Hildegarde Naughton (Fine Gael) | Oireachtas source

I thank the Minister for coming to address the Social Welfare and Pensions (No. 2) Bill 2013. We have all read about pension funds becoming insolvent in recent years, the most notable case being that of the Waterford Crystal workers who had to deal with the issue of double insolvency when both the company and the pension fund became insolvent. This is cold comfort to any person who has spent a lifetime working hard, paying into a defined benefit pension scheme in order to provide financial security for themselves and their partner in older years. In making pension provision, people want to ensure they will not fall into a poverty trap in old age and that they will have a reasonable disposable income based on their financial needs at this time and that they will have access to adequate health care support. However, in recent years some people who had worked for many years and contributed to a pension fund had to face the awful realisation that their fund was insolvent and that there were insufficient funds to provide adequate pension cover.

I have read the briefing documents the Department has provided and it is clear that there has been widespread concern within all sectors - employers, employees, the Irish Congress of Trade Unions and pension actuaries - that the issue of adequate funding of pension schemes needs to be addressed.

The Minister facilitated a consultation process earlier in the year with the relevant stakeholders to identify what is needed to protect all those contributing to a defined benefit scheme. I note the amendment to section 50 of the Pensions Act and the inclusion of three subsections, subsections (1B), (1C) and (1D), to broaden the category of benefits that can be reduced where a defined benefit pension scheme is being restructured because it does not meet the statutory minimum funding standard. Section 50 of the Pensions Act permits the Pensions Board to direct the trustees of a pension scheme to reduce the benefits of current and former scheme members or post-retirement increases in benefits for pension scheme members whose scheme does not meet the statutory minimum funding standard.

The proposed subsection (1B) provides for reductions to the benefits payable to pensioners by certain percentages within certain limits. The proposed subsection (1C) prohibits any reduction of an annual pension that is €12,000 or less. For pensions greater than €12,000, a reduction of up to 10% can be made where the annual pension is between €12,000 and €60,000, and up to 20% where the annual pension is greater than €60,000. The proposed subsection (1D) prohibits any reduction that would reduce a pension to below €12,000 or that would reduce a pension to below €54,000 if the annual pension is €60,000 or more.

I am glad to see there will be no change to the State contributory pension of €12,000 per year. However, for the purpose of clarity, could the Minister advise on possible reductions affecting those currently in receipt of a defined pension? Is there a disregard for the first €12,000? For example, if a person is in receipt of a total pension of €40,000 per year, with €12,000 being the State pension and the balance, €28,000, being a defined benefit pension, is the 10% applicable on the €28,000 or on the total pension of €40,000? Likewise, if a person has a pension in excess of €60,000, which includes the State pension of €12,000, how is the 20% applied?

There is justifiable concern among those currently in receipt of a defined pension that it may be reduced, albeit in a temporary capacity, until there are adequate moneys in the fund to provide for those coming on-stream. Hence, I would like clarity on the aforesaid figures.

It must be noted that the purpose of this Bill is fairness and to ensure there is enough money in the pension pot for everybody. I understand the State can intervene to ensure a fairer deal for workers and sufficient protection for pensions while allowing employers address their pension scheme problem. I have no doubt that this Bill will be widely debated and amendments tabled but we must ask ourselves in our discussion whether it is fair that a person who has contributed all his or her life to a defined benefit pension scheme could have no pension entitlement on reaching retirement if the fund is insolvent. Can the State be expected to solve all pension deficits when a pension fund becomes insolvent?

Social protection is vital, particularly as we get older. To ensure adequate social protection, pension provision is fundamental. It is important to address the common concept that pensions are for old people. Investing in a pension needs to commence when we enter the workplace in order to provide some financial security to ensure we will have a certain level of comfort on reaching retirement. There is a tendency to address pension needs only when we are in our fifties, which is quite late given that we reach pension age at 66 years and may not have contributed sufficiently to provide the financial support required in our later years.

I commend the Minister on addressing this issue comprehensively. It has been noted that although several reports were published under the previous Administration, including the Green Paper on Pensions, 2007, and National Pensions Framework, 2010, nothing was done. I congratulate the Minister on what she is doing.