Dáil debates

Tuesday, 8 May 2018

Topical Issue Debate

Defined Benefit Pension Schemes

6:50 pm

Photo of Willie O'DeaWillie O'Dea (Limerick City, Fianna Fail)
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I raise this issue to highlight the plight of 1,200 workers formerly employed by Irish Life, which was sold to a Canadian company, Great-West Lifeco, GWL. The net effect of what is proposed is that, on 30 June, the defined benefit scheme will be changed to a defined contribution scheme. This means that there will be an immediate loss of more than one third of the pensions the people involved were entitled to expect. The transfer from a defined benefit scheme to a defined contribution model also means that the risk attaching to the pension will be transferred from the company to the employees and that the latter may well lose more than 35% depending on the vagaries of the market.

None of the employees wants this. There has already been some industrial action and there is further industrial action threatened, even though these people are not the type of workers who usually engage in such action. We have long lamented the fact that wealthy, solvent companies are entitled to walk away from defined benefit schemes despite the fact that their employees have paid into those schemes year in, year out. Some of the 1,200 workers to whom I refer have been paying into the scheme for a lifetime.

When we talk about such situations, we normally refer to a solvent company walking away from a pension scheme in which the liabilities exceed the assets. In this case, not only is the company hugely profitable - so profitable, in fact, that it is in a position to transfer more than €200 million per year to its Canadian shareholders - the pension scheme is eminently healthy. I am informed that the scheme is €240 million in surplus. It seems perverse that a company of such magnitude and profitability can penalise its Irish workers in order to increase the dividend to its wealthy shareholders in Canada. In 2017, we put forward legislation which would prevent that sort of thing from happening. At the time, the then Minister for Social Protection and current Taoiseach, Deputy Varadkar, told me various things here on the floor of the House. He more or less told me that the sky would fall in if we attempted to take such action, all the while blithely ignoring the fact that other jurisdictions - not least our nearest neighbour, the United Kingdom - have in place the sort of protection to which I refer. The Bill in question subsequently passed Second Stage. Of course, it has since disappeared into the Bermuda triangle with thousands of other Bills that were put forward here in good faith.

Photo of Finian McGrathFinian McGrath (Dublin Bay North, Independent)
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We will find it.

Photo of Willie O'DeaWillie O'Dea (Limerick City, Fianna Fail)
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This is the new politics. Instead of Government saying that it will vote something down, it simply says that it will get back to it. That is the difference. The Social Welfare Bill 2017 introduced by the current Minister, Deputy Regina Doherty, originally included some provisions relating to defined benefit pension schemes. These were removed on the basis that they would be put back in again on Committee Stage in substantially the same form. That is something which I do not understand.

Is the Minister of State aware of the plight of 1,200 Irish Life workers? Is he aware of the fact that there are many rumours to the effect that other companies, particularly in the insurance sector, will follow suit if Irish Life gets away with this? Does he envisage that the legislation the Government is proposing, Committee Stage of which is to be taken 31 May, will be in place in time to save the situation? Even if it is in place before 30 June, will it be strong enough to do so?

Photo of Finian McGrathFinian McGrath (Dublin Bay North, Independent)
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I thank Deputy Willie O'Dea for raising this very important issue. I apologise on behalf of the Minister, Deputy Regina Doherty. I am stepping in for her today.

I am very much aware of the concern highlighted by the announcement of the closure of the Irish Life pension scheme to future accrual. It is common knowledge that the scheme is very financially secure and that is assets adequately cover all liabilities that will arise in the event that the trustees take a decision to close the scheme. However, the closure of the scheme does not mean that its members will not receive pensions. First, the pensions accrued to date are secure. Additionally, those members concerned will also be beneficiaries of the new defined contribution scheme to which the company is contributing for them. Even where a scheme is closed to new members or to future accrual of benefits, the sponsoring employer's role continues in respect of that scheme. Finally, members will receive the level of contributory State pension commensurate with their social insurance contributions once they reach pension age.

It is important to note that neither the Minister for Employment Affairs and Social Protection nor the Pensions Authority has the power under existing legislation to intervene to freeze the winding-up of a scheme or to compel the employer to make contributions to a scheme. As we all know, the number of defined benefit, DB, pension schemes has declined in recent years. The decline of DB schemes accelerated during the financial crisis to the extent that the whole pension sector was possibly at risk. In recent years the Government has amended pension legislation to protect the pension sector and ensure fairer and more equitable outcomes for all members of schemes.

