Séamus Brennan (Dublin South, Fianna Fail)

The Pensions Board was asked to review, in consultation with the Department of Enterprise, Trade and Employment, the position and regulation of income continuance plans. These products often interact with occupational pension schemes and it was considered necessary to establish the facts of the situation and to clarify the position for the bodies with an interest in this area, namely, my Department, the Department of Enterprise, Trade and Employment and the Pensions Board. The report was compiled by consultants Watson Wyatt and Matheson Ormsby Prentice Solicitors and was published on the Pensions Board website in December 2005.

Income continuance plans provide cover to individuals in the event of long-term illness or disability which prohibit the person from following his or her normal occupation. These plans are insurance policies and the financial regulator regulates the providers of the products since May 2003.

Different types of products are available in the market — those sold directly to individuals by insurance companies and those that are employer sponsored. I am aware of issues arising with the latter type of product relating to avenues of redress in the event of problems or complaints arising.

As the employer is the beneficial owner of the policy underpinning the income continuance arrangement, there is no access for the individual to the Financial Services Ombudsman. The consultants' report suggested that corporate income continuance plans should be brought within the remit of the Insurance Ombudsman, now the Financial Services Ombudsman, and my Department has raised this issue with the Department of Finance with a view to making progress in this area.

In general, the report found that lack of adequate disclosure has been the most significant source of misunderstanding in the interaction of income continuance plans and related pension plans. To overcome this it was suggested that the Department of Enterprise, Trade and Employment should introduce regulations to improve the flow of information to employees on income continuance arrangements. The consultants have also suggested that guidance notes on disclosure requirements on occupational pensions need to be strengthened to cover some aspects of the income continuance arrangements.

In this regard, I have recently signed into force new disclosure of information regulations for occupational pension schemes. The Pensions Board is drafting the guidance notes in respect of these regulations and, in this context, will consider how best to implement the recommendations made in the consultants' report in so far as they relate to pension benefits.

See this speech in context