Mr. Ronan Gill:

I thank the committee for the invitation to address it on CIÉ pension matters. I am the acting chief operating officer of CIÉ and my colleague, Mr. Declan Carlyle, is the head of human resources. I have a brief opening statement following which we will be happy to answer any questions the members have.

CIÉ wholly owns the three national transport providers, Bus Átha Cliath, Bus Éireann and Iarnród Éireann. Group employees are members of one of two pension schemes, namely, the regular wages scheme and the superannuation scheme. The scale of the CIÉ pension issue can be summarised as follows. The regular wages scheme covers approximately 75% of staff and accounted for €98 million, or 21%, of the total deficit, including risk reserve, as at December 2016. The superannuation scheme covers 25% of staff and accounted for €361 million, or 79%, of the total deficit, including risk reserve, as at December 2016. In 2013, both schemes submitted funding proposals to the Pensions Authority which, on the basis of certain assumptions, envisaged the schemes achieving solvency together, with the appropriate risk reserve by the end of 2023. At the end of 2016, the schemes did not achieve the target solvency levels that were planned for them at that date. As a result, they are required to submit revised funding proposals that will bring them back to solvency by the end of 2023.

The issues that face the pension schemes are those which face pension schemes generally. In common with all pension schemes, the cost of pensions is increasing by virtue of long-term interest rates that have been reducing, increasing longevity and, finally, increasing regulation of schemes to ensure that they adopt measures to de-risk schemes, secure pension benefits and protect pensions in payment. CIÉ's policy is to seek the agreement of scheme members through their recognised trade unions for proposals which are designed to restore the schemes' deficits. These proposals, once agreed and approved by the schemes' actuaries, can be submitted to the Pensions Authority by the schemes trustees. It is also CIÉ policy to engage fully in a process with the trade union group, facilitated by the Workplace Relations Commission, to achieve that objective. Unfortunately, that process is in abeyance. However, CIÉ continues to be available to engage to seek a resolution. CIÉ's policy in the interim is to operate the schemes in accordance with their rules, which are set out in statutory instruments. In all of this, CIÉ is seeking to secure the benefits of pensions in payment and the accrued benefits of the active membership. It is not a cost-reduction measure on the part of the company.

At the end of February, CIÉ published a comprehensive briefing note in response to a number of parliamentary questions. The note confirmed the following matters. CIÉ has always contributed to the schemes on the basis of actuarial advice and in full compliance with the rules of the schemes. The schemes are off-track as of the end of 2016 and, as such, the schemes' trustees have an obligation under the Pensions Act to submit revised funding proposals to the Pensions Authority. CIÉ's preference is that the employer and scheme beneficiaries, namely, the employees, should agree a proposal which can be submitted by the pension schemes' trustees to the Pensions Authority. The proposals that were being discussed in the process facilitated by the Workplace Relations Commission mirror changes that have already been made by the State and in other State companies, the principal change being to increase the retirement age applicable within the schemes. In consultation with the trade union group and based on a trade union group suggestion, CIÉ has developed a proposal for the regular wages scheme which would, if implemented, improve the security of benefits payable under that scheme. The main elements of that include: ensuring that scheme rules regarding retirement age align with actual retirement experience within the scheme; capping pensionable pay in the scheme at the greater of 3.3 times State benefit or current pay levels; providing an alternative pension scheme for pensionable pay in excess of the cap; and, in line with CIÉ's commitment to maintaining its contribution, maintaining funding of schemes at a maximum of 2.7 times employee contributions.

CIÉ regrets that there has been no substantive engagement as yet on proposals to address the risk to member benefits in the superannuation scheme. CIÉ has developed a proposal capable of securing retirement benefit levels and returning the scheme to solvency within the timeframe required by the Pensions Authority. The proposal is similar, in principle, to that developed for the regular wages scheme, namely, to change in-scheme rules regarding retirement age in order to: align scheme retirement age with the State retirement age on a phased basis; close the scheme to new entrants and provide an alternative arrangement for those who choose not to enter the remaining defined benefit scheme available within the group; and replace purchase in-scheme notional service with a best-in-class additional voluntary contribution, AVC, scheme. CIÉ has responded comprehensively and reasonably to all representations and requests from recognised staff representatives regarding the provision of independent advice. CIÉ also responded positively to a recent trade union suggestion aimed at progressing these matters.

I have already outlined the contributory factors to the current deficit position of the schemes. Therefore, the consolidation of CIÉ pension schemes in 1994, on a basis agreed with staff, is not the source of the current funding deficits. The 1994 consolidation resulted in improvement in benefits for members and an increase in the employer contribution ratio to the schemes from a matching contribution to a contribution of up to 3.6 times in the case of the superannuation scheme and up to 2.7 times in the case of the regular wages scheme. In return, CIÉ removed the requirement for funding proposals and balance sheet provision for the schemes.

On the questions that have been raised in respect of the schemes, statutory instruments provide clear segregation and independence in the roles and responsibilities of CIÉ, as the employer, and the trustees and committees of both schemes. Questions that are addressed to the pension committee are, therefore, a matter for it. It is not appropriate for CIÉ to engage on matters that are exclusively for the pension committee. CIÉ's contributions to the schemes are in accordance with the funding proposals submitted to the Pensions Authority in 2013. These contributions are near the maximum prescribed levels provided for within the statutory instruments.

Under the current rules, further increases in employer contributions above those levels would trigger a review of employee contributions.

That is an overview of the current situation from CIÉ's perspective. I will endeavour to answer any questions the committee may have.