Almost all Irish DB schemes have a rule that allows the employer to cease making contributions, usually after a notice period. At present, there is no legislative obligation on the employer to make contributions and no further liability on the employer where contributions cease. Neither is there an obligation on the employer to give notice to members or to consult in advance of ceasing contributions. However, in circumstances where a restructuring of benefits is proposed, pensioners, deferred scheme members and unions must be kept informed by trustees. Furthermore, changes made in 2015 require trustees to notify groups representing the interests of pensioners and deferred scheme members in a scheme in such a situation.

The roadmap for pensions reform, which was published recently by the Government, details specific measures that will modernise our pensions system. Under strand 4, entitled "Measures to Support the Operation of Defined Benefit Schemes", the roadmap sets out that the Government is committed to advancing the Social Welfare, Pensions and Civil Registration Bill 2017. The purpose of the defined benefit pension measures in this Bill is to respond to the ongoing difficulties in schemes and to increase protections for members as well as encouraging employers to ensure that schemes are funded and managed well.

As Deputy O'Dea is aware, the general scheme of the social welfare and pensions Bill 2017, which is now the Social Welfare, Pensions and Civil Registration Bill 2017, was published in May 2017 and proposed a number of key measures relating to defined benefit pension schemes. To ensure that an employer cannot walk away from the pension scheme at short notice, it is proposed to provide a 12-month notification period where an employer seeks to cease making contributions to a scheme. In order to seek a middle road between the current position, whereby employers can abandon DB schemes, and full and immediate debt on employer provisions, it is proposed that, where a scheme is in deficit and a funding proposal is not put in place in a timely manner, the Pensions Authority be allowed direct steps to be taken to ensure that the scheme meets the funding standard. The general scheme also proposed more frequent monitoring of the financial position of schemes.

It is important to note that if this new legislation is enacted, a scheme will have to give a minimum notice period of 12 months before contributions can be stopped. However, provided the scheme meets the minimum funding standard, it will not prevent a company from ceasing contributions once the minimum notice period is served. These proposed legislative provisions are quite technical and very complex.

Work to finalise them is at an advanced stage. The Department hopes to be in a position to bring forward the amendments on Committee Stage at the end of May or in early June. It hopes that, with the co-operation of the Oireachtas, it can pass the legislation before the summer recess.

7:00 pm

Photo of Willie O'DeaWillie O'Dea (Limerick City, Fianna Fail)
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While I do not have any problem with the Minister of State, Deputy Finian McGrath, I regret that the Minister for Social Protection herself is not here. That said, what we want to bear in mind here is that the workers in Irish Life, or GWL, as it is now called, are watching this debate because they face the prospect of huge cuts to their pensions. What the Minister of State says is not correct strictly speaking. Of course the pensions of people already in receipt of them are secure but the pensions of future pensioners, namely, those still working for the company who have yet to retire, will not be secure because of the change from defined benefits to defined contributions. The financial impact has been carefully worked out.

The Minister of State says there is new legislation that does not allow people to walk away at short notice but the point is that it allows them to walk away. It allows them to walk away if they give 12 months' notice, which is not much good to the pensioners in Irish Life or any other group.

The people affected are facing an appalling vista. Not only are they facing the loss of more than one third of the pension they were led to expect and for which they have paid but, because of their being transferred to a defined contribution system, they are also facing the possible loss of their entire pension at some time in the future. As I stated, it depends on the vagaries of the market. We are all too well aware of those.

The Minister of State cannot tell me that the legislation, despite its being Government legislation, will be in place by 30 June. It is hoped that the legislation will be enacted by the summer recess. To the best of my knowledge, the summer recess will not be until some time in July. All that was expressed was a hope.

I spoke to representatives of the trade union representing the affected people today. They are most anxious to meet the Minister, Deputy Regina Doherty, so they can explain their position to her face to face and explain what exactly is involved. I urge the Minister of State earnestly to ask his colleague, bearing in mind that there has been a request for some time for a meeting, to meet the people face to face. We are talking about real people and people losing a substantial chunk of the money they were expected to receive on retirement. It is a very real problem.

Photo of Finian McGrathFinian McGrath (Dublin Bay North, Independent)
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I take on board the views of Deputy Willie O'Dea. There are 1,200 workers and they have been paying into their scheme for a lifetime. If they are facing the loss of one third of their pensions, we must take it very seriously. I also take on board the Deputy's points on the risk issue. The Deputy said the company had a profit of €200 million, going to shareholders, and that the pension scheme value was in the region of €240 million. There is protection needed for the workers.

With regard to the legislation, the Minister is determined to have it enacted by the end of May, or by June. I will raise the other issues with the Minister. If the representatives of the unions representing the staff would like to meet her, I will request it. It is not acceptable to have 1,000 workers in the circumstances described. We have to act. The legislation is really a priority.