Dáil debates

Thursday, 28 November 2013

Ceisteanna - Questions - Priority Questions

Pension Provisions

9:50 am

Photo of Richard Boyd BarrettRichard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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3. To ask the Minister for Social Protection the protections provided for in the Pensions (Amendment) Bill 2013 that would ensure that the restructuring of defined pension schemes would place the interests of workers and pensioners first, with particular reference to any instance of continued restructuring and its implications; and if she will make a statement on the matter. [51034/13]

Photo of Richard Boyd BarrettRichard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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As the Minister knows, there is a major crisis affecting defined pension schemes across the country. Some 20% are in trouble.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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I believed this question was in the name of Deputy Pringle.

Photo of Michael KittMichael Kitt (Galway East, Fianna Fail)
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It has been changed.

Photo of Richard Boyd BarrettRichard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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My name is on the Order Paper. It was in the name of Deputy Pringle but it has been changed.

There is a crisis affecting defined benefit pension schemes. We know about the current crisis in the ESB and Dún Laoghaire Harbour Company. We are also familiar with the circumstances of Waterford Glass and of approximately 160 other pension schemes. What will the Minister do about it? Will the pensions Bill sort out this crisis? The Minister made reference to the United Kingdom. In the United Kingdom, pensioners are guaranteed at least 90% of what they should get up to a maximum of £30,000. Will the Minister give the full level of protection to workers who have paid into pension schemes all their lives, or will she do the bare minimum? In particular, can restructuring occur on multiple occasions?

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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Defined benefit pension schemes in Ireland are in general set up under the law of trust. The trustees of such pension schemes have a fiduciary duty to act in the best interest of all scheme members. The Pensions Act provides for a funding standard which applies to funded defined benefit pension schemes. The funding standard requires a defined benefit pension scheme to maintain sufficient resources to meet the liabilities of the scheme in the event of the winding up of a scheme. Where a scheme fails to satisfy the funding standard, the trustees of the scheme are required to submit a funding proposal to the Pensions Board outlining their plan to restore scheme funding. Section 50 of the Pensions Act makes provision for the restructuring of a defined benefit pension scheme where the scheme fails to comply with the funding standard. The Pensions Board can, either unilaterally or on an application from the trustees of the scheme, issue a direction to the trustees of a scheme to restructure scheme benefits. Such a direction by the Pensions Board only facilitates a restructuring of benefits designed to enable the scheme satisfy the funding standard.

The current provision in section 50 of the Act allows the trustees to consider the benefits of active and former scheme member and future post-retirement increases in benefits. The changes I am bringing forward in the Social Welfare and Pensions (No. 2) Bill, which is currently before the Seanad, will extend these options to include a limited portion of pensioner benefits. Trustees will now have the option to consider up to 10% of pensioner benefits where the annual amount of pension is between €12,000 and €60,000 and up to 20% of benefits where the annual amount of benefits is greater than €60,000. Pension benefits up to €12,000 are protected and cannot be included in any consideration of a restructuring of scheme benefits.

All directions issued by the Pensions Board to date have been as a result of an application to the board by the trustees of a scheme.

Additional information not given on the floor of the House

Before the trustees make such an application, they must consult the employer, the scheme member, any person receiving benefits from the scheme and the authorised trade union representing scheme members. The Pensions Board has discretion as to whether to issue a direction following an application by the trustees of a scheme. There are no indications that continued restructuring of scheme benefits gives rise for concern. As I said at the outset, the trustees of a defined benefit pension scheme are required under trust law to act in the best interest of all scheme members. The changes I am proposing to section 50 of the Pensions Act will enhance the ability of the trustees to protect the overall best interest of scheme members.

