Clare Daly (Dublin North, Socialist Party) | Oireachtas source

It is important to put the amendments in the context of the backdrop to the legislation and the stated objectives of the Minister, and whether they have been addressed. We are dealing with a scenario in which some defined benefit schemes have run into difficulties. As it is constituted now, many active members and some deferred members are left with a very serious hit, whereas up to now those who were already on a pension had a certain amount of protection. This Bill proposes to alter that priority arrangement. We have to be very careful because, while there is obviously a serious issue that needs to be addressed for the active and deferred members of schemes, examination of the impact on pensioners needs to be carefully factored in.

The Bill deals with double insolvency scenarios, in which both the company and the pension scheme are in financial difficulties, and guarantees certain benefits in that scenario. The Bill does not sufficiently address scenarios in which the company is financially secure but the pension scheme is potentially in difficulty. The issue of employer responsibility is the key part of this legislation which needs to be tackled. On Committee Stage the Minister was sympathetic to these points, but she has not accepted any changes to the legislation which are necessary to address this. We must stress the reasons these amendments must be taken on board.

I am very conscious of the situation where companies, like Aer Lingus, have cash reserves of almost €1 billion yet refuse to invest adequately in a pension scheme which, based on the way it is actuarially calculated now, has been depleted a little because of some of the antics of that company. It is not good enough that a company like that can walk away and leave either pensioners who are currently drawing their pensions, active members or the State picking up the tab. There is a statutory basis to what we are saying, but this Bill leaves it too open. Up to now, employers have been using a certain loophole in this regard. They have looked at standards like FRS17 and so on, but that the issue has been adjudicated by the Pensions Board and it was decided that the accounting of the scheme as a defined contribution scheme does not negate any of the statutory obligations on the employer.

The Minister is aware there was an important case in the commercial court last year with Aer Lingus. The ruling in that case was that pensions were a contingent liability and that these issues - the debt - existed. What we are trying to do is have this recognised in law as it is in Britain. It is somewhat ironic that in America even people like George Bush implemented legislation which put the pension obligations of employers in law. That is what we need to do here. On Committee Stage, the Minister said the reason she could not do this was because it might result in some of these schemes shutting down.

We must be clear about this issue. As things stand now, defined benefit schemes are not open for business and no new ones are being created. In fact, in many of the companies where they exist, they have been shut to new applicants. The Irish airlines superannuation scheme, IASS, which has almost 15,000 members between the various categories, has been closed to new applicants as a defined benefit scheme since 2008 and 2009, because Aer Lingus has set up an Aer Lingus Ireland pension scheme and the Dublin Airport Authority has set up a Dublin Airport Services Limited scheme. Both of these schemes operate as defined contribution schemes. Therefore, the doomsday scenario the Minister warned might happen is here already. The defined benefit schemes are shut for business.

A good argument could be made that if the Minister imposes strict guidelines and legal requirements on employers that do not allow them walk away, but compels them to face up to their responsibilities for the schemes, this would act as a deterrent to them shutting defined benefit schemes. Currently, they can close them and do not have a liability. What we seek to do is to ensure that if they try to close them at a time when the company is in good financial health, they should be penalised or compelled to foot the bill for that. This is necessary, because if we do not factor this into the legislation, de factowe are saying that existing pensioners must pay to solve the problem. This is not good enough, particularly when the majority of pensioners across the State, including those who have contributed over a lifetime of working, have a very modest pension in their retirement years.

It is not true to say that pensioners have not contributed. Let us take as an example a scenario like that of the airport schemes, in the context where this legislation was passed and the 10% cut was to be implemented. Some 95% of the pensioners in that scheme, which would have been considered okay, would come into the lower category and would be open to the 10% cut proposed by the Minister. This would take €8 million per annum from the pockets of those pensioners. This is not good enough, particularly when dealing with companies that have a fine balance sheet. We must take into account the fact that pensioners have funded their schemes over a lifetime of work. They have already seen reductions in pensions due to stamp duty, the pension levy of 2.55%, with another one scheduled for 2015. Many of these pensioners have seen no post-retirement increase in their pension since April 2007. This means that in terms of purchasing power, they have been falling behind.

The Minister made the point on Committee Stage that people are living longer and that this is the reason for the problems. I do not see that as the reason. It may be a small element of the problem, but to be honest the problem is due more to the policies pursued by these companies. They should have recognised this. Some of the big schemes facilitated the problem by using reserves built up in the pension schemes. They diverted the funds belonging to the pensioners who worked a lifetime to pay for them to incentivise early retirement or voluntary severance programmes, thereby causing a problem in the schemes.

In many instances these employers gave workers no choice. Joining these pension schemes was a condition of employment. If the company has taken steps to break that contract, it is liable. If we do not accept that, we are saying that pensioners or deferred or active members are responsible. That is not good enough. Over a lifetime of work, workers have paid an average employer-employee contribution of over 10% or 15% of their income. That is more than enough, or would have been, to fund an adequate pension on retirement.

For all of these reasons, employer responsibility must be factored into this Bill. The amendments we proposed is one way of doing that. In some of the discussions ongoing in regard to defined benefit schemes, compensation funds are being considered by employers and some moneys are being invested in these. We saw this in the case of the ESB and similarly in the IASS. However, these contributions are not legislated for in the Bill. They need to be legislated for to provide security and to ensure the onus is put on the employer in this regard.

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