Joan Burton (Dublin West, Labour) | Oireachtas source

I thank all of the Deputies who contributed to what has been an extremely informed debate. I appreciate the fact that people have welcomed the Bill, because a huge amount of work has gone into it and some difficult decisions have had to be made to find the best balance to protect the various interested parties in regard to pensions. Striking that balance is difficult. Some people have suggested the balance should be as high as €24,000 while others have suggested a figure as low as €6,000. I have aimed to get a balance of fairness.

The contributions of Deputies from all sides reflect the view that a decent income in retirement is a mark of a civilised, modern society. All of the parties which have been in government in recent decades have accepted as a working premise that the retirement pension should be adequate. In the context of the financial tsunami which hit the country, the bank guarantee, the property crash and so on, it is important to recognise we have been able to protect the weekly rate of the old age pension, both contributory and non-contributory, so that retired people have the security of a fixed income.

Pensions, however, must be funded. Some Deputies, including Deputy Dooley, commented on the The Irish Times poll on what people think taxpayers' money is spent on. The poll indicated that some people think we spend more on child benefit payments abroad and on jobseeker's payment to people in Ireland and elsewhere than on any other area. The child benefit payments for children abroad are now down to approximately €13 million a year, whereas payments to pensioners in 2012 was €6.279 billion. Despite all the restrictions on spending, every year for the past three years my budget has provided approximately €200 million extra for the pensioners coming into retirement pension payments and to cover pension payments for pensioners who are living longer. Therein lies a large part of the crisis in regard to defined benefit schemes.

We often forget that many employers are good employers. Some of these good employers made promises decades ago about levels of pensions to be paid but, as the OECD pointed out, many Irish funds were invested where the level of risk was very high. Individuals also invested in these pension funds. Unfortunately, much of that risk crystallised in investments in bank shares and so on, which once seemed the practical, profitable and patriotic way to invest, and these investments turned out to be a disaster for the funds and for those individuals who had also invested their private pension fund in bank shares.

In response to Deputy O'Dea, in the period 1997 to 2011, the number of defined benefit schemes declined from 2,242 to just over 1,000. The close down of these schemes happened largely on the watch of the previous Government, for the reasons I have outlined. The issues date back over the past decade and were raised by the previous Government in both the 2007 Green Paper on pensions and the 2010 national pensions framework, which set out what the retirement age in Ireland would be for retirement pension purposes. This was agreed by the previous Government and included in the troika programme.

This Bill, for the first time, addresses the issues relating to the priority order. It has taken time to bring this about, but it is important to try to balance these difficult changes, which affect people's rights and entitlements to pension. We want to get the balance right between existing pensioners, the active members currently contributing and the deferred members who have paid in but who, because they have not yet reached retirement age, are some distance from claiming from the scheme.

Deputy O'Dea and others mentioned the pension levy. The levy introduced on the defined contribution schemes, of 0.6%, related to the jobs programme.

At the outset the Minister for Finance undertook to terminate this in 2014, and he gave this undertaking again in this year's budget debate.

The Minister also announced a separate levy of 0.15% which would apply to all pension fund assets. He indicated that this would continue to fund the jobs initiative, including the continuation of the reduced 9% VAT rate in the hospitality sector, which is very popular on all sides of the House, and would make provision for potential State liabilities which may emerge from existing or future pension fund difficulties. The 0.6% levy ends this year, as was promised, and another levy will begin this year. This will continue to fund the lower 9%VAT rate for the hospitality sector and liabilities that may arise in the context of future pension schemes, including existing cases to which many speakers referred, particularly the Waterford Crystal case.

With regard to the exemption from the funding standard, I remind Deputy O'Dea that in 2008 almost 200 schemes were exempt from the funding standard. This doubled the number of schemes exempted in the previous regulations. No additional schemes have been added to this in the period since. The OECD report that I commissioned and published in April described the Irish funding standard as undemanding, and this is an important point. It is not of a high enough standard to absolutely secure the future of everybody's pension to the level they would like. However, we are in a recovery position from very difficult situation. I acknowledge that I have acted with a degree of caution in reintroducing the funding standard and trying to get the balance right in this legislation.

A number of Deputies spoke about retrospective legislation. The advice received is that the proposed legislation will apply to any scheme that enters wind-up after the legislation has been enacted and will not apply retrospectively. A number of Deputies asked whether schemes restructuring at present could take advantage of the legislation. I assume that if it is to their advantage they may well do so. In other words, they will await the enactment of the legislation to proceed, and this is perfectly possible if they are in restructuring discussions at present. This is how I understand it.

Deputy Joan Collins and others asked about the right to audience. Significant efforts were made, particularly by the departmental staff dealing with pensions, to identify an approach that strikes a reasonable balance between the interests of pensioners, active members and deferred members across a broad range of scheme portfolios and structures. To ensure the broadest range of views and expertise was considered, the consultation process during the review of these provisions included a stakeholder consultation forum in late 2012 for those representing older people, pensioners, the pensions industry, employers and trade unions. The older representatives who attended included representatives of the Senior Citizens' Parliament, Age Action and the National Federation of Pensioners' Associations. Written submissions were also sought from the groups and informed the review process where they were received. In addition, the provisions brought forward in the Bill regarding the restructuring of scheme benefits provide for engagement with pensioners and other beneficiaries.

