Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

The exclusion is for pension contributions. No individual at any of the covered institutions is allowed to receive more than the cap. This is being honoured as proven in the case of the new CEO appointments at AIB and Permanent Trustee Savings Bank, respectively, whose packages are contained within this policy.

The Government has also been putting downward pressure on pay levels throughout the State-owned banks. In 2012, AIB has introduced reductions in pay and benefits of 7.5% to 15% for its higher earners. These reductions and the overall restructuring of the bank mean that the number of AIB employees with a salary of over ¤150,000 will have more than halved by the end of this year, from where it stood at the end of 2008.

The Irish Bank Resolution Corporation or IBRC, the former Anglo Irish Bank, has reduced its overall staff remuneration costs from ¤206 million in 2008 to ¤107 million in 2012. Therefore, we are dealing forcefully with the issue. We will continue to deal with the issue but there are legal constraints which limit the course of action we can take.

In respect of IBRC, it is on the public record that I have written to the chairman, Mr. Alan Dukes, and asked that the board impose a 15% cut in their wages and salaries. He replied to say that the board did not think that was an appropriate policy for reasons of staff replacement in an institution that is going to run out eventually sometime around 2020. He also said they had issues about retaining key staff. Those are the arguments that were put forward. I do not regard that matter as finished, however. I regard it as the first exchange of correspondence that I have had with the chairman and that it will move on.

Senators will also be aware that we have retained the Mercer Group - since June, before any of this controversy emerged - to do a full review of pay and pensions across the covered institutions. They will report to me by the end of the year and we will see what action will be taken then. When I get that report I will engage with the chief executives of those institutions and with their boards to see if we can amicably work out a way that pay and pensions can be reduced, in a manner that is in accordance with law and without taking away from these institutions their authority to make commercial decisions.

Senators will also recall that on the issue of excessive pension payments funded from the public purse, my colleague, the Minister for Public Expenditure and Reform, Deputy Brendan Howlin, dealt with this comprehensively in the other House when responding to a Private Members' motion on 7 November last. He explained in great detail what actions the Government has taken to reduce the cost of public service pensions both immediately and in future. I would encourage Senators, if they have not already done so, to study that particular debate closely.

As I have said regarding the options to reduce existing pay and pension awards in the banking sector, there are limits on the Government's course of action. This is because pre-existing contractual arrangements were entered into by the previous Government. The protection for pensions in the Constitution are those clauses which protect property rights. A pension is regarded as a property right. To move unilaterally against pensions is like taking a field from a farmer - it is confiscation. That is the legal advice.