Willie Penrose (Longford-Westmeath, Labour) | Oireachtas source

Yes. It goes without saying that a significant and worrying crisis has developed over the past few years pertaining to defined benefits pensions, and the Minister mentioned this. As I said, if things keep going as they appear to be going, it is a trajectory that will ultimately lead to a meltdown. They will all be wiped. Hardly any of them are left in any event. They are being wiped out by the day. Deputy O'Dea spoke about the minimum funding standard. The standard, as designed, clearly overstates the scheme's liabilities and facilitates some employers taking advantage to welch on defined benefits. They had this beautiful way of doing it. I recall attending an ICTU conference and Fergus Whelan and those guys had this down to a tee.

There was a comprehensive analysis of the problem. How can we prevent the demise of the defined benefit provision? It was a compelling analysis of where the blame lies for a situation which will mean that hundreds of thousands of people at work today in our country are likely to be significantly worse off in retirement than they anticipate, having done the right thing all their lives by putting aside significant amounts of their hard-earned income into pension funds. Our defined benefit pension deficits are calculated on a buy out basis, which means that a scheme is deemed to be in deficit unless it has enough assets at any one point in time to purchase annuities for each of the beneficiaries. I do not know where this was made up, but it is leprechaun economics. The current minimum funding standard overstates liabilities. If we look at the UK, they do not apply anything like the minimum funding standard that we apply. They think that we are crazy over here. The regulator there regards the projections as misleading as they are based on deficits calculated on a buy out basis, reflecting exceptionally low bond yields, a cost to capital buffers and a profit margin for insurance companies built in.

Many schemes are unwell. Many employers are very responsible and make contributions under the section 50 schemes. Workers and unions work together. As long as the regulator insists on valuing liabilities on the basis of German bond rates and annuity buy outs matters will only get worse for what is left. Nobody in the UK is forced to buy annuities. The only people who are actually forced to buy into Ireland's dysfunctional annuities market are the defined benefit schemes in wind up. The people with defined contributions do not have to purchase them. We have to end this. We should call in all the pension regulators and tell them that it is time to stop. The good work of trustees, the unions and employers mean that we can salvage something. They have salvaged the section 50 agreements already. There are many good employers out there and we cannot tar them all with the same brush. However, that will all be rendered useless unless we stop this. That is why this legislation is important.

I regret that we are not passing this legislation in full before the summer, because I am worried that in the eight, nine or ten weeks that we are off unscrupulous employers will run to the headland and say goodbye and leave the unfortunate workers, or their partners or wives, in the lurch waiting for pensions. It is desperately important that we get our act together here. There is no excuse. They need not be crying wolf. Some 90% of these defined benefit schemes are now closed to new members. We are trying to protect those people who have already paid in. Everyone believed that the defined benefit schemes were the best place to invest their funds, and if there was any risk the scheme, or the responsible employer, was to carry them. What has transpired is that, just like the defined contribution schemes, it is the worker that carries the burden of risk. We also have the issue of the defined benefit schemes being tied up with the State pension schemes.

Let us be clear. The Government made the rules as to how those defined benefit schemes were to operate. The Government introduced the legislative measures, for example revaluing the deferred pensions, the cost of which is added to the burden of active members. The workers make their contributions and pay for the regulatory system, but their pensions were not protected. Who is at fault? The workers pay for everything, including the regulatory system, and the regulator's function appears to be just to adhere to the minimum funding standard, even though it might not be in the best interests of the members of the defined benefit scheme. The FRS17 came in in 2002, and there is now the IAS19 of 2011. The assumed liabilities scheme appears on a company's balance sheet. My Bill was going to deal with that nicely. Neither myself, Deputy Brady or Deputy O'Dea are experts in the area, but we are circling the wagons so that there will be no more escapes. I proposed crystallising events to meet this. When we introduced that Bill on behalf of the Labour Party last spring opportunistic companies were availing of the situation. To repair their balance sheet resulted in dividends being payable to the shareholders, and the only losers would be the workers. The company suffered no pain. Events which have transpired on the defined benefit pension scheme over the last six month have lead me to question why the regulator insists on valuing liabilities on German bond rates and annuity buy outs. Currently even the defined contribution members would have nothing to do with an annuity. The UK Government changed its rules last year concerning personal annuities. In any event, the question of whether there is a functioning annuities market in Ireland today arises. ICTU stated that annuity prices in Ireland are a mathematical exercise in a non-existent, dysfunctional market. Annuities are not affordable or good value for money, so why should defined benefit scheme members still be compelled to buy overpriced annuities? That has to be reviewed. It has to stop, and if legislation is required to enable this to happen then legislation amendments should be brought forward.

