Shane Ross (Dublin South, Independent)

Deputy Healy has authorised me formally to move his amendments, as required, if that is in order.

I welcome that the Minister has acknowledged the extent of the management fees. When I raised this issue on Leaders' Questions some weeks ago, the Taoiseach responded very positively and stated the matter would be looked at. It is very welcome that many Members have taken up this issue. However, I am disappointed it has not been taken up in a formal way in the Bill. In other words, no initiative has been taken by the Minister or the Government to force the funds to take this out of the hands of the trustees and instead to take the levy from the administrators and fund managers. If it is left to the administrators and fund managers I do not believe they will take this action, for reasons that are obvious and partly to do with the incestuous nature of the financial world in which we live. Unfortunately, we will find that out when these fees are taken from the pockets of pensioners and the pot - net of fees rather than before fees are charged.

The Minister speaks about the pensions industry and of talking to that industry but I am very suspicious of the people who represent that industry. I doubt they represent the actual contributors to the pension scheme though whether they know that themselves is a different issue. Had the pensions industry been representing the contributors and subscribers to the pension funds its representatives should have come to the Minister and said, "The source of your funds should not be the pot. The source of your funds should be the managers". It is not only the managers - there are very many vested interests with their hand in this particular pot, and not only investment managers, who charge God knows what. I shall return to that presently.

Administrators and custodians charge fees and there are legal and all sorts of hidden charges. If the pensions industry was efficient, transparent and honest it would have agreed that area should be the source of the funds and that we should forget about the people who put in their money every week and every month. That latter area is where the levy will come from and we have seen masses of surveys that show benefits will be down as a result. Deputy McGrath read a statement from IBEC indicating benefits will be down. I am not sure about this because I have not read the statement but it indicates that some pension schemes will even go into deficit as a result of this levy. That would not happen if the Minister went to the managers and the people with their hand in the pot and took the money from them.

The pensions industry is an untapped and untouched gravy train; a sacred cow. There are still areas in the financial services industry which are untouched and lucrative, a mystery to the rest of the world, and the pensions industry is one of those. However, we can be sure of one or two elements. Those who live in the industry live very well out of it. Pension fund managers are a kind of mysterious elite in the financial world. Most of them are answerable to banks; most of the principal managers are owned by banks. Most of them become extraordinarily rich and hand out large fees to the Bank of Ireland, AIB, Irish Life and all the usual suspects. That is where the money should come from but the easy option has been taken and will have a tangible and immediate effect on hundreds of thousands of individual people.

That is why I support Deputy Healy's amendments. He wants to ensure the administrators and trustees are not allowed to pass this levy on to those people who have already been crucified. I do not believe it was mentioned in the part of the debate I listened to that many of the people who contribute to the pension funds have already lost huge amounts of their pensions. Whether in defined benefit or defined contribution, they have already been cut back and will be cut back further by this cheap raid. I understand better than anybody the Government's need to bridge this massive deficit and the desperation with which it faces it. I sympathise with the Government. However, this option is short-sighted and immoral. It is also lazy. It is very easy to look at all these pension pots and say, there is that amount of money, we will get €480 million if we do it that way. No doubt it will.

The figure of 0.6% seems to come up in several contexts at present. Perhaps the Government has an obsession with it. However, there is one problem about going in and taking out 0.6% which is that this figure is close to what appears to be the average management fee. It is very difficult to find out what that fee is; one will not find it out because people charge different amounts to different institutions and pension funds. I did some work on this in recent days, however, and it seems that among the big pension fund managers the average management fee is approximately 0.6%. It is not a precise figure - some charge more, some less, but it is approximate. It is an awfully large average management fee. We are talking about billions of euro being managed. I shall give one example which the Minister might be interested in because the Government virtually owns the bank in question, the Bank of Ireland. It does not own it yet quite, but might own it next week. Bank of Ireland Asset Management, which has been taken over by State Street, got €5.8 million in management fees from a particular pension fund in a single year. The fund in question happens to be the Bank of Ireland's own pension fund. What does the fact that its own pension fund handed €5.8 million to the bank tell one about the incest between the Bank of Ireland and those it is charged with looking after? It is an awful lot of money to be taking from one's own pensioners, subscribers and contributors.

