Joan Burton (Dublin West, Labour) | Oireachtas source

The new provisions include post-retirement increases if they form part of the figure of 50% for expected benefits in a double insolvency, or if payment of the increases is the final point in the order of priorities order in the case of a single or double insolvency.

On retrospection, based on advice received, the legislation will apply to any scheme which is wound up after the legislation has been enacted and will not apply retrospectively. It is important to have regard to the negotiations undertaken and agreements between the parties in a wind-up. Generally, where schemes have been wound up, the process to date has been managed through dialogue between the stakeholders, the trustees, the employers and the members, whereby efforts are made to reach agreement on the steps to be taken when a scheme is no longer considered viable and the decision to wind up is made. This nvolves negotiating arrangements which are unique and particular to each case in terms of the benefits the beneficiaries will ultimately receive and the substitution of the defined benefit pension model with other pension arrangements such as the defined contribution or a hybrid model.

In regulating schemes to a better funding level we have been concentrating on ensuring measures are put in place to make sure schemes have sufficient assets to meet the pension promises made and that this is done through regulation and implementation of the funding standard which the last Government relaxed. I reinstated it some time ago with a view to having pension schemes make sustainable arrangements in respect of the promises made to members. Responsibility rests with the employer, as the sponsor of a scheme, and the trustees for ensuring the scheme is properly funded and managed. Many Irish pension schemes were very unfortunate and many comments have been made on this issue by pensions experts on the imbalance in equities and the poor returns from certain types of investment and on the general dislocation of global financial markets. The changes needed to encourage underfunded schemes will be aimed at seeking funding of about 70% of that required in the funding standard which the Bill seeks to strengthen.

The key provisions of the Bill address difficult issues of equity and fairness. The aim of the Bill is to ensure a fairer system for workers and sufficient protection for pensioners, while allowing employers to tackle their pension problems. Representatives of employers, employees and the pensions industry have all been encouraging action in this area for some time. I am heartened that there has been a broad welcome for the measures contained within the Bill. We would all have wished that the pensions industry in Ireland and pension funds had not entered into the dreadful crisis in 2008, but it did happen and we are now trying to ensure as much stability as possible, as well as sustainability, for those pension schemes that remain in place. There were 2,500 pension schemes in existence 20 years ago; only ten years later there were 1,000 fewer. Throughout this period there has been a dramatic fall in the number of defined benefit schemes for many reasons.

The process for distributing the assets of underfunded defined benefit schemes is very complex. It is a very sensitive issue and terribly important to people as they grow older and come to rely on a pension as their major income. The concept of intergenerational risk-sharing would suggest that maintaining the status quo, whereby people of working age can potentially lose their entire benefits before scheme pensioners make any contribution, is not sustainable. At its most fundamental level, while a good degree of priority should be retained for the pensioners who are older, it is also fair that some measure of protection be afforded to all members of defined benefit pension schemes.

As I pointed out earlier, there is a €12,000 limit, plus, in the majority of cases, people have an entitlement to roughly the same amount through the State retirement pension. That brings the amount to €24,000, and the average industrial wage is in the region of €36,000. Somebody with a combination of the two would be in a relatively good position in terms of a pension on retirement. I wish it were more. If we bring in some of the proposals made by the OECD and others, we will, I hope, start to extend coverage on a more intensive basis, particularly to low-paid workers. That is very important.

I thank all of the Senators who spoke on the Bill. In conclusion, the Bill addresses the State's obligations in a double insolvency, but also goes further. A fundamental aim of the Bill is to encourage schemes, through regulatory measures, to move from an underfunded position towards an appropriately funded position and further minimise the risk to the members, pensioners and taxpayers. People need to have decent incomes in retirement and it is important that occupational pensions be viable and sustainable.