Dáil debates

Tuesday, 21 February 2017

Priority Questions

Legislative Programme

5:05 pm

Photo of Willie PenroseWillie Penrose (Longford-Westmeath, Labour)
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30. To ask the Minister for Social Protection when the heads of the proposed social welfare and pensions Bill will be published; and if it will include measures to protect defined benefit pension schemes, the pension rights of workers and those already retired. [8531/17]

Photo of Willie PenroseWillie Penrose (Longford-Westmeath, Labour)
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Deputy Brady, Deputy O'Dea and I met representatives of the Irish Congress of Trade Unions, ICTU, and it is concerned that the Government is guided by financial experts who made the rules as to how defined benefit schemes were to operate. Costly legislative changes were introduced to revalue deferred pensions, the cost of which has added to the burden of active members, and the regulator enforced these to the letter. The workers paid their contributions and paid for the regulation system but their pensions were not protected. The workers were not given any say in what was happening to their pension assets, neither were they given any choices as to what might be done when things went wrong. This has all contributed to the effective demise of defined benefit, DB, schemes. We must now tackle this and the lacuna in the law with comprehensive and appropriate legislation.

Photo of Leo VaradkarLeo Varadkar (Dublin West, Fine Gael)
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As the Deputy will be aware, the usual practice is that a social welfare Bill is brought before the Oireachtas each year, in spring or early summer, to provide a legal basis within the social welfare code for policy, administrative and operational changes that may be required.

My Department is developing the heads of a Bill which will address legislative needs in a number of operational areas within the Department. When this work is completed, I will seek the approval of Government to publish the general scheme of the Bill and to proceed to drafting the legislation with the Office of the Parliamentary Counsel. At this stage, I envisage that the general scheme of the Bill will be published and sent for pre-legislative scrutiny to the Joint Committee on Social Protection some time in April.

While I cannot comment at this stage if the Bill will contain measures to change the law governing defined benefit schemes, I will in the near future bring forward some of my own proposals, carefully thought out and fully analysed, to help alleviate some of the difficulties currently being experienced by defined benefit schemes and their members.

This year, I have confirmed an intention to develop, publish and commence the implementation of an action plan for the reform of pensions. Over the coming months, I intend to set out a roadmap which will include the rationalisation and reform of the pension landscape, the transposition of the EU directive IORP 2, institutions for occupational retirement provision, and the design of a universal retirement savings platform for all working people.

I hope this clarifies the matter for the Deputy.

Photo of Willie PenroseWillie Penrose (Longford-Westmeath, Labour)
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I have no doubt the Minister is trying to reform the system and he is committed to that but time is of the essence. The current minimum standard overstates schemes' liabilities and acts as an incentive for employers to welsh on their responsibilities. That is basically it. It is clear that fund liabilities are calculated on the basis of annuity prices, as we stated in the House on the previous occasion. Is the Minister aware that the UK pensions regulator has stated that calculating DB pension deficits on a buy-out basis is misleading, reflecting exceptionally low bond yields and the cost of capital buffers and a profit margin for insurance companies? The same is happening in New Brunswick in Canada, which we read in an ICTU document. It is clear that it is not in the interests of members of DB schemes to force them into a dysfunctional annuity market which will not provide a stable pension. Does the Minister agree that as long as his Department clings to the bond and annuity-based liability calculations, most DB schemes will be subject to damage and volatility and will continue to be driven towards unnecessary wind-up? That is what is happening.

How integrated pension schemes interact with the State pension age is another major issue. Integrated schemes are where pensioners receive benefits from both the scheme and the State at age 65 and, as it goes on for a number of years, pensioners can lose out on anything up to three years, depending on whether the State pension age is increased up to the age of 67 or 68. That is a major issue and I ask the Minister to take account of it.

ICTU has sought a stakeholder forum involving all the relevant bodies, including the Minister, to whom I understand it has made that point. That might be a way to make an adequate and appropriate contribution in this respect and he may well find that it will be very useful in what he is trying to achieve. I applaud the Minister for what he is doing.

