Séamus Brennan (Dublin South, Fianna Fail)

The construction federation operatives pensions scheme operates as a registered employment agreement under the Industrial Relations Acts. There is a statutory obligation on employers to register eligible employees in the scheme and pay the necessary contributions. Since its inception in 1965, the scheme was a defined benefit scheme with flat rate contributions and benefits, which could only be indexed by direct agreement between unions and employers each year. It is understood that after an extended review process between employers and unions, it has been agreed to introduce a new scheme, the terms of which were registered with the Labour Court on 19 May 2006 under the requirements of the registered employment agreement.

Generally speaking, I do not favour the replacement of defined benefit schemes with defined contribution arrangements because defined benefit provision best serves the interests of employees. While the Government has been critical of high profile and profitable enterprises which have chosen to close their defined benefit arrangements to new staff, the position of the construction industry scheme is different in a number of respects. First, it appears the changes proposed have been agreed between the parties concerned after prolonged review and discussion, with an agreement registered with the Labour Court. Second, the benefits available under the old scheme were flat rate payments which, unlike most defined benefit arrangements, were not related to previous earnings. The value of these benefits has also been eroded over the years as a result of the non-indexation of benefits and contributions.

While the previous scheme had been a defined benefit scheme, the scheme sponsors consider that the new scheme will be more beneficial to scheme members for a number of reasons including that contributions to the scheme will be higher; a retiring worker will have an option to take 25% of his accumulated fund as a lump sum, whereas heretofore the lump sum paid was equivalent to about one year's pension, which was up to €4,500; annuities will be provided in-house rather than buying them on the open market, which will give better value for accumulated funds; death in service benefits will be better as spouses will receive not only the €63,500 lump sum available at present but also the accumulated value of the individual's pension fund; workers will have choices in how to apply their accumulated funds ranging from a fixed pension with no indexation and no surviving spouse's benefit to an indexed pension indexed at 3% per annum with a 50% surviving spouse's pension; and where a member's remaining fund, after taking his or her 25% tax free lump sum, is less than €15,000, the member will be offered the option to fully commute his or her pension to a lump sum payment.

Additional information not given on the floor of the House.

Occupational pensions in Ireland are voluntary arrangements and, as such, employers can change the terms of these arrangements. I am aware there are many pressures on defined benefit schemes emanating from the need to pre-fund and meet the requirements of accounting standards FRS17 and the funding standard under the Pensions Act. While some employers have taken unilateral action to change their pension schemes, the changes proposed in the construction industry scheme have been agreed after extensive discussions and it appears the change may be to the advantage of workers in the industry.

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