Joan Burton (Dublin West, Labour) | Oireachtas source

I do not propose to accept the amendments in the names of Deputies Willie O’Dea, Róisín Shortall, Joan Collins, Aengus Ó Snodaigh, Thomas P. Broughan and Clare Daly. They broadly entail placing a debt or obligation on employers to secure or guarantee a level of scheme funding, changing the manner in which the assets of the pension scheme are distributed in the event of the wind-up of a pension scheme and provision of an appeals mechanism for scheme members where trustees have decided upon reduced benefits for members. Defined benefit pension schemes in Ireland are set up and maintained by employers on a voluntary basis. There has never been a statutory obligation on employers under Irish law to contribute to their pension scheme. Rather, when a defined benefit scheme is set up, the level of employer and employee contributions is agreed and established in contract in each scheme’s trust deeds and rules. The trust deeds and rules differ from scheme to scheme, as I am sure Deputy Mathews is well aware. As with any contractual situation, they reflect the parameters on the level of obligation of the parties involved. This is an issue which has been considered on several occasions over the past decade.

The funding standard expert group of the Pensions Authority recommended against the introduction of a debt on employers in 2004 and 2005. They saw it as introducing a retrospective cost on employers and feared that it would undermine the voluntary basis on which defined benefit schemes were set up. The Green Paper on pensions, which was published in 2007 by the previous Government, considered "debt on employer" and referred to the recommendations of the Pensions Authority in 2004 and 2005. Following the public consultation process on the Green Paper, the national pensions framework was published by the previous Government in 2010 and did not include any provision for a debt on the employer. While the Organisation for Economic Co-operation and Development, OECD, review of the Irish pensions system, which was published last year, considered the issue of the debt on the employer, its findings are not prescriptive. In tabling its views the OECD advised:

In considering these alternatives, it should be kept in mind that each of the national schemes and reforms discussed was adopted in a specific national economic, social and political setting. There is no blueprint for reform which Ireland could take off-the-shelf and implement directly. Any solution has to fit the Irish situation.

A debt on an employer would require employers to account for any deficit in the pension scheme in its annual accounts following changes to accounting requirements as set out in financial reporting standard, FRS, 17. Notwithstanding the outcome of previous considerations of this issue, very serious consideration was given in developing the measures contained in the Social Welfare and Pensions (No. 2) Act 2013 to imposing a statutory obligation on employers to secure scheme level funding. I recall having very detailed discussions on this with quite a few people present in the House here today.

Internationally, the structures needed to administer such arrangements are complex and costly. It has resulted in increased and detailed State involvement in sponsoring employers’ business decisions. Given the very small proportion of defined benefit schemes in Ireland, linked to employers who have a credit rating or other reliably accurate and consistent measure of solvency, it is not the case that a workable "anti-avoidance framework" to "selectively apply" a debt on an employer is easily achievable.

I suggested previously that many schemes are making great efforts to ensure their ongoing viability. Many have been very successful in doing that. Employers and members have often made significant financial contributions over and above those required by their particular trust rules. This process is generally managed through dialogue between trustees, employers and members where efforts are made to reach agreement regarding the steps that have to be taken to secure scheme viability, which may include a mixture of measures such as those outlined in several contributions today.

I do not propose to accept the amendments put forward but in response to the points raised by Deputy Ryan and just as we were finishing on the previous day by Deputy Clare Daly, I want to draw attention to the powers of the Pensions Authority in respect of the matters they raised.

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