other words, if the DAA were to establish its own separate pension scheme for its existing and newer employees who are currently members of the scheme, it would have to be essentially a replica of that IAS scheme, with all its problems and inflexibilities. DAA and Shannon simply do not have a mandate under current legislation to introduce any other type of scheme for their members of the IAS scheme and this is potentially a serious barrier to the implementation of whatever agreed solution emerges to the problems in that scheme. We could find, and I very much hope we have found, a compromise solution to those problems, but DAA will not be able to implement it unless the flexibilities provided in this Bill are implemented.

It was also suggested on Second Stage that these provisions are premature and that we should wait for the current discussions among the parties to reach a conclusion. The implication of that suggestion is that I introduce a short Bill to the Oireachtas at that stage to provide for the legislative tools to implement whatever compromise solution has been arrived at by the parties. Leaving aside the prospect that the Houses might not be sitting, as the summer recess is almost here, that would be a very inefficient use of Oireachtas time and departmental resources when there is absolutely no need for such a course of action. We can provide the necessary provisions in this Bill, which I hope can be enacted before the recess. In addition, any prospect of causing further delay to the implementation of the solution to the problem, which has been ongoing for many years, is not one that should be attractive to any of us, and it would certainly be grossly unfair to the parties involved.

The amended section 34 which I have tabled contains two subsections. Section 34(1) substitutes three new sections in place of the existing section 32 of the 1998 Act.

