Seán Kyne (Galway West, Fine Gael) | Oireachtas source

I am responding on behalf of the Minister, Deputy Doherty. She understands the intention behind the Bill is to alleviate the issues that are continuing in defined benefit schemes. She and the Government share Deputy Penrose's concern on this area. There is a danger of unintended consequences in any legislation. It is essential that any proposed changes be carefully drafted and analysed in order that a fair, balanced and proportionate approach can be achieved especially when considering imposing a statutory duty on sponsoring employers of DB schemes.

I would like to reiterate some of the points made earlier by the Minister. While the Bill may be well intentioned, it lacks proportionality as it seeks to place a full obligation on the employe for any funding deficit in a scheme. As the Minister stated, DB pension schemes in this country are voluntary tripartite arrangements between employees, employers and trustees. It is important to take account of the individual circumstances of DB pension schemes and the implications arising for sponsoring employers of such schemes. This Bill does not recognise the position of employers who have, over many years, provided significant supports to their pension schemes and fails to take account of the circumstances of the individual sponsoring employer and the negative consequences that may arise for that employer, its employees, contractors and creditors, from placing a full obligation to fund the scheme deficit.

The purpose of the Bill is to address situations where a DB pension scheme is being wound up, as set out in the proposed provisions. However, as the Minister outlined, the text of the provisions are so narrow in focus that they cannot be considered to fulfil this purpose and will not ensure ongoing, adequate funding and support is provided to schemes by sponsoring employers.

The Bill will only address circumstances where a scheme is in deficit and it will have no effect in cases where a scheme satisfies the funding standards and fails to provide any additional protection to scheme members of such DB pension schemes. The provisions of this Bill specifically link the wind-up of a scheme to the manner in which sponsoring employers represent the scheme on their balance sheet as per relevant accounting standards. A change in the accounting treatment of a scheme does not mean that the scheme would cease to operate with the resources distributed to its members.

Regardless of how DB schemes are represented on the sponsoring employers' balance sheets, under pensions legislation, such schemes are DB schemes and, as such, are required to meet the minimum funding standard requirements. Where a DB scheme fails to satisfy the relevant funding standards, action is required by the trustees of the scheme to restore the scheme's funding position such as agreeing and submitting a funding proposal under section 49 of the Pensions Act. This Bill places a full obligation for a scheme deficit on the sponsoring employer and it completely bypasses these existing mechanisms and processes in the Pensions Act.

Unlike this Bill, the Social Welfare, Pensions and Civil Registration Bill 2017 includes provisions that will ensure ongoing support by employers and early dialogue between them and trustees to resolve a funding deficit and also includes provisions to oblige employers who intend to cease making contributions to their scheme to provide a minimum 12-month notification period. Other provisions will enable the Pensions Authority, where a scheme is in deficit, to make a funding obligation direction specifying payments to be made by a sponsoring employer to the pension scheme where no agreement was reached, within a specified time period, to resolve that funding deficit.

These amendments, which will be brought forward at Committee Stage, will act to support existing provisions in the Pensions Act and will encourage employers to ensure that schemes are well funded and managed. I assure the Deputies that the Government is very conscious of the issues raised in this Bill and DB pension schemes generally. I hope that Deputies now have a clearer understanding why the Bill is being opposed.

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