Mr. Jim Murray:

I thank the committee for inviting us here. I am speaking on behalf of the Pensions Council, the sole function of which is to advise the Minister for Employment Affairs and Social Protection on pensions generally. As my opening statement sets out, the members of the council work voluntarily, in effect. No payment is made to members in respect of most of their work. We do not have a secretariat, as such. We get some support on an administrative level.

We would not usually look at something as specific as the Pensions Amendment (No. 2) Bill 2017. Instead, we would put forward some general ideas. Having been invited to consider the text of the Bill, the council did so at its April meeting. The Bill is one of a number of efforts to improve protections for members of defined benefit and other schemes. Such efforts are needed, if I may say so. We very much welcome the objective of the Bill. We assume that the first section, which relates to the matter of so-called equity between the different kinds of pensioners, does not apply to the wind-up of insolvent schemes because the allocation in such circumstances is already specified by statute. Overall, we feel that the best starting point in dealing with the issues raised here is the principle that defined benefit fund deficits should be treated as a debt on the sponsoring employer. We do not suggest that this should be applied in every single instance, because there is sometimes a need to adapt to particular cases. We feel that it is the best starting point for considering all the issues in this area. The proposed Bill would certainly create a debt on the employer in relation to fund deficits in certain cases. While it should be commended on that basis, it does not fully embrace the approach we propose.

There are some legal and practical problems with the Bill, as drafted. It may or may not be the case that they are capable of being fixed. I remind the committee that with the possible exception of the chairman, the Pensions Council is a group of the most experienced experts on pensions and pension policy in the country. There are three groups within the membership of a pension scheme - the pensioners, the active members who are still in employment, and the deferred members who will eventually have some rights when they reach retirement but are not accruing benefits in the normal way. When we looked at section 2, which introduces the new section 48C, we asked whether this provision will apply to one of those groups or to all three. The number of deferred benefit pensioners is very much higher than the number of active members and pensioner members combined. It is a very large number. Some of them may have been dispersed to the four corners of the earth. Therefore, there may well be problems in securing a majority of members of a pension scheme.

We may assume that the only people who could object to the way the funds are allocated are the pensioners. If they make an objection in accordance with the scheme of the Bill, they will be appealing for reallocation of what, in most cases, will be a fixed amount of money. Any group that is appealing will be asking for money to be taken from another group and given to it. The problem is that the other groups would then have to be heard. I remind the committee that what is equitable for a pensioner may not be equitable for an active member and may not be equitable for a deferred member. The potential exists for three groups of people to make arguments that will probably be perfectly plausible and equitable from their perspective. The non-pensioner group might point out that the overwhelming balance of any money in a fund is paid to the pensioners. The per capitapayment made to pensioners in such cases is far higher - it is either six or 12 times higher - then the per capitaamount paid to active members or deferred members. We do not think that in this case, the Pensions Authority could act like Solomon and say this is exactly how it should be and so on and so forth. We certainly could not do so without the risk of legal challenge. The point I am making is that when we tried to figure it out, it just was not clear how it would work in practice.

Section 3 proposes to amend the principal Act by inserting a new section 50D after section 50, and it meets part of the general principle that we like, which is that the deficit should be a debt on the employer, but only in part. We think it may pose practical problems or difficulties for the Pensions Authority which would have to decide in a very public way and declare a fund solvent or insolvent, with the possible consequences so far as that is concerned. We believe that the existing section 50 of the Pensions Act 1990, which provides for what I would best describe as an overall review or check by the Pensions Authority on how a scheme is to be restructured, is probably the best way forward, although it has to be said that the main concern of the authority, perhaps rightly, is to ensure that there is enough funding left to fund whatever has been decided in terms of restructuring.

I cannot emphasise enough, and we considered this at one meeting in a very general way, that there are many details that would have to be filled in in terms of applying this system, particularly for monthly employer schemes and the like. Certain procedural rules for wind-up would need to be required and improved. For example, there should be a clear period of notice so that, in effect, there would be an opportunity for the different partners or the different members to make their views known and time for the informal dispute resolution system that is there to be triggered in proper cases where there is a dispute between the trustees and the employers. Of course, in all of this, everything has to be looked at in terms of the fact that a pension scheme is a private contract between the trustee and the employer. While there is regulation applied by the authority, that is it in essence. Could the authority in those circumstances for whatever good argument insist that an employer should continue to pay into the scheme ad infinitum,so to speak, in what is a private commitment? There may be things in the trust deed that impose certain duties on the employer, but that is specific to the particular trust deed. To give an authority the power to insist that somebody should honour a contract ad infinitum will certain pose difficulties. We do not know what exactly the situation will be.

I will end by repeating the point that we have looked at this in a general way. We believe the idea of starting with the deficit as a debt on the employer, and within that dealing with specific hardship cases or especially difficult cases, would be the best approach to this, although a great deal of work would remain to be done on it. I thank the Chairman.