Fiach MacConghail (Independent) | Oireachtas source

Cuirim fáilte roimh an Aire. On the Order of Business this morning, my colleague Senator van Turnhout, who cannot be here, requested a debate with the Minister before Christmas on the youth guarantee. Could we have a date for this before the Irish submission on the guarantee is made to the European Union? The Leader encouraged us to ask this on the Order of Business.

This is a crucial and sensitive piece of proposed legislation. A majority of citizens do not consider their pension or possible entitlements until they are well into their working life. Often these issues arise as one moves into middle age and close to retirement. I have lived the life of a freelancer. I do not have a defined benefit pension but, thankfully, I copped on a couple of years ago and set up a PRSA. I can also afford it and I am aware many find it difficult to support such a retirement plan these days.

I have had the recent and unfortunate experience of closing down a defined benefit scheme at the Abbey Theatre. It was a terrible and anxious time for all members concerned, but particularly the deferred and current active members. As a Senator or artistic director of the national theatre, I never thought I would become an expert on pensions. The fact is that our scheme was fully funded and up to date at the end of 2007 and within a couple of years, we were showing a significant deficit in the scheme through no fault of our own or of the employee. As I learned, the concept of defined benefit is flawed and we were placing an unequal burden on some members over others. There are more than 200,000 members of defined benefit schemes. They were popular with employees as they placed the burden of funding of the pension on the shoulders of the employer. As an not-for-profit NGO, it placed tremendous pressure on an arts organisation such as the Abbey.

We had a substantial deficit in our scheme, despite the fact that a contribution totalling €2.27 million was made by the Abbey over that period of time. It deteriorated, as, indeed, is the case with over 80% of all defined benefit schemes. The reasons include that life expectancy has increased substantially pushing up the cost of pension provision and investment performance has been poor in recent years, in particular, since the worldwide financial crisis which began in 2008. Another reason is that interest rates have fallen to record levels making low the assumption for future growth of schemes' assets. Also, falling interest rates had the effect of increasing the value of future liabilities as discount factors used to reflect the diminishing value of money over time are based on these rates. Finally, the more onerous funding requirement implemented by the Pensions Board had that impact.

The Public Service Reform Plan Critical Review, published in April 2013, states:

Occupational [defined benefit] pension schemes continue to face financing challenges due to a range of factors. These include an under-estimation of longevity, poor investment returns, the impact of the downturn in financial markets (in which significant declines in asset values were exacerbated by rapid increases in the valuation of liabilities as interest rates dropped) and the imposition of a tax levy of 0.6% of assets from 2011 to 2014. Following the 2008 financial crisis in excess of 80% of schemes fell into an underfunded position, ...

The position referred to is the position which I experienced in my organisation. It caused a tremendous amount of anxiety, particularly for our current members and deferred members, but also for the pensioners who had benefit from their contributions and the employees' contributions.

Senator Mooney mentioned the index-link for inflation. Is there provision in the Bill for this to be reviewed every couple of years as that adds security? The Minister is quite a good communicator when it comes to pensions matters. One of the issues we must address in the debate, both here and in the Dáil, is to minimise the level of anxiety. Some of those questions, and, indeed, some of the questions Senator Hildegarde Naughton raised, are important. I thought the Minister's performance on "Morning Ireland" the previous morning was very good, but we need to continue that to avoid increased anxiety, of which I have personal experience.

Also, on what date, subject to democracy and votes, does the Minister imagine this Bill will be enacted because that might cause a particular concern for schemes which have been winding down? As the Minister will be aware, there is a deluge of schemes being wound down, particularly in the single insolvency category. Perhaps there could be clarity about a cut-off date because there will be unfortunate overlaps in that regard. Clarity is required.

I am supporting the Bill, as is my colleague Senator van Turnhout, who unfortunately cannot be here with us at this session.

The clarity with which the information relating to the issue of double and single insolvency is set out in the Bill is most welcome.

The legislation is about fairness and sharing the burden. I am aware of a terrible situation where one employee was only ten months away from retirement when we shut down our scheme. As we proposed to wind down the scheme, it emerged that his rights and entitlements were completely different from those of a person who had retired just a year previously. That is a terrible position in which to be placed. I am supporting the Bill because it proposes to rebalance matters in this regard. Essentially, in the situation to which I refer, those already in receipt of pensions had first dibs and the person with ten months remaining in employment was placed at the end of the queue. The Bill will, as I understand it, ensure that all members in a pension scheme will share some element of the deficit, regardless of how unsatisfactory that may prove to be. We did nothing but try to fund our scheme to the limit. There are many organisations - NGOs, not-for-profit charities, etc. - which are in a very difficult position whereby their need to continually fund and top up their pension schemes will threaten their sustainability and solvency. It is regrettable that schemes of this nature often have to be wound down in order that the organisations themselves might survive.

The Bill will also ensure that the assets in a scheme will be distributed more fairly. As a recent editorial in The Irish Timesnoted, it makes provision for "a rebalancing of risk in a more equitable way". It is an example of a reasonably swift response by the Minister and the Government to a most distressing and current challenge.