Clare Daly (Dublin Fingal, Independent)
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I welcome the opportunity to discuss this important issue. The Minister will agree that what we are dealing with is an injustice - where a defined benefit pension scheme is wound up and, as a result of the manner in which our pension and taxation laws are levied, its existing pensioners are given no option but to purchase an expensive annuity that does not do them or their families any good and just makes the insurance companies a great deal of money. The purpose of this debate is to examine the source of the problem and determine what we can do to rectify it.

The situation was aptly summed up by the situation of the supplementary Aer Lingus pension scheme that the House discussed previously. The trustees wrote to existing pensioners and made the point that, in order to protect those people's funds, the trustees would approach insurance companies in the market and get an annuity. No other option would be entertained, just an annuity. In one instance that brings the point home, a woman was told that the cost of that annuity for one person would be €300,000. That money was being taken from the wound-up scheme to buy her annuity.

We inquired of an Irish insurance company this morning and received a quote for a joint life annuity that allowed for annual inflation of 1.4%. The quote was €5,000 per year. If this person lived for 40 years and got €5,000 per year, which would not happen in a pension scenario, the insurance company would benefit to the tune of €100,000 for nothing. On top of that, the company would get €6,000, or 2% of the purchase annuity price, in fees. If a recipient died, his or her spouse would get nothing, which is unlike the case with an approved retirement fund, ARF, but that option is not available to the people in question. It would have allowed them to get a greater yield in their retirement years and their families, spouses or children to benefit from some of that income later on.

A product that is bad value for money is being imposed on members of pension schemes under the excuse that this is just the way the legislation is. This legislation might not be within the remit of just the Minister's Department, but also the Department of Finance. Frankly, though, I do not care. It is every Deputy's responsibility to address the situation immediately.

I put it to the Minister that, interestingly, the then Minister for Finance altered the rules in 2011 to allow pre-retirement bonds to invest in ARFs because of the outrageous cost of annuities at the time. However, he did not extend that option to defined benefit schemes. Last year, the rules were again altered to allow defined benefit scheme members access to ARFs. Guess what? This could only be done in cases where the members were classified as directors of a company. Rich people can benefit from this arrangement but the pensioners who pay into a defined benefit scheme for all of their working lives cannot. They are frogmarched into an annuity where the pension industry takes the excess cash and charges a large price for the privilege. Only really wealthy people would benefit.

I appeal to the Minister. We need to address the weaknesses in the legislation urgently because this issue is affecting people's livelihoods in their retirement years.

Regina Doherty (Meath East, Fine Gael)
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I will ask the Deputy to humour me because I must read this bit out before I can get to the part for which she is waiting. I thank her for raising this matter. I know why she has done so. Scheme trustees have duties and responsibilities under trust law, other relevant legislation and the Pensions Act 1990, as amended. The duties of a pension scheme trustee include administering a scheme in trust in accordance with the law and the terms of the trust deed and rules.

Consequently, any decision made by corporate or individual trustees of an occupational pension scheme are governed by the relevant legislation and rules set out in the trust deed and the rules of the particular scheme. Scheme trustees must always act in the best interests of scheme members.

Usually the options available to members for taking benefits will be set out in the trust rules. In some cases, the benefit structure may be inflexible, leaving the member little or no choice as to the form his or her benefits will take. This is something I recently brought to the attention of Deputy Daly and she kindly helped me with it, although we could not provide any help.

Where a member of the pension scheme reaches retirement age, a pension is immediately payable. Part of the pension may be taken in cash, and once the entire pension is not taken up by this, the trustees then have a liability to pay a pension income to the member. The trustees then either pay a pension income regularly out of the fund or they buy an annuity to secure the future liability to pay a pension. On wind-up, where the pension is being paid out of the fund, the trustees normally purchase annuities for the existing pensioners.