Photo of Leo VaradkarLeo Varadkar (Dublin West, Fine Gael)
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I am very much open to the idea of a stakeholder forum involving employers, unions and perhaps people who represent pensioners. I would propose to start it off with the new Labour Employer Economic Forum, LEEF, which was recently established.

I will bring proposals to LEEF in the spring. However, I would not be averse to a different form of stakeholder forum, perhaps similar to that which the Deputy proposes. The bridging issue is a real problem. I know some of the better-funded pension funds are making up the difference themselves for the year or two during which the person is aged between 65 and 66 but this is not happening in all cases. We therefore need to find a solution in that space. I accept that this is an issue and will get worse.

Regarding the minimum funding standard, the difficulty I have - this is just the reality I face - is that while many people express the opinion that in Ireland it is too onerous, nobody has been able to prove this. The advice I get from the Pensions Authority and the OECD is that, if anything, our minimum funding standard is too lax compared with those of other countries and I cannot just ignore this advice. It would just not be the right thing to do for people in the medium to long term to relax a standard that the independent experts and advisers say is, if anything, too lax.

5:15 pm

Photo of Willie PenroseWillie Penrose (Longford-Westmeath, Labour)
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This does not make sense. I know what the Minister is saying. I think he is being wrongly advised by his own Department. Let us cut to the chase. I know the Minister is aware of this matter because he is very bright. I do not say that in a patronising way. His Department is stuck in a time warp. There is a pensions regulator who just collects levies. What did he do to protect the schemes? He should be dragged in here and made accountable for his actions. I am not on the social welfare committee but I know my colleagues will shortly drag him in and see what is going on. What did he do to protect the pension rights of these people? We had a very positive meeting with the Irish Congress of Trade Unions. I might as well be honest with the Minister: we might not be able to wait for the Bill to come through but what worries me is that employers are beginning to welsh all over the place or are contemplating welshing without any need to do so. It is time we got to the bottom of this. I know the Minister is going about it, I accept his bona fides and I thank him for his offer of a stakeholder forum. It would be very important for ICTU, the pensions actuaries, the pensions representatives and everyone else to engage with the Department of Social Protection but I think that Department is stuck in a time warp. I think it gave the same advice to the Minister's predecessor and probably her predecessor, and it is time the Minister went outside this whole thing. Why is England, New Brunswick in Canada and everywhere else different from Ireland? What the heck is wrong with us?

Photo of Leo VaradkarLeo Varadkar (Dublin West, Fine Gael)
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The difficulty I have is that it is not just my own Department.

Photo of Willie PenroseWillie Penrose (Longford-Westmeath, Labour)
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I appreciate that.

Photo of Leo VaradkarLeo Varadkar (Dublin West, Fine Gael)
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I am not afraid as a Minister to take a decision that my officials do not recommend. I have done so on many occasions in the past few years. The OECD, the European Insurance and Occupational Pensions Authority and our own Pensions Authority all say much the same thing, that is, that our minimum funding standard is not too onerous and I cannot ignore that advice. It is the advice I am being given by all the independent authorities that consider these issues. I appreciate that unions may take a different view. Some employers take a different view and the pensions industry may take a different view. However, they all represent particular interests. The regulatory bodies and independent bodies do not take the view that our minimum funding standard is too onerous. They take the view that, if anything, our minimum funding standard is not onerous enough. If I change the standard now, it might be of benefit to people who are due to retire in the next few years, but I would be causing harm to people in their 30s, 40s and 50s who are paying into schemes and who may find that all the money is gone by the time they get to retire.

Photo of Pat GallagherPat Gallagher (Donegal, Fianna Fail)
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We move on to Question No. 31. Tá Deputy Donnchadh Ó Laoghaire as láthair.

Photo of John BradyJohn Brady (Wicklow, Sinn Fein)
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Deputy Ó Laoghaire asked me to take the question. Is that possible?

Photo of Pat GallagherPat Gallagher (Donegal, Fianna Fail)
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A Deputy can ask another Deputy to take his or her question but he or she must first get approval from the Ceann Comhairle. I have no note of approval from the Ceann Comhairle in respect of Question No. 31. I am sorry about that.

Photo of John BradyJohn Brady (Wicklow, Sinn Fein)
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That is no problem.