Photo of Richard Boyd BarrettRichard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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One question Deputy Pringle wanted to ask was whether it will be possible under the Bill for a company to restructure a pension scheme more than once in circumstances where restructuring is allowed? Owing to a restructuring plan implemented by a company, could one lose 10% to 20% of what one expected and then lose the same again, perhaps on multiple occasions, if the under-funding problem persisted? In the framing of the Bill, will the Minister do the absolute minimum required by the European Union or will she do the maximum by really putting the priorities of workers and pensioners first in dealing with under-funded pension schemes? It seems she is acting for the minimum rather than the maximum.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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I am sure the Deputy is familiar with the history of defined benefit pension schemes. The employer is the sponsor of the scheme and makes promises regarding the contributions the employer and the contributions of employees, if any, to the scheme, thus determining the level of benefit that will accrue on the retirement of the employee. The reason so many schemes have difficulty is that the context of the promise, made many decades ago in some cases, failed to take into account the happy increase in life expectancy. In the past, one might have lived after retirement for ten to 20 years but this could now be 30 or 40 years, resulting in a fundamental change in schemes' total exposure to liability. It is important to remember that the trustees, prior to making an application to the Pensions Board, will have to have undertaken a comprehensive review of the scheme with a view to its long-term stability and sustainability. The review must cover a number of matters, including the benefits payable under the scheme, the options available for reductions in benefits and the impacts on the various categories of members and others. As the Deputy knows, there are retired members, active members who are currently paying into a scheme, deferred members and people who have already retired but who have not yet reached pension age.

Photo of Richard Boyd BarrettRichard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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This is a complicated technical matter that is very difficult to deal with.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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I appreciate that.

Photo of Richard Boyd BarrettRichard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Can a company restructure on multiple occasions with the result that a scheme member would lose out not just once, but several times?

The under-funding crisis is another legacy of the banks. One should remember that many of the funds are in trouble because of the banks or investments in banking shares that have now collapsed. Pension scheme members comprise another victim of the banking crisis.

Many problems with pension funds could be sorted out if we diverted some of the €2.5 billion that is currently spent on tax breaks for private pensions, mostly for the genuinely premium gold-plated pensions of the super-rich or wealthiest in the country, to help with crises such as those in Waterford Glass, the ESB and other companies whose pension schemes are in trouble. In this way, we could actually resolve the problem whereby ordinary workers are being shafted. They are victims yet again of the banking crisis.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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With regard to the investment strategies of pension funds, I do not know whether the Deputy has an objection in principle to pension funds. The nature of pension funds is that they collect payments from the employer and employee. Many employers are very good employers. The Deputy seems to believe that all employers are bad but that is not the case.

Photo of Richard Boyd BarrettRichard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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The Minister should forget about the potshots and answer the question.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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Is the Deputy interested in an answer? He just stated the issue is complicated technically but unfortunately that technical complication is included in the answer. I cannot give the Deputy a Ladybird answer on pensions. It is a complex and terribly important issue for hundreds of thousands of people in the country. The Deputy should not treat it as some kind of joke.

Photo of Richard Boyd BarrettRichard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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The Minister is the one treating it as a joke.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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With regard to pensions, the Deputy asked about investments. Owing to the tsunami of problems affecting the financial markets, pension funds in Ireland took a terrible hit.

The Pensions Regulator has reported on how Irish pension funds were often over invested in a particular field of investment, which included the Irish banks.

10:00 am

Photo of Michael KittMichael Kitt (Galway East, Fianna Fail)
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I thank the Minister.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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Let me say as well that, in 2010, the previous Government legislated to provide for bonds via the NTMA structure. That did not happen during its term. I am happy to say it has happened during my term. It is one of the items to which the Deputy referred. The demand has been fairly continuous and significant and, to date we have €1.377 billion for investment in amortising bonds.

Photo of Michael KittMichael Kitt (Galway East, Fianna Fail)
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I thank the Minister.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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In other words, the Government has created a vehicle, which has been utilised and which, I hope, will provide an important investment vehicle for pensioners in Ireland in the future.

Photo of Michael KittMichael Kitt (Galway East, Fianna Fail)
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I must go on to the next question.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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It is an important issue.