Section 48 of the Pensions Act sets out the priorities on winding up a scheme. It sets out the order in which the liabilities must be discharged and how they may be discharged for members. When a scheme winds up, section 48(3)(b) provides that the trustees may, notwithstanding anything contained in the rules of the scheme and without the consent of the member concerned, discharge the liability for benefits payable by any member by one of the following: transferring the benefits of each member into a new pension scheme; purchasing an approved assurance policy with a company or insurance agency that sells life insurance; or transferring the benefits into another arrangement for the provision of retirement benefits such as, for example, a PRSA or a buyout bond.

It must be noted that this discretionary provision and the trustees are not compelled to discharge the liability in this way. The wind-up options in section 48(3)(b) are contingent on the requirement that the scheme’s policies or contracts are approved by the Revenue Commissioners under the Taxes Consolidation Act 1997, as amended. The Act sets out the circumstances in which retirement benefit schemes are approved by the Revenue Commissioners for tax purposes. In other words, transfers from the scheme being wound up must be made into schemes or products approved by the Revenue Commissioners and which, therefore, comply with Revenue rules.

Section 772 of the Taxes Consolidation Act allows for flexible options on retirement, that is, the approved retirement fund, ARF, option. The purchase of an ARF is not available to members of defined benefit schemes, subject to certain exceptions. Legislation and policy on taxes and access to ARFs are a matter for the Department of Finance, as Deputy Daly said. I know why Deputy Daly is raising this matter. I agree with her.

I have asked my Department to refer this particular issue to the Department of Finance. Given that within the next couple of weeks we will launch a public consultation on what will probably be the most far-reaching reform of the private and public pensions industry, it is probably timely that the Department of Finance considers this issue, and that is the effort I will try to bring to bear during the coming weeks.

Clare Daly (Dublin Fingal, Independent)
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I thank the Minister. The tackling of this issue is beyond overdue and it is not the responsibility of any one Department or Member of the House. We all have to get our act together in terms of pensions. Given that they are structured in a manner which makes them incredibly cumbersome to understand and mind-numbingly boring, people hear the term "pensions" and switch off. Sadly, they wake up in their retirement years to find that something into which they have paid all their lives is not worth what they thought would be. Their families are impoverished at a time when they should be enjoying a better standard of living.

No matter what laws are involved, be it the Taxes Consolidation Act or pension legislation, the reality is that the restriction exists. As the Minister said, it appears as though there is a choice. However, in the case of the winding-up of a defined benefit scheme, there is no choice and people do not have access to an approved retirement fund which would be much better for them. That is the nugget that we have to fix quickly.

Public consultation processes can take a very long time. It is to be hoped that the one announced by the Minister will be completed expeditiously. There should be a fix in the Act similar to a previous change. It was recognised what bad value for money annuities are and the rules were changed by the Department of Finance in previous years via various statutory instruments and Revenue briefings which allowed the situation to be altered for the benefit of pensioners. That could be done immediately, pending the necessary review of the scheme. I appreciate that the Department of Employment Affairs and Social Protection will liaise with the Department of Finance and we can all expedite this issue as quickly as possible.

Regina Doherty (Meath East, Fine Gael)
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It is not about shirking my responsibility. The two Acts which need to be changed do not come under my Department but rather the Department of Finance, and that is why I will refer the matter to the Minister for Finance. In my reply I mentioned that exceptions are made in exceptional circumstances. That does not appear to happen in reality because the Deputy knows the exceptional circumstances to which I referred and there are no exemptions for them. I do not know how it works in practice.

It is clear to me that the existing measures do not suit all of the people the legislation is supposed to cover. It is exceptionally restrictive in respect of those people who just need a weekly income and do not need to wait on the never-never for a magic gold pot which they might never get to.

The public consultation I hope to launch in the next couple of weeks will not take any longer than three months because otherwise it is not worth doing. We need to move together on this issue to make sure we make the necessary changes not only to the State pension but also to private pension funds which need to be responsible for looking after people. I give the Deputy my word that I will take immediate action. I will talk to the Minister for Finance, Deputy Donohoe, and try to include it in the public consultation process.