Róisín Shortall (Dublin North West, Independent) | Oireachtas source

The Hogan judgment, which was delivered on 25 April last, has major implications for the operation of defined benefit pension schemes. It is a matter of extreme regret that this Bill does not address the precarious position that so many Irish people find themselves in as a result of being in defined benefit pension schemes, with little or no protection. Legislation was promised to provide such protection as is required but, unfortunately, for some reason that legislation is not contained in this Bill. That is a missed opportunity. Not only does it continue the insecurity for defined benefit pensioners but it also exposes the State to potential significant claims as a result of the failure of successive Governments, including this Government, to provide that necessary legislation.

Members of defined benefit schemes currently have no protection whatsoever in legislation and, as a result, they are dependent entirely on the continuing support of their employers to deliver on the pension commitments made in the past but there is no legal obligation on employers to honour those commitments that have been given.

I very much welcome the ruling of the European Court of Justice, ECJ. It is a very good ruling for the Waterford Crystal pensioners in particular and it is promising for members of defined benefit, DB, schemes generally as it will provide a greater level of clarity for people in those schemes in the event of a company going into liquidation where the pension scheme is also insolvent. It is the first time I can remember during the current economic crisis when a European institution has found in favour of the people, and in that regard it is to be welcomed. Since the ECJ delivered its judgment in favour of the Waterford Crystal workers there has been little or no constructive engagement by the Government with those workers. In light of that fact the legal team acting for the workers is now in the process of preparing to return to the High Court to see this case out. It is important to point out that the Waterford Crystal workers got positive rulings on all the significant points of law before the ECJ. There is a good deal of optimism among the workers, their legal advisers and their pension advisers regarding the likely outcome of the case when it returns to the High Court, but it is very important that the Government would now decide to address this matter. We know that after the ECJ ruling on the precedent case, the Robins case, the United Kingdom moved swiftly to introduce legislation to provide the kind of protection required and has provided protection to the level of 90% of people's pension entitlements. That addressed the issues that had been raised by the ECJ.

It is incumbent on the Government now to move to deal with this matter. We expected some provision would be made in this Bill to address the precarious position DB pensioners are in but for some reason Government spokespersons, including the Minister for Social Protection, seem to be using this judgment as an excuse for not legislating when the onus is on Government to do the reverse. Given the positive findings of the ECJ on the Waterford Crystal workers case there is an urgent need now for Government to move to legislate to provide the necessary protection, which the UK Government has already done and on which the ECJ has found the Government to be remiss in its responsibility to members of DB schemes.

I do not know the strategy the Government is pursuing. The sensible thing to do would be to take account of the fact that all of the ruling has been positive to date, take account of what happened in the Robins case and move to engage at a senior level with representatives of the Waterford Crystal workers to reach an arrangement with those workers to assist them in ensuring that they have an entitlement to a significant percentage of their original pension promises.

If, as is expected by most people, the case is won in the High Court the likelihood is that there will be a very significant capital compensation payment demanded of the Government that will result in a very significant expenditure exposure by the Government, estimated to be in the region of €250 million to €300 million. That is likely to be an up-front payment with other associated costs and for that reason the most sensible thing for the Government to do would be to engage with workers to see if a plan can be put in place to meet the likely liabilities in terms of the pensions of the former Waterford Crystal workers. The actuarial advisers to those workers have calculated that the immediate exposure, if such an arrangement was to be reached on the basis of staged payments over the lifetime of those workers, would be in the region of €2.5 million rising to a maximum of approximately €18 million in about 2030. From everybody's point of view - the taxpayer and the Waterford Crystal workers - that would be the most satisfactory outcome if agreement could be reached to secure the pension provisions of the Waterford Crystal workers over their lifetime and also, in the process, reduce the liability of the State and provide the necessary security.

If an up-front compensation payment is demanded of the State by the High Court we are then talking about having to buy annuities to secure the future pensions of the Waterford Crystal workers. That would work out far more expensive and, in addition, there would be legal fees associated with further hearings in the High Court. For all those reasons the sensible thing for the Government to do would be to engage with the Waterford Crystal workers and reach an agreement on the way their pension provision can be secured into the future while at the same time limiting the financial exposure of the taxpayer. I again urge the Minister to take action in that regard and engage at this point before the matter returns to the court.

Leaving aside the particular case of the Waterford Crystal workers, there is a need to act now to ensure that security is provided for members of DB schemes generally.

Companies that are solvent should be prevented from walking away from their pension scheme responsibilities where there is a question of insolvency in the scheme itself because as things stand a company can do that. There is an urgent need to introduce an insurance scheme to provide a safety net for those workers who find themselves in a double insolvency, as happened in Waterford Crystal. It is a matter of serious regret that action has not been taken to date.

Overall, it is disappointing that no action has been taken on a thorough review of pension provision in the State generally. More than €2 billion goes to tax relief on pension schemes, the vast majority of members of which are higher earners who have benefited from the unfairly generous pension tax relief scheme that has operated in the country in recent years. That must be brought to an end. The Government signalled last year that it would do that in this year's budget and there is no reason why a limit could not have been put on the total tax relief any one person could claim in last year's budget. The Government moved against everyone else: public sector workers, child benefit recipients and other people are on low and middle incomes. The better off, however, always get away with it for as long as possible. There was no excuse for the Government not acting in the budget last year.

I would like to hear an assurance when the Minister is concluding the debate that promised reforms and the cap that was talked about last year will now be applied to pension tax reliefs for the current year, where relief will not be given to anyone that would allow a pension in excess of €60,000 per annum.

Finally, I raise with the Minister again the issue that I have raised on several occasions, the opportunity for the State to make savings of €21 million by ending the welfare subsidy that currently goes to insurance companies because of the failure of the Government and the Minister's Department to introduce a system where it is possible to claim back welfare payments paid out to a person who has had an accident and who made a successful insurance claim. It makes no sense that no arrangement is in place to recoup those social welfare payments. This represents a welfare subsidy to the insurance industry at the cost of the taxpayer. It is an opportunity for the Minister to make savings of €21 million that would not impact on social welfare recipients.

The processing times for social welfare claims leave a lot to be desired. It is intolerable that people are waiting for up to 60 weeks for an invalidity pension claim to be processed. People are in horrendous circumstances while waiting between 30 and 60 weeks for claims to be dealt with by the Department. That would not be tolerated in any other walk of life and I urge the Minister to take the necessary action and transfer staff from other areas to bring those claim times down to an acceptable level.

It is a disappointment that the Government has not acted to put in place a fairer regime where we no longer spend €2 billion on pension tax relief for the better off. We currently have a situation where people on low incomes who cannot afford a pension subsidise the pensions of the better off. That is intolerable and must be brought to an end. People who are paying into defined benefit schemes must be given the security they require.

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