What does it do to get such money? When I had a look at the performance of Bank of Ireland Asset Management in recent years, I found it has been pretty dreadful. Over five years, it lost 2% per annum. Over three years, it lost 4% per annum. It ranked itself 11th, 8th, and 12th in the asset management league in those years. Its consensus fund, which uses a computer that takes an average of other funds rather than the super brains of the fund managers, beat the managed fund every single year. It does not matter if the figures are examined over a ten-year, five-year, three-year or one-year period. I have seen the figures up to the end of last year. The consensus fund, which is a fund without a brain, beat the managed fund, which charges more, every single year. It does not use any expertise, but instead makes its decisions by means of a computer. The bank has charged over €5 million for managing a fund even though it would have been better to have left it to a monkey.

That is the reality of these pension fund managers. These are the guys we are not touching in this Bill. That pattern does not just apply to Bank of Ireland Asset Management - it also applies to AIB and Irish Life. I tend to over-generalise, but I can say it applies to nearly all of the fund managers. The pattern tells us that these guys are raping the pensioners of money. The pensioners are getting absolutely nothing back. In fact, they are getting a negative back. They would do better if they made their own investments by sticking a pin or getting a monkey to throw darts at a target. Why does the Minister not do something about the people who are protected by this Bill? The Taoiseach responded positively on this matter and perhaps the Minister will respond even more positively this afternoon. The Government should make it clear that it intends to forensically demand that the pension levy be paid by the fund managers, the custodians and everyone else who is milking this industry. They are useless. They are parasites. The industry would be better without them.

The Minister spoke eloquently about his intention to talk to representatives of the industry, but I am not quite sure who they represent. My guess is that many of the people in this industry are far too close to the managers and not nearly close enough to those who make monthly or weekly contributions to pension funds. That is where the money is. There is no transparency in this industry. It is almost impossible to find out what these guys' real charges are. They have all sorts of hidden charges, including bid office spreads, which they do not reveal. Such charges cannot be seen in the prospectuses they issue. It is almost impossible to get a total expense ratio, which sets out how much it costs to run these funds. One can be charged management fees, but there will be absolutely nothing about such fees in the tables that are issued. These people are right to disguise the fees so extraordinarily well because they make so much money from them.

Stockbrokers' fees are buried in this as well. Stockbrokers have wonderful cosy arrangements with these guys. Some of the stockbrokers who have been involved in recent years - not so much now - have been owned by the banks that own the same fund managers. Inevitably, all the pension fund dealings go through the stockbrokers who are owned by the parent bank, which also owns the fund managers. Stockbrokers' fees are absolutely exorbitant. I suggest those two pillars of this industry could probably contribute the full amount just as easily, because they are making hay with the pensions of the people of Ireland. They are making fortunes out of them and doing virtually nothing for it. That is why I find it so offensive that this pension levy is being imposed. It is an easy option. There is another option. I was a stockbroker, so I know how this works. I have seen that it works in a most iniquitous fashion in the case of people who do not perform properly and do not deliver the goods. The evidence of the performance of pension funds is clear in every table one examines.

I would like to make a final point. I do not think it is scaremongering to suggest that the psychological effect of this legislation will be that savings are seen as fair game. I know the Minister will assure us that this measure will last for four years and no longer. I accept that is his intention. I was alarmed by his responses to Deputies Pearse Doherty, Michael McGrath and O'Dea. He failed to assure them that this money will be ring-fenced. The distinction between what people put into pension funds and what we traditionally call deposit savings or other savings is a pretty thin one. It comes out of their wages or monthly pay packets and it goes into future savings. I do not really see the difference between future and present savings, except that future savings are not accessible. We have now found that the future savings ordinary people are making are not accessible to them but are accessible to the Government, which is worse. I do not think that principle should be breached. I oppose this section for that reason.

See this speech in context