On Committee Stage I will be happy to return to this point if committee members have proposals that might facilitate stakeholders and increase and improve levels of communication. I do not know about other people, but I find legislation dealing with pensions to be technically very complex, demanding and difficult. It is important that we examine how to improve communications to make it more understood. At the end of the day we can have promises on pensions but unless they are properly funded and those funds are invested appropriately people will live with a risk about which they have not been told. Unfortunately, from 2008 on these risks crystallised.

With regard to the Waterford Crystal workers mentioned by a number of speakers, I noted all the points made on the Waterford scheme and I am very conscious of the issues involved. The Deputies will appreciate that as the specific case remains before the courts it is not appropriate for me to comment on any aspect of, or possible issues arising from, the case at this time. I emphasise this point to Deputy Shortall. Everybody has enormous sympathy with the workers at Waterford Crystal because of what happened there. This goes without saying. It is before the courts and the applicants have the right to present their case as they see fit before the courts. I emphasise this. There is close concern about the issues as they affect Waterford Crystal workers.

Deputy Shortall also complained that the Bill had been presented within a short period of time. It has been technically very difficult to complete the Bill and fine-tune the balance of constitutional and property rights involved. It has imposed huge demands on the resources of the Office of the Attorney General. If there were an extended presentation it would postpone enactment until sometime in 2014. Deputies, including Deputy Shortall, asked for a Bill to address the issue of the priority order. I felt on balance we should deal with it now. We brought it through the Seanad where we had a very detailed debate, as we have had here. It is better on balance, in terms of the interests of the various parties to pension schemes, including pensioners, current members and deferred members, to enact this legislation before the end of 2013. This is my decision, and if people want to be critical about it I understand their point of view. I would not like to delay until well into 2014, which is what would have happened if we had had a very protracted publication period before the Bill came to be discussed in the Houses. People who spoke in the House, particularly the Opposition spokespersons, have engaged very deeply with the legislation and are quite informed about it. The committee hearings will give us an opportunity to discuss the legislation in much greater detail.

The aim of the Bill is to ensure a fairer deal for workers and sufficient protection for pensioners while allowing employers to tackle their pension problems. Representatives of employers, employees and the pension industry have been encouraging action in this area for some time. I am heartened to see a broad welcome for the measures contained in the Bill. I am aware that a number of people want to see an employer obligation. I am prepared to discuss this in some detail on Committee Stage because on balance the advice was not to do this. I do not believe we have the time to go into it in detail now, but I will come back to it on Committee Stage.

A good degree of priority is being maintained for older people and pensioners in the scheme.

It is also fair that some measure of protection be afforded to all members - both currently active and deferred members - of defined benefit pension schemes. In a way, what we are doing here contemplates the concept of intergenerational risk sharing. The level of €12,000 is appropriate, particularly when one takes account of the fact that significant numbers of people also have contributory State pensions.

A number of Deputies referred to the ESB, and I wish to comment from my Department's perspective on the company's scheme. The ESB's defined benefit scheme has always been a funded defined benefit scheme. It is therefore subject to the provisions of the Pensions Act and has complied with those provisions relating to the funding standard. The defined benefit scheme is closed to new entrants and a defined contribution scheme for new entrants has been in operation since 2010. The ESB has stated that the scheme is currently viable on an ongoing basis and can meet its expected cashflows. The ESB and the trustees of the scheme agreed a funding plan with the Pensions Board in 2012. This was following a lengthy period of discussion and negotiation involving the trustees, the management of the ESB and the members of the scheme. The agreement in question will lead to the scheme being restored to solvency by 2018. There are approximately 5,600 active members, more than 1,000 deferred members and more than 7,000 pensioners involved.

As public servants, many ESB workers have class D PRSI contributions. Permanent and pensionable employees in the public service other than those who were recruited after 6 April 1995 are liable to pay PRSI contributions at a lower, modified rate. Subject to having the required number of PRSI contributions, employees who pay modified contributions have access to widow's or widower's contributory pension, a guardian's payment and carer's benefit. They do not have access to the contributory State pension. This matter was referenced in a number of recent media discussions. However, the employer and employees have benefited for many years from the lower class D rate of PRSI rather than being obliged to pay - as almost everyone else does - class A contributions. Their occupational pension is not an integrated pension but, importantly, their final defined benefit pension is, as a result, much higher than pensions in the private sector. I understand that their average pension is approximately €25,000. This reflects the fact that many of those who were taken on pre-1995 did not pay class A contributions but rather paid the lower class D contribution and qualified for more limited benefits as a result. My understanding is that this was very much the result of the desire of the workers involved and the ESB to have the scheme dealt with in this way. There has been some confusion in respect of this matter and I am anxious to clarify the position for the Members who referred to it.

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