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

I will comment on a few issues which perhaps I did not cover fully in my initial remarks. The section allows people who are already paying into the scheme to cease doing so, if they so wish. This is a real issue for people. After the Dublin-Laois match a couple of weeks ago, I met a man from Swords, probably a constituent of Deputy Daly, whose major concern is that he has to pay a couple of hundred euro per month into this pension scheme even though he does not want to do that any more. He wants this provision put into law as soon as possible so that he can keep that money for himself or put it into his own investments. He was very realistic about the future of the IAS scheme and did not want to pay more money into it. This is a very positive provision that I hope people can avail of sooner rather than later.

The second issue is that the Bill allows the DAA to establish a pension scheme for its newer staff. There are some 1,250 staff in DAA and also in Shannon, who are unusual in that they work in a State-run enterprise but do not have a pension scheme. This legislation allows those companies to set up a pension scheme for their staff, which is a positive development. They often get forgotten about in this debate.

The third issue is that the Bill facilitates the resolution of the IAS scheme. I understand the point has been made that we should wait until there is agreement and ballots have taken place and then legislate. I do not agree with that approach. We can use the opportunity now to do so. I think it makes more sense to legislate first because there will be ballots of the shareholders of Aer Lingus, which will be a difficult ballot, ballots of the staff in the airports and in Aer Lingus, and there could even be a ballot of the members. It makes more sense to me that before they ballot they know the legislation is in place and that what they are voting on can actually be implemented. Many times, when it came to referendums, we published the legislation first so that people actually knew that what they were voting on could be done. I think it makes much more sense to have the legislation and the legislative tools in place first for that reason. We do not want people arguing against a solution on the basis that the legislation is not in place to implement it. It makes sense to put the put the legislation in place beforehand on so that people have certainty that this can actually be done. This is a problem that has existed for a long time. There is now a window of opportunity to resolve this issue once and for all to give more than 10,000 people certainty about their pensions and their pension rights when they retire. It gives the companies certainly about their future liabilities, which is also of particular value to the shareholders, who happen to be the Irish taxpayers. They will now have certainty about this too.

Deputy Daly is correct that we have a fundamental disagreement. It is my view and the view of most of those involved in this that the IAS scheme is unsustainable and that the only way to go now is to freeze and de-risk it and establish new sustainable schemes for the staff in the airports and in Aer Lingus. Deputy Daly's view is different and it is that we should try to rehabilitate the scheme or create a new scheme similar to the old scheme which did not work. That is the fundamental disagreement and I doubt we will convince each other on the issue.
In regard to the investment decisions made by the trustees, I am not a pensions or investment expert and I am, therefore, limited in what I can say on that. I am sure the trustee believed the decisions made were correct and it is up to him to defend them. It is standard with pension funds that when one moves from property and equities to bonds, one does so because one wants to remove the risk. It is acknowledged that the return is lower, but the move is made in order to minimise risk. In the case of personal pension funds, people tend in the earlier part of their working lives to invest in equities and properties that might rise quickly, but as they approach retirement, they move into low-yield bonds because these have a lower risk. I imagine the motivation in the case of this scheme was to remove the risk, although the yield would be lower.
In general, deficits are calculated using the minimum funding standard. The OECD conducted an interesting report on the minimum funding standard in Ireland and determined that if anything, we may underestimate our deficits. If, for example, we used the German standard for calculating pension deficits, we would have bigger pension deficits. I have heard the argument that we are overestimating our pension deficits trotted out a few times. The Minister for Communications, Energy and Resources and I are interested in this and we met the pensions regulator to go through this issue to see how the deficit is calculated. The OECD looked at comparisons of how other countries do it and, if anything, we are on the side of underestimating deficits in comparison with other countries. I assume whatever calculation was used to calculate the deficit of the IAS scheme used the minimum funding standard, but I am not certain about that.
Looking at pension funds in other State-owned enterprises, they usually project life expectancy to be approximately 89 or 90. I do not know what age is used for the IAS scheme, but 89 or 90 is fairly standard for semi-State bodies and State-owned enterprises and the type of fund needed is calculated based on this. Perhaps people will not live that long as life expectancy now is approximately 86 years. However, over time people have tended to live longer. While life expectancy has not increased in the past five years, it had been increasing up until then. Therefore, it makes sense to assume people will continue to live longer and that people now in their 30s or 40s may live into their 90s.