Mr. Tony Donohoe:

I will take the point on a minimum funding standard first. I bow to the Deputy's judgment on whether legislation is required but I agree fully that it should be reviewed. The OECD has commented to the effect that it should reflect the long-term cost of the scheme rather than a snapshot at a particular time, which does not reflect the reality of buying annuities in the event of a wind-up. The risk reserve calculations do not make sense either and one needs flexibility on valuation dates as well. This is a fairly technical work but it seems strange that a pension fund might not look too bad in February but by June it looks shocking because of the way the bond markets have moved. The fluctuations are significant.

I still take exception to the idea that employers can just walk away from schemes and that there are no constraints on them. The Deputy may know of companies that have done so in the past but the rate of wind-ups has declined significantly since 2014. In that year, there were 41 wind-ups but by 2017, there were only 16 and I suspect there were even fewer in 2018. Companies that were going to walk away from this less altruistically would have done so a long time ago. There were 1,200 schemes 12 years ago and now there are 611 schemes, according to the latest data. Most of these companies have gone. They have moved out and those that remain are generally very well established, reputable companies. They are companies of a sort and scale that they could not just treat their employees flippantly.

The notion that defined benefit schemes are without risk is false. As we have seen, they are very risky. We have seen what happened with wind-ups where active members saw their pension promise completely decimated. That was a risk. The risk on the individual is more manageable. At least the individual can manage his or her own risk. However, he or she must be educated and advised on how to address this. This relates to another issue which I hope this committee will get a chance to deliberate on, namely auto-enrolment. Hopefully, we will see a lot more employees with their defined contribution pots accumulating. How that is going to be managed is important, especially as 65% of private sector workers do not have a pension at all. There will be issues relating to education, the cost of advice and a range of other matters in the context of mitigating individual risks and making sure that people are informed.