Joan Burton (Dublin West, Labour)

My colleague, Deputy Lynch, from Cork South-Central, sought an Adjournment matter for the past two days on the problems surrounding defined benefit pension schemes and, in particular, the problems of pensioners who are coming very close to retirement age within months or years. This is an enormous issue around the country but when I was in Cork last week I had the opportunity to meet several delegations of workers in various employments, many of whom have almost 40 years of service and are now looking at a pension, under the current rules, which will be about half of the pension they might have looked forward to and expected to get three years ago.

Given the constant flow of people approaching pensionable age, once they are close to 40 years there is not a lot they can do. As they are defined benefit pension schemes, once they retire under the current regulations, as the Minister is aware, they are obliged to purchase an annuity. The Minister made a number of announcements on Wednesday when he spoke to the Irish Association of Pension Funds. He announced a longer framework for a defined benefit schemes which would allow schemes to take account of new provisions, in other words to extend the deadline, which was to have been November, to provide the restructuring and that is welcome.

However, there is still a problem for somebody who retires tomorrow as he or she has to purchase an annuity and, as the Minister is aware, the rules of most pension funds require that the annuity is purchased by reference to the highest rated bonds, which generally speaking are German bonds, with those of other European countries with very high ratings. The Minister will know the interest rates are very low at approximately 2.5% whereas the current interest rate on Irish Government bonds is much higher and is unfortunately closer to 6%. This means that one requires a very large capital sum from the pension fund to purchase an annuity at the very low rates available from German bonds.

There has been a series of proposals from a number of different organisations involved in pensions, including the Society of Actuaries, suggesting that the Minister should allow flexibility. There are several different kinds of flexibility involved. The first is not to force the new retiree to purchase the annuity immediately or to purchase all of the annuity immediately, rather to give him or her time and space. The second is to examine, as has been suggested by the Society of Actuaries, the notion of a sovereign Irish Bond which would potentially provide a much higher rate of interest. I do not think the Minister would anticipate, if such a bond was developed, issuing it at current Irish Government market interest rates but it could be at the German rate plus a percentage to reflect the fact that, for reasons of which the Government is aware, a higher risk premium is demanded for Irish debt and the purchase of same.

On the pace of pension reform in Ireland, people are terrified. They were looking forward to a reliable pension of a certain level as they moved into retirement. In many cases half of that expectation is gone and the Government shows absolutely no urgency in addressing the matter. Defined contribution schemes have seen more flexibility. A business owner or director can avail of special pension fund systems like approved retirement schemes. Again, there is quite an amount of flexibility in those schemes.

I urge the Minister to address this pressing issue immediately. In starting to address it, it is critical to provide for flexibility. We know we are in a fairly disastrous period in our economic history but we hope this will not continue forever.

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