Thomas Pringle (Donegal South West, Independent) | Oireachtas source

I welcome this opportunity to contribute to today's debate on the Social Welfare and Pensions (No. 2) Bill 2013. The Minister's contribution today focuses entirely on the defined benefit schemes in operation in the State and deals with the single insolvency and double insolvency situations that may arise in the future and the restructuring that may take place within schemes. It is amazing to think that the private pension industry is subsidised so much by the State, which forfeits €2.6 billion per year of taxes on pension contributions. The industry is like a betting shop, where one gives one's money and hopes it will deliver the best outcome. The exorbitant fees that fund managers have charged on private pensions have been outlined many times in the House. The performance of many Irish pension schemes has been dismal, to say the least, over the years.

Over the last number of years we have seen a number of very high-profile defined benefit cases. ESB workers have served strike notice on their management because of the way it unilaterally changed the terms of their pension scheme. Changes took place within the Aer Lingus and DAA pensions which are having a major impact on deferred pensioners. The Waterford Crystal workers had to go to the European courts to have their rights vindicated, and that case is still before the courts. The High Court will adjudicate on the level of compensation they will receive regarding their pensions.

It is hard to escape the fact that in this legislation we are laying down a marker to say we believe 50% is the acceptable figure in a double insolvency situation. That is sending a none-too-subtle signal to the courts as to where the line should be drawn in double insolvencies. The courts will probably take that on board when making their judgement on the Waterford Crystal workers, and that is a retrograde step. It is a historic case and we cannot deal with it in this legislation. It should have been left for the courts to come to an adjudication on that. The European Court of Justice has indicated that the Waterford Crystal workers must receive somewhere between the 49% guaranteed in European legislation and 90% of their contributions.

In all defined benefit schemes the workers, by taking up employment, have had no choice but to contribute. They did that in the expectation that they would have a certain amount of benefit on retirement. The workers have always contributed to and played their part in pension schemes, but the companies have made unilateral decisions and cut contributions, with a direct impact on the workers. While it may be acceptable to see some buy-in for pensioners in the future with the possible cuts to pensioners included in the Bill, it is a breach of trust and of contract when the companies or their pension scheme trustees unilaterally decide to change the terms and conditions of the schemes. That is a poor situation for workers to be placed in.

The Bill seems to let companies off the hook. Particularly in cases of restructuring, it does not seem to force companies to contribute some of their profits to the pension schemes and funding the deficits. While in most cases companies do end up contributing, the onus should initially be on the company to make up the deficit. The company has benefited over the years from the work of the workers who have contributed to the scheme, and the pensioners who are benefiting from the scheme have contributed in the past to the success of the company. Companies such as the ESB, with annual profits in the region of €600 million, should be asked and made to contribute more to the restructuring and solvency of their schemes. Company profitability should benefit the workforce as well as allowing the company to reinvest. That is missing from this legislation. In the hierarchy of dealing with restructuring and insolvencies, the company should be placed at the top and should be the first port of call for the trustees.

In response to parliamentary questions the Minister has outlined that the trustees of the companies will be obliged under this legislation to consult widely with regard to restructuring that might have to take place or changes in the winding up of schemes. They must consult with the employers, members, retirees and the unions that represent the members of the schemes. What about the deferred pensioners? They will be left out in the cold. I do not see how they are being accommodated in this legislation. A mechanism to allow deferred members to feed into the process should be included in the legislation.

In the Aer Lingus pension scheme restructuring, Aer Lingus has offered existing members, of whom there are approximately 2,500, a contribution of €110 million towards the scheme, while for deferred members, of whom there are more than 3,800, they are contributing only €30 million. That is a very unfair system because deferred members have also contributed considerably to the success of the company. Many of those deferred members are of an age at which they will not be able to accrue extra benefits that might offset some of the shortfall in their pensions. The legislation should at least give deferred members some input into the plans of the trustees and the scheme.

The type of consultation that takes place is also very important.

It appears that much of the consultation is in the form of telling people what will happen, how it will happen and when it will happen, rather than meaningful consultation where people are brought around the table to ensure everybody will be satisfied with the outcome of the agreement.

I would like to focus now on the restructuring arrangements contained in the legislation. Section 11 of the Bill deals with this and amends section 50 of the 1990 Act. It outlines the priorities for what options are available to trustees or the Pensions Board, in terms of a scheme that is being restructured. This will apply in situations where a company's scheme is solvent, but needs to be restructured to enable it meet future liabilities. It provides for options where contributions can be increased or the retirement age can be extended for members of the scheme and for reductions in benefits. It outlines the provision for benefits up to €12,000 to be fully protected, for a reduction of up to 20% between €12,000 and €60,000.

I have a concern in this regard that needs to be examined. I imagine this legislation is intended to work for many years into the future and that it is not something we intend to revisit again and again. However, if, for example, a scheme that is solvent now is restructured and current members and pensioners see a reduction in their benefits from the scheme, what will happen if in five years time or so the Pensions Board or the trustees decide there is another large deficit and go for another restructuring? Pensioners could then see another reduction in their benefits and an increase in their contributions or retirement age. The situation could deteriorate to the extent that in 15 years time when the scheme is wound up, workers who have been contributing all along to it, and pensioners who have been benefiting from it, will have seen numerous reductions and then be faced with the same again on the wind up of the scheme. This is very unfair and difficult for members of schemes. It is not something we should have to envisage.

The Minister said in response to a parliamentary question last week that there are no indications that continued restructuring of scheme benefits gives rise for concern. However, we do not have a crystal ball and cannot look ten or 15 years into the future to see whether this will happen. We cannot turn around and say it will never happen. This is something that should be examined in the context of this legislation. Where a scheme has been restructured on a number of occasions or restructured once and then wound up, the level of benefits should be frozen at the point the restructuring took place. I urge the Minister to consider this.

While this legislation was broadly welcomed when published, the general response is that we must wait to see how it will work in practice. This is not a great way to introduce legislation - waiting to see how it will work in practice and not knowing the intended result at the start.

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