Timmy Dooley (Clare, Fianna Fail) | Oireachtas source

The Minister will appreciate from what he has heard on Committee Stage and, so far, Report Stage that there is a general view that the main provisions of the Bill as they relate to the establishment of Shannon Airport as an independent entity and the bringing together of the parts of what was SFADCO are accepted and appropriate. That initiative is receiving almost unanimous support in the House. The issue with which we all seem to have a problem on the Opposition benches, and I suspect among some on the backbenches, is the way the Minister is introducing legislation to deal with the funds of a private pension scheme.

It is the first time the Government has sought to legislate to deal with a private pension fund. I appeal on Report Stage, as I have done on Committee Stage, that section 34 be removed, which would take away the difficulties we have talked about and allow it to be addressed in a more comprehensive manner at an appropriate time when agreement is reached between all parties in the pension debacle. With the protracted nature of the discussions on the difficulties in respect of pensions, I find it difficult to understand why it is imperative to put in place at this stage a legislative framework that seeks to second guess the outcome of discussions. The issue has been going on for a long time and I think a little longer could be taken to await an appropriate outcome before dealing with legislative issues that arise.

Up to the Social Welfare Act 2009, deferred members had the same protection as pensioners in payment, meaning that they could not have their entitlements varied by a section 50 order. That was reasonable when schemes were all in surplus. The then Minister changed the rule in May 2009 and removed all protection for deferred members. This was legitimately done with a view to active and deferred members sharing the load where deficits were required to be shared between a large group of members. What was not foreseen was that the IASS employers would use the complete absence of any protection for deferred members as a weapon whereby they have all but excluded the deferred members from the funds to be provided to solve this crisis. Putting all the funds outside the IASS was the mechanism by which they could achieve this. We believe it was assumed by the employers that deferred members would not become a political force and that the deal would be done by the time they realised what was happening.

The expert panel has exacerbated the situation and now, in the case of Aer Lingus, 2, 570 active members are sharing €147 million while 3,687 deferred members are sharing €34 million. This is the reality despite the spin that the companies are putting on the narrative. It appears, from the DAA and Aer Lingus proposals for deferred members, that using a "set of principles" agreed with the expert panel, much of the additional funds will be paid to deferred members who have lower service as their deferred pensions will fall below €12,000 and the set of principles favours these members. The result is that longer serving members are still losing up to 50% to 60% of their expected pension. By any calculation, that is an enormous burden for any pensioner to have to carry.

They are losing the unco-ordinated provision, which represents approximately one third of the expected benefit for members on an average IASS pension of €30,000 to €40,000. They are also losing revaluation, which accumulates to 25% per ten years of deferment, and a further 20% of the resultant figure. The DAA and Aer Lingus proposals for deferred members, based on the expert panel principles, will only contribute a lump sum to the direct contribution fund, which has the potential to make up 10% of the 20% cut proposed by the IASS trustees. There is no compensation for the loss of revaluation and unco-ordination. When the Minister and others say that it is a 20% cut, this should be corrected as untrue. I ask him to do so when he addresses this.

Loss of unco-ordination is a huge issue for deferred members. I have spoken to many of them. Under the rules of the IASS, members who left service as deferred members were unco-ordinated, which meant that they did not suffer a deduction from their IASS pension for the State pension. This is a rule that the trustees or employers could have changed at any time but chose not to for their own reasons. Both Aer Lingus and the DAA used this rule to entice staff to take voluntary redundancy through the 2000s in particular. We are all aware of the various proposals and plans put in place to make Aer Lingus a viable entity towards partial privatisation. People accepted pay restraint during that period and others left the company under various plans, believing there was no future for them in the company. They accepted the proposals in the real expectation that they would have a reasonable pension on reaching retirement age. Sadly, that is now gone, a situation enshrined in the legislation we are enacting.

Staff taking voluntary redundancy created huge savings for both companies. Members made life-changing decisions based on this rule and now find themselves in a position that their IASS pensions will be reduced at aged 65 years, even though some of the younger deferred members will not receive the State pension until 66, 67 or 68 years.

The Social Welfare Act 2013 removed full protection from pensioners in payment and decreed that their pensions could be cut by 10% over €12,000 and 20% over €60,000. In the case of IASS pensioners, this forced cut equates to them refunding approximately €110 million back into the IASS at a time when the employers have put not one cent into the scheme. I do not intend to revisit the ground covered by Deputy Clare Daly. The deferred members group lobbied hard to have the Social Welfare Act 2013 include some protection for deferred members and suggested the cuts applied to pensioners should also apply to deferred members but, unfortunately, they were unsuccessful, notwithstanding the protestation of the Tánaiste and Minister for Social Protection about her desire to rule with the head and the heart rather than with one separated from the other. With her increased powers, she will have the opportunity of the next social welfare Bill to address the expectation that rested in the minds of the deferred pensioners.

The only alternative is to force the employers and the trustees to treat deferred members proportionately. In the case of Aer Lingus, when active members were getting €80 million and deferred members €30 million in the initial proposals of December 2012, Aer Lingus contended that the difference was cost stabilisation but it was never forced to prove this point. Estimates at the time were that active members were getting €27 million in cost stabilisation.

The Labour Court recommendations of 13 January and 13 May reduced cost stabilisation by approximately €8 million to approximately €19 million and increased the funds for active members from €80 million to €110 million. These changes blew out of the water the argument that cost stabilisation represented the difference in funds between active members and deferred members but Aer Lingus continues with the same narrative. As the employers had stated at the outset of negotiations that they recognised that the trustees must act in the best interest and have regard to all categories, the deferred members group fully believed this discrepancy would be rectified either by the employers allocating more funds to deferred members, as was their due, or the trustees reallocating benefits within the IASS to ensure proportionate benefit with active members. The employers did nothing and neither did the trustees.

I support the call of Deputy Clare Daly for an investigation into the way the fund was managed. Over the past year, we have seen a level of growth in pension funds, particularly Irish managed funds, that is in line with significant increases in commercial property prices in this city, where a considerable amount of the funds were linked. Deputy Clare Daly outlined the sell-off of valuable properties as part of the necessity or desire to turn them into cash at a time when they are growing rapidly. That warrants further investigation but I do not know whether it falls within the remit of the Minister. I assume it does not but it certainly falls within the remit of the Government to address this. Many members are deeply confused about the way in which their pension pot has been managed in recent times. It does not appear that advice is being given independently. There is a perception that there is a connection between advisers and people involved in other activities in respect of the disposal of assets. I do not want to name any particular companies but, going back to the banking crisis, one can see a similarity in auditors, accountants and consultants. They are all part of the same large group, or a small cohort, of advisers. The age-old indication that a Chinese wall has been built between various sections lends a perception in the minds of the people greatly affected by these decisions that the Chinese wall is anything but and that there is a significant breach in the perimeter.

For that reason, it is appropriate for the Minister to pass some comment on this debacle.

I seek the advice of the Chair on amendment No. 17.

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