Clare Daly (Dublin North, United Left) | Oireachtas source

This is the most controversial part of the Bill, which will have an impact on the living standards of thousands of citizens in their retirement. It is of major importance. Like the other Deputies, I do not accept that the Minister's amendment addresses those concerns. It is inappropriate to insert this amendment in this Bill. While the Minister has attempted to address the issue of decisions being made unilaterally and without the consent of the employees, I would argue that some of the provisions that are there are there anyway. The Minister is at pains to say that the problem is that, under the existing arrangements, the airport authorities have to replicate the IAS scheme. What the Minister is saying, in effect, is that he does not want them to replicate the perceived benefits that employees thought they would get on their retirement. That is precisely the problem. There was a reasonable expectation because people paid into a scheme over their working lifetimes in respect of which there were commitments, over which there are now a question mark. This is an attempt to corral them into accepting something less than what they thought they would get. I wish to address some of the points the Minister made in that regard.
The Minister is absolutely correct to spend most of the time during his contribution dealing with where we are, the crisis as it is and the backdrop to it. However, I do not think he has correctly identified the root of the problem. If we are to come up with a solution, then we have to identify the problem that gave rise to it in the first place. The Minister reiterated that in his opinion one of the key problems with the IAS scheme was what he called the lack of contributions by both sides, the employer's side and the workers' side. I reject that from the point of view of the employees, as the level of contribution was set by an actuary and reviewed every couple of years, with the conclusion that it was sufficient to meet the benefits as defined by the rules of the scheme. People paid into the scheme over decades. Existing pensioners have suffered as the amount of their contributions increased sevenfold, but the employer's contribution decreased. The decisions that the employers took placed a major strain on the scheme. The people who are being asked to pay the price are the pensioners, the deferred pensioners and the active members. They are still being asked to pay that price. We should be quite cognisant of that, because it is not their fault. I do not accept that they should be paying the price.
This is the one occupational pension scheme that we are dealing with in law in this way. I think that is dodgy. It is my opinion that if the present scheme wanted to cease contributions, which is one of the reasons given by the Minister, there is no reason a rule amendment could not have been implemented. As things stand, there is a superannuation committee in the IAS, but the committee has been overruled by trustees. The Minister could implement some of the things he would like to do without the need for legislation. An issue that has been highlighted, and correctly so, is how the pension scheme got into its current position. The Minister would have seen the articles in newspapers in the past about the very poor financial decisions made by the trustees in relation to the scheme. There is a question mark over whether the deficit is in fact a deficit as has been made out. That is the basis for justifying the legislation, but is it really what they say it is? I am sure the Minister saw the article in The Sunday Business Post last month which questioned the basis of the actuarial valuation in 2011. Prior to 2011, the calculations for the funding of the scheme were based on the assumption that an average male in Aer Lingus was expected to live for 20 years and a female for 23 years after reaching the age of 65.

In 2011, a couple of years later, it changed that and added an extra six years for both categories. How was it arbitrarily decided that pensioners would live that number of years longer than had been anticipated three or four years before that? The consequence of making that actuarial change was the addition of a €400 million liability to the pension scheme. Therefore, a multi-million euro problem was caused by an actuarial assessment rather than anything else. In addition, the interest rate calculations used were quite low, which meant a higher liability and deficit expressed in monetary terms. The article in the Sunday Business Post, which summed it up well, stated

In summary, the members of the Airlines' Pension Fund are faced with clear proposals to cut their benefits by between ten and fifty percent, which are based on nebulous assumptions about future liabilities, ill-advised asset allocations and a now questionable re-allocation of assets into bonds at historically low interest rates.

It goes on state that 15,000 people and their families had an expectation which is threatened because of some of those decisions. This is a serious issue. It is not arbitrary assessments or calculations but financial decisions made by the trustees of the scheme that were at best bizarre and at worst, in some cases, of questionable motivation. I mentioned some of them on Second Stage. Decisions were made to dispose of the assets of the IASS. In essence, its property portfolio was dumped at a time when commercial property prices were escalating and everybody knew it. The five Dublin properties that it sold for €58 million within less than ten months had already shot up in value by more than €10 million compared to what they had been sold for previously, and the rental income was €6 million per year. Questions have been asked as to who are the beneficiaries of some of these decisions, and about some of the advisers. The actuarial assessment that underlay some of these calculations was carried out by Mercer, and we know that the chairman of IASS trustee is also involved in Mercer. That person also spent a long working career with Irish Life.
Suddenly, a decision was made to divest the portfolio of its valuable assets for much less than their value at a time when those assets were escalating in value, and instead to invest that money in Irish Life. Some €800 million is tied up in incredibly low-yield investment in Irish Life. It does not even make sense that they would make such a decision. Why did they redirect cash from the sale of equities in commercial property to a low-yield fixed-income fund in Irish Life? That is potentially costing the pensioners, and who will pay for that? Our job should not be to amend legislation to make up for bad financial decisions made on the backs of pensioners. Why did the pension fund sell a broad selection of property, an equity portfolio, and tie it up in this low-yield fund in Irish Life? What is being proposed by the Minister arises out of that crisis. The pensioners and deferred pensioners pay for that in their living standards.
The Minister has said they will have to be consulted, but the mechanisms for consultation have not been yet been defined. Much as been said about how deferred pensioners were affected, but the pensioner group is the most excluded in this entire process. The expert panel told them it could not and would not talk to them. There is not a single mention of the pensioners in the expert panel report. Let us look at their contribution. They are the only people who have had to put moneys up-front back into the IASS to make up the deficit. They are losing about €40 per week from next January, and almost the same again if the resolution to buy sovereign annuities is implemented, in addition to the cuts they have already taken.
The Minister mentioned the amounts of money that Aer Lingus and the DAA have agreed to put into the scheme. They have not actually agreed to fund the deficit. There is no agreement to put money back into the IAS scheme. They are not doing that. It is clear from the expert panel report that they have agreed to set up separate individual funds to mitigate against future losses of active and deferred pensions. The funds belong to the individuals covered by the scheme. The 5,000 people already on a pension are excluded from this situation. If we enshrine this problem in legislation we are doubly excluding them, because no fund is set up to mitigate the losses of the pensioners. They are excluded and they are suffering. There is nothing to stop the trustees from reducing pensions further if they continue with the disastrous investment policy on which they have embarked, which I think will continue for years. The Minister's energy should be focused on addressing those issues, if we are to help the pensioners, rather than inserting a legislative provision that does not offer them a way out of the situation.
Some of the amendments I have tabled concern the replication of existing clauses - for example, the clause to protect people's pensions and pension expectations when the Department of Posts and Telegraphs broke up. There is a fundamental conflict here because the problem with the measures we are tabling is that we are trying to protect the benefits of members, whereas the Minister is trying to loosen things up in order to facilitate an erosion of those benefits. The Minister should address some of the financial problems that got us into this situation in the first place.