I have to mention the equality provision in this Bill. My colleague, Senator Ivana Bacik, brought forward a Pensions (Equal Pension Treatment in Occupational Benefits Scheme) (Amendment) Bill 2016. That was intended to deal with what is now in place under head 14 of this Social Welfare Bill. Senator Bacik brought that Bill forward last March as a result of the David Parris situation. When this scheme was introduced she was very grateful to the then Minister - now Taoiseach Varadkar - for adopting the words of our Bill and placing them into the social welfare heads. It is important to ensure equality for the small group of LGBT couples who have been denied equal treatment and pension rights. Recently in the English courts this particular provision was applied. Whatever little worries people may have had, we are under the same common law and so we can utilise the precedent. It is a legacy issue left over after the marriage equality referendum was passed. There are a small number of cases, as Deputy O'Dea referred to - I would support other cases if they are out there - where retired employees who were not legally permitted to marry persons of the same sex before a certain date were denied certain pension benefits. The Parris v. TCD case, which went to Europe, included an argument that the TCD pension scheme was discriminatory because a TCD employee's partner would only be entitled to a survivor's pension if the employee had married or entered into a civil partnership before reaching the age of 60. This is a very important but significant step towards rectifying continued discrimination against a small number of individuals who faced the same difficulty as David Parris under the pension schemes despite the passage of the equality referendum. I believe that Senator Bacik was in contact with the Minister and received confirmation from him. She was very grateful that the Committee Stage was included.

I read the heads of the Bill and had a discussion with the Minister, and was fortified in my view. The heads of the Bill had some very interesting, forward thinking material, but it is disappointing that they did not reach the Bill. There are sections in the Bill relating to actuarial calculations which are welcome, but they are very confined and it is important that we widen those. Section 13, which gives pension authorities the power to determine a scheduled contribution for defined benefit schemes where they are in deficit and the employer is not engaged with trustees, is particularly engaging and exercises me most, because in my view it was the most important amendment.

It enabled the Pensions Authority to determine a schedule of contributions that would restore the defined benefit pension schemes which do not satisfy the minimum funding standard or funding standard reserve to an adequate funding position in circumstances where the employer has not engaged with the trustees to develop and agree a funding proposal. This scheduled contribution was enforceable as a debt by the trustees before the civil courts. It would have meant that an employer could not walk away from a defined benefit scheme that did not meet the statutory minimum funding standards. Without this amendment, the current statutory minimum funding standard means little when a scheme goes belly up. The consequences of this for members of a defined benefit pension scheme have been and will continue to be catastrophic. I am heartened to see that will be one of the most important amendments the Minister will bring forward, together with heads 11 and 12, requiring employers to give minimum notice of 12 months to members of defined benefits schemes, trustees and the Pensions Authority for ceasing contributions to defined benefit schemes whether that scheme was in deficit or not. I know there can be a shorter time period, if it is agreed, but that would have prevented employers from making arbitrary and unilateral decisions to close defined benefit schemes without any notification to the members of the scheme. That is extremely important.

The proposed amendment also provides that where a scheme is already under a funding proposal the employer must continue to contribute during the contribution period at the rate agreed under the funding proposal. That provides members of the scheme with some security heading into the wind up. That is extremely important. I look forward to those amendments. I congratulate the Minister and have no doubt that she will work hard. Like Deputy O'Dea, I would like to receive the amendments during the summer because it would be helpful to review them then.

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