Séamus Brennan (Dublin South, Fianna Fail)

I wish to return to what Senator O'Meara asked about PRSAs. I agree that the take-up has been disappointing. It now stands at 46,000 — that is the number of individual contracts. For that reason, I have formally asked the Pensions Board to bring forward from 2006 to this year the review that it is required to carry out of pensions coverage and adequacy. I expect the board's report this summer because of that situation.

The preservation for pre-1991 benefits only came into force for those who left employment after June 2002 on foot of the Pensions (Amendment) Act 2002. It was considered, for cost reasons, that this requirement would not be met retrospectively. Regarding the €2.5 billion — the figure that I gave Senator Terry last week, which refers to the gross cost of taxes paid when the pension is paid out — there are significant issues. They are being examined by the Department of Finance as part of the review of tax relief measures that the Minister for Finance, Deputy Cowen, has announced. They are also kept under review by the Pensions Board as part of general pensions strategy.

I have no doubt where I stand on pensions. I am 100% on the side of pensioners. That is as it should be as it is my responsibility. Pension funds are able to look after themselves, as are boardroom directors. However, my responsibility is to make absolutely certain that the elderly have proper pensions. Having said that, I must live in the real world. I cannot simply make that statement and then say that I do not care what happens to pension funds. They are an amalgamation of funds which are invested and depend on the performance of markets, properties and equities and the quality of management. Occupational funds need all those things to come right. There is an element of risk involved, and the Senator rightly says that companies are increasingly finding that they cannot afford the benefit type of pension, with the result that they are moving to the contributory model. That means that the risk is increasingly moving from the employer to the employee.

One can do several things, one being to say, for example, that schemes are €3 billion underfunded, depending on how one measures them. There is a funding standard. One figure is based on an going concern and one on wrap-up or closure of the scheme. What figure one arrives at depends which measure is used. I am advised that the funding standard in place is a very conservative one based on a wind-up situation. Some 57% to 60% of funds are meeting that standard, which is extremely conservative and tough. Under this legislation the remaining funds are given a period of up to ten years to meet that same standard.

Meanwhile, the Pensions Board is required to sit on these funds to ensure that, each month, it receives returns and information to convince it that they are heading in the right direction. I explained to the Senator last week that were I to move in a more sudden fashion and demand that the 60% become 100%, I would probably effect what happened in the UK, where many firms were pushed into insolvency by the requirement that major payments be made to the pension fund in circumstances where it was not immediately necessary. On the other hand, it had the effect of closing down the company, with the ultimate result that no one gained. A better way is to grant the extended period, have the Pensions Board monitor schemes, and get everyone up to a funding standard over the period so that pensions can be paid out.

Considered in that context and with that strategy, there will be no plethora of underfunded schemes. However, if one approaches it from an entirely different angle, I accept that one might arrive at that conclusion. That is not the perspective that I have chosen, since it is more sensible to adopt the strategy that we are now pursuing.

Like every other speaker last week, I can indicate the size of the tax reliefs, which are very generous. However, one must also consider where they are going. They are not all going to boardroom types, and many are taken up by ordinary people on ordinary salaries who are allowed a tax benefit because they are buying pensions. A very substantial slice of that figure is going to ordinary, middle or low-income people who choose to take out a pension rather than pay the tax, since it is a better deal for them. Before one disturbs that, one must examine carefully whom it is helping.