Enda Kenny (Mayo, Fine Gael) | Oireachtas source

This is an issue of considerable importance to thousands of workers around the country. Obviously, the Minister for Social Protection is well aware of this. The Government has yet to consider the submissions made arising from the requirement to submit plans and how it is proposed to deal with them.

Strong regulation of defined benefit pension schemes is essential to protect scheme members and the taxpayer. Stronger pension regulations could have prevented the situation in which some workers have lost almost all of their pensions. It is harrowing to speak to somebody who worked all their lives but found their expected pension diminished or gone entirely. Those calling for further regulatory forgiveness should reflect on the consequences of what light-touch regulation has brought about in this case and in the financial sector.

We cannot stand over a situation of allowing employees, by virtue of their employment contracts, to be forced to make contributions into a pension scheme from which they may never get a pension. It is morally wrong to expect workers, by contract, to pay into a pension scheme from which they may never draw a pension. The persistent funding difficulties of many of these defined benefit schemes due to increased life expectancy and the financial downturn is well recognised. Employers, unions and trustees have been making strenuous efforts to protect the viability of their schemes and many measures have been introduced to support them.

The funding standard for defined benefit schemes was suspended in 2008 following the downturn in the financial markets to give trustees and sponsoring employers adequate time to get their schemes in order and to consider a response to improving the funding position. Following the reintroduction of the funding standard in June 2012, pension schemes were required to submit funding proposals to the Pensions Board by 30 June 2013. We have had some initial reflections on the outcome of this. Where funding proposals have not been submitted, the Pensions Board will formally contact the schemes in question to ascertain their particular circumstances. The board will decide what steps to take on a scheme-by-scheme basis, taking into account the individual scheme’s circumstances.

It must be emphasised that trustees are required to meet their legal obligations. Ultimately, the Pensions Board will use its regulatory powers where underfunding is not properly addressed.

A number of things have happened. Significant changes in social welfare and the Pensions Act 2009 allowed for the restructuring of underfunded schemes by removing the priority given to post-retirement schemes for pensioners to ensure a more equitable distribution of assets in the event of a wind-up of a defined benefit scheme. The powers of the Pensions Board were strengthened to ensure pension contributions were remitted by employers to scheme trustees. The pensions insolvency payments scheme was established to reduce the cost of purchasing pensions for trustees where the employer became insolvent. Legislation was introduced in 2010 and 2011 to provide for the option of a sovereign annuity for trustees. Changes to the defined benefit model and the funding standard were introduced last year in the Social Welfare and Pensions Act, including the introduction of a risk reserve. The reintroduction of the funding standard followed the recent announcement by the Minister for Social Protection of a number of regulatory changes to assist defined benefit schemes as they prepared funding proposals. Legislation has since been enacted in the Social Welfare and Pensions Act 2013 to strengthen the powers of the Pensions Board. I expect the Minister for Social Protection to report to the Cabinet on the outcome of the response to the Pensions Board in due course.

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