Willie O'Dea (Limerick City, Fianna Fail) | Oireachtas source

In response to Deputy Brady, Mr. Donohoe said he could understand why companies want to remove risk but it is not a question of taking risk and sending it out into orbit.

What one is doing is moving the risk from the company or the pension fund to the employee. People can argue back and forth about whether that is a good thing in an overall context.

The witnesses mentioned that solvent employers who can perfectly well afford to keep a defined benefit pension scheme in operation are sometimes constrained by the trust deeds. That is sometimes the case but it varies from company to company. Having read many of them in my time, I know that every trust deed is different Some of them clearly are not constrained but it has happened. There have been some negotiations but it has happened. Companies have unilaterally changed over to defined contribution schemes where the entire risk is on the back of the employee who depends on the success of those who invest the money in bonds or on the stock market. We have a lot of examples of spectacularly unsuccessful investments and ordinary people are, as we speak, bearing the consequences of that.

This discussion is taking place in the context of an obligation we are seeking to place on the Government. The witnesses have said that it does not require legislation to set the minimum funding requirement but I believe that it does. If legislation was not required, we would have introduced it. We have been beating this drum for the past five years and there is no sign of the Government doing anything about it. The only way to make the Government do something about it is to put it into legislation and compel it to act. The witnesses will agree that the way liabilities are measured at the moment is daft. One can talk about large debts overhanging companies and pension funds but it very much depends on how one calculates the liability. If it is calculated in such a way that is grossly exaggerated, then naturally there will be a continuing problem.

I also accept the point made about the situation in the UK, which I have been following closely. The witnesses have said that it has not solved the problem there. Of course, it has not solved every problem in the UK and the legislation put forward by Deputy Brady or whatever legislation ultimately becomes law here will not solve the problem entirely either. There will be situations were companies will be found to be not solvent, the risk will be too great or companies will not be able to make up the difference because of profit flows in the future. If we had the guy in here who drafted the ten commandments, he would not be able to draft legislation that would solve every problem in every instance. What we are trying to do here is solve a particular problem, namely, that companies that can well afford to keep a defined benefit pension scheme going are deciding that it is better for their shareholders and for their profitability to just walk away from it and replace it with a defined contribution scheme, under which the employee carries all of the risk.