Marie Moloney (Labour) | Oireachtas source

I welcome the Minister. She is becoming a regular visitor. I hope she will come before us on a few more occasions prior to Christmas in order to take Committee and Report Stages of this Bill and engage in a debate on the youth guarantee.

Defined benefits mean exactly what they imply, namely, when one finishes making contributions - more than likely the point at which one will also finish working - what one is paid is defined. A person with a defined benefit pension enters into a contract with his or her employer and expects what has been defined or promised to be paid out in the end. Unfortunately, however, many pension schemes are in trouble at present. Trustees placed funds in what they anticipated would be reliable and rewarding investments but this has not proven to be the case, particularly in view of the fall in the value of stocks and shares and the position of the economy in general. As a result, schemes are completely under-funded. I understand that some funds were invested in bonds held by the famous bondholders, whom people wanted to burn. If the latter had happened, many pension schemes would have gone under.

If a pension scheme in this country is under-funded, the trustees of that scheme are required to take action in order to bring them back into a funded position. Of the 800 schemes here, some 40% are fully funded. However, the remainder are either under-funded or poorly funded. What the Minister and the Government are setting out to do in this Bill is to ensure equity and fairness to all who have contributed during their working lives. The legislation relates to pension schemes which are being restructured, single insolvency and - where both a scheme and a company are insolvent - double insolvency. Under the provisions of the Bill, the Minister and the Government are seeking to ensure that those who paid into pension schemes for their entire working lives will not be left with nothing when they retire. Senator Mooney referred to circumstances where a person who is only one day away from reaching the pension age might be left high and dry. The Minister is attempting to rectify the position in that regard and to bring some equality to the situation. At present, the bulk of pension funds are being paid out to existing pensioners. These people, who also contributed during their entire working lives, are entitled to their pensions. If, however, a company and a scheme are to be restructured or both become insolvent, then workers who have made contributions for all of their lives would not get much of - or perhaps any - pension. This simply would not be fair to those who have yet to retire.

What is proposed in the Bill will apply to the private sector only. All pensioners will have an entitlement to the State pension, which the Minister has continually protected since entering office. She has given a commitment to the effect that she will continue to protect it.

Existing pensioners who have an occupational and State pension will have percentage protection under the new legislation. As the Minister noted, people with pensions of less than €12,000 per annum have nothing to fear as they will be fully protected, while those with pensions in excess of €12,000 will have 50% of the value of their pension exceeding €12,000 protected. I welcome the commitment by the Minister to protect occupational pensions of less than €12,000 as the individuals in question have the smallest pensions and will have been hard-pressed to contribute to their pension scheme during their working years. They did so to provide a decent income for themselves and their spouses in their old age. The measures in the Bill have been taken to ensure fairness in the distribution of pension funds to all those who have contributed. The Bill changes the position from 100% priority to pensioners to 50% priority to all members of the scheme.

Senators will recall that the pay-out under the defined benefits scheme came to a head this year when workers at Waterford Crystal took a case to the European Court of Justice. This was an appropriate course of action as it was devastating for the workers to find their pension entitlements had been seriously eroded due to a shortfall in funding and the insolvency of their pension scheme. It took courage and determination to take their case to the European Court of Justice, which ruled in their favour in April last. We must now meet our obligations and address the court's ruling on the insolvency directive. This requires that we put in place measures to ensure at least 49% of expected benefits are paid to members when the employer and pension scheme are both insolvent.

As I stated, the Bill does not affect people on defined contribution pension schemes or the State contributory pension. The State, that is, the taxpayer, cannot fund private pensions. This means trustees must find ways to increase pension funds to a level that meets their members' requirements. The Bill provides trustees with the option of restructuring a scheme. If they see fit, they may reduce a higher pension and they are also given discretion on the final amount. Trustees will be able to reduce higher pensions of between €12,000 and €60,000 by 10% and pensions of more than €60,000 by 20%, thus ensuring that those who are better off pay most.

The legislation will ensure, in the case of double insolvency, that the State will guarantee that existing pensions of more than €12,000 per annum will be protected to the amount of 50%. I welcome the Minister's announcement that she has secured agreement from the Minister for Finance, Deputy Michael Noonan, to use funds from the pension levy to honour her commitment. It also provides for a scenario where the pension scheme were to remain viable and could, depending on its future investment performance, restore benefits to those whose pensions had been reduced.

The Minister has invested considerable work in this legislation and consulted all relevant stakeholders. In the case of a single insolvency, is legislation required to force employers to honour their commitments? Currently, an employer can walk away from a business and establish a new company under another name. Is legislation required to safeguard workers in such a scenario?

I note the Bill makes amendments to the Social Welfare (Consolidation) Act. In light of the High Court decision that it is not necessary for new applications to be made for claims and that old claims must be reopened, what is the position regarding arrears in such cases? If a decision is made on the basis of a change of circumstances, will it be necessary to backdate payment to the date of application or only as far as to the point at which the relevant changes took place? Opening up an old application could have ramifications in terms of how much will be paid in arrears. I ask the Minister to examine this issue before Committee Stage.