These are new section 32, new section 32A and new section 32B.
With regard to the new section 32, most of the provisions of this new section 32 are similar to those of the existing section 32 which it is replacing. For the most part, therefore, it contains the fairly standard provisions governing pension schemes that appear in legislation governing commercial State companies, such as power for the airport authorities to establish superannuation schemes for staff, ministerial approval being required for such schemes and for any proposed subsequent amendments to them, power to establish a fund associated with each approved scheme from which benefits can be paid, a requirement that an appeals mechanism must be provided for in each scheme, and the laying of schemes before the Houses of the Oireachtas.
I have deleted subsections (13), (14) and (15) from the previous version of this section. Those provisions were intended to give clarity around how any new DAA pension scheme would be divided between DAA employees and those of a future Cork Airport authority if and when Cork Airport is separated from the DAA. I felt that, while not essential to the Bill, these provisions would assist the administrative processes involved in a future separation of Cork Airport. However, they have given rise to a certain degree of confusion and misunderstanding and it is for that reason I am removing them.
I have divided the previous section 32A into two separate sections for greater clarity. These are now sections 32A and 32B. The new section 32A will allow IAS scheme members who become members of another pension scheme to cease making contributions to the IAS scheme. The airport authorities will be required to submit that other pension scheme for ministerial approval in the normal way under section 32, which I mentioned a moment ago. Obviously, the employer contributions to the IAS scheme in respect of such a member would cease simultaneously and no further superannuation benefit would accrue under the IAS scheme for that member. This is entirely voluntary and there is no obligation on IAS scheme members to cease contributing to that scheme unless they want to. I have made an amendment to the previous version of this provision to make it absolutely clear that the member, him or herself, must agree to join another scheme.
The problems in the IAS scheme will still, of course, remain to be resolved by the parties. However, this section addresses the desire expressed by some employees to have the option of putting contributions in respect of future service into a pension fund other than the IAS fund where there is a prospect of a better future benefit. SIPTU held a vote on this issue last February and the overwhelming majority voted in favour of withholding contributions to the scheme pending resolution of its problems. The provisions in this section provide them with that option if, on a purely voluntary basis, they wish to avail of it.
The new section 32B(1) provides the trustees of the IAS scheme with power, without the need for consent by members or employers, to amend the provisions of the scheme to cease contributions to the scheme by both members and employers and of course to cease the corresponding accrual of further benefits under the scheme. This will facilitate an overall solution to the problems in the IAS scheme, whether that is along the lines of the Labour Court recommendations of May of last year, the trustees' proposals of last February, the proposals issued a fortnight ago by the expert panel or some variation of any of those proposals. In deciding whether to exercise this power, the trustees must consider what is in the best overall interests of the scheme members. Also, they must have due regard to the interests of the different categories of member and to any other matters they consider relevant, including the funding deficit and its implications for all members. Clearly, an agreement among the parties will make the trustees' job in this regard a lot easier. The trustees of most modern pension schemes would, in conjunction with the scheme's employer, have the power to cease contributions and benefit accruals in any event. Therefore, it is not an unusual provision in that regard.
In section 34(4) I have made the operation of these provisions subject to a commencement order. This is another amendmentthat I have introduced having listened to Deputies' concerns last week, and the concerns expressed by Senators some weeks ago. Having considered the matter again, it is not unreasonable that the activation of the ability to use this power should await further progress by the parties towards an overall solution.
Obviously if the trustees freeze the IAS scheme, there would be a requirement for a new pension scheme to be established, under which current IAS members could accrue benefits in respect of their future service. Such a new scheme would be subject to ministerial approval under new section 32 which I referred to earlier. Any new scheme would also of course cater for new employees, including those 1,250 new and largely young employees in the DAA and Shannon, to whom I referred on Second Stage, who currently are not members of any occupational scheme because current legislation does not allow Shannon or the DAA to establish pension schemes that are not more or less the same as the failed IAS scheme.
Section 34(2) clarifies that the IAS scheme trustees have the power to amend any provision of the IAS scheme that is necessary to comply with a direction of the Pensions Authority, pursuant to section 50 of the Pensions Act 1990, as amended. While it may seem strange that there should be any doubt about the power of the trustees to institute rule changes on foot of a statutory direction issued by the Pensions Authority, the potential nevertheless exists, due to the inflexible nature of the scheme, for a challenge to any such action taken by the trustees. The subsection is designed to remove any doubt that there may be in any quarter that, in order to implement statutory directions from the Pensions Authority under section 50 of the Pensions Act, the trustees may make any necessary changes to the provisions of the IAS scheme without any requirement to seek the consent of members or employers.
Section 34(2) repeals section 9 of the Aer Lingus Act 2004. Section 9 of the Act is similar to the existing section 32 in the 1998 Act applying to airport authorities. It allowed Aer Lingus to set up its own replica IAS-type scheme for its own staff. However, that section was never commenced and those provisions were never used. Replicating the significant structural issues inherent in the IAS scheme does not make sense and section 9 of the Aer Lingus Act 2004 will now never be commenced. Therefore, its retention on the Statute Book is no longer appropriate.
As I and previous Ministers with this portfolio have said many times, the resolution of the funding difficulties in the IAS scheme is a matter for the trustees, members, employers and the Pensions Authority. The deficit in the scheme arose over a number of years for a number of reasons and, most particularly, because the contributions made by the members and companies have not been sufficient to match the benefits expected or promised.
The expert panel was established by ICTU, IBEC, my Department and the Department of Jobs, Enterprise and Innovation. It stressed in its report of 16 June that its recommendations represent the best possible outcome that can be achieved. It also said that it was the view of the panel that if this final opportunity to resolve this very protracted problem is not grasped, the situation facing members of the IAS scheme will deteriorate further. Since then Aer Lingus, which represents almost 70% of the membership of the IAS scheme, has stated that, subject to an overall agreement based on the panel's recommendations, it is prepared to increase its previous offer of €110 million in respect of its current employees by €36.7 million to €146.7 million, as recommended by the panel. It is also prepared to increase its offer to its deferred members of the scheme by €14 million to a total of €44 million. Therefore, Aer Lingus has indicated that it is prepared to contribute more than €190 million towards the resolution of this scheme's deficit.
The DAA has also indicated that it is continuing to review the details of the panel's report and I expect to hear positive news from it shortly. The company has said that it believes that the panel's report represents the basis for a final and complete resolution of pension arrangements. In the DAA's case, the panel recommended an increase of more than €9 million on the company's original upfront capital offer to €57.3 million in respect of active IAS scheme members. The company has signalled a revised amount in respect of its deferred members of €15.5 million, an increase of €5 million on its previous position. The ratio of payments that was recommended by the expert panel's report in respect of both companies broadly aligns with the split of membership of Aer Lingus and DAA employees within the scheme. There has also been further contact between the DAA and the deferred members' committee in recent days which I very much welcome. I understand that arrangements are being finalised for a meeting next week. I have urged all parties to grasp this opportunity to deal finally with this long-standing problem. The panel's recommendations are capable of acceptance, although I appreciate that some of the decisions necessary to achieve this will be challenging and difficult for all parties.
This part of the Bill, particularly the proposed new sections 32A and 32B, is essential in the context of the efforts to find and implement a solution to the serious problems in the IAS scheme. Those recommendations, or any solution agreed among the parties, cannot be implemented without the provisions I have included in this Bill. I apologise for being long winded but hope I have covered everything.
Section 23 was passed earlier but I will need to amend it as it still refers to the replacement scheme. We are deleting the reference here and if my amendment is passed, I will need to table an amendment to section 23 on Report Stage.