Clare Daly (Dublin Fingal, Independent) | Oireachtas source

When this Bill was made available to us last week and we were asked to facilitate it passing all Stages prior to the recess in order to protect workers' defined benefit pension schemes, I thought I was on another planet and that this was something on which we could wholeheartedly and enthusiastically support the Government. Then, of course, I woke up and all of the good and welcome provisions in the Bill were gone. What is happening gives incredible clout to the belief that the big employers and others nobbled the Minister and, perhaps, the committee. Despite what people have said to assure me otherwise, it has not left a good taste. More importantly, it has left vulnerable workers in defined benefit pension schemes continuing to face a nightmare.

There is no doubt that when one talks about pensions, people's eyes tend to glaze over and they sort of lose the will to live. The pensions industry thrives on that because no matter how boring pensions are, the fees paid to the pensions industry continue unabated. We hear sporadically about the pensions time bomb that is going to explode due to the fact that 70% of retirees will depend on social welfare. In other words, they will get just over €200 per week in non-contributory pension payments. Undoubtedly, there is a need for an urgent discussion on pensions and on the need to supplement the poverty-level amounts with which people will end up in their retirement years. This Bill does not refer to that. It concentrates on just one aspect of pension provision, namely, occupational defined benefit pension schemes in the private and semi-State sectors. That is simply not good enough.

Let us consider the history of pensions. There was a time when an unco-ordinated occupational defined benefit scheme was regarded as the Rolls-Royce. The worker contributed a modest percentage of his or her wages and the employer made up the difference to ensure that the employee, whom it was assumed would give 40 years of loyal service, got up to two thirds of his or her final salary when he or she retired. The worker could rely on the State pension as well. That Rolls-Royce has been replaced by a banger that would not even pass the national car test, NCT. It has been stood on its head completely. The clawback or undermining began with the introduction of co-ordination or integration of defined benefit alterations. In short, one's benefits were reduced by the full value of the State contributory pension. That significantly and disproportionately affected lower paid workers as against those on higher salaries. It accelerated the decline and the Bill does not address that. An increasing number of defined benefit schemes are being wound up, are having their benefits drastically reduced or are closed to new entrants. The acceleration of this process has been phenomenal. It is incredible how much the landscape has changed. At the end of 2008 there were 1,271 defined benefit schemes, but this year there are 628. Over 150,000 people have gone from those schemes in ten years. It is absolutely incredible, and it is more probable than possible that many more will join them.

We must consider why this is happening. The official line from the pensions industry is that it is due to historically low German bond yields, low interest rates, the high cost of annuities and so forth. Annuities are defined as the amount of pension the retiree receives regularly throughout their retirement. I will give an example of how costly annuities have become. Less than 20 years ago, it would have cost approximately €130,000 to buy a pension of €200 per week. Today, it costs €270,000, which is a massive increase of 108%. However, the people selling the annuities get 2% commission. Even in the case of a small pension of €200 per week the pension provider picks up a fee of €5,400 for a few hours work. It is absolutely scandalous and unregulated. Low bond yields, low interest rates, the higher expense of purchase of pensions and the fact that people are living longer are undoubtedly contributing factors.

The elephant in the room which we never officially discuss and which is causing the death - not just the terminal illness - of defined benefit pension schemes is the funding standard. The funding standard for defined benefit schemes is quite simply mad. The Pensions Authority works on the ridiculous principle that all of the schemes must have the money to pay out all pensions to active, deferred and existing pensioners today. That is the standard. Has anybody ever heard anything so ridiculous? Let us apply it to the housing market and to a couple in my constituency who wish to buy a nice house in Swords. It will cost them €280,000. If they go to the EBS for a mortgage, it will inform them that it will consider their application but that it must apply the Pensions Authority rules. Before the EBS will provide the mortgage, the couple will have to prove, beyond all doubt, that they can meet their monthly mortgage repayments for ever and, more importantly, they must also have the €280,000 stashed away already before the application can be approved. How in God's name could that be reasonable? This is what is causing the death of many of these pensions schemes.

To add salt to the wound, there are 100 defined benefit schemes that do not play by that rule and that do not have the funding standard hanging over them to collapse them. What schemes are these? Interestingly, one of them is the Pensions Board staff superannuation scheme 1993. Another is the Labour Court (members) superannuation scheme 1971 to 1998. There is also the National Standards Authority of Ireland superannuation scheme 1996. There are 100 schemes of similar bodies on the list. It is a case of do as I say, not as I do. It is criminal. This is the reason used for closing down many schemes and there is nothing in the Bill to address it. Some 164 of the remaining defined benefit schemes are insolvent based on the stupid, ridiculous rules in place. The rules are being used to wind up schemes and erode the retirement conditions of workers.

I do not have time to go into detail about the appalling robbery that was unleashed on the Central Remedial Clinic, CRC, pension scheme, which was arbitrarily abandoned overnight by the employer, the CRC. I have spoken many times in the House about the carnage in Aer Lingus and the Dublin Airport Authority after the wind-up of the Irish airlines superannuation scheme, IASS, and the attacks on existing pensioners, deferred pensioners and members at that time. Despite the assertions of the actuary that the scheme is on track, I have proof that it continues to be insolvent and will remain so. In fact, the pension scheme people are paying into now will be effectively worthless.

If that is not bad enough, we now hear through the grapevine that CIE wants to get in on the act. It has jumped on this funding-standard-and-pensions-in-trouble bandwagon and now wishes to restructure its defined benefit scheme. Among other things that will include, of course, closing off the scheme to new entrants. To make matters worse, management in CIE is threatening to cut workers' trade unions out of the negotiating process. Not only was there the affront to retired members from Aer Lingus and the Dublin Airport Authority in the past few years when they were excluded from a process that decided their livelihoods in their retirement, now existing workers in CIE are being told that their unions cannot represent them. What has happened in Irish Life was the proof beyond all doubt, if that was required. That staff scheme was shut down despite the fact that it was perfectly healthy, even with mad regulation.

What we should be discussing here is properly regulating defined benefit pension schemes. The industry and many employers are trying to eliminate them and replace them with defined contribution schemes, which put all of the risk on the hard pressed workers. It is unacceptable. I am sorry that the Tánaiste is not present because last November, on Leaders' Questions, I called for an investigation of this pensions debacle. Since then, 38 other regulated defined benefit schemes have closed down, causing huge uncertainty to workers in their retirement year.

In the time remaining, I wish to call on the Minister to do the following in no particular order, namely: reinstate heads 11, 12 and 13, as originally set out; introduce a statutory order precluding any further winding up or restructuring of regulated defined benefit schemes until the full legislation has been enacted; and establish a commission on adequate pension provision to investigate and make recommendations on securing fair, affordable and reasonable retirement benefits for workers, including more than 1 million employees who do not have a pension scheme and rely on the welfare system.

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