Séamus Brennan (Dublin South, Fianna Fail)

I thank Senators for raising this issue, which needs to be considered. It involves many complicated aspects. The Pensions Board has advised me that it does not support the immediate introduction of a protection fund. However, the board has recommended me to consider it in the medium term, taking into account the UK experience, in particular.

The pension benefit guarantee corporation has operated in the United States since the mid-1970s. More recently, arrangements have been made for the new pension protection fund in the UK. On a recent visit to London, I discussed the operation of that fund with the authorities there. I came to the conclusion that they are not yet fully satisfied that the fund will do what is required of it. They want to take some more time to see how it works.

The issue of pension protection for defined benefit schemes was considered by the Pensions Board during the recent review of the funding standard. They came to the conclusion of which I have just informed the House. The pension benefit guarantee corporation in the United States is funded by insurance premia, investments and assets of plants that are taken over. The UK's pension protection fund will be funded by a levy on all defined benefit schemes. I am told that is having certain effects already in pushing people out of defined benefit schemes and into defined contribution schemes. They do not have to pay the levy because they are in contribution schemes as opposed to defined benefit schemes. That seems to have been an unintended consequence of the establishment of the new fund.

The Pensions Board recognises, as I do, the substantial potential benefits of a well-designed pension protection fund. I do not rule out a protection fund or a bonding system but we are not in a position to address the matter in this legislation. It is too complicated. A great deal of practical and technical issues require further discussion in this House, the other House and at Government level.

I have taken into account examples from other jurisdictions. On my visit to the United Kingdom, I detected considerable uncertainty there as to how the pension protection fund will work out. In the United States the protection fund, the Pension Benefit Guarantee Corporation, is itself in considerable deficit and a degree of uncertainty now surrounds it.

I do not say "No" to this proposal. In the medium term some form of protective net may be required. Bonding is one approach, protection funds are another but no matter what we do we must ensure we make matters better not worse.

I have details of the number of defined benefit schemes that failed the funding standards up to November 2004. I can provide Senator Terry with tables detailing the information. If she wishes I can provide her with the current position in writing. In 2003, 484 funding certificates were received. This was the board's experience of funding certificates and proposals from the beginning of 2003 to 5 November 2004. The number of funding certificates increased to 549 in 2004. A total of 408 out of 484 schemes satisfied the funding standards in 2003. A total of 317 out of 549 schemes satisfied the funding standards in 2004. I can provide Senator Terry with more detail on the matter and will correspond with her on the subject as soon as possible.

Senator Terry must wonder why I am not doing what I say. I cannot do it in the way she prescribed. It is worthwhile in the medium term examining whether some protective mechanism can be put in place, either by means of UK or US-style protection funds or a bonding system such as in the example Senator Terry gave in regard to the travel trade and other professions. I am not in a position to address the matter now.

The Pensions Board looked at this issue during its examination of the funding standard and did not recommend the immediate introduction of such a fund. However, it recommended its consideration in the medium term. It is watching very closely how the UK experiment, in particular, works out. That is probably the prudent thing to do. We will keep it very much on the agenda. Although I do not accept the amendment I will keep the matter on the Government's agenda. We need to find out more about how it works, especially in the UK, and see if we can learn lessons from that experience.