Richard Bruton (Dublin North Central, Fine Gael)
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Question 24: To ask the Minister for Finance his Department's view regarding the defined benefit pension schemes in public bodies and the accounting standards applied in pensions funding. [25173/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
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The pensions policy in the non-commercial bodies is that recommended by the pensions commission and accepted by the Government, that is, the defined benefit model is generally used. However, there may be circumstances where, if staff are engaged on private sector pay terms and conditions, a defined contribution arrangement is appropriate.

In regard to commercial State bodies, pension schemes are generally funded and, to date, the great majority of commercial State bodies have opted for defined benefit schemes. The schemes are a matter in the first instance for the boards concerned and the relevant legislation usually provides that they are subject to the agreement of the responsible Minister and the concurrence of the Minister for Finance.

In putting forward particular schemes, the boards of commercial State bodies must take account of a wide variety of issues and must ensure that the pension arrangements safeguard the long-term viability of the scheme and are consistent with the financial position of the body concerned. Thus, it is for the bodies themselves in the first instance to determine the nature of their pension scheme in terms of whether it be a defined benefit or a defined contribution scheme. Thereafter, the relevant Department and then the Department of Finance will consider each scheme on its merits.

As regards the accounting standards applied in pensions funding, this is primarily a matter for the board and auditors of each body, having regard to accounting standards in place.

Richard Bruton (Dublin North Central, Fine Gael)
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I thank the Minister for his reply. I am sure he has seen reports in the media of the experience of the board of one State company which was considering moving from a defined benefit to a defined contribution scheme. On approaching the Department of Finance to discuss the matter, the board was told that if the idea of moving to defined contributions were to surface ahead of the national pay talks, unions would use the talks process to put that possibility beyond bounds, at least for the public sector. It seems the Department of Finance is adopting a remarkably strange position in this matter.

Will the Minister clarify whether it is the view of his Department that public bodies should migrate towards defined contribution schemes, or is it his view that defined benefits should continue to be the norm? Will he comment also on the remarks reportedly attributed to the Taoiseach expressing concern at the private sector move towards defined contributions? If accurate, these reports suggest that the Taoiseach and the Minister's Department are not on the same page in their approach to pensions. What is his view on future policy in regard to these two competing schemes?

Brian Cowen (Laois-Offaly, Fianna Fail)
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My reply clearly states that pensions are, in the first instance, primarily a matter for the relevant board. Commercial State bodies have their own autonomy and it is for them to work out with their stakeholders how they wish to proceed on such matters. They seek my approval in regard to their pension scheme only after they have reached agreement on it at that level.

The principle that guides this issue in regard to commercial State bodies is that it is a matter for the board concerned in the first instance, with the relevant legislation generally requiring the subsequent agreement of the responsible Minister and the concurrence of the Minister for Finance. In dealing with such proposals the bodies have regard to all relevant considerations, including discussions with employees and legal, contractual and procedural matters. It is not a matter that I pre-empt.

Richard Bruton (Dublin North Central, Fine Gael)
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I accept it is not a matter the Minister should pre-empt. As he indicated in his reply, however, the attitude of the Department of Finance to public pay and condition norms in State bodies has always been central to the way in which they developed. Is the Minister saying the reports are incorrect that an approach was made to his Department and that the latter was at best two-faced in suggesting it would not confront this issue in case those representing workers might hear of it and raise it in the partnership process? Does the Minister deny this occurred?

Will the Minister give his view on the future direction of pension schemes? There is widespread discontent that there is a migration away from defined benefit schemes, most recently in the case of one of the banks. Is it Government policy that this is something that ought to be resisted or is it the case, as the newspaper reports suggest, that the Minister is saying one thing under his breath while being of the opposite view that it should be encouraged, even among the boards of State bodies?

Brian Cowen (Laois-Offaly, Fianna Fail)
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I am not saying anything under my breath. I have said that the primary responsibility for these matters rests with the individual boards. The question of the sustainability of a pension scheme and the issues that arise in this regard will vary from board to board and body to body. The defined benefit scheme has generally been the norm in the non-commercial sector.

Difficulties may arise in regard to the adequacy of pension provisions into the future and, in such circumstances, there is often the necessity that a contribution be made by the company and its employees. In the case of the initial public offering, IPO, for Aer Lingus, there must be a preparedness on our part to contribute to resolving a particular structural problem that has emerged. In regard to specific commercial bodies in general, which have a commercialisation agenda and have been given the autonomy to run their businesses commercially, if issues arise that must be addressed in the pensions area, as in any other area of their activity, they must work out a solution to that problem themselves.

Richard Bruton (Dublin North Central, Fine Gael)
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In the context of the migration away from defined benefit pensions, I notice the Irish Congress of Trade Unions has suggested that part of the problem is the demanding accounting standards that pertain. It has put forward a proposal for a scheme under which the State would act to some extent as a holding company for the purchase of the annuities. Is this something the Minister has examined and is he well disposed towards the concept?

Brian Cowen (Laois-Offaly, Fianna Fail)
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The general pensions policy has been discussed in some detail in the context of social partnership. The agreement we have obtained includes a commitment to the production of a Green Paper on this issue in the next 12 months. The Minister for Social and Family Affairs has begun the process of consultation in this regard and I will also be centrally involved in terms of any issues that may arise for the taxpayer.

My initial position is that these are matters above and beyond those relating to State pension provisions, which are the responsibility of the State. The question of supplementary pension provision is one that must be addressed primarily by those who are the beneficiaries, including the companies and employees concerned. In regard to individual State bodies, it is a matter for the boards of those bodies in the first instance. In the case of any State body with a deficit on its scheme, it is a matter for that body to address the problem in a sustainable manner that does not compromise the commercial viability of the company. In regard to accounting issues, commercial bodies are expected to observe appropriate accounting standards and there is a general awareness of that requirement.