Sheila Terry (Fine Gael)

I move amendment No. 5:

In page 30, line 19, after "may" to insert "carry out some borrowing only for liquidity purposes and on a temporary basis".

This matter is one which causes me great concern. I was not convinced on Committee Stage that the Minister was looking after the best interests of the consumer. I am sorry to attack the Minister all the time but, as I said earlier, it is nothing personal.

I read the EU directive carefully. It states that the home member state shall prohibit the institution from borrowing or acting as a guarantor on behalf of third parties. However, member states may authorise institutions to carry out some borrowing only for liquidity purposes and on a temporary basis.

I am sorry to have to remind the Minister again that he agreed with that in the Dáil when he spoke on the Bill on Second Stage. He took the view that if this was a prudent rule for some schemes, it was prudent for all, an approach supported by the Pensions Board. Somehow or other, between Second Stage and Report Stage in the Dáil the Minister changed his mind. He did a U-turn and introduced an amendment that would allow him to exempt certain schemes from this prohibition by regulation. Article 18.2 is clear in its terms and it is not subject to any derogation. The Minister knows the clause to which I refer, as I previously read it out. For the most part, section 36 of the Bill as initiated gave effect to this requirement. Paragraph 15 of the preamble to the directive allows member states to exempt schemes of fewer than 100 members from this requirement. As a result of the Minister's U-turn, we face the prospect of Ireland being sanctioned by the Commission for being in breach of EU law. Member states have an obligation to transpose directives. The Minister will be aware that while there is some degree of flexibility with regard to how member states go about implementing directives, there is no flexibility in terms of the objective to be achieved. Article 22.1 provides that member states shall bring into force the laws, regulations and administrative provisions necessary to comply with the directive. Under Articles 22.3 and 22.4 member states are permitted to postpone the implementation of Articles 17.1, 17.2 and 18.1(f) but there is nothing in the directive which releases the Government from fully implementing Article 18.2 within the deadline provided.

Will the Minister explain under what provision of the directive he is permitted to allow for borrowing in any circumstances as the Bill provides? He must explain what motivated him to make this U-turn. He should state whether he or his officials had meetings with pension industry representatives who raised this point and explain why he did not take the advice of the Pensions Board not to make this amendment.

The Minister stated earlier in the debate that he did not want to prevent a person from providing for his or her pension by buying a property for his or her business. That is not the purpose of pensions. If an individual wants to buy a property, whether residential or commercial, there are ways of doing so. For example, he or she could borrow the money from a bank if capable of making the repayments. However, to use a pension fund to allow somebody to buy property is not the purpose of the pension fund. This would not abide by the directives whereby we must have a good spread of investment and it does not provide for somebody buying a property for his or her pension.

As Senator O'Meara noted, many people are buying property for their pensions instead of buying into pension industry schemes. However, the Bill is not a vehicle for doing this and it is strictly prohibited in this EU directive, which we are obliged to implement. We can only borrow for liquidity purposes and this must only be on a temporary basis. What the Minister is providing for is not for liquidity purposes. The wording in his amendment flies in the face of what is provided for in the EU directive. I would like to hear